The bank proposes to hold equity in health insurance companies to take advantage of their regional strength, Mr Krishnamurthy said.

Government's overdraft at Rs 6,833 crore
Mumbai: The government's overdraft facility with the Reserve Bank of India (ways and means account) has shot up to Rs 6,833 crore in the week ended 1 October 1999. It was Rs 2,234 crore in the previous week.

The RBI's weekly statistical supplement said loans and advances to state governments fell to Rs 1,022 crore from Rs 2,093 crore during the same period.

3 Japanese insurers to form alliance
Tokyo: Mitsui Marine and Fire Insurance Company is joining two other major Japanese non-life insurers, Nippon Fire and Marine Insurance Company and Koa Fire and Marine Insurance Company, to form a broad alliance under a joint holding company.

The alliance will create the largest non-life group in Japan with combined assets of more than $57.1 billion, beating the current No 1, Tokio Marine & Fire Insurance Company.

Banks will be credit-rated soon
Mumbai: Credit rating of banks, based on the CAMELS model is on the anvil. The Reserve Bank of India will discuss the issue with bankers on 22 October 1999. CAMELS stands for 'capital adequacy, asset quality, management, earnings, liquidity and systems and controls'. Banks will be rated on a scale of 1 to 5 based on the CAMELS criteria.

SBI to adopt GAAP
Mumbai: As a precursor to its American depository receipts issue in mid-2000, the State Bank of India will prepare its accounts for the financial year ended March 2000 on the basis of the US Generally Accepted Accounting Practice. According to G G Vaidya, chairman, SBI, a consultant will be appointed who will advise the bank on the implementation of the US GAAP.

SBI will also seek a reduction in the government’s stake held in it and also for increasing the ceiling for foreign institutional investors to 30 per cent from the current 20 per cent.

Call rates go up
Mumbai: Banks that borrowed heavily to bridge the cash reserve ratio gap, took the call rates to 25 per cent. Towards the end of the day, the rates eased to about 17 per cent.

ING Insurance wants one more partner
Mumbai: Dutch ING group company ING Insurance is scouting for a third partner in its planned insurance venture. It already has a memorandum of understanding with Vysya Bank. ING is looking only at the life insurance business in India, according to N N Joshi, chief advisor.
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SBI, associates will merge
Mumbai: An ‘in principle’ decision has been taken by the State Bank of India to merge itself and its seven associate banks. This will create a $70 billion or Rs.3,00,000 crore giant.

The seven associate banks in the descending order of size in terms of assets are State Bank of Hyderabad, State Bank of Travancore, State Bank of Patiala, State Bank of Bikaner & Jaipur, State Bank of Mysore, State Bank of Saurashtra and State Bank of Indore.

The Reserve Bank of India holds 59 per cent of the equity of SBI. The SBI wants the RBI to reduce the stake to below 55 per cent so that the former can increase its equity by issuing American depository receipts. The SBI management feels that if the RBI is not interested in a dilution in its stake, there will be a strain on the future profitability of the bank. 

Forex brokerage war may erupt
Mumbai: ICICI Bank will pay only half the rates the State Bank of India pays on spot and long-swap transactions. While the SBI has a 60 per cent market share in the foreign exchange market and is in a position to dictate market rates, ICICI Bank’s brokerage has been accepted by some of the top foreign exchange brokers. ICICI Bank has only a 2 per cent market share in the foreign exchange market.

From 1 October 1999, the Foreign Exchange Dealers Association of India had decided to let banks fix foreign exchange brokerage charges as they wished. The SBI was the first to slash its rates, which have been considered to be the benchmark rate for all Indian banks.

RBI rejects NBFC application
Mumbai: The Reserve Bank of India has refused to register Vijaya Commercial Credit Ltd., a Mangalore-based finance company as a non-banking finance company. Vijaya Commercial cannot operate any more as a NBFC. 

Bank of Scotland to formally bid for Natwest
London: The Bank of Scotland will make its $34.7 billion hostile bid on National Westminster Bank formal by issuing an offer document. The main rivals for Bank of Scotland are the Royal Bank of Scotland and Abbey National which also want to take over NatWest.

Credit Suisse raided in Tokyo
Tokyo: Credit Suisse Financial Products’ Tokyo branch was raided by the police on charges of preventing inspection by the Japanese financial regulatory authorities.

The branch where the raid was conducted had allegedly instructed employees to shred some of the recorded transactions and erase e-mail records when the Financial Supervisory Agency was inspecting it in January 1999.

Earlier, when the FSA had accused it of malpractices, Credit Suisse had already made a public apology to Japan, ordered a report on the incident. It had lost its licence.  

Sumitomo, Sakura banks to merge
Tokyo: Japan's Sumitomo Bank and Sakura Bank will merge to create a $925 billion behemoth. This will be the second largest bank in the world, after the $1,308 billion bank that was formed after the merger of the Industrial Bank of Japan, Dai-Ichi Kangyo Bank and Fuji Bank. An official announcement regarding the merger will be made at a later stage. Deutsche Bank of Germany is the third largest with $899 billion in assets.

The Japanese financial sector, troubled by bad loans and losses, has been reforming at a feverish pace.

The banks are members of Japan's 'keiretsu' groups -- industrial clusters with cross-shareholdings and other long-standing business ties.
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Two insurance bills likely from govt.
New Delhi: An Insurance Amendment Bill will be tabled in the parliament so as to make necessary changes to the Insurance Act, 1938. The other bill that will be presented is the Insurance Regulatory and Development Authority of India (IRDAI) Bill. The bills will carry rules on minimum capital adequacy for insurance companies and penalties.

Rupee dips before recovering
Mumbai: The rupee touched 43.54 a dollar on 13 October 1999 before rallying to close at 43.44. Dealers fear a slowdown in capital inflows owing to the military coup in Pakistan.

Call rates shot up to a maximum of 18 per cent as dealers and banks were finding it tough to fund the securities held by them. Dealers feel that call rates will ease as they expect a cut in the cash reserve ratio.

FRA to be set up
Mumbai: As proposed by the Verma panel, a Financial Restructuring Authority will manage the government’s holding in public sector banks. The FRA, which will be in existence for seven years, will decide on the disinvestments to be made in the banks, enter into memoranda of understanding with weak banks, set targets for the banks and penalise banks that do not achieve the targets.

IDBI, ICICI calculate exposure differently
Mumbai: The 15 per cent maximum exposure limit in a single sector, specified for financial institutions, is computed differently by ICICI and the IDBI. ICICI calculates exposure on the basis of disbursals made as a percentage of total loans, while IDBI calculates it according to sanctions made.

The Reserve Bank of India is unable to give a clear direction on the method of computing of the 15 per cent.

CARE upgrades Srei
Mumbai: Srei International Finance has been upgraded by Credit Analysis and Research by one notch from A to A+. Srei’s main shareholders include the International Finance Corporation, the Netherlands government-owned FMO and the German government-owned DEG.

Syndicate Bank to launch co-branded card
New Delhi: Syndicate Bank, which is opening its maiden public issue on 25 October 1999, has entered into a tie-up with Standard Chartered Bank to launch a co-branded credit card. The cards will be launched by mid-November 1999. Syndicate Bank will also market Stanchart cards through its branches.

According to K V Krishnamurthy, chairman and managing director, the bank has started bullion trading in Ahmedabad, and will soon extend such trading to Chennai and Coimbatore.

Syndicate Bank will come out with an equity issue of Rs.125 crore at par, which will reduce the government’s holding to 76 per cent in the bank from the current 100 per cent.

Currently, the bank has a capital adequacy ratio of 9.5 per cent, which will go up to 10.2 per cent after the issue. The Rs.346-crore equity capital of the company will go up post-issue to Rs.471 crore.
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Rupee may be kept stable
Mumbai: Foreign exchange dealers expect the Reserve Bank of India to help stabilise the rupee at the current level, in case there is selling pressure as a result of the instability in Pakistan, where the army has taken over. On 12 October 1999, the rupee lost seven paise to close at 43.4350 vis--vis the dollar.

Some banks may not be able to meet CRR norms
Mumbai: Some Indian banks may be unable to meet the cash reserve ratio requirements by 31 December 1999. They feel that depositors will go in for huge cash withdrawals fearing a system crash owing to any Y2K bug. Banks are asking the Reserve Bank of India to relax the CRR levels on 31 December 1999, which happens to be the reporting Friday, or remove the reporting requirement on that day.

The RBI, in turn, has planned to introduce greater liquidity into the system at year-end so as to marginalise any Y2K-related cash crunch in the financial system.

ARCs to help banking sector
New Delhi: Reforms in the banking industry are likely to start with the formation of an asset reconstruction company, in which the government will most likely hold a 51 per cent stake. The M S Verma Committee has suggested the formation of an ARC with a life of seven years, and with a government holding of 49 per cent in an equity of Rs.1,000 crore.

IDBI Bank likely to introduce novel card
Calcutta: IDBI Bank and a state transport corporation may jointly launch a ‘smart card’ that will allow passengers to gain entry into buses by swiping such as card in machines that will be installed in buses. The bank and the state government agency may jointly invest in the venture, which may take the form of a new company.

According to Deepak Mukerjee, mamaging director, IDBI Bank, the feasibility of the venture is currently being studied. Even a person who does not hold an account with the bank will be able to place a deposit with the bank, which will be adjusted depending on the extent of usage of the bus service.
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FIs may revoke sanctions
Mumbai: Financial institutions may review their sanctions for certain power projects where disbursements have not begun. In some cases, sanctions may be withdrawn.

The exposure in any particular sector for a financial institution cannot exceed 15 per cent. For most financial institutions, the exposure in the power sector is already more than 10 per cent. But this has not benefited the institutions at all since disbursements have been low. IFCI and IDBI have almost touched the maximum while ICICI has its exposure at 10 per cent in the power sector.

Until 1994 the disbursals to sanctions ratio for the power sector was 69 per cent. This ratio has deteriorated to 22 per cent during 1998-99.

RBI announces new scheme
Mumbai: The Reserve Bank of India has announced the Rashtriya Krishi Bima Yojana, the crop insurance scheme effective immediately. In its first year, the scheme will cover the cash crops – sugarcane, potato and cotton and will be managed by the Crop Insurance Corporation, a subsidiary of the General Insurance Corporation. The new scheme supplements the GIC's Comprehensive Crop Insurance Scheme.

IDBI may enter takeout financing agreement
Mumbai: Industrial Development Bank of India and the Power Finance Corporation may strike a takeout financing deal that will help IDBI free some of its blocked funds.

IDBI’s current lending is in long term projects with a maturity of about 10 years. But, power projects have a maturity exceeding 12 years. By adopting the takeout financing route, one institution will take over the assets from the other after a certain mutually agreed period.

IDBI is also seeking the sale of stake in its asset management company to Principal Group of the US.

ANZ seeks McKinsey’s help
Calcutta: ANZ Grindlays Bank, which has started focusing on the retail banking segment, has appointed McKinsey & Co. for helping it draft a three-year business plan.

The bank has recently introduced a satellite banking system.
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BOB’s unique fee plan
Mumbai: One of the top Indian public sector banks, the Bank of Baroda, may charge customers who have got loans sanctioned but are not using them. This will help the bank increase its non-interest income, as it foresees a low interest regime in future.

According to K Kannan, chariman, Bank of Baroda, the final structure of the ‘commitment fee’ will be decided soon. He said that non-utilisation of sanctioned loans has caused problems of asset-liability management for the bank.

IBA norms for credit card companies
Chennai: The Indian Banks Association will issue a code of conduct for credit card collection agencies. The norms will be finalised after studying the system in other countries, such as the UK, Phillippines and Hong Kong.

Credit card collection agencies are employed by banks to recover the amounts due from credit card holders who have overdues.

RBI may ban forward deals in gilts
Mumbai: The Reserve Bank of India, on worries of a skewed yield curve, may ban forward deals in gilts. The RBI feels that though forward trades are just about 1 per cent of the total gilt market, they seem to be causing some confusion on the projected price movement.

BNP too to go retail
Mumbai: Banque Nationale de Paris is the latest in the list of banks that have decided to go retail. It will invest $46 million in India in the next one and a half years.

According to Jonathan David Lyon, country manager and chief executive, BNP India, by mid-2000, the bank will provide asset management services, a depository company, an automatic teller machine network, an interactive website, and telephone and internet banking to its retail customers.
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