Kotak Bank Offers 6% On Savings Deposits Above Rs 1 Lac

With the Reserve Bank freeing interest rate on savings deposits, the mid-size private lender Kotak Mahindra Bank today said it will be offering 6 percent interest on savings deposits above Rs 1 lakh and 5.5 percent those below Rs 1 lakh effective November 1. 

The eight-year-old city-based lender with just 323 branches has also increased its base rate, or the minimum lending rate below which it cannot lend, by 25 basis points to 10 percent.

Kotak Bank becomes the second lender after another city-based mid-size bank Yes Bank announced six per cent interest on savings deposits immediately after the Reserve Bank freed interest rates on savings accounts on October 25. 

Terming the RBI move to free the last regulated interest rate as "a revolutionary and path-breaking decision", Kotak said, "our asset liability committee met this afternoon and felt that we have to offer higher rates on savings accounts."

Kotak further said, "it has nothing to do with competition but it is just giving a fair deal to our customers. The RBI decision is the beginning of significant improvements in benefits for customers."

To a specific query from PTI on whether service charges will also go up along with the hike in interest rates, Kotak said, "there will be no changes in the product offerings or the prevailing charges at our bank. This is a standalone decision and is in public interest."

About the incremental cost that the bank would incur following the rate hike, its consumer banking president KVS Maniyan said, "we expect 10 to 12 bps spike in our cost of funds due to this decision. However, we are confident that it will not impact our net interest margin (NIM), as we will be making savings by better operational efficiency."

Banks Like SBI And ICICI Might Restructure Loans To Crisis-Hit Power Sector

State Bank of India and ICICI Bank are among the dozen lenders staring at the possibility of restructuring loans to the crisis-hit power sector that has been hobbled by state electricity board defaults and delays in new projects. 

A sector that only a few years ago was a gold mine of opportunities for investors and lenders, is turning out to be an unwanted child with both private equity investors and lenders. So far this fiscal, private equity investment in the sector has halved while lending has slowed to a trickle due to a number of reasons.

At least for the record, no power producer has defaulted so far, but the state of affairs has begun to ring alarm bells with some estimates showing that losses on loans could squeeze the banking system and revive memories of what happened when the textile industry went through a similar crisis in the 1990s. 

It has given Rs 37,233 crore, or 5.9% of its total book, followed by State Bank with Rs 36,915 crore, or 2.5% of its total book. Axis Bank ranks third with Rs 17,110.60 crore, or 5.7%, annual reports of all the banks show. State Bank and ICICI Bank officials declined to comment, citing silent period ahead of their quarterly earnings.

"Our power sector book continues to perform satisfactorily,'' said an Axis Bank spokesman. "The projects are progressing as per schedule and most of them are expected to become operational over the next 2-3 years. With the longterm outlook positive, the portfolio is expected to perform satisfactorily....''

Lack of major reforms in the power sector is hurting the economics of the industry. In most cases, the state-owned electricity companies are monopolies in distribution, and sell power at heavily subsidised rate to consumers, especially farmers.

Years of uneconomical operations have pushed many, such as Rajasthan and Tamil Nadu's distribution companies, into losses, followed by default to power producers. The state-owned power distribution company in Tamil Nadu has seen its losses rise to Rs 38,000 crore in fiscal 2011 from Rs 4,900 crore in 2006. Its debt is up at Rs 40,300 crore from Rs 9,300 crore over the same period.

"Structural reforms are required in the transmission and distribution," said RK Bansal, executive director, IDBI Bank Ltd. "State regulators will have to make sure that they increase tariffs as fast as they can. The delay is largely in new power projects.

In one case, there has been a delay in implementation which can be handled.'' Scores of power projects, including JSW Energy and Reliance Power, are also facing delays due to nonavailability of fuel, such as coal and gas, and land acquisition. The government's flip-flop in mining, and environmental policies have also hurt.

Some, such as Tata Power and Adani Power, are importing coal, but even that is becoming unviable given the surge in coal prices. These issues may manifest themselves as losses to banks. "Our supervisors are assessing the situation in each bank and also the entire banking sector,'' Reserve Bank of India Governor Duvvuri Subbarao told ET in an interview earlier this month.

Wipro Beats Market Forecast : Q2 Profit At Rs 1301 Crore

Wipro Ltd , country's No. 3 software services exporter, on Monday posted a 1 per cent rise in quarterly profit, beating street estimates, helped by a weaker rupee and rise in spending on outsourcing by overseas clients. 

Bangalore-based Wipro forecast third-quarter revenue of $ 1.50 billion to $ 1.53 billion from its IT services unit, which accounts for three-quarters of its total revenue, a rise of 2 percent to 4.1 percent from the second quarter.

Country's showpiece $76 billion industry gets more than 90 per cent of its revenue from providing technology services to overseas clients and counts the United States and Europe as its biggest markets.

Europe is the second largest market for the software firms, and the euro zone debt crisis is a worry for the sector that has been looking to increase its sales to the region to hedge against their excessive exposure to the United States. 

Total revenue rose 18 per cent to Rs 9094 crore, as the company added 44 new clients in its IT services business.

This compares with a media poll forecast of Rs 1276 crore on net sales of Rs 8928 crore for the company, which counts Citigroup , Cisco and Credit Suisse among its clients. Top software exporter Tata Consultancy Services Ltd posted a slightly lower-than-expected rise in quarterly profit earlier this month, while No. 2 Infosys met street forecasts in its earnings.

The top two outsourcing companies, however, sounded caution about the business outlook in the near-term due to the global economic uncertainty.

The company is not seeing pressure on the prices that it charges for its services and spending on technology by its clients has been good, its chief financial officer Suresh Senapaty said.

Wipro's shares, valued at about $18.30 billion, have fallen nearly 24 per cent this year, compared with a 16 per cent drop in the sector index and a 12.6 per cent fall in the Mumbai index .