epages News [Banks, February 2004]

• IDBI to be a bank from April
• Amex enters into six-month agreement with BOI
• Personal loans prop up credit demand
• UTI Bank to open 15 branches in South
• Back to Banks Archives

IDBI to be a bank from April

Feb 10, 2004: New Delhi: Come April, a new public sector bank will start functioning on the second day of the month. According to a source, the government is likely to notify the Industrial Development Bank of India (IDBI) as a bank on April 2. A bill to convert the institution to a bank was passed in the winter session of Parliament. It says the new bank will be called Industrial Development Bank of India Limited. Its subsidiary, IDBI Bank, will continue to co-exist with its parent banking firm. The bank is likely to start operations from 101 branches from the same day. The government, which owns around 58% equity in it, will continue to extend guarantees to the bank. This will make customers confident of banking with it. The major reason behind converting IDBI from an institution to a bank was to enable it to raise cheap funds through public deposits.

At present, the institution raises funds at around 6.5% per annum through bonds and debentures. Post-conversion, the cost is likely to come down by half to one %age point. Although the institution will be converted to a commercial bank, its development financial institution (DFI) status stays. It will be the lead DFI of the country. IDBI’s total domestic public deposits in the form of bonds and debentures as on March 31, 2003, were Rs 41,800 crore. It also raised funds from the World Bank and through borrowings from other domestic commercial banks. Total loans disbursed by the institutions to other companies are Rs 63,115 crore. But its bad loans, where recoveries are doubtful, are 14.2 % of its assets. In absolute terms, its doubtful assets are around Rs 9,000 crore, whereas its net worth in March 2003 was Rs 6,945 crore only. However, as the industry had revived ever since , many of the non-performing assets had become performing, said the source.

Amex enters into six-month agreement with BOI

Feb 16, 2004: Mumbai: American Express Bank and state-run Bank of India have entered into a forward rate agreement linked to the six-month, a statement from the US bank said. American Express Bank said the deal was the first in the Indian market to be linked to the MIFOR benchmark. A forward rate agreement is a contract between two parties to make interest payments to each other on a notional principal amount for a specified period in the future. The notional transaction amount for the Amex-Bank of India deal is 250 million rupees and the six-month agreement begins on August 19. At the start of this period, one party will pay a pre-determined fixed rate, and the second party pays the prevailing six-month MIFOR on the date the deal takes effect.

Personal loans prop up credit demand

Feb 23, 2004: Mumbai: The feel-good factor seems to have finally translated into money moving off the shelf, and into the system. Non-food credit given by scheduled commercial banks has been moving up sharply since the end of December. And even deposits are coming into the banking system in much bigger amounts, as compared to last year’s levels. According to the latest banking business figures released by the Reserve Bank of India (RBI), outstanding non-food credit extended by scheduled commercial banks amounted to Rs 7,69,711 crore as on February 6. This represents a growth of Rs 34,850 crore since end-December, against a growth of Rs 21,612 crore in the comparable period of last year. This translates into a growth rate of 5.7% since end-December, compared with a growth of 3.4% in the same period last year. Personal loans that are picking up include, among others, loans for purchases of consumer durables, as well as auto loans. Besides, banks also report a rising demand for personal loans to invest in the capital market, on the back of a rising sensex.

Deposit growth during the period too has been strong — Rs 43,860 crore, compared with Rs 17,049 crore mobilised in the corresponding period last year. Deposit growth during the period worked out to 3.1% since end-December, against 1.3% in the corresponding period of last year. Interestingly, commercial banks have recorded one of the highest fortnightly growths this time round. Aggregate deposits mobilised by them went up Rs 14,120 crore to Rs 14,53,805 crore during the fortnight ended February 6. This is one of the highest fortnightly growth in deposits experienced in the current fiscal so far. Only on two occasions during the year has deposit growth crossed Rs 14,000 crore. And these incidentally were the fortnights during which a quarter ending period fell. Typically, during a quarter end there is a tendency among banks to shore up deposit figures, as most banks listed at the stock exchanges have to make their financials public.

UTI Bank to open 15 branches in South

Feb 26, 2004: Hyderabad: In an effort to garner low cost deposits in South, UTI Bank has decided to add as many as 15 branches and about 200 ATMs in the Southern region during the current fiscal year. The bank currently has an extensive network of 238 offices. “In South, we are focused on Andhra Pradesh since the state is leading among all the other southern states in terms of business growth,” Mr L J Fonseca, senior vice president, South, UTI Bank, said here on the occasion of inauguration of an extensive counter. The bank currently has 62 extension counters and 176 branches.

“The branches, spread across 110 cities, enable the bank to reach out to a large cross-section of customers with an array of products and services catering to both the retail and corporate segment,” he said. South’s contribution at present in terms of bank’s deposit-base is to the tune of Rs 2,300 crore.When asked if the bank’s style of functioning has changed after the recent acquisition of equity stake by HSBC, he said “HSBC has made a strategic investment in UTI Bank and currently holds about 35%. However so far there has been no change in the bank’s working style.”