epages News [Banks]

ICICI Bank to keep 10% for existing retail investors

Mar 13, 2004: Baroda: In keeping with its corporate policy of going retail, ICICI Bank’s extra ordinary general meeting (EGM) held decided to reserve 10% of the proposed public issue for its existing retail investors. While it can't have differential pricing for its retail investors like ONGC and other public sector floats, this is as far as ICICI Bank would go to show that it is inclined towards retail investors. The bank's investors holding less than 1,000 shares would be eligible for this reservation. ICICI Bank is expected to float the issue in the first week of the April. Around Rs 3,500 crore would be raised through the book-building route. The bank has proposed to hit capital market with fresh offering to strengthen its capital base and leverage various business opportunities that have arisen in financial sector particularly in infrastructure lending and insurance business. The net worth of the bank would go up from Rs 8,000 crore to Rs 11,500 crore and its capital adequacy ratio will go up from 11.4% to around 15%.

StanChart sets up 100% NBFC subsidiary in India

Mar 12, 2004: Mumbai: Standard Chartered Bank of UK has set up an 100% subsidiary — Standard Chartered Investments and Loans (India) (SCILL), which will operate as a non-public deposit taking non-banking finance company. In recent times, foreign banks had been facing problems after Reserve Bank of India tightened norms on capital raising for foreign banks in India. The RBI had said that foreign banks’ exposure to Indian corporates through the external commercial borrowings (ECBs) route should be excluded from their Tier-I capital. Also, according to current norms, banks exposure to a single corporate has been restricted at 15% while for a group it is at 40%. An NBFC does not, however, face such limits. There isn’t much difference between the funding costs of the NBFC and the bank if one SCILL to start with will focus on corporate assets takes into consideration the SLR, CRR and other regulatory requirement. Incidentally, Standard Chartered has another NBFC under its arm — Standard Chartered Finance — of which it has a 76% stake. This NBFC focuses on the wealth management services and has around 18 branches across the country.

BoI's first off the block: introduces IPO financing

Mar 08, 2004: Mumbai: Industrial Development Bank of India (IDBI) plans to raise tax saving bonds at 5.5% for three years or 5.65% for five years under the annual payment scheme. The financial institution will raise Rs 500 crore with the option to retain another Rs 500 crore.Significantly, the bank will extend loans at its prime lending rate of 10.7%, which works out to be one of the cheapest in the industry. The announcement comes amid rumours the government has asked PSU banks to support the IPOs. The loans can be used by investors to apply for IPOs such as ONGC, Gail, LNG Petronet, Biocon, Power Trading Corporation and Bank of Maharashtra. The bank has set up a committee, which will approve the Initial Public Offerings (IPO) that will be funded.

As per the Reserve Bank of India norms, an investor can borrow a maximum of Rs 10 lakh and maintain a 50% margin with the bank. The loan, to be offered for 60 days, is a revolving facility, which means that if an investor repays a part of loan, he can go for fresh borrowing. While some of the PSU banks have been trading in secondary markets and extending personal loans against shares, IPO financing is dominated by private banks and non-banking financing companies (NBFCs). The NBFCs charge an interest of around 16%. Public sector banks have little or no exposure to the capital market, capped at 5% of the loan outstanding at the close of the previous fiscal. Besides IPO funding, this includes loans against shares for investments in stocks, broker funding and direct investments by the banks in stocks and equity mutual funds. Some of the private banks have been lobbying with the RBI to relax this limit. Having touched the exposure ceiling, these banks have been extending personal loans against shares, which are not considered as the capital market exposure for banks.

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.”

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.

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.

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.

HDFC Bank Q3 net up 32% on retail loan boom

Jan 10, 2004: Mumbai: HDFC Bank, India's second-largest private sector bank, reported a 32% rise in quarterly profits on a boom in retail lending. The New York Stock Exchange-listed bank said its net profit was Rs 130.4 crore ($28.7 million) in the third fiscal quarter ended December 31. That compared with a profit of Rs 98.88 crore reported a year earlier. Indian banks have reported strong earnings growth for the past two years as they reaped bumper trading profits on a steep slide in bond yields and on a boom in retail lending stoked by steep falls in interest rates. Industry leader State Bank of India is expected to report a 20% rise in net profit to Rs 940 crore while private sector rival ICICI Bank is forecast to post a 14% rise in profit to Rs 370 crore. Shares of HDFC Bank rose 67% in 2003, under performing a 108% rise in the Bombay exchange's banking sector index, which is heavily weighted in favour of state-run banks. The benchmark Bombay exchange index rose around 73% last year.

Orissa banks to up credit exposure to farm sector

Jan 03, 2004: Bhubneshwar: Bowing to the constant pressure from the Orissa government, commercial banks have agreed to release more credit to the crucial agriculture sector and some vital government sponsored schemes to up the CD (credit deposit) ratio from the level of 50.57% in September last to 60% by the end of this fiscal. At the quarterly meeting of the State Level Bankers Committee organised by the convenor bank, Uco Bank, held last week, the Banks have agreed to increase credit off take to take the CD ratio to the level of 60% as per the Reserve Bank of India (RBI) stipulations. The banks in Orissa at the end of September last had mobilised Rs 20486.27 crore as against advances of Rs 10318.49 crore, which brings CD ration to 50.57%. Though the CD ratio is up by 2.82%, it remains far below the RBI stipulation of 60%. Nevertheless, banks in the state have disbursed total credit of Rs 1392 crore during the half of this fiscal as against the plan allocation of Rs 1425.74 crore achieving 98% of the target, sources pointed out.

Banks, however, are worried over the recovery position as it continues to be grim, adversely affecting credit flow to various sectors. The recovery of dues remains as low as 31% and the bankers have urged the government to amend various laws to facilitate better recovery, which would lead to more credit flow. With the recovery in Self- Help Group (SHG) financing at a high 92%, the banks have been urged to adopt a proactive approach for financing these SHG groups with a more liberal view. The meeting emphasised priority in credit delivery to farm water management and agriculture and allied sectors. Banks were also asked to achieve their targets under annual credit plan and other government sponsored schemes. While there was suggestion for fixing accountability in case of non-performance at all levels, private sector banks were asked to improve their CD ratio to 40% from the present level of 21% by the end of March next.

ICICI Bank Retains PLR at 10.5%

Jan 01, 2004: Mumbai: ICICI Bank has decided to leave its benchmark prime-lending rate (PLR) unchanged at 10.5% per annum, available for a tenor of upto 1 year. Over the past few days, a number of banks, mostly public sector, have lowered their PLRs. The bank’s benchmark PLR (known as ICICI Bank benchmark advance rate or I-BAR) comes into effect from January 1, and would be payable monthly. The RBI, this year, decided to introduce benchmark PLR for banks, and the methodology was prepared by the Indian Banks’ Association. Earlier, ICICI Bank had three slabs of lending rates. Besides the short term PLR, it had medium-term PLR (11.5% for 1-3 years) and long-term PLR (12.5% above 3 years). Union Bank of India was the first to cut its PLR to 10.75% from 11%.

SBI reduces benchmark lending rate to 10.25%, lowest in industry

Dec 30, 2003: Mumbai: State Bank of India has fixed its single benchmark prime lending rate at 10.25%, the lowest in the industry and down from its PLR of 10.50%. The country’s largest bank has also cut interest rates on deposits by 0.25%, to 5.25% for three years and above, and to 5% for one year to less than three years. The reduction in lending rates rate will translate into a 0.25% cut in home loan rates for existing and new borrowers. The new home loan rates will be 7.5% against 7.75% for five years, 8% (8.25%) for up to 10 years and 8.25% (8.5%) for loans of over 10 years. The new rates will be effective from January 1.Interest rate on deposits with maturities of two to less than three years has been fixed at 5%, while the rate for deposits of three years and above stands at 5.25% with effect from January 1. Rates on its short-term deposits remain unchanged. All SBI lending rates will now be linked to the new single BPLR.

SBI has said that loans that are presently linked to PLR, SBMTLR and SBSTAR shall accordingly stand reduced by 0.25%. SBI has said that the reduction is in response to RBI’s suggestion that BPLR should be determined by taking into account the actual cost of funds, operating expenses and a minimum margin to cover regulatory requirement of provisioning or capital charge and profit margin. The SBI rates on short-term deposits are unchanged at 4% for 15 to 45 days, 4.5% for 46 to 179 days and 4.75% for 180 days to less than a year. ICICI Bank, the second largest bank after SBI, has not yet announced its single BPLR. ICICI Bank charges 10.5% for loans up to 1 year, 11.5% for loans of one to three years and 12.5% for loans above three years. Bank of Baroda has announced a single BPLR of 10.5%, while Union Bank of India, Canara Bank and Punjab National Bank have pegged it at 10.75% with effect from January 1.

City Union Bank eyes Rs 10,000 cr biz by 2007

Dec 30, 2003: Chennai: The 100-year-old City Union Bank (CUB) expects to double its total business every three years to reach Rs 10,000 crore by 2007. The bank is also in talks with Western Union to offer money transfer facilities through its branches. The bank has been doubling its business every three years in the last decade and was confident of continuing its performance to reach Rs 10,000 crore by 2007. The bank plans to add about 15 branches a year to have a network of 175 branches by 2007 from the current 125. The investment portfolio amounted to Rs 1,300 crore, yielding an average return of 9.2%. The bank had about Rs 500 crore above the SLR requirement.

ALFL merger gives IndusInd retail edge with Rs 2,000 cr. asset

Dec 27, 2003: Mumbai: The proposed merger of Chennai-based Ashok Leyland Finance Ltd (ALFL) with IndusInd Bank was approved by both the boards in the ratio of 9:4 which will provide the bank with an edge in retail lending and add assets worth Rs 2,000 crore portfolio to its balance sheet. The private sector bank is likely to upgrade some ALFL offices into bank branches and does not plan any retirement scheme to rationalise manpower in the immediate future. The bank has limited presence in retail lending segment while ALFL has strong retail assets base with relationship with three lakh customers. Both the entities are Hinduja group companies. Ghose said the bank would review the lease asset portfolio of the ALFL and take a decision about its disposal or continuation. Besides synergy in the business, the bank balance sheet would also benefit from ALFL's Rs 235 crore reserves. Bank's networth comprising equity and reserves stood at Rs 602 crore as on March 31, 2003 while the capital adequacy ratio was 12.13%.

Buyers of bad loans find India a better bargain than China

Dec 24, 2003: Mumbai: India, compared to China, offers greater opportunities to investors keen on acquiring stress assets. However ‘critical mass and clarity on cost structure’ will also be a key consideration for investors. The gross NPAs of scheduled commercial banks in India stood at Rs 68,714 crore and net NPAs at Rs 32,764 crore as on March ‘03. The gross NPA in India is close to 8.8%, while that in China is estimated at 35-40%. In Australia and the UK, the recovery is within three months, but surprisingly, most of the European countries are lagging behind in putting in place a proper legal system. Recovery takes very long in Germany and Italy. PwC is of the view that returns would be better in India than in Germany.

New design triggers a crash in ATM prices

Dec 20, 2003: Mumbai: The cost of automated teller machines (ATMs) has crashed further with the introduction of ASAN, the first ever ATM conceived and designed specifically for the Indian market by NCR Corporation. The world’s largest manufacturer of ATMs, has launched the machine at a cost of less than Rs 5 lakh, significantly lower than the price of regular ATMs and cash dispensers which can range from anywhere between Rs 6 lakh to Rs 9 lakh. ASAN, as the ATM will be known in the domestic market, will help banks give many more bank account holders access to ATMs without incurring huge capital or operational costs. The operational cost of this machine is expected to be just Rs 60,000 per month against the monthly cost of Rs 1.2-1.3 lakh that banks incur in running other machines.

Based on technology designed to meet Indian infrastructural challenges, ASAN’s small size and low running costs offer banks a low total cost of ownership, safeguarding their investment even in locations with relatively low transaction volumes. The machine has an enhanced dust filtration system and also works at temperatures of upto 40 degrees Celsius. The machines also comes with an integrated UPS which ensures that in case of power failure, the ATM completes the ongoing transaction before shutting down. The ATM can also be automatically switched off or on at pre-decided times every night and morning if located at sites that do not require 24-hour availability. ASAN also supports wireless connectivity through GPRS and CDMA communication technologies for areas with poor conventional telecommunications connectivity. The ATM has been developed based on NCR’s global expertise and insights into the Indian ATM market with consumer research-based design inputs from the Industrial Design Centre at the Indian Institute of Technology (Mumbai). The ASAN machine is being developed at NCR’s plant in Pondicherry and the company expects to manufacture nearly 10,000 machines a year. NCR plans to deploy ASAN in other emerging markets such as China and Brazil in the next 2-3 years.

Foreign cos sniff around on hopes of IDBI de-merger

Dec 16, 2003: Mumbai: Foreign investors seem to be snooping around IDBI Bank, despite the on-again off-again rumours of a possible reverse merger with the parent, IDBI.Till quite recently, investors had approached IDBI for picking up a stake in IDBI Bank. These included Citigroup, Temasek Holdings and DBS, both from Singapore.At present, IDBI holds 57% in IDBI Bank, and its associate Sidbi 14%. The government holds 58% in IDBI. The IDBI Bank stock price currently quotes at Rs 38. Sources said that if the proposed plan for a merger with a PSU bank goes ahead, it is possible that IDBI would look at divesting its stake in the bank. The proceeds from such a divestment, said sources, would be utilised for writing-off sticky assets of IDBI. The Lok Sabha passed the Industrial Development Bank of India (Transfer of Undertaking & Repeal) Bill that proposes to corporatise IDBI. The bill was passed by the House, after finance minister Jaswant Singh gave a categorical undertaking that the government will not bring its holding in the FI below 51%.

Govt plans IDBI merger with PSU bank now

Dec 15, 2003: Mumbai: The government is considering a proposal to merge Industrial Development Bank of India with a public sector bank. However, it has not ruled on its merger with its subsidiary, IDBI Bank. The passage of the bill was a pre-requisite for the conversion of IDBI into a commercial bank. The three options for transfer of IDBI’s business into a banking entity were to create a new entity with a fresh banking licence, merge IDBI with a public sector bank and merge IDBI with IDBI Bank.

On the issue of whether the government would permit UTI (I) to respond to the open offer made for shares of UTI Bank by HSBC, Finance ministry secretary, Mr Sisodia said he was not aware if UTI (I) needed to obtain government permission for sale of shares, but if such permission was required, UTI would make the necessary application to the government and the government would respond to it. UTI (I), which has taken over the assets and liabilities relating to the guaranteed return schemes of the erstwhile UTI, is controlled by a special administrator governed directly by the finance ministry. He added that high margins were only part of the problem; another issue was the considerable deviation between interest rates charged between various segments.

ICICI Bank to mop up Rs 4,000 crores

Dec 11, 2003: New Delhi: The finance ministry’s approval to ICICI Bank to issue tax-saving bonds to raise up to Rs 4,000 crore in 2003-04 has prompted a me-too chorus from other banks. In the past, these tax-saving bonds were issued only by the two financial institutions ICICI and IDBI, which were engaged in funding infrastructure projects. Commercial banks, given their access to relatively cheaper sources of funding like deposits and the inter-bank market, never took recourse to this window of borrowings. Now with ICICI Bank having obtained the approval of the Central Board of Direct Taxes even after its transformation into a bank, other banks also want to get into the act.

The tax-savings bonds are offered to investors who can avail of a tax rebate under Sec 88 of the Income Tax Act, upto a sub-ceiling of Rs 30,000 within the overall ceiling of Rs 100,000. Investment in these bonds qualifies for a tax rebate for investors whose annual taxable income does not exceed Rs 5 lakh. For financial institutions, raising funds through tax savings bonds helps, considering that they do not have access to deposits and other cheaper sources. ICICI completed the first tranche of its tax-saving bonds in August this year offering investors a coupon rate of 5.75 %. According to the estimate of officials of FIs, the market for these tax-saving bonds — called infrastructure bonds in the past could be close to Rs 3,000 crore annually. IDBI and ICICI usually tap the market a few times in a year, raising close to Rs 500 crore from each tranche.

Deposit rate cuts begin

Dec 11, 2003: Mumbai: Several banks have started lowering their deposit rates in anticipation of a fall in lending rates in the near future. In the last one-month BoI, SBI, BoB, UCO and HDFC have cut deposit rates. “So far banks have followed SBI. There was no methodology involved in arriving at lending rates. Now, banks will peg their PLR based on a methodology prepared by IBA,” said V Leeladhar, CMD of Union Bank of India and also chairman of Indian Banks Association at a press meet on the Bank Economists’ Conference scheduled this week. “The interest rate would fall by 0.25%-50% after benchmark PLR is introduced,” he added.

StanChart plans to launch 100% NBFC arm

Dec 02, 2003: Mumbai: Standard Chartered Bank (StanChart) is targeting a January launch for its proposed 100% non-banking finance subsidiary (NBFC) Standard Chartered Investments and Loans (India). The bank plans to start business with an initial capital of $7m. StanChart also plans to strengthen its retail network in the country and expand its geographic spread. It plans to raise its presence to 30 cities from present 24 in the next couple of years and also add 20 to 30 new branches in the country. Besides, it also wants to increase its existing network of 87 ATMs to 120 over the next couple of years.StanChart will also consider acquisitions to retain its leading position.

The web-based transactions banking solution, which is already launched at Hong Kong, Singapore and the UK markets is expected to help corporates in supply chain management. Set up with investments of around $100m, the bank expects to help customers to realise 20-30% of their incremental growth in businesses.

 
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