24 July 2000

Citibank offers stocks to employees
Mumbai: Under a program recently cleared by the Reserve Bank of India, Citibank Indiais offering options to its Indian employees allowing them to hold shares of Citigroup at a pre-determined price.

Under the proposal, Citibank employees who wish to avail of this option, will undergo a monthly deduction from their salary for a period of two years. At the end of the term the amount accumulated could be used to obtain shares based on the price prevailing as on August 1, 2000. The monthly deduction scheme has been structured to ensure that employees availing the option are not required to cough up the cash upfront. In the course of two years an employee will have the option to step out of the arrangement.

The maximum number of shares that can be held by an employee will depend on the salary and central bank regulations.

The present programme is distinct from the employees stock option scheme and would cover close to 1.5 lakh employees across the globe.

Stanchart to begin integration with Grindlays
Mumbai: Having got the approval from the Reserve Bank of India, Standard Chartered Bank (Stanchart) is said to be initiating its process of integration with Grindlays Bank, which it recently acquired for $1.34 billion from the ANZ group.

Under the governance plan, where Stanchart will initiate operations at Grindlays under the Standard Chartered Grindlays name, two chief executives are envisaged during the two-year integration period. However, according to sources, the RBI has asked Stanchart to seek information from the Financial Supervisory Authority UK, for the integration in India.

FSA is the supervisory arm which broke off from Bank of England. The move is understood to be in line with RBI's understanding with Bank of England that the latter would not take any unilateral decision on any Indian bank with UK operations without consulting the RBI.

Under the limited clearance that has been agreed to in-principle, the central bank has said that Stanchart will be required to take its approval for all major decisions as the integration between the two entities is carried out.

Nasscom takes the initiative to create banking strategy forum
New Delhi : India's apex software body, National Association of Software and Services Companies (Nasscom), has taken the initiative to create a high power forum of banking and IT experts in the country to create a suitable action plan for a coordinated IT implementation strategy in Indian banks.

According to Nasscom, since Indian banks are facing new challenges in the form of increased competition within the industry, lower entry barriers for new players, presence of alternative forms of financial intermediation, the ever-increasing demand for skilled people and finally customers who are demanding better services and products, there is an urgent need for such a forum.

According to Mr .Dewang Mehta, president of Nasscom, India has the possibility of leap frogging in banking technology and moving from the traditional ledger based banking to total e-banking.

Further, the issue of computerisation becomes increasingly important, since only 14,000 of the 45,000 odd branches of the nationalised bank network, are computerised.

According to a paper prepared by Nasscom on Information Technology @ Banks in India, Internet banking is emerging as a strong and revolutionary alternate service delivery channel and corporate and wholesale clients were provided customer activated terminals and various remote services.

However, in India, since IT has evolved during a period when the communications infrastructure was expensive to acquire and was not dependable, there has been a scenario where selective functions and departments instead of business process end to end.

Besides, this selective computerisation has also resulted in isolated systems, islands of data, semi manual interfaces and reconciliation issues, in all achieving limited business benefits and IT and information architecture and data standards remained under developed.

Nasscom also observes that, banks have recognised the need of IT and most of the banks have already completed or are in the process of completing business restructuring and developing IT strategies along with automation of critical branches.

Government asks Indian Bank to close 75 branches
Chennai: The government has instructed the Indian Bank that if the bank expected more funds from the government towards recapitalisation, it would have to bring down the number of branches by 75 in three years' time, and also reduce the number of employees by 15 per cent.

In keeping with these instructions, the bank has decided to to close down 35 branches this year. Ten more branches are likely to be closed next year and the remaining later. The 35 branches that are to be closed this year include 11 in Chennai, seven in New Delhi and seven in Tiruchi.

The government has also asked the bank to "de-layer" its management structure. In accordance with this, the bank has decided to close down 11 zonal offices.

Ripple effect of RBI move, banks set to hike interest rates
Mumbai : Following the hike in the benchmark bank rate and the cash reserve ration, public sector banks are planning to increase their lending and deposit rates. They believe that the recent RBI announcements are likely to be in force for the rest of the year.

Bankers, who were caught unawares by the RBI move to change the benchmark rates and the cash reserve ratio, argue that in April they were forced to cut their lending rates even though the situation did not warrant so. Now, the believe, central bank has given them the opportunity to push up rates.

It is likely that the liquidity position will worsen in the near term, especially given the huge government borrowing program.

Besides, the banks have also been affected by the changes made to the government securities yield. The investment of banks in government securities had already deteriorated in value since the beginning of the current fiscal despite the RBI signal on lower interest rates by cutting its bank rate and cash reserve ratio.

The situation this year is in sharp contrast to that of last year when the bond market went through a bull run with yields falling across the board and the treasuries of most banks finishing the year with heavy profits.

Even before the latest bout of tightening by the RBI , yields were already on the uptrend with most securities seeing a rise of as much as 20 basis points in their yields since April when the RBI had adopted an easy money stance by cutting the CRR and bank rate.

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