22 June 2002
Sicom To Close Down Housing Finance Arm
Sicom Ltd, has decided to exit from the housing finance sector and close down the operation of its arm, Sicom Housing Development Finance (SHDF).
Sicom Ltd has also decided to sell SHDF whicha share capital of Rs 8.75 crore and an asset base of Rs 10 crore. Its employee strength is 25.
Corporation Bank instals ATM in Chandigarh
Corporation Bank has installed its first ATM in Chandigarh at its branch in Sector 8.
The branch was inaugurated by TV and cinema personality Jaspal Bhatti.
The bank had entered into a strategic alliance with LIC on June 6 whereby the latter obtained 27 per cent of the stake in the bank.In terms of the MoU, the bank can now explore possibility of opening its extension counters, branches and installation of ATMs at premises of LIC, which has over 2,100 offices countrywide.
KMFL to convert into bank by year-end
Kotak Mahindra Finance, a non-banking finance company, expects to convert itself into a private bank by end-December and may relocate some of its branches.
Currently, the company is looking into technical aspects like conversion of the balance sheet of NBFC into that of a bank.
IRDA fixes cap on rider charges
Insurance companies can now charge a maximum of 30 per cent of the premium of the main product for all riders attached to any policy.
The cap has been put in place by the Insurance Regulatory and Development Authority (IRDA) in its Protection of Policyholders' Interests regulations.
The IRDA said that the insurer would also have to clearly spell out to the customer all allowable riders on the product and their benefits.
Om Kotak Mahindra launches policy for kids
OM Kotak Mahindra Life Insurance Company has launched a new children's policy.
Called Kotak Child Advantage Plan K-CAP, the policy is aimed at parents to secure the future of their children.
"Flexibility, affordability and customisation are the three principles on which we built this product,' said Mr Shivaji Dam, Managing Director, Om Kotak Mahindra Life Insurance.
Andhra Bank to focus on MFs
Andhra Bank, the Hyderabad-based premier public sector bank, has chalked out a strategy to substantially enhance its non-interest income levels.
The bank has recently signed a MoU with United India Insurance Company Ltd for marketing its general insurance products as a corporate agent, Andhra Bank also plans to market life insurance products and mutual funds.
IFCI board discusses McKinsey report
The IFCI board, which met today to consider the McKinsey report and discuss the future business plan, felt that it is imperative for the institution to move away from the hitherto-pursued, single-product focussed institution towards a more broad-based approach with diversified sources of revenue.
IDBI Bank launches new scheme
In a bid to increase its low cost deposits, the IDBI Bank has launched a new scheme, which allows a current account holder to get certain services free of charge, provided there is a certain minimum balance in the account.
Announcing this to the press, Mr J. Venkataramanan, Head-Retail Banking (South), said that if a customer kept a quarterly minimum balance of Rs 1 lakh in his current account, he would get a slew of services free of charge. These would include free DDs up to Rs 1.5 crore per month on (IDBI Bank locations in 61 cities), free electronic funds transfer up to Rs 1.5 crore per month (on IDBI Bank locations), free pay orders and free statement of accounts. The bank calls this scheme `Business Premium Current Account'.
Birla Corporation stock hits new high
The Birla Corporation stock today touched its 52-week high on the Bombay Stock Exchange (BSE) at Rs 27. It, however, closed at Rs 25.50, slightly up from its previous close. The counter attracted a volume of over 1.38 lakh shares on the BSE.
The stock has been witnessing upward movement in the last one month with a gain of around 51.34 per cent. On May 21, the scrip had closed on the BSE at Rs 16.85 and on June 14 it finished at Rs 20.90. On the NSE today, it attracted a volume of 2.52 lakh shares.
ING in talks with IRDA on life venture stake
The ING Group may either rope in another partner for its insurance venture - ING Vysya Life - or divest part of its stake to the Indian partner.
With the group hiking its share in the bank to 43 per cent, its 26 per cent holding in the insurance company will also increase correspondingly. Foreign partners are allowed to hold only up to 26 per cent stake in the insurance venture.
21 June 2002
Birla Sun Life bancassurance partner soon
Kolkata: Birla Sun Life Insurance Company Ltd, the 74:26 joint venture between the AV Birla group and Sun Life Financial, Canada, expects to finalise its partners for bancassurance within the next few months.
Says Birla Sun Life CEO Nani B Javeri: "We are in talks with both public and private sector banks for bancassurance. In fact, we already have similar arrangements with Citibank and Deutsche Bank."
The arrangements with the banks, he says, will be formulated after studying the strengths of these banks. "It will be either a national player or a strong regional one. These arrangements will help us gather more business in future."
After creating a direct sales force comprising 2,000 agents, whom the company calls advisors, Birla Sun Life is now concentrating on a second set of marketing arrangements. This will comprise corporate advisors, direct marketing, group insurance and bancassurance.
Bank disclosures to reach boards regularly
Mumbai: The Reserve Bank of India (RBI) has asked banks to adopt the recommendations of the consultative group on appointment of directors on their boards.
The Dr Ganguly Group report, which was submitted to the RBI in April 2002, suggested that banks must make disclosures to their boards at regular intervals. They must detail the board on exposures to related entities with respect to the lending and investment in subsidiaries and the asset classification of such lending and investment.
In a list of recommendations made to the RBI after reviewing the supervisory role of boards, public sector banks have been advised that in order to improve information flow, boardroom proceedings must be recorded. To this end, a summary of key observations made by the directors can be submitted in the next board meeting.
Banks should also consider appointing a qualified company secretary as the secretary to the board and have a compliance officer (reporting to the secretary to ensure compliance with various regulatory and accounting requirements).
Private sector banks have been asked to evolve appropriate systems for ensuring fit and proper norms for directors, which may include calling for information by way of self-declaration, verification reports from market, and the like.
ING to increase Vysya Bank stake to 44%
Bangalore: ING group has proposed to buy out 23.99 per cent stake held by the GMR Vasavi group in Vysya Bank Ltd. The acquisition of this stake is expected to vault INGs holding to 43.99 per cent in the bank, the Dutch group said.
The buyout will involve transfer of 5.4 million shares of the GMR group. As a result, GMRs stake is expected to shrink to just 4 per cent in the bank.
Vysya Bank informed the Bombay Stock Exchange that the board, at its meeting, expressed support for the transaction as it was in the best interests of the bank and all its stakeholders.
IndusInd hires KPMG for risk management
Mumbai: IndusInd Bank has appointed the consultant KPMG to advise for developing risk management system. KPMG will conduct an enterprise-wide risk management exercise to help the bank select a state-of-the-art treasury software solution.
KPMG will advise the bank on developing and implementing an enterprise-wide risk management framework covering credit risk, market risk, operational risk and other systems.
This initiative will also deal with the revamping of the banks existing asset liability management system and also transform its existing internal audit system into a risk-based audit mechanism. The risk management exercise will be done in three phases and will be completed in a year.
Post this exercise IndusInd Bank should be on the path to conform to Basle II guidelines for the adoption of international good practices in risk management.
SBI net profit rises 52% to Rs 2,432 crore
Kolkata: State Bank of India has recorded a net profit of Rs 2,431.62 crore in 2001-02, marking a growth of 51.57 per cent compared to Rs 1,604.25 crore in 2000-01. The bank has increased its dividend to 60 per cent from 50 per cent.
The operating profit of the bank rose to Rs 6,044.83 crore against Rs 3,966.78 crore in 2000-01, registering a growth of 52.39 per cent.
SBI chairman Janki Ballabh says the increase in net profit was due to an increase in the net interest income of 8.33 per cent. The other income of the bank increased by 7.5 per cent. SBI also reduced its operating expenses by 14.1 per cent.
"Moreover, we made a net gain of 0.5 per cent on the falling interest rates in deposits. In absolute terms, it was Rs 2,600 crore, but the rate of lending also fell by 400 basis points. The net effect was Rs 300-400 crore, which translates into 0.5 per cent," says Ballabh.
He says the banks profits were depressed both in 2000-01 and in 2001-02 owing to expenses on account of voluntary retirement schemes (VRS) and India Millennium Deposits. It wrote off the deferred revenue expenses relating to VRS on a pro-rata basis.
Moreover, the bank made provisions for investment depreciation, which includes amortisation of premium on held to maturity category. Further, as per Reserve Bank of India guidelines, the appreciation in the held for trading category of investments was not recognised by the bank during the current years accounts.
"On a fully comparable basis, the adjusted net profit of 2001-02 would have been Rs 2,841.76 crore and in 2000-01 it would have been Rs 2,160.48 crore. Hence, the effective point-to-point growth in net profit in 2001-02 would have been only 31.53 per cent," he says.
For the current financial year, SBI has targeted a 25-per cent increase in net profit. And, the expected net profit of the bank during 2002-03 may thus be a little over Rs 3,000 crore.
Benares bank merger with BoB approved
Mumbai: The central government has approved the amalgamation of Benares State Bank Ltd with Bank of Baroda. The scheme of amalgamation has come into force from 20 June 2002.
A Reserve Bank of India press release said the existing depositors will be paid in accordance with the scheme of amalgamation from 19 July 2002 and onwards on completion of the evaluation of assets by Bank of Baroda, for which a period of one month has been provided.
As per the provisions of the scheme of amalgamation, all the staff security deposits will be paid in full together with accrued interest, and all outside liabilities as on the prescribed date excluding deposits shall be paid or provided in full.
Deposits up to Rs 1 lakh will be paid in full by Bank of Baroda or the Deposit Insurance and Credit Guarantee Corporation and the balance of deposits above Rs 1 lakh will be paid pro-rata on the basis of the evaluation of assets of Benares State Bank Ltd.
The branches of Benares State Bank Ltd are functioning as branches of Bank of Baroda from 20 June 2002.
Citigroup, Credit Suisse face apartheid lawsuit
New York: Four apartheid victims filed suit yesterday against Citigroup Inc and Credit Suisse, alleging the banking companies helped finance the violent South African apartheid regime and its crimes against humanity.
SBI net rises 52% to Rs 2,432 crore
Mumbai: State Bank of India has recorded a net profit of Rs 2,431.62 crore in 2001-02, marking a growth of 51.57 per cent compared to Rs 1,604.25 crore in 2000-01. The bank has increased its dividend to 60 per cent from 50 per cent.
RBI help sought on automatic route misuse
Mumbai: The Foreign Investment Promotion Board has written to the Department of Economic Affairs to take up the issue of misuse of the automatic approval route by a section of foreign investors with the RBI.
GTB buys Geekay Exims property for Rs 113 crore
Mumbai: The Global Trust Bank has finally acquired the property of the Gopal Rati-promoted trading company, Geekay Exim, for Rs 112.9 crore in lieu of unpaid interest on loans.
Cholamandalam to raise Rs 35 cr via preference shares
Chennai: Cholamandalam Investment and Finance Company Ltd, the finance and investment arm of the the Chennai-based Murugappa group, is planning to raise Rs 35 crore by way of issuing redeemable preference shares to banks, mutual funds and institutional investors on a private placement basis subject to the shareholders approval.
SBI Cards reports its first profit
Mumbai: State Bank of Indias credit card business has broken even after two years of mounting losses and emerged as the largest issuer of Visa cards in India with 9,46,000 live cards.
CCIL set to extend settlement system for forex
New Delhi: After the successful implementation of the negotiated dealing system for government securities, the Clearing Corporation of India Ltd is gearing up to launch its new product for the foreign exchange market.
ING increases Vysya stake to 64 per cent
Mumbai: The Dutch financial services group ING has decided to acquire an additional 24-per cent stake in Vysya Bank from the promoters, GMR group.
20 June 2002
Vijaya Bank opens ATMs
Vijaya Bank inaugurated five new ATMs as well as its Bank IT Lab in Bangalore on Tuesday.
The ATMs, situated on Residency Road, Shantinagar, Vanivilas Road, Yeshwanthpur and Bilekahalli are connected to a central switch and aim to enable customer convenience, a press release here said.
UBI To Wipe Off Rs 1,200 Cr Accumulated Loss In 4-5 Yrs
The United Bank of India (UBI) has targeted to wipe off its entire Rs 1,200 crore accumulated losses in the next 4-5 years after government decided against fresh capital infusion in the erstwhile weak bank.
"Last fiscal, we reduced the accumulated losses by Rs 300 crore to Rs 1,200 crore. We are planning to reduce it further to less than Rs 1,000 crore this fiscal and wipe off the remaining in the next 4-5 years," UBI chairman V Madhukar told PTI IN Kolkata yesterday
IDFC infrastructure fund to be ready by Sept
Infrastructure Development Finance Company Ltd will operationalise an Infrastructure Equity Fund by September, and diversify its areas of operations, according to Mr Nasser Munjee, Managing Director and Chief Executive Officer, IDFC.
Addressing a press conference in Chennai on Wednesday following the company's annual general meeting, he said that by September, IDFC would have an operating fund in place for infrastructure funding, as outlined by the Union Finance Minister, Mr Yashwant Sinha, during his Budget speech. While transportation would be a major area of focus, IDFC plans to diversify into new areas such as tourism, oil and gas (production and transportation), education and health, he said.
ABN-Amro ties up with EDS for card processing
ABN-AMRO Bank announced a tie-up with Electronic Data Systems (India) Pvt Ltd (EDS) for its credit card processing services in India.
"Through outsourcing of credit card processing we increase cost efficiency by 15-20 per cent. We will be able to offer a low cost delivery experience to our clients,' said Mr Romesh Sobti, Executive Vice-President & Country Representative India, at a press conference IN Mumbai testerday
Aviva Life starts operations in Kochi
Aviva Life Insurance, a joint venture of the Dabur group and CGU of UK, yesterday formally started its operationsin Kochi, with the launch of seven products.
The company offers three products: LifeLong a whole life flexible protection plan, LifeSaver a regular premium endowment savings plan and LifeBond a single premium investment bond. These three products are available under two options, viz., `unit-linked' and `unitised with profits'. In line with the IRDA regulations, these count as six different products.
The seventh product, called EasyLife, is a simple endowment product, amenable for sales through bancassurance, and is unitised with profits.
Tata AIG claims No. 1 slot in life Insurance business
Tata AIG Life Insurance Company said it has become the largest private life insurer in terms of lives covered, with its policies covering 4.4 lakh individuals.
The company has achieved a total sum assured of Rs 1,100 crore on its life, pension and group business for the year ended March 02 against which it has mobilised Rs 21 crore premium.
19 June 2002
Sinha to review lending rates with bank chiefs
New Delhi: The lending rate structure of public sector banks will come under fresh scrutiny during the forthcoming meeting of Finance Minister Yashwant Sinha with the chiefs of the banks.
Global cards not to be used for banned items: RBI
Mumbai: The Reserve Bank of India on Tuesday clarified that international credit cards cannot be used on the Internet or otherwise for the purchase of prohibited items, lottery tickets being one of them.
Long-term FCNR deposits not feasible for banks
New Delhi: Many of them which had accepted FCNR deposits for three years in 2001 at Libor were now stuck with high-cost funds as global interest rates have crashed since then. In March 2001, the one-year Libor was around 6.50 per cent.
Nabard gets nod For Rs 1,000-cr tax-free bond float
New Delhi: The ministry of finance has given an in-principal nod to the National Bank for Agriculture and Rural Development to float a Rs 1,000 crore tax-free bond issue to meet its fund requirements.
NHB plans Rs 50-crore MBS for PNB Housing
New Delhi: Close on the heels of its mortgage-backed securities issue for Canfin Homes Ltd, the National Housing Bank will be launching a Rs 50-crore issue for PNB Housing Finance in July 2002.
IDFC to focus on reforms in agro-market infrastructure
New Delhi: The Infrastructure Development Finance Company, which has approved financial assistance for 71 projects aggregating Rs 8,665 crore as on 31 December 2001, will focus on reforms in agro-markets infrastructure, as part of its food and agro-sector agenda for the current year.
Emirates Bank eyes small stake in ICICI Bank
Mumbai: Emirates Bank International is planning to buy a small stake in ICICI Bank, as part of its new philosophy to have a strategic presence in countries where it wanted to operate.
Mizuho files report to regulator on computer woes
Tokyo: Mizuho Financial Group said on Tuesday it had submitted to Japans top bank regulator a report outlining measures to prevent a recurrence of the computer failures that affected millions of its transactions in April 2002.
Rabo to start commercial bank next year
Kolkata: The bank proposed to be set up by the Rabo group of the Netherlands will be a commercial bank for all practical purposes, but will focus particularly on sectors such as food, life sciences and technology.
The bank, which will come up in association with a select group of banking professionals, will be launched in early 2003. It will try to bring in a certain degree of product differentiation in terms of both banking products and technology application.
"The proposed banking outfit, among the first to be cleared by the Reserve Bank of India in recent times after it started vetting banking applications afresh, will build on areas that have been identified as growth sectors in India," says Rabo India Finance managing director Rana Kapoor.
Rabo, he says, is the worlds only AAA-rated bank in the private sector. The Indian venture will be a conservative bank in many ways, maintaining strict credit discipline and following all prudential norms.
Rabo India Finance, for its part, has been in operation for more than three years. It is now going in for fresh capitalisation - the Foreign Investment Promotion Board recently cleared an additional infusion of $30 million.
SBIs credit schemes for small businesses
Kochi: State Bank of India (SBI) will be launching small business credit card and tailor-made home loans in Kerala, where the demand for housing loans is on the rise.
Says SBI chief general manager (Kerala circle) C Sundarashyam: "The bank has designed a novel product for providing hassle-free credit facilities to small borrowers with a credit limit up to Rs 5 lakh."
Small-scale industrial units, including tiny units, small retail traders, professional, self-employed and small business units, are eligible for the issue of credit cards under the scheme, he says.
Simplified application forms and credit-scoring model for small business credit cards have been designed to enable officials to quickly process applications. This scheme, to be launched in 10 days, will enable borrowers to avail of the credit limit with minimum paperwork.
SBI has also launched a new home loan product called tailor-made home loans, which gives the borrowers the flexibility of structuring their equated monthly instalments (EMIs). Sundarashyam says the bank is the first in India to offer tailor-made EMIs, which will be based on the servicing ability of the borrower.
For instance, he explains, "the EMI could be higher for the initial few years and subsequently come down. The borrower can also resort to balloon repayment during times of high income, like receipt of bonus, insurance maturity amount, etc. To top it all, the scheme will not attract any higher interest rate or fees."
Sundarashyam says his bank, which has 229 branches spread across 14 districts, has plans to open more branches in the Malappuram, Wynad and Kasargod districts, where its presence is minimal. "But this will be done depending upon viability."
Karnataka Bank net doubles to Rs 91 crore
Mangalore: The private sector Karnataka Bank has registered a 100.68-per cent increase in net profit for the financial year 2001-02. The net profit now stands at Rs 91.13 crore as against the corresponding Rs 45.41 crore the previous year.
The banks board of directors has taken on record the financial results for the year 2001-02 at its meeting held here last week. During the year, the bank witnessed a 32.41-per cent increase in total income to Rs 984.26 crore from the previous years Rs 743.37 crore.
The banks deposits stood at Rs 7,001.48 crore, registering a growth of 15.24 per cent from Rs 6,075.50 as on 31 March 2001. Advances grew at the rate of 20.84 per cent to reach Rs 5,417.54 crore.
Investments also increased by 24.40 per cent to reach Rs 3,467.15 crore from Rs 2,787.01 crore. The banks capital adequacy ratio moved up to 12.96 per cent as on 31 March 2002, against 11.37 per cent in the previous year.
The bank has made adequate provisions for standard advances, non-performing assets, depreciation on investments and other usual and necessary requirements as per Reserve Bank of India guidelines. Provision for gratuity and pension, among other things, has been made on an estimated basis.
Sinha, bank chiefs to review lending rates
New Delhi: The lending rate structure of public sector banks will come under fresh scrutiny during the forthcoming meeting of Finance Minister Yashwant Sinha with the chiefs of the banks.
The review will be done to assess the extent of the banks compliance with the Reserve Bank of Indias (RBI) directive to ensure that the lending rates reflect the prevalent low-interest rate regime.
The RBI had pointed out that some banks have been maintaining "very high spreads" over their prime-lending rate. It had urged them to review the rates to ensure that the borrowers are able to access credit at "reasonable interest rates." Banks may also have to provide details of the level of transparency adopted by them in fixing the lending rates as has been desired by the central bank.
The RBI had asked banks to not only come out in the open about their maximum and minimum lending rates but also to adopt an "all-cost" concept for borrowers by providing details on all charges, such as processing and service charges.
The review of lending rates forms part of the formal agenda of the meeting, which has been now rescheduled for 29 June 2002. The meeting, originally fixed for 19 June 2002, was rescheduled due to Sinhas visit abroad.
Federal Bank not to sell out in near term
Kochi: Federal Bank, which has been reportedly short-listed as a buyout target for ABN-Amro Bank, says it will not sell out in near term. "We have a critical base and an own brand. We are not interested in any sell-out or strategic stake sell," says Federal Bank executive director P R Sankaranarayanan.
Moreover, ICICI will retain its close to 30 per cent stake in Federal Bank, though it had merged with ICICI Bank. "ICICI has not come out with a statement willing their exit from our bank; we also have not heard from them," says Sankaranarayanan.
Federal Bank expects its net profit to be in the range of Rs 85 crore to Rs 90 crore in the current financial year - marginally up from Rs 82.01 crore a year ago. "The economy is going through some hardships. We have not fixed our net profit target as yet - it depends on so many things," he says.
The bank, however, expects to report a gross profit of Rs 250 crore in the current financial year. While Federal Bank plans to mop up deposits worth Rs 10,350 crore in the current fiscal, it expects to lend Rs 6,000 crore as advances in the current year, says Sankaranarayanan.
RBI forbids global cards for banned items
Mumbai: The Reserve Bank of India (RBI) has clarified that international credit cards cannot be used on the Internet or otherwise for the purchase of prohibited items, lottery tickets being one of them.
These prohibited items also include banned or proscribed magazines, participation in sweepstakes and payment for call-back services, since no drawal of foreign exchange is permitted for such items and activities.
The central bank has, however, said international credit cards can be used on the Internet for the import of books, purchase of downloadable software or import of any other item permissible under the Exim Policy for which exchange can be purchased from an authorised dealer in India.
There is no aggregate monetary ceiling separately prescribed for the use of international credit cards through the Internet. Debit cards and ATM cards can also be used for any purpose, for which foreign exchange can be purchased from an authorised dealer, the RBI said.
Authorised dealers are also permitted to accept payment by debit to credit cards for exports made out of India. The RBI will issue separate guidelines for this.
18 June 2002
ATMs cheapest in India
New Delhi: If you thought hi-fi electronic gadgets cost more in India than elsewhere, its time to remind yourself of the adage There is an exception to every rule. In this case it is the ATMs, which cost lesser in India than in any other country.
Swiss, US banks face apartheid lawsuits
New York: A US lawyer who helped force Swiss banks into a $1.25 billion settlement for Nazi victims said on Monday he would file suit against Swiss and US banks for propping up South Africas former apartheid regime.
Bank officers seek paternity leave
Mumbai: Heralding the age of equal rights, bank officers are now demanding paternity leave. In a recent charter of demands submitted by bank unions, officers of public sector banks have demanded a 15-day paternity leave.
Rabobanks Indian subsidiary to start by Jan 2003
Mumbai: The Netherlands-based Rabobank Internationals subsidiary banking outfit in India is scheduled to begin full-fledged operations by January 2003, according to Rabo India Finance Pvt Ltd managing director Rana Kapoor.
NPA provisioning exempted from tax for NBFCs
Mumbai: In a major move, non-banking financial companies will now not need to pay tax on provisions for non-performing assets made as per the Reserve Bank of India guidelines.
Sicom shifts focus to advisory services, infrastructure
Mumbai: The development bank Sicom Ltd has reworked its business strategy to shift its focus from the traditional term lending to the infrastructure and services sector financing and advisory services.
S Korea plans deregulation to boost insurance market
Mumbai: South Korea plans to ease financial regulations to bolster the worlds seventh largest insurance market by luring financial institutions and business conglomerates into the sector, the government said on Monday.
BOJ agrees to flexible funds for money market
Tokyo: Bank of Japan board members agreed at their 30 April 2002 meeting to provide funds to the money market flexibly, beyond a formal target, due to potential instability in the financial system, minutes of the meeting showed on Monday.
Metlife to start operations in Mumbai, Delhi
Mumbai: The six-month old Metlife India will launch operations in Mumbai and Delhi in the next three months. The company is present in five centres Bangalore, Kolkata, Kochi, Hyderabad and Chennai.
HDFC Bank to offer private banking to all clients
Mumbai: HDFC Bank is bringing all its customers, under the fold of private banking services offered by the bank. To begin with, the bank plans to offer basic investment advisory services to all its customers.
BoB expects 20% growth in deposits, advances
Mumbai: Bank of Baroda has targeted a 20-per cent growth in its deposits and advances in 2003. Its also looking at complete inter-connectivity once its core banking solutions as suggested by US consultant, Gartner, are put in place.
Moodys in talks to buy Vysyas stake in ICRA
Mumbai: Moodys Investment Company India is marginally increasing its equity holding in rating agency, ICRA. The company is in talks with Vysya Bank for acquiring its 52,500 equity shares in ICRA to increase its stake.
Ambitious Uco Bank all set to slug it out
Chennai: That, image-building is a difficult proposition for public sector units is a well-known fact. The mission is further compounded when it is a bank with its bottomline dipped in red for several years. Two years of being in black is not enough to have a positive public image, because many are still unaware of the change in the banks fortunes.
Precisely this is the predicament Uco Bank chairman and managing director V P Shetty finds himself in. He is trying hard to change the public perception of his bank, though.
"All these years we were focussing on the banks path to profitability. Now that has been achieved we are looking at external communication," concurs Uco Bank general manger (treasure and international wing) B K Datta. As this fiscal happens to be the diamond jubilee year for Uco Bank, Shetty is taking full advantage of it by meeting the Press across the country.
Sprucing up a banks image is crucial. Shorn of any government support in the form of equity infusion, Uco Bank has to approach the market to mobilise resources to cater to the mid-segment clientele. In fact, the banks advertisement expense had considerably gone up last year.
"We cannot tap the public with an accumulated loss of Rs 1,751 crore," Shetty says. "The loss has to be adjusted fast, and the adjustment has to come against capital since it will take years to write off the losses against profits. The government is seriously considering the write-off against the capital. Then the capital will be around Rs 1,194 crore tier-I capital will be Rs 606 crore and tier-II will Rs 588 crore. It is then we will go public."
So what will be the initial public offering (IPO) size? Listen to him: "The IPO size depends on our 2003 balance sheet. If the net profit is Rs 200 crore then I can have around Rs 3,000 crore of risk-weighted assets." And that will determine the banks capital needs.
As per indications, the Kolkata-headquartered bank has plans to mop up Rs 200 crore from the equity market probably next year.
The year ended 31 March 2002 saw Uco Bank clocking good performance with its total business nearing Rs 40,000 crore (deposit: Rs 26,849 crore and advances Rs 12,805 crore). "The new business added this year was Rs 800 crore," says a gleeful Shetty.
The bank exceeded its deposit target by Rs 2,967 crore and advances by Rs 1,937 crore. The total income went up to Rs 3,124 crore (interest earned: Rs 2541 crore; other income: Rs 583 crore), while the interest expended showed a Rs 200-crore increase to Rs 1,812 crore.
The operating profit clambered up to Rs 476 crore from Rs 214 crore logged the previous year. "But for the Rs 145 crore provided for voluntary retirement scheme (VRS) and salary arrears, the net profit would have been higher than Rs 165 crore," says Shetty. Incidentally Uco Bank, like Indian Bank, delayed VRS payments, giving rise to various speculations among the retirees.
For the first time in three years the gross non-performing asset (NPA) percentage came down to single digit figure of 9.46 (Rs 1,332.65 crore). Last year it was 11.71 per cent. "The net NPA improved to 5.45 per cent (Rs 723.59 crore) from 6.35 per cent," he adds. On the other hand the capital adequacy ratio moved up by 0.59 per cent to 9.64 per cent.
The better operational performance coupled with VRS and usual retirement increased the business per employee to Rs 1.34 crore. "We are progressing well towards the various targets fixed for the year 2003 as per the restructuring plan drafted in 1997," claims a proud Shetty.
The targets he is talking about is to bring down the net NPA to 4.33 per cent, the operating profit to Rs 507 crore and the net profit to Rs 329 crore. Last fiscal the bank nearly achieved the 2003 target in respect of total business. But this performance is also a cause to worry, since the same levels he cannot expect this fiscal. And Shetty knows this very well.
The bumper profit was contributed by Rs 583-crore other income. Included in this sum is the hefty Rs 346-crore profit on sale of investments. As a matter of fact most of the government banks made hefty profits last fiscal from treasury operations that came handy for higher provisioning. "This windfall will not be there this fiscal," Shetty argues.
And this year the profits are bound to take a hit what with thinning of spreads to 2.66 per cent from 2.83 per cent the previous year. In addition, the yield on investments is also going southwards. In fact, the bank has lowered its operating and net profit target for this year at Rs 400 crore and Rs 135 crore, respectively.
According to Shetty, the bank is focussing on reducing its cost of funds by growing the savings bank deposit as well as other expenses. Last year, the savings bank deposits went up by 234 crore to Rs 1,001 crore. The average cost of funds came down to 6.74 per cent from 7.35 per cent. The yield on advances went up marginally to 10.18 per cent.
The bank also closed down 100 branches and also reduced the administrative offices to 34 to cut operational costs. "A new business committee is looking into increasing the fee-based revenue," says Shetty.
"We have budgeted Rs 200 crore for technology," he adds. Out of 1,706 branches 663 have been IT-enabled. And multi-channel banking facilities will be provided in 200 commercially important locations. ATMs and call centres will also be set up soon.
In a bid to consolidate its position in the mid-market segment, Uco Bank has revamped all its mid-market products to make them more competitive. For instance the banks housing loan, Uco Shelter, was made more attractive by making it customer friendly and cutting down the interest rate to 10.25 per cent. The bank lent Rs 200 crore last year under this portfolio and hopes to increase the same in the coming years.
If all things go well for the bank as planned, Shetty hopes to do a business of Rs 1 lakh crore in five years time. And this is quite an ambitious target indeed.
17 June 2002
IDBI corporatisation to be delayed
Mumbai: IDBIs corporatisation plans have hit a minor speed hump with the government now keen on moving ahead with the repeal of IDBI Act only in monsoon session of Parliament. Earlier, the government was weighing options of coming out with an ordinance to expedite corporatisation of the financial institution.
Foreign banks in India have more options
New Delhi: The options for foreign banks in India have increased. They have much more flexibility vis--vis the nature of their operations in India. Banks will take a choice on what option they would follow depending on their strategies and the way they operate in other markets.
RBI strategy bristles with risk for banks
Mumbai: The RBI has managed to stabilise the market in the short-term, but the sentiment is such that any primary supply will again break the market. There is complete investor apathy. In spite of sitting on loads of cash, investment banks are at best buying T-bills.
BoB to invest Rs 400 crore in IT
Mumbai: Bank of Baroda (BoB) has targeted a 20-per cent increase in deposits and advances for the current year. The nationalised bank is also looking at complete interconnectivity once its core banking solutions as suggested by US consultant Gartner is put in place.
Banks urged to raise CD ratio in Kerala
Thiruvananthapuram: Kerala Chief Minister A K Antony has called upon banks operating in the state to raise the credit-deposit ratio to 60 per cent. Addressing the state-level Banking Consultative Committee meeting, he said that this was absolutely necessary.
TN interest in ICICI Bank product on ST deferrals
Chennai: With securitisation as a concept gaining ground, cash-strapped state governments too have started looking at this as an option to get some immediate funds. The options for the State Governments are many.
Banks told to submit details of deposit rate structure
Mumbai: The Reserve Bank of India has asked all commercial banks to submit details of their deposit rate structure. This follows a study by the New Delhi-based Indian Statistical Institute, claiming that the existing deposit rate structure is biased.
RBI against urban co-op banks setting up primary dealer
Mumbai: The RBI is not keen that the cooperative banks float a separate PD at this stage. It appears that the central bank feels that cooperative banks should not diversify into different areas at this stage.
Housing finance firms report good business at expo
Dubai: As many as 76 flats valued at Rs 11.46 crore were sold at the recently held Indian exhibition for real estate developers and housing finance companies in Dubai. The housing finance companies reported sanctioning Rs 13.65 crore.
Housing mortgages turn an attractive deal
Mumbai: The bull charge resumed in the bond markets after a gap of almost three months. The sentiments were fuelled by the possibility of conflict on the western frontiers having substantially wakened.
Housing finance excels in Dubai exhibition
Dubai: As many as 76 flats valued at Rs 11.46 crore were sold at Property 2002, an Indian exhibition for real estate developers and housing finance companies, held in Dubai between 29 and 31 May 2002. Housing finance companies reported sanctioning Rs 13.65 crore through 91 spot loans.
Property 2002 drew 4,543 enquiries worth Rs 108 crore. Housing finance companies received 1,500 business enquiries worth Rs 22.5 crore. The exhibition was organised by Maharashtra Chamber of Housing Industry (MCHI).
Fifty developers from across India, including Mumbai, Pune, Nashik, Goa, Bangalore, Kerala, Rajasthan, New Delhi and Chennai, besides four housing finance companies, participated in the exhibition.
MCHI is now planning to organise an exhibition in Saudi Arabia in December 2002. "Saudi Arabia is a market waiting to be tapped," says MCHI chief executive officer Zubin Mehta.
Antony asks Kerala banks to raise CD ratio
Thiruvananthapuram: Kerala Chief Minister A K Antony has called upon banks operating in the state to raise the credit-deposit (CD) ratio to 60 per cent.
Addressing the state-level Banking Consultative Committee meeting here, he said this is necessary in view of the forthcoming global investors meet and the increasing investment possibilities in the states information technology and tourism sectors.
He said the CD ratio in the state has not registered any significant increase in the past several years. "But the slight rise in the ratio this year to 45 per cent from the last years 43 per cent is a good beginning."
According to the chief minister the state is turning more and more investor-friendly. "The banks have a major role to play in the emerging scenario. The various projects to be implemented by the local bodies over the next five years will be finalised in three months. The banks have extended the period for one-time settlement of dues from the agricultural sector till 31 December this year."
But the banks will be free to decide on the extent of relief to be allowed in penal interest on a case-to-case basis, he said. "The state government will request the centre to permit the banks to offer relief in times of natural calamities and collapse of agricultural prices. We will also approach the banks boards to help create a corpus fund for preparing projects."
The meeting decided to ensure the participation of bank representatives at least twice in the deliberations of the working groups of the local bodies that draw up the projects. The banks will also extend finance to the viable projects of the local bodies without insisting on government guarantee.
ICICI Bank to adopt six-sigma initiative
Pune: ICICI Bank has announced that it will take up the six-sigma initiative as a key cornerstone of its strategy in the future to reduce customer transaction time across all modes and to improve its processes to provide maximum benefits to customers.
The formal adoption of the programme, expected to take place at its strategy meet next week, will make it the first Indian bank to adopt such a programme. The initiative will reduce its cost to income ratio, making it globally one of the most competitive banking operations, says ICICI Bank managing director and CEO K V Kamath.
The first results of the programme, which will involve half a dozen branches initially, will be visible in improved performance, with transaction time coming down to one-third of the current levels, says Kamath. "The effort is now to benchmark the banks performance on every aspect with the best banks in the world."
The sigma project, to be personally steered by Kamath, will be rolled out to hundred branches within a year. The bank has appointed consultants to guide it on the sigma roadmap.
No mercy to wilful defaulters, banks told
New Delhi: Finance Minister Yashwant Sinha says the proposed legislation to help banks recover the dues from defaulters will strengthen the rights of creditors and will lead to a improvement in bond prices, the share prices of banks and create a market for securitised assets, besides providing an incentive to recover sticky assets and improve the financial health of banks.
The proposed asset reconstruction company (ARC) will be set up in June 2002. It will have the specialisation to handle bad loans. The government has also directed banks to be merciless with wilful loan defaulters. They have also been told to opt for onetime settlements with borrowers to recover their dues. "We cannot afford to show any mercy to wilful defaulters. Chase them, bring them to Debt Recovery Tribunals (DRTs) and handle them as strongly as possible," says Sinha.
Several banks have filed suits against defaulters in DRTs. Unit Trust of India has also approached DRTs against a few industrial houses to recover dues.
Sinha says banks should take up onetime settlement for small borrowers while clamping down on wilful defaulters. "They should also offer higher credit to small borrowers, especially first-generation entrepreneurs. In this respect, they should move out from the charms of the top 500 corporates and go out to those who need credit the most."
Bank of Rajasthan in talks for insurance foray
Mumbai: Bank of Rajasthan (BoR) is close to concluding its deal with either Tata AIG Life Insurance Company or Birla Sun Life Insurance Company, as part of its plan to venture into the life insurance segment, it is learnt.
Talks with both the companies are said to be in an advanced stage. The bank will strike a deal with one of these life insurance providers by next month, say BoR officials. "We were in talks with almost all life insurance providers in India, including LIC. Now we have short-listed Tata AIG and Birla Sun Life, and the final partner will be selected within a month."
As per the current plan, BoR will act as a corporate agent of the selected company and will sell life insurance products of the same through the banks counters once the bancassurnace concept comes into effect. It is expected that the Insurance Amendment Bill will be passed by the government in the monsoon session of the parliament. Last week, the bank had tied up with Bajaj Allianz to sell its general insurance products through its counters.
A BoR official says initially the bank will launch the insurance products in its selected branches in Rajasthan and then, depending on the feedback, it will be extended to other branches.
BoR is one the leading banks in Rajasthan with a strong rural penetration. Industry observers say at present all life insurance providers are in the process of finalising plans to tap Indias rural market. A lions share of LICs new business comes from rural and semi-rural markets.
In a country of 1 billion people, bancassurnace is one of the profitable and cost-effective options for private sector life insurance providers to tap the huge market, the observers say.