Lending Growth May Touch a 7 Year Low In FY13

Slow economic activity, delays in project execution and rising interest rates may result in banks’ credit growing at the slowest pace in eight years in the next financial year.

While most bankers see advances growing 16-18 per cent this financial year, they expect credit expansion to slow to less than 16 per cent in 2012-13. Banks’ credit growth has remained over 16 per cent since 2005-06. In the previous financial year, loan growth was 21.38 per cent.

According to bankers, credit growth this financial year is driven by disbursement of loans sanctioned earlier. With new project launches being delayed, the pipeline for new sanctions is drying up quickly. On the retail side, high rates and rising inflation are keeping borrowers in a wait-and-watch mode and delaying their purchase decisions. The festive season did little to boost sentiments and improve retail loan demand.

“A lot depends on the investment climate. Going by the current trend, we expect credit growth at around 16-18 per cent this year. Next year, it would certainly be lower than this,” said M V Nair, chairman and managing director, Union Bank of India.

A chief executive of a Mumbai-based private bank said if loan sanctioning did not improve immediately, banks would stare at credit growth of 14 per cent in the next financial year.

The Reserve Bank of India (RBI) has cut its credit growth projection for this financial year. It now expects bank loans to grow 18 per cent in 2011-12, compared to the earlier forecast of 19 per cent. Annual credit growth fell to 17.9 per cent in October from 22.2 per cent a year ago, with industrial output growth slowing to a two-year low in September.

“The current growth is coming from past projects. What is clearly happening is the new approval rate is going down because there are no projects, or very few projects, that are coming for financial closure,” Chanda Kochhar, managing director and chief executive of ICICI Bank, said in a recent interview with Business Standard.

 “Credit growth has seen moderation this financial year, and one cannot be very optimistic about growth in the next financial year. While sanctions are in place, there is no disbursement schedule yet for some projects,” said Bhaskar Sen, chairman and managing director, United Bank of India.

Bankers said micro and small enterprises and the farm sector were likely to drive loan demand in the next financial year.

For more details: www.dialabank.com

High Ticket Defaulters Owe Rs 47000 To Financial Institutions

Defaulters of Rs 1 crore and above owe over Rs 47,000 crore to banks and financial institutions as on March 31, 2011, Parliament was informed on Tuesday. 

According to the list of people who defaulted over Rs 1 crore and above in payments to various lenders, a total of 4,102 defaulters owe Rs 47,594.31 crore,Finance Minister Pranab Mukherjee said in a written reply in the Rajya Sabha.

According to the RBI data, the number of defaulters having an outstanding amount of Rs 10 crore and above (non-suit filed accounts) of financial institutions as on March 31, 2011, stood at 723. They owe Rs 26,165.51 crore, he said.

The suit-filed accounts of Rs 1 crore and above involved an amount of Rs 21,428.80 crore.

The Minister said in order to improve the health of the financial sector, the government and the RBI have taken various steps.

This includes prescribing prudential norms for provisioning and classification of non-performing assets, guidelines for prevention of slippages, corporate debt restructuring and other restructuring schemes.

To another query, Minister of State for Finance Namo Narain Meena said PSU banks have granted Rs 14,12,542.71 crore worth loans to industrial houses as of March 31, 2010.

On deposits, Meena said about Rs 1,723.24 crore worth of such funds are lying with commercial banks as on December 31, 2010.

For more details: www.dialabank.com

3 in 1 Accounts : Things To Know

The 3-in-1 account allows an investor to operate the savings bank, demat and trading accounts on a single platform. 

An investor can open all three accounts with the same bank using a single account opening form and know your client form.

Funds can be transferred from the bank account to the trading account while buying securities, and to the bank account while selling or redeeming them.

It reduces paperwork involving cheques, fund transfers, contract notes, account statements, order placement and branch banking transactions.

The bank account is only used for securities transactions to see and block the balance. Net banking is not available with 3-in-1 passwords.

The demat account can be debited only for online transactions linked to the trading account and is secured from being debited in favour of any third party.

Some banks have extended this facility to NRIs by allowing them to link their NRE/NRO accounts, PIS/Non-PIS trading accounts and demat accounts.

Banks Join The Race On Waiving Pre-Payment Charges

There is something to cheer about for home loan borrowers even in this high interest rate regime. After housing finance companies (HFCs), banks have finally started scrapping prepayment penalty charges, both for the new and existing customers. While the big two, State Bank of India and ICICI Bank, waived off such charges with immediate effect, other banks are expected to follow suit soon.

Pre-payment penalty is an amount charged by a lender when the borrower prepays the outstanding amount before the end of the loan tenure. Some banks do not charge a penalty if the outstanding is paid through “own sources of funds”, while few others charge anywhere between 0.5 per cent to 2 per cent depending whether it is paid from own source or it is re-financed. Banks were so far resisting any proposal to scrap pre-payment penalty, claiming it would lead to asset-liability mismatch. On the other hand, the Reserve Bank of India (RBI) was putting pressure on banks to stop this practice for quite some time now.

Zero penalty means there would be no charge if one decides to shift the balance loan amount to some other lender also known as re-financing. Pre-payment charge is used as a client retention tool to discourage borrowers to move to other lenders which may offer better interest rate for transferring the outstanding amount. Pre-payment charge puts limitation on the number of choices a customer can have due to the market competition.

Last month, National Housing Bank (NHB), which regulates housing finance companies (HFCs) like HDFC, LIC Housing Finance and Dewan Housing Finance, issued a circular which directed them not to charge pre-payment penalty on floating rate home loans (made through any source) or pre-closure done on fixed rate home loans through own sources.

Union Bank of india Increases Loan Rates By 0.5%

State-owned Union Bank of India today raised lending rate by 0.5 percentage points making existing loans costlier. 

The bank has decided to revise Benchmark Prime Lending Rate (BPLR) by 50 basis points from 15 per cent to 15.50 per cent, Union Bank of India informed the BSE.

The revised rate will be effective from November 28, it said. The hike in PLR will make existing loan costlier.

The hike in interest rates comes a month after RBI raised its key policy rates by 0.25 percentage point to check high inflation.

RBI raised the short-term lending (repo) rate by 25 basis points to 8.5 per cent and the short-term borrowing (reverse repo) rate by a same margin to 7.5 per cent in a bid to check the rate of price rise.

Future Generali Launches “Secure Income”, A Traditional Endowment Cum Money Back Plan

Future Generali Life has launched a traditional endowment-cum-money-back plan called Secure Income. This plan, like some other child plans launched by insurers to mark Children's Day (November 14), is also targeted at parents intending to save for their child's future.

Features

The features are similar to other endowment or moneyback plans available in the market. Under the plan, policyholders can choose the amount of sum assured, premium payment term and also the period during which they would like to get regular cashbacks — that is when the money-back can kick in and for how long. Premium paying term extends from 10 to 30 years, while the cashback period can range from five to 35 years. The total policy tenure will be the premium payment term plus the cashback period for regular, limited premium term plans.

Like all endowment plans, you will also be entitled to accrued bonuses at the end of the premium payment term. The minimum annual premium is Rs 10,000. The upper age limit for buying the plan is 60 years, while the tenure can range between 15 and 65 years. On completion of the premium-payment or accrual period, the accrued compounded reversionary bonuses will be paid.

During the cash-back period, 5.5% of the sum assured is paid annually in addition to any cash bonuses till the end of the policy term. On maturity, the policyholder stands to receive the sum assured plus the terminal bonus, if any, as maturity benefit. In the event of the demise of the life assured during the premium-paying term or the accrual period, the sum assured plus the accrued bonuses will be paid to the nominee, over and above any cash-backs received, provided all the due premiums are paid. The plan also offers accidental death, term benefit and premium waiver benefit riders.

Source BY dialabank.com 

ICICI and SBI Abolish Prepayment Penalty On Home Loans

The country’s largest lender, the State Bank of India (SBI), has decided to abolish pre-payment charges on home loans, giving some succour to borrowers who want to foreclose their accounts.

“We have decided to do away with pre-payment charges on all kinds of housing loans with immediate effect,” a senior official of the bank said. The bank has been charging pre-payment penalties only on housing loans with floating interest rates taken before May, he added.

It has been charging about two per cent of the amount due as penalty if, borrowers opted to foreclose their loans. ICICI Bank has also waived off pre-payment charges on floating rate home loans irrespective of the borrowers' source of funds used to repay the loans. The bank was so far charging 2-4 per cent penalty on pre-payment of housing loans. Other banks are also likely to follow.

The total home loan of SBI rose to Rs 92,383 crore at the end of September, against Rs 86,769 crore in March. At present, some banks are charging up to two per cent as pre-payment penalty on the outstanding loan, if a borrower settles the full payment before maturity by switching to another lender. No pre-payment fine is charged if borrowers pay using their own funds.

This development comes after theReserve Bank indicated indicated it would scrap prepayment of penalties charged by banks.

“It is proposed to implement the recommendations of the Damodaran Committee, as also the action points which were identified by theIndian Banks’ Association and Banking Codes and Standards Board of India in the last Banking Ombudsmen conference,” RBI had said in its mid-year credit policy review.

Economic Activity To Slow Down : Chanda Kochhar

The Indian banking sector and the economy are headed towards sedation after years of high-octane growth driven by record overseas fund flows and rising incomes-induced consumption, says the top executive at ICICI Bank. 

The worsening European crisis could hurt the global financial system and may even lead to markets seizing up as in 2008, though there may not be a total breakdown, said Chanda Kochhar, managing director and chief executive officer at ICICI Bank, the nation's secondbiggest lender by assets. 

Growth prediction for India is being sliced to 7-7.5% from well over 8% as government finances lie in tatters and consumption far outstrips supplies. Current account deficit, the excess of imports over exports, is poised to touch the 1991 crisis levels. The Indian rupee is at its life low to the US dollar as inflows dry up and portfolio investors flee to the safety of the greenback.

Businesses Flummoxed :

The index of industrial production grew an anemic 1.9% in September after interest rates were raised 13 times.

The deteriorating global economic environment and the necessity for the Reserve Bank of India to keep interest rates high is hurting companies which may need loans restructured to survive, she said without naming customers.

"You may have a few large corporates who may need handholding for some time, but I don't think we are seeing such huge deterioration in asset quality," Kochhar said. "Our exposure is structured differently than taking a direct exposure only on the cash flows, in that sense our security package or cash flow package is much stronger than the rest of the banking sector.

Therefore, for us the pain should be lesser than the rest of the sector." The consumer is still shopping, thanks to growing income, but businesses are flummoxed at the uncertainty in environment with various agencies of the government pulling in different directions, stalling projects worth thousands of crores of rupees.

"There is a part of the economic fundamentals that is still showing the same resilience - which is our domestic consumption," said Kochhar. "But the other part is really to do with the mood, the sentiment and you know everything to plan for the future."

Construction at many power plants and building of roads in many places are stalled as the government goes back-andforth on whether these projects are violating environmental rules."But the necessary factor today, or the sufficient factor, is that one which should change the mood, and make people confident that if I want to do a project then the implementation should come through," she said.

Source BY dialabank.com

SBI Raises Fixed Deposit Rates; Others To Follow

The country's largest bank, State Bank of India (SBI), which recently launched an aggressive deposit mobilisation scheme that offered 8.5 per cent for tenures of seven days to 180 days, has caught the competition off its guard, and other banks are now considering launching similar products.

The new deposit scheme from SBI, launched earlier this week, would be applicable to deposits of more than Rs 1 crore. SBI has waived the pre-withdrawal penalty after seven days to make the product attractive.

According to a senior SBI official, the bank's new product would enable it to take advantage of the arbitrage opportunity, as rates offered for other short-term instruments, like certificates of deposits, are higher. SBI also expects the product, which has no pre-withdrawal penalty, to compete with resources flowing to liquidity mutual fund schemes which offer 8.5 per cent to 9.25 per cent.Private sector lender Federal Bank followed suit today, launching a fixed deposit scheme for retail customers that offers 9.50 per cent on a maturity period of 200 days. For one year, the rate offered is 9.75 per cent.

SBI is keen to tap surplus funds of corporate houses, which are now parked in other banks, for a lower rate.

“There is a probability that banks would offer higher rates on deposits, given the current liquidity scenario,” said M Narendra, chairman and managing director, Indian Overseas Bank. The Chennai-based lender is also planning to raise rates for one-year maturity by 25 basis points to 9.5 per cent.

A senior Union Bank of India official said banks may decide on increasing the short-term rate over the next seven-10 days.

Liquidity has become tight over the last few days, with banks borrowing more than at least Rs 1 lakh crore, daily, on average, from RBI's liquidity adjustment facility. On Wednesday, banks borrowed Rs 1.35 lakh crore, compared with Rs 1.31 lakh crore on Tuesday from the RBI window. The liquidity tightness is well above the central bank's comfort zone of Rs 50,000 crore.

Source BY dialabank.com

RBI Increases NRE and FCNR(B) Deposit Rates

RBI today hiked interest rates on Non-Resident (External) Rupee term deposits and Foreign Currency Non-Resident (Banks) deposits, a move expected to increase the flow of foreign exchange amid the weakening domestic currency. 

"Interest rates on fresh Non-Resident (External) Rupee (NRE) Term Deposits for 1-3 years maturity should not exceed the LIBOR/SWAP rates plus 275 basis points, as on the last working day of the previous month, for US dollar of corresponding maturities," RBI said in a notification.

The interest rates will also be applicable to deposits with the maturity period exceeding three years and to deposits renewed after their present maturity period.

The interest rate on NRE deposits was LIBOR/SWAP rates, plus 175 basis points since November, 2008. 

The interest rate on these deposits was earlier LIBOR/ SWAP rates plus 100 basis points.

The hike in rates is intended to make such funds more attractive at a time when the rupee has depreciated sharply during last few months.

Falling for the eight day in a row, the Indian rupee today closed at 52.35/36 -- its all-time closing low -- against the US dollar amid continuing signs of capital outflows and steep fall in stock markets.

Real Estate Prices In India Expected To Decline By 25%

Prices for real estate in India are expected to decline by 25 per cent in the upcoming quarter, according to market observers.

The Royal Institution of Chartered Surveyors (RICS) says that the market is currently over-heated, after a strong growth in recent years, which has since slumped due to the global economic uncertainty.

The consequent cash crunch for realtors and cautious buying habits by potential investors is expected to shrink the market and bring down prices by nearly a quarter, with sales in Delhi and Mumbai already seeing drastic cuts in sales.

Large scale developers, such as DLF and Unitech have already started selling land plots in order to keep some liquidity and pay back loans to banks. According to the Reserve Bank of India, the developers held around US$24.4bn of outstanding credit at the end of June, a 23 per cent increase from the year prior. With hiked interest rates, developers are finding it increasingly difficult to keep their heads above the water.

With home prices at an all time high, market observers say that if there won’t be a price adjustment for launched projects, new developments will be offered to a much lower price. This puts additional pressure on developers who are largely required to repay bank loans by the end of this fiscal year ending on March 31, 2012.

Sales in Mumbai have declined by 60 per cent in the last six months, with Delhi down by 50 per cent, confirming that there will likely be trouble ahead for developers if price corrections won’t be introduced.

MCA Comes Down On PSU Banks For Easing Norms For Select Players

Some state-run lenders and private companies are under scanner of the corporate affairs ministry after allegations that these firms in collusion with bank officials misappropriated bank loans to generate cash among their subsidiaries and inflate enterprise value. 

"There were allegations that bank officials are easing sanctioning norms for term loans and working capital loans to some private companies," said an official from the ministry of corporate affairs (MCA).

The finance ministry is investigating the role of some of the officials in leading public sector banks such as Indian Overseas Bank, Bank of India, Oriental Bank of Commerce and Bank of Baroda, the official said.

Companies or promoters used a part of these loans to purchase fixed assets such as land and then used them to borrow further loans by pledging them as collateral.

The remaining loan amount is shown used for purchasing moveable assets through fake invoices and the cash was shared between the borrower and conniving bank official, the official said.

"The entire loan amount will turn into bad assets and banks will have nothing much to recover," the official added. MCA is also likely to look into allegations that promoters are using their subsidiaries to help convert cash into equities at higher premiums, thereby multiplying their shared capital.

A finance ministry official confirmed that a probe was initiated, but said so far no substantial evidence has been found against any bank official. "We have asked MCA to investigate the issues relating to floating of a number of companies and issue of shares at unrealistic premiums," he said.

Another finance ministry official said most of the bankers have been given a clean chit. "The allegations were examined by the chief vigilance officer of these banks and no evidence was found," he said.

J&K Bank Gets Long Term Rating Of “AA” From Fitch

Fitch Ratings has affirmed its national rating of very low default risk with a stable outlook for Jammu and Kashmir Bank on the back of the government of India's support for the lender.

"Fitch Ratings has affirmed Jammu and Kashmir Bank's national long-term rating at 'AA (ind)' with a stable outlook," it said. An 'AA' national rating denotes expectations of very low default risk relative to other issuers, or obligations, in the same country.

"JK Bank's ratings reflect Fitch's expectation of moderate support from the government of India through the J&K government, if ever required, considering the bank's central role in sustaining the economy of the politically important state of J&K," Fitch said. It said the bank dominates the banking business in Jammu & Kashmir, with a 75% market share in lending and a 68% share of deposits.

"JK Bank's asset quality has remained stable, with a gross NPA ratio of 1.95% in the financial year ended March, 2011, and 1.89% in the first half of FY12," Fitch said. It said the bank has demonstrated a track record of managing its asset quality during the past two decades of socio-political disturbance in the state.

Source BY dialabank.com

IDFC To Increase Forex Loan Portion To 13% From Current 8%

Infrastructure Development Finance Co (IDFC) is looking to increase the proportion of foreign currency debt in its total loan portfolio, prompted by a burgeoning demand for financing in infrastructure.

IDFC may raise forex loans to 12-13% of its total portfolio from 8% now depending on the interest rate environment, Group CFO Sunil Kakar said at the launch of the company's retail infrastructure bond issue on Monday.

"We are actively pursuing getting foreign currency debt in the Indian capital market, because of the sheer quantum of funding required to finance Indian infrastructure. But our forex exposure is fully hedged," he said.

The infra finance firm is looking to raise Rs 5,000 crore through 10-year taxsaving bonds by March 2012. The bonds, which are secured in nature and rated 'AAA' by ICRA and Fitch Ratings, have a lock-in of five years after which they can be redeemed.

The bonds offer 9% annualised return and have been launched in two series - one will pay interest on cumulative basis and another will pay interest on non-cumulative basis.

"In order to make the bonds more popular, the government can increase the investment limit and make the interest income tax free," said ED Vikram Limaye. Currently, investments up to Rs 20,000 in infrastructure bonds are exempt from income tax.

IT Deptt Not Sure If The List Of Swiss Bank A/C Holders Is Genuine

After serving notices and conducting raids, the income-tax department is having second thoughts on the authenticity of the list of Swiss bank account holders it obtained from the French government three months ago.

Tax authorities, investigating the 700 unreported account holders with HSBC Geneva, are planning to go back to the French government to verify the list which was complied out of stolen data. It will seek the French Government's permission for approaching the Swiss government.

Tax officials claim that they are not in a position to approach the Swiss authorities directly due to a provision in the treaty between India and France that stipulates information exchanged would not be shared with any agency other than the tax department.

The I-T authorities are in an unenvious position with most of the individuals in the list denying having any account with HSBC Geneva. So, it is desperate to cross-check the information with Swiss authorities. Its immediate plan is to obtain the French government's approval as soon as possible, for dealing with the Swiss government directly. Most of those named in the list are hoping that the income-tax authorities will not be able to prove its point in any court of law as the list was based on data stolen in 2008 by a former HSBC employee.

The French government had procured the data from an ex-employee of HSBC by offering him a new identity and asylum. The evidential value of data stolen from a foreign bank is almost nil unless the agency that produces it before the court has supporting evidence such as certification by the Swiss authorities or the bank itself.

Even if the French authorities allow the Indian tax department to approach the Swiss authorities directly, the department is not certain whether it can persuade the Swiss banks to cooperate.

More so, because of the revised Indo -Swiss tax treaty that will come into effect from April 1, 2012. Under the revised treaty, Swiss banks have to share information about accounts that are in operation. So far 17 individuals (out of the 700) have disclosed their account details with the Mumbai tax office.

This was possible through revised returns, an exercise allowed under the Income-Tax Act if the taxpayer thinks there was a mistake in the original return. However, returns are allowed to be revised within one year of filing the original return.

The amount disclosed ranges from Rs 50-300 crore. It is also learnt that there is a disclosure of Rs 300 crore at the Chennai income-tax office by a member of a leading business family who was the beneficiary of a trust set up by the patriarch of the family.

Asset Quality Of Private Banks Like ICICI and HDFC Better Than State Run Counterparts

JP Morgan Asset Management India is bullish on stocks of private sector banks that are better placed than their public sector peers in terms of asset quality, said Nandkumar Surti, chief investment officer, who manages assets worth Rs 4,772 crore. 

"On the financial sector side, private banks are what we are overweight on, particularly because they are not seeing the kind of pressure that public sector banks are seeing, especially on their NPA side," he said. The fund house has increased exposure to private banks from 9.89% in August to 10.19% at the end of October.

In the quarter ended September, the country's largest lender, State Bank of India, posted 12% decline in net profit amid a steep rise in bad loans. However, the two largest private sector banks, ICICI Bank and HDFC Bank, posted 22% and 31% increase in net profit for the second quarter and also improved their bad loan portfolio.


The fund house is bullish on discretionary consumption sector stocks such as two-wheelers and paints, while it remains averse to metal, telecom and most state-run firms.

Going ahead, two key factors to look out for will be the Reserve Bank of India's rate stance in its December policy review and global commodity prices, said Surti.

"The more important factor would be indication from the Reserve Bank of India that monetary tightening is nearing a pause and if we see some meaningful correction in global commodity prices and reforms on the policy front those could be triggers for a re-rating of markets," he said.


"The focus on fixed income is because the rates have continuously risen from the low of 4.75% to the current repo rate at 8.50%. Investors have found better investment opportunities on the fixed income side and obviously we have also tried to exploit that," he said.

Source BY dialabank.com

Govt Decision To Centralise Procurement Slows Down ATM Additions

The wait outside public sector bank ATMs is set to get longer with the banks putting on hold plans to install new cash dispensing machines in the wake of a government decision to centralize procurement. 

While the finance ministry has informed banks about its intent to go for a common purchase contract for all public sector players, it is yet to firm up the modalities, including the agency that will undertake the procurement. In addition, a bank chief said that the government is looking to put in place a mechanism through which banks can mutually decide the locations for new machines. 

ATMs, while it hovers between 30% and 40% for the new generation private sector players.

India is probably the largest ATM buyer with public sector banks expected to set up close to 20,000 machines this year. State Bank of India alone had planned to add 10,000 new ATMs this year, but is going slow following the policy review by the government. Other banks too have put fresh orders on hold.

Senior banks executives said that a centralized procurement would help negotiate better prices. A large bank such as SBI pays around Rs 4 lakh per ATM, while those with a smaller requirement end up paying close to Rs 6 lakh, an executive said. A common purchase platform may help lower the cost for a big player like SBI, bankers said.

Other banks too have put fresh orders on hold. Banks executives said that a centralized procurement would help negotiate better prices. A large bank such as SBI pays around Rs 4 lakh per ATM, while those with a smaller requirement end up paying close to Rs 6 lakh, an executive said. A common purchase platform may help lower the cost for a big player like SBI, bankers said.

On the flip side, they said, it could take up to six months to put in place the new mechanism for purchases and order the next lot of machines.

Bhartiya Samruddhi Finance Heads To RBI, Fearing A Default

Bhartiya Samruddhi Finance, the second biggest micro lender for the poor, is headed to the central bank to have its loans restructured to avoid a possible default as attempts to raise equity failed and loan recoveries reduced to a trickle, said two people familiar with the plans. 

The micro lender promoted by Vijay Mahaja that held out in the hope of private equity funding when the whole industry rolled over its loans and cut interest rates, is seeking a prolonged tenor and lower rates for its loans, those people said.

"BSFL has approached the Reserve Bank of India seeking its approval to file for corporate debt restructuring,'' said one of the persons who knows the matter." The CDR cell has not received any formal application, but it is in talks with its lenders and exploring the option.''

There is no certainty that the restructuring will be permitted, or what the outcome of the efforts would be. "BSFL is in advanced stage of discussion both with the investors and lenders and expects to have a resolution soon,'' said Manmath Dalai, chief executive at Bhartiya Samruddhi.

BSFL, which was less affected than leader SKS Microfinance or other lenders after the Andhra Pradesh government restricted practices of microfinance companies led to a collapse of recoveries, was negotiating with many funds for equity. But the efforts seem to have failed with no light at the end of tunnel for the entire industry that has crumbled like a pack of cards.

"The institution has not been able to raise funds from its investors which one of the precondition set by banks to release any fresh funding to the MFI,'' the person said.

ICICI Bank, Axis Bank, HDFC Bank, SIDBI, IDBI Bank, Standard Chartered Bank, Citibank are major lenders to the MFI with an exposure of around Rs 1,440 crore.

The MFI has been in discussions with banks to secure a fresh line of credit. However, banks had laid a condition that existing investors such as IFC, Washington, Shorebank, Chicago, Hivos-Triodos Fund, Netherlands, ICICI Bank and HDFC must bring in equity.


Source BY dialabank.com

Indian Bank Loans Rise 18.4% On Year (As On Nov 4)

Indian bank loans rose 18.4 percent on year as of Nov. 4, the RBI's weekly statistical supplement (WSS) showed on Friday. 

Deposits were up 17.5 percent from a year earlier. Outstanding loans rose 299.54 billion rupees to 41.80 trillion rupees in the two weeks to Nov. 4.

Non-food credit rose 214.13 billion rupees to 41.03 trillion rupees and food credit rose 85.42 billion rupees to 774.64 billion rupees in the period, the bank said.
Bank deposits rose 351.20 billion rupees to 56.54 trillion rupees in the two weeks to Nov. 4, the WSS showed.

Vijay Mallya Meets SBI Chairman To Ask For Rs 400 Cr Loan

Kingfisher, the troubled airline owned by Vijay Mallya, fought battles on multiple fronts on Friday. Chairman Mallya, who used to be compared with flamboyant British entrepreneur Richard Branson, met the chairman of India's largest bank to ask for a short-term loan of Rs 400 crore to meet day-to-day expenses, even as leasing companies threatened to repossess 16 aircraft for delay in payment of rentals. 

Mallya met Pratip Chaudhuri, chairman of State Bank of India, and top officials of other banks at the SBI headquarters in South Mumbai. Besides the working capital loan, which will be used to meet daily expenses such as salary payments, the chairman asked for letters of credit and guarantees, which would increase the exposure of the banks by Rs 445 crore, to enable the airline to buy fuel, according to people familiar with the matter. 

Lenders Crack the Whip 

Banks, which own 23% of the debt-laden airline and have lent close to Rs 7,000 crore to the company, want promoters, Mallya and the UB Group, to bring in equity before they lend more. "Before taking a further call on this matter, we first want to see that money (equity of Rs 400 crore) coming in.

Other creditors like oil companies and airport authorities are working out a schedule, and then we will sit with the company to understand how much more money it requires and what are the different sources. All the money need not necessarily come from banks," Chaudhuri had said in Kolkata.

While Mallya was attempting to persuade banks to loosen the purse strings, lawyers representing aircraft-leasing companies were engaged in tough negotiations with representatives of Kingfisher. The lessors have told the airline that they will be forced to seize leased aircraft because of regular defaults in paying rentals, sources with direct knowledge of the matter told ET.

The lessors, which together have 16 aircraft leased out to Kingfisher, are believed to have told the airline that it should pay up in two weeks, increase security deposits and ensure the aircraft are in the same condition as they were at the time of delivery. The average lease rental is $400,000 per aircraft per month.

"Kingfisher is behind schedule on lease rental payments to every leasing company," said an official of one of the leasing companies that have exposure to Kingfisher. He did not wish to be identified because of the sensitivity of the matter. "The most worrying part is that not all of our aircraft assets are in pristine condition," he added.

RBI Permits Authorised Banks The Power To Approve “Set-Off”

With a view to liberalising the export-import procedures, RBI today decided to delegate to authorised banks the power of sanctioning 'set-off', under which an item or amount is allowed to be set off against another in the settlement of accounts.

Earlier, set-off in export receivables against import payables -- in respect of the same overseas buyer and supplier -- was allowed only with sanction of the Reserve Bank.

"It has now been decided to delegate the power to Authorised Dealer Category I banks to allow such set off with immediate effect," the Reserve Bank said in a circular.

It said, however, that the import has to be as per the Foreign Trade Policy in force.

Besides, invoices or bills and exchange control copies of bills of entry for home consumption have to be submitted by the importer to the authorised dealer bank.

The payment for the import has to be maintained as outstanding in the books of the importer.

Exporters and importers availing of the facility will have to report both the transactions of sale and purchase separately in returns.

"The 'set-off' of export receivables against import payments should be in respect of the same overseas buyer and supplier and that consent for 'set-off' has been obtained from him. All the relevant documents are submitted to the concerned AD bank who should comply with all the regulatory requirements relating to the transactions," RBI said.

No Relaxation In CRR : RBI Dy Gov

Reserve Bank of India Deputy Governor Subir Gokarn today said the RBI will not relax the quantum of deposits banks have to park with the central bank, dubbed the cash reserve ratio (CRR), to ease current liquidity pressures.

"Not at the moment. CRR is being seen by us as a part of a monetary dashboard. To use it in a sort of tactical liquidity management sense, I think we are not at that point," Gokarn told reporters on the sidelines of a conference here.

The CRR stands at 6 per cent at present and has not been changed for over a year now.

The RBI had yesterday announced it will buy Rs 10,000 crore of government bonds from the market through open market operations (OMO) on November 24, which is reportedly aimed at easing pressures on liquidity and interest rates.

With the busy season for credit picking up, banks are reportedly borrowing up to Rs 1 lakh crore everyday from the repo window.

According to reports, the move can also be aimed at easing pressures on yields, as the RBI was unable to carry out three bond sales because investors were asking for higher yields than what the RBI was offering.

"... The OMO is the obvious market-based tactical move. It does not send a signal of change in the monetary policy stance, which the CRR always runs the risk of doing," Gokarn said.

D K Mehrotra May Become Chairman of LIC

Decks have been cleared for acting chairman D K Mehrotra to become the regular chairman of Life Insurance Corporation, as the finance ministry has decided to send his name to the Appointment Committee of Cabinet (ACC) for final approval.

A senior finance ministry official said on Tuesday that Mehrotra has been cleared by a high-level committee headed by finance secretary R S Gujral. “His name is now being sent for ACC approval,” the official told Business Standard.

On October 29, the panel had interviewed five candidates in its bid to select the regular chairman for the country’s largest insurer, founded in 1956. Besides Mehrotra, the candidates interviewed were Sushobhan Sarkar (executive director, international operations), D Vijayalakshmi (executive director, investment), Thangam Matthew (executive director, underwriting and reinsurance) and D D Singh (zonal manager, south).

The selection panel comprised department of personnel & training secretary Alka Sirohi, financial services secretary D K Mittal and IRDA chairman J Hari Narayan among others.

Mumbai-headquartered LIC has been without a full-time head since this May, when chairman T S Vijayan’s five-year term ended and the government did not grant him extension despite his having about two years of service tenure left.

That time, as an interim arrangement, Rakesh Singh, additional secretary in the finance ministry, was appointed LIC chairman. Subsequently, the insurer’s managing director Mehrotra was asked to officiate as chairman.

In June, the selection panel had met to take a call on finalising names for the new chairman. It could not reach a decision, as candidates did not have the required clearance of the Central Vigilance Commission.

 

SBI Adjudged Most Preferred Bank of North East

The State Bank of India (SBI) was adjudged as the most preferred bank of North East at the second Northeast Consumer Awards, presented here on Saturday.

Constituted by regional Hindi daily Dainik Purvoday, the awards were based on a survey covering 3,000 households by research agency MaRs across 5 cities of the region.

The category list this year had increased from last year’s 30 to 37 to include airlines, watches, apparels, shoes and even digital cameras.

Besides SBI winning the ‘most preferred bank’ award, Life Insurance Corporation of India (LICI) won the most preferred life insurance company award.

While Oil and Natural Gas Corporation (ONGC) was adjudged the best company of the year award

.

The other winners of the Northeast Consumer Awards were Maruti Suzuki, Hero Honda, Tata Motors, Airtel etc.

The awards were awarded by JB Patnaik, Governor of Assam and Bhubaneshar Kalita, Rajya Sabha MP.

   

Future Generali Plans For Rs 700 Cr In New Premium Business

Future Generali India is hoping to collect up to Rs 700 crore in new premiums in the life insurance business for the current year with an expected growth of 20 per cent on the back of new product launches and expansion of marketing operations.

The company collected Rs 168 crore in new premium business in the first half of the current financial year and expects to make substantial business in the last quarter, according its managing director Deepak Sood.

Speaking to the media in connection with the launch of its new traditional endowment plan with guaranteed return on the sum insured, Sood said the company's performance had been on the targeted lines.

Poor Asset Quality & Low Credit To Rural Areas A Concern : RBI

The Reserve Bank today expressed concern over asset quality of banks and lower credit flow to rural areas, despite the fact that performance of Indian banks improved during the 2010-11 period. 

In its report titled 'Trend and Progress of Banking in India 2010-2011', RBI said that the Indian banking sector demonstrated continued revival from the peripheral spill over effects of the recent global financial turmoil in 2010-11, but despite the positives, certain concerns continued to persist.

"During the last two years, the writing off ratios were high in the Indian banking sector, which implies foregone profitability in an attempt to clean balance sheets," the report said adding that there was always concern regard to restructured standard accounts. 

More alarmingly, rural areas accounted for only a small proportion of credit," the report said.

RBI also said that non-adherence to the priority sector lending poses risk of skewed distribution of advances to certain sectors.

The report also stressed on improving efficiency, greater use of technology for financial inclusion, improving quality of banking operation along with review of operation of foreign banks to increase the reach and profitability of Indian banks.

Meantime, the report showed that the consolidated balance sheet of commercial banks recorded higher growth in 2010-11 along with sound growth in profitability.

The report also said that there was concern with relation to rising incremental NPAs from agricultural lending portfolio. The central bank also pointed out that while credit flow to rural areas is low, there is high growth in advances to few sensitive sectors like real estate, infrastructure, NBFCs and personal loan.