epages News [Banks, May 2003]

ICICI falls 6% on worries over equity dilution

May 01, 2003: The ICICI Bank scrip fell 6% following reports that it may have to dilute its equity to raise its tier I capital adequacy ratio, which is currently at 7%. ICICI Bank officials, however, have made it clear that there will be no dilution in its equity base in the near-term.The ICICI Bank share fell to Rs 123, the lowest since November 2002. Trading volumes were also at the highest since September 2002 when a 100 million share deal was struck by the bank to offload the stake held by the erstwhile ICICI in the bank. Market players say that a section of US-based funds sold some quantities of the stock.

ICICI Bank had stated earlier in a release that US GAAP requires the capital gain of Rs 1,191 crore on the sale of shares of ICICI Bank to be directly added to the stockholders' equity without being routed through the income statement.

Bank officers begin strike, PSU banks most affected

May 02, 2003: Mumbai: More than 2,00,000 bank officers began a one-day strike on Friday to demand a wage increase, a move unions said would halt banking operations. The Indian Banks' Association (IBA), a group representing bank owners, said it hoped some branches would operate. The strikers include officers in PSU banks, which account for around 70% of all bank deposits and loans. They include the country's largest commercial bank, State Bank of India (SBI), and other large banks such as Bank of India and Punjab National Bank. Officials said the strike would cripple clearing, trading and retail operations.

Trading in government securities has also ground to a halt because state-run banks are the largest investors. Although foreign and private-sector banks are likely to trade, volumes will probably be thin. Officers at most private sector banks are expected to participate in the strike. However officers at the Reserve Bank of India are not joining the protest.

Indian Bank net soars four-fold to Rs 189 crores

May 05, 2003: Chennai: The Indian Bank has recorded a steep increase in net profit at Rs 188.8 crore during the year ended March 2003, from Rs 33.2 crore in the previous year. The bank has decided to reduce PLR by 0.25% to 11.5% from June ‘03. Total income went up by 9.3% to Rs 3,056.9 crore. Total expenditure increased by 3.8% to Rs 2,868crore (Rs 2,762 crore). Reflecting the increase in net interest margin, interest earned rose 10.4%, while interest expended declined 2.9%.

The bank has achieved the performance target set under the three-year restructuring plan (‘00-03) in terms of net profit and fulfilment of capital adequacy norm. As on March ‘03, capital adequacy ratio of the bank was 10.9%. It earned an interest of Rs 120 crore from these two recapitalisation bonds during the last financial year. In addition, the bank had received Rs 1,850 crore as recap bonds in early ‘90 when provisioning norms for non-performing assets (NPAs) changed.

RBI details fair practices for bank loan recovery

May 06, 2003: Mumbai: After providing banks with overriding powers to act against defaulters, RBI has sought to ensure that banks do not ride roughshod over borrowers by announcing a fair practices code for lenders. While the code aims to level the playing field, it appears to have given the lenders a long rope as most of the protection is sought to be provided for only small borrowers, up to Rs 2 lakh. As per the fair practices code, bankers must make full disclosure of the material terms and conditions of the loan. RBI has said that banks can provide loan advance only on the strength of a proposal and not on the strength of the security for the loan.

In case a bank rejects an application for a small loan (up to Rs 2 lakh) it must specify in writing the reasons why it is rejecting the loan. Once the loan is sanctioned, lenders have to disburse funds in time in line with the terms and conditions of the sanction. Lenders should also give notice of any change in the terms and conditions, including interest rates, or service charges. Lenders should also ensure that changes in interest rates and charges are effected only prospectively.

United Bank plans facelift to take on trendy rivals

May 08, 2003: Ahmedabad: United Bank of India, a Kolkata-based state-owned bank, is working out a strategy to impart lessons to its workforce in being savvy and trendy, to take on competition from leading public and private sector banks. The bank, which has a strong presence in the eastern part of the country, is planning to change the mindset of its employees so that they can offer better services. Keeping pace with the changing environment, the bank wants to offer many value-added and non fund-based services to its customers, but it felt that the main hindrance is its work-culture.

The bank has decided to carry out an extensive operational training programme for its employees during the current financial year. United Bank, which has a network of 1,800 branches, is also in the process of inter-connecting its branches in order to provide technology-based services. In the first phase, the bank is targeting 160 branches for providing inter-connectivity by the end of December 2003. Of these, 90 branches have already been connected.

Citibank offers $1.25 bn in asset-backed securities

May 09, 2003: New York: Citibank, Citigroup's commercial banking unit offered $1.25 billion in asset-backed securities, supported by its Visa / Mastercard credit card receivables, market sources said. Citigroup headed the deal's underwriting group that included Bank of America Securities LLC, J.P. Morgan Securities, Lehman Brothers and Merrill Lynch.

HDFC Standard premium soars by Rs 96 crores

May 09, 2003: Mumbai: HDFC Standard Life said that it has generated Rs 132 crore premiums from new business in Financial Year 2003 against Rs 36 crore in the previous year, recording a year-on-year growth of over 260%. Insurance coverage in terms of sum insured has exceeded Rs 5,000 crore during the year. In Financial Year 2003, the company extended its life insurance coverage to over 1.5 lakh people.

The company’s focus in the last financial year was to have a national foot print by increasing its geographic reach, which was reflected in the expansion. But even after the expansion a large part of the business came from metros, with Mumbai and Delhi alone accounting for 25% of total premium.

Another co-op bank in Gujarat goes bankrupt

May 10, 2003: Ahmedabad: After a brief respite, co-operative bank depositors in Gujarat have again been dealt with a massive blow. One of the leading district co-operative banks, Panchmahal District Co-operative Bank, with a deposit base of over Rs 192 crore has gone bust. Until now, only urban co-operative banks were caught in the downward spiral. According to sources, this crisis may affect at least 20 urban co-operative banks and several credit societies in the Panchmahal district of Gujarat, as they have parked over Rs 150 crore with the Panchmahal District Co-operative Bank. This may also affect liquidity of some of these 20 banks.

Sources say that Panchmahal District Co-operative Bank went bust as its bad loans outstripped its deposits. As of now, the bank has a total deposit base of Rs 192 crore and advances of Rs 372 crore. The bank had also raised debt worth Rs 178 crore from various co-operative banks and institutions. The enormity of the crisis can be gauged from the fact that despite having a deposit base of over Rs 192 crore, the bank has requested the State Bank of India, which conducts clearing house activities in the district, and the Reserve Bank of India to exempt it from participating in clearing house activities after its liquidity dried up. The bank is believed to be in such dire straits that it has withdrawn its SLR (statutory liquidity ratio) deposits parked with the Gujarat State Co-operative Bank.

Citibank launches money transfer to India from US

May 13, 2003: New York: Citibank has introduced a new scheme, which will enable its account holders to transfer funds between a Citibank account in the US and a rupee checking account in India using its online service or ATMs. Announcing the new scheme, the bank said account holders in the US would also be able to transfer funds within the country using online banking or ATMs. The bank expects the scheme - called Citibank Global Transfers - to be especially appealing to people of Indian origin in the US who wish to remit funds to family members or friends as they would be instantly available to the party to whose account they are transferred.

Customers have the option of entering the US dollar amount to be sent or the foreign currency amount to be received. They also have the option of sending a typed message with the transfer, Citibank said. The service is available at all Citibank ATMs except located in former California Federal Bank or European-American Bank locations, both of which were recently acquired by Citibank, it added.

Bank employees to go on strike

May 20, 2003: New Delhi: Banking operations throughout the country are expected to be paralysed on Wednesday in view of the one-day strike call given by major trade unions. Five of the nine banking unions will be joining the agitation against Government's economic policies. Major bank unions such as the All India Bank Officers Confederation (AIBOC) representing 2,50,000 officers, the Bank Employees Federation of India, the National Confederation of Bank Employees (NCBE) and the All India Bank Employees Association (AIBEA) will join the strike, according to bank union officials. The strike will also be in protest against amendments in labour laws, Bank Nationalisation Act and Banking Regulation Act. The ATM services would, however, continue despite the strike though these facilities at Kolkata are likely to be affected.

RBI curbs UCBs' deposit-raising from non-scheduled counterparts

May 20, 2003: Mumbai: The Reserve Bank of India (RBI) has put restrictions on scheduled urban co-operative banks (UCB) in raising deposits from non-scheduled (UCB) and the extent to which the latter can place deposits with scheduled UCBs. The central bank had announced in the recent credit policy that non-scheduled UCBs might place deposits only with strong scheduled UCBs, subject to certain conditions. The central bank said that a non-scheduled UCB should not deposit more than 20% of its capital fund with scheduled UCBs. Similarly, scheduled UCBs deposit mobilisation from non-scheduled UCBs cannot exceed 10% of their total liabilities of the previous financial year.

RBI has clearly pointed out that scheduled UCBs cannot place fixed deposits with either a scheduled or a non-scheduled bank. There are 52 registered scheduled UCBs and close to 2,000 non-scheduled UCBs. The central bank has said that non-scheduled UCBs can place deposits only with those scheduled UCBs which fulfil the prescribed level of capital adequacy ratio, have net non performing assets below 7% and have recorded net profit for the past three consecutive years.

ICICI Bank offers netbased rail booking and payment facility

May 23, 2003: Mumbai: ICICI Bank has launched a new service for its customers, enabling online booking and payment of railway tickets. According to the ICICI Bank, the service would be available through the website of Indian Railway Catering and Tourism Corporation Ltd (IRCTC). The bank sources said that the customers would be charged 0.5 % fee on the fare.

RBI empanels advertising agencies

May 27, 2003: Reserve Bank of India has empanelled at least six advertising agencies, including RK Swamy/, BBDO, FCB Ulka, J Walter Thompson and Pressman. This is the first time that the bank has chosen to create an ad agency panel. Prior to this, it approached the agencies as per its needs and requirements. RBI officials said that the bank does not advertise on a regular basis.

“We only advertise when we need to invite tenders, educate public or provide them with information on an important subject," quoted a bank official. In case the size of job is sizable, the empanelled agencies would be asked for a pitch. Smaller assignments would be handed over to empanelled agencies individually.

RBI's global interest income takes a hit as interest rates dip

May 27, 2003: Mumbai: The Reserve Bank of India’s (RBI’s) income from overseas investments has slowed down, thanks to a dip in interest rates internationally. According to an RBI study on `invisibles’ in the balance of payments, interest earnings on RBI investments in ‘01-02 rose by just $61 m to $2,010m from $1,951m in ‘00-01. Interestingly, these earnings had gone up $568 m in the previous year. Going by the trend in ‘02-03, analysts expect this slowdown to continue in the last financial year as well. Investment income in invisibles during April-December ‘02-03 actually was lower at $1651m as compared to $1843m in the comparable period in the previous year. Thus there are chances that the returns on RBI’s overseas investment may not show any significant improvement in period ended March 31, ‘03. It may be noted that foreign exchange reserves are touching a new high by the day.

In ‘02-03, the central bank amassed close to $22 billion. A portion of the reserves is deployed in certain permissible securities in the overseas market like sovereign bonds of developed economies or `AAA’ corporate bonds. The balance is parked as currency or deposits with central banks of other countries or other foreign banks. The ideal level of reserves and the cost of holding huge reserves have been the hot issues of debate at various forums. The central bank has time and again said that the cost of holding reserves is not very significant given the role reserves accumulation has to play. But, interestingly, the World Bank in its recent Global Development Finance Report has warned against the accumulation costs of holding high reserves by different economies.

ICICI Bank to make cops tech-savvy to curb card frauds

May 28, 2003: Mumbai: Plastic card frauds rank high among white-collar financial crimes. The police, generally not-so-tech-savvy, have a tough time catching criminals. But help is at hand for the policemen attached to the economic offences’ wings and crime detection cells. Card issuing banks, who are at the receiving end of such frauds, are taking time off to teach the police how to tackle such crimes and investigate the cases. While many banks are considering workshops and awareness seminars for the police, ICICI Bank has taken the lead by organising seminars all over the country. It has already held programmes for the law-enforcers in Bhopal, Chennai, Hyderabad, Baroda and Lucknow. Bank officials say credit card offences encompass basic frauds like misusing stolen cards, to more complex ones like account take-overs, high technology frauds like counterfeit cards and skimming (where the magnetic stripe data of a valid card is copied into a dummy card), among others. These frauds, which were hitherto unheard of in India, are slowly making their entry into the thriving Indian credit card market.

HDFC Bank in marketing tie-up with Amex

May 30, 2003: Mumbai: HDFC Bank has inked a marketing alliance with American Express. This alliance enables HDFC Bank to offer American Express Travelers cheques to consumers at over 160 HDFC Bank branches across 70 cities, which also offers other retail foreign exchange facilities, as according to a bank release.

Govt asks banks to return capital at market price

May 31, 2003: New Delhi: In a major flip flop, the government made it clear that it will accept return of capital from listed state-owned banks only at market price. Several state-owned banks, which had announced their intentions to return capital infused by the government back to the owners, will now have to reconcile to paying a premium, considering the high market quotes of their scripts. Just two days ago, the finance ministry spokesperson had announced that the return of capital by banks would only be at par, prompting a further bull-run in the stock prices of several state-owned banks. Many banks stocks have touched their 52-week highs.

Today it was officially clarified that it was not the intention of the government to accept return of equity from listed public sector banks at par when the price is higher in the market. The change in stance may act as a dampener to several state-owned banks that have over the last couple of days announced their plans to return capital. In this year’s budget, the government had provided for return of capital by the Union Bank (Rs 58 crore), Canara Bank (Rs 277.87 crore), and Andhra Bank (Rs 50 crore each in ‘02-03 and ‘03-04). The finance ministry will soon work out the modalities of determining the market price. This could be, say, the weighted average market price for a particular period. The change in the government policy may prompt banks to take a fresh look at their plans to return capital.

 
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