New bank licence norms could be delayed

http://www.business-standard.com/india/news/wait-for-new-bank-licence-norms-to-get-longer/500471/

With differences between the finance ministry and the Reserve Bank of India (RBI) emerging over who can enter the banking sector, release of the new guidelines on banking licence norms could be delayed.

The finance ministry has asked RBI to consider broking firms and real estate developers while issuing new licences. This is despite the banking regulator ruling out such entities in the draft norms released in 2011.

RBI Governor D Subbarao today said the central bank was waiting for the government’s response.
“New bank licence guidelines are in the final stage. We have consulted the government and they have made certain points, to which we have responded. I do not know how many iterations it might go through, but now we are waiting for the government’s response to that,” said Subbarao.

He, however, added both the government and RBI would want to announce this as soon as possible.

Expectations were high after the Banking Laws (Amendment) Bill was passed by Parliament in December, vesting more power to the banking regulator. Subbarao, however, declined to comment on whether industrial houses will be allowed to do banking.

“You will have to wait till the final guidelines come out. We have put out draft guidelines and received feedback, which we put out in the public domain. Now, we are in the final lap and we will take a view shortly,” he said.

The recent comments from various quarters such as International Monetary Fund (IMF) that industrial houses should not be allowed in banking has made RBI re-think the entire issue.

“International experience has supported the prudent policy position of disallowing industrial houses from promoting and owning banks,” an IMF report titled ‘Financial System Stability Assessment Of India’ had pointed out.

Recently, Nobel laureate Joseph Stiglitz had also advised against giving licences to industrial houses for setting up new banks. C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, had suggested preference be given to the non-corporate sector in issuing these.

Federal Bank launches National Auto loans hub

http://www.thehindubusinessline.com/industry-and-economy/banking/federal-bank-launches-national-auto-loans-hub/article4361141.ece

Federal Bank launched a National Auto Loans Hub at Kochi on Wednesday.

The Hub has been set up as a single window for processing and sanctioning of auto loans on fast track.

With the launch of the National Auto Loan Hub, the bank has addressed two key points that affect consumers — pricing and speedy processing.

The bank has slashed the interest rates on car loans to 10.45 per cent, one of the lowest rates offered by any Bank in the industry. The Auto Loan Hub is committed to speedy processing and will enable the Bank to reduce turn—around—time [TAT] to less than a day, a bank release said.

The steps taken by the lender would make it the most aggressive player in the car loan market and provide customers best deals in the space.

The central hub has started operations and is currently handling all applications from Kerala. The bank proposes to spread its operations countrywide.

Federal Bank disburses car loans through all its 1029 branches across the country. Apart from this, bank’s subsidiary Fedfina, is also receiving applications directly from customers in all centres other than Kerala.

The bank’s own sales channel will supplement the efforts of the centralised hub to extend personalised service to clients for acquiring vehicles.

Federal Bank is entering into tie-ups with leading auto manufacturers and dealers across the country to offer best of services to prospective auto-clients. The launch of an online facility to give spot sanctions for car loans is also in the pipe-line.

Lending rates likely to come down: SBI

http://businesstoday.intoday.in/story/rbi-policy-review-lending-rate-sbi/1/191929.html

Borrowers could see better days ahead as banks are expected to cut lending rates following the RBI's decision to cut short term lending rate as well as unlocking Rs 18,000 crore by slashing cash reserve ratio (CRR) by 0.25 per cent.

Soon after the Reserve Bank unveiled its mid-quarter review of the monetary policy, several bankers hinted that they may consider rate cut in their ALCO (Asset Liability Committee) meeting.

RBI Governor D Subbarao in the third quarter monetary policy review surprised the market by cutting short-term lending rate called repo by 0.25 per cent to 7.75 per cent and Cash Reserve Ratio (CRR) by similar margin to 4 per cent, releasing Rs 18,000 crore primary liquidity into the system.

Commenting on RBI's action, SBI Managing Director A Krishna Kumar said "a rate cut is likely. Rates on advances and deposits could come down simultaneously. The RBI's action is positive".

RBI cuts key rates as inflation eases

http://businesstoday.intoday.in/story/rbi-cut-key-rates-as-inflation-eases-loans-to-become-cheaper/1/191919.html

The Reserve Bank of India brought some cheer for the middle class on Tuesday as it cut key rates for the first time in nine months in its monetary policy review. The repo rate was cut by 25 basis points and the cash reserve ratio (CRR) was also reduced by 25 bps. 

Soon after the policy announcement, the 30-share BSE Sensex was trading at 20,098.08, down 5.27 points or 0.03 per cent as 11.17 am. The 50-share Nifty was at the same time was trading at 6094.15, up 19.35 points or 0.32 per cent.

Business Today had in its analysis of the central bank's last monetary policy review predicted that the Reserve Bank would go for a rate cut in January. 

Senior Editor Anand Adhikari had said: "It is clear that there will be a softening of interest rates only from January, going by the RBI's guidance in October this year. The central bank says that headline inflation has been below the RBI's projected levels in the last two months...It is clear that there will be a softening of interest rates only from January, going by the RBI's guidance in October this year. The central bank says that headline inflation has been below the RBI's projected levels in the last two months."

Highlights:

1. Repo rate now stands at 7.75 per cent
2. CRR now stands at 4 per cent
3. Moderation in inlfation has given way for reducing key rates
4. Inflation target to 6.8 per cent for Mar 2013
5. CRR cut to infuse Rs 18,000 crore of liquidity in the system
6. RBI to work in conjunction with fiscal steps
7. Policy action guidance to support growth
8. INflation likely to remain range bound at current level
9. Lowering CRR last year didin't give us the desired result 
10. Policy to provide rate environment for growth
11. Large fiscal deficit to crowd out private investment
12. Bank rate stands adjusted 8.75 per cent
13. RBI trims 2012-13 growth estimate to 5.5 per cent from 5.8 per cent
14. RBI says inflation has come off its peak
15. Q3 CAD likely to widen beyond 5.4 pc of GDP.
16. Next mid-quarter review of monetary policy on March 19.

SBT net grows 31% on higher interest income

http://www.thehindubusinessline.com/industry-and-economy/banking/sbt-net-grows-31-on-higher-interest-income/article4354258.ece

State Bank of Travancore (SBT) posted a net profit of Rs 132 crore in the third quarter of the current fiscal.

This represented a 31 per cent jump over the net profit of Rs 101 crore in the corresponding quarter of the previous year.

Speaking to Business Line, P. Nandakumaran, Managing Director, SBT, attributed the good performance to an overall improvement in the operational scheme of things. It also marked reversal of a trend in which the cost of deposits had been weighing down the overall performance. The bank had managed the challenge on this front after NRI deposits, which accounted for 24 per cent, were set free last year. Adequate provisioning has been made not only for non-performing assets (Rs 245 crore this quarter) but also for restructured assets.

“Growth in advances resulting in a higher net interest income also aided in achieving a growth in the net profit,” Nandakumaran said.

The net interest income moved up from Rs 1,325 crore to Rs 1,511 crore, a year-on-year growth of 14.04 per cent.

Net interest margin (NIM) stood at 2.50 per cent (2.63 per cent).

The net operating income rose from Rs 1,799 crore to Rs 1,975 crore, a growth of 9.75 per cent.

The capital to risk weighted assets ratio (CRAR) stood at 11.40 per cent (under Basel II framework) against a regulatory minimum of nine per cent. Gross net performing assets (NPAs) grew to 3.04 per cent from 2.82 per cent while net NPAs stood at 1.83 per cent against 1.64 per cent.

Total business crossed Rs 1.45 lakh-crore mark and stood at Rs 1.46 lakh crore as at the end of December, 2012.

State Bank of Mysore Q3 profits up 39.50%

http://www.thehindubusinessline.com/industry-and-economy/banking/state-bank-of-mysore-q3-profits-up-3950/article4353943.ece

State Bank of Mysore’s (SBM) profits rose 39.50 per cent to Rs 154.77 crore in the third quarter of the current fiscal.

The bank’s total income was up 13.19 per cent to Rs 1,616 crore. EPS stood at Rs 33.07 compared with Rs 23.70 recorded last year.

SBM’s asset quality improved with percentage of gross non-performing assets (NPA) to gross advances at 3.99 per cent (3.67 per cent). Gross NPA for Q3 stood at Rs 1,772.36 (Rs 1,396.70 crore) and percentage of net NPA to net advances stood at 1.95 per cent (1.73 per cent). Return on asset (ROA) annualised stood at 0.98 per cent (0.80 per cent).

The bank’s net interest income increased 11.35 per cent to Rs 461 crore (Rs 414 crore). Net interest margin (NIM) was higher at 3.27 per cent from 3.23 per cent.

Kingfisher should infuse Rs 2,000 crore for revival: SBI chief

http://www.thehindubusinessline.com/industry-and-economy/banking/kingfisher-should-infuse-rs-2000-crore-for-revival-sbi-chief/article4332672.ece

Kingfisher Airlines needs to invest at least Rs 2,000 crore to restart its operations, said one of its lender SBI’s Chairman Pratip Chaudhuri.

SBI is the lead banker in the 17-lender consortium that extended Rs 7,000 crore loans to the now grounded Kingfisher Airlines. The state-run bank has an exposure of Rs 1,500 crore to the carrier. The debt has not been serviced since January, 2012.

To a question, Chaudhuri also said right now SBI is not contemplating any legal action against the carrier as the door for negotiations is still open.

“In order to restart operations, Kingfisher Airlines needs to infuse at least Rs 2,000 crore as capital. We are still holding talks with the company and following up also,” Chaudhuri told reporters here.

Chaudhuri said the bank was holding talks with the carrier every week.

If necessary, some buildings and non-core assets might be disposed, he said.

Kingfisher is saddled with mounting losses and debts. It has been grounded since October 1 following strike by pilots over non-payment of salaries. The airline’s licence has also been temporarily suspended and aviation regulator DGCA has told the airline that it will be restored only when it submits a revival plan.

As per the revival plan submitted to DGCA last year, Kingfisher had said it would require about Rs 652 crore over the next 12 months for running its operations.

Federal Bank launches `Federal Manipal School of Banking'

http://www.thehindubusinessline.com/industry-and-economy/banking/federal-bank-launches-federal-manipal-school-of-banking/article4328760.ece

Private sector lender, Federal Bank launched the Federal Manipal School of Banking at the Manipal University Bangalore Campus to provide student training on various areas of banking and management.

The Federal Manipal School of Banking will offer full-time programme for one year that includes nine months of campus training and three-month internship at a branch of Federal Bank, which will be coupled with grooming and soft skills training, the bank said in a statement.

Students will earn a monthly stipend of Rs 2,500 for the first 9 months and Rs10, 000 per month during their three month internship with the bank. Federal Bank will support full fee financing through education loans and loyalty bonuses, the statement added.

A post graduate diploma in banking and finance will be awarded by Manipal University to students at the end of the course and will be absorbed as probationary officers by the bank.

Abraham Chacko, Executive Director, Federal Bank said “This programme is aimed at providing the officers with that extra mile of knowledge and skills which will in turn aid to their excellence in banking and services.”

Indian government pushes banks to go rural, but will it pay?

http://www.indianexpress.com/news/indian-government-pushes-banks-to-go-rural-but-will-it-pay-/1062446/0

New Delhi plans to directly transfer cash payments for subsidies into these accounts, a move aimed at tackling graft in India's creaky, corruption-ridden public distribution system.

If successful, the initiative could also bring modern banking to the doorstep of rural India, a goal towards which progress has so far been fitful despite mandatory targets set by the government and Reserve Bank of India.

The target is a tough one in a country where only 35 percent of people had formal bank accounts, versus the global average of 50 percent, according to a financial inclusion survey by World Bank in 2011. Nearly two-thirds of India's 1.2 billion population still live in rural areas.

Currently being piloted in 20 districts, including three in Rajasthan, the programme is expected to go nationwide in phases over the next year.

The government plans to transfer 3.2 trillion rupees ($58 billion) to beneficiaries of its subsidy schemes and welfare programmes, according to newspaper reports.

It will pay the wages for more than 50 million workers in a rural job scheme, pensions for 20 million senior citizens and about 5 million education scholarships directly to bank accounts linked to a unique identification number.

It is also likely to free farmers from the clutches of money-lenders who charge annual interest of 24-50 percent, giving them access to institutional finance.

Shiva Kumar, managing director of SBBJ, a subsidiary of government-owned State Bank of India, says the initiative will bring "financial freedom" to India's vast rural hinterland, home to about 800 million people.

"Lot more money will come into the banking system. It can boost prosperity in the villages and that will get more business to banks," he said.

Banks fear early pain - the move could burden them with 250 rupees to 500 rupees ($4.5-$9) of additional costs per account annually, while profits may remain elusive for at least 2 years.

Still, they see a huge opportunity even if only a quarter of these new accounts were to turn into regular customers, demanding loans, mutual funds and other products.

The programme could help banks and business correspondents earn about 40 billion rupees ($735 million) as fee income, Mumbai-based brokerage Anand Rathi, said in a note this month.

Banks are currently losing money in most of their rural operations, hit by highs costs, poor connectivity and low savings in areas where average per capita income is around 16,000 rupees, compared with 44,000 rupees in urban areas.

Oil stocks help Sensex hold above 20K for first time in 2 yrs

http://www.indianexpress.com/news/sensex-closes-about-20000-first-time-in-two-years/1061361/

The BSE benchmark Sensex today ended above the 20,000-mark for the first time in two years on continued strong buying in oil & gas stocks by FIIs on the back of partial deregulation in diesel prices.

Bucking the broader market trend, shares of Wipro and HDFC Bank ended lower despite posting good quarterly numbers.

Extending gains for the second day, the 30-share Sensex rose by 75.01 points, or 0.38 per cent, to close at 20,039.04, a level last seen on January 6, 2011.

The gauge had surged 146 points in the previous session.

"The partial decontrol in diesel prices has triggered a rally in Oil Marketing Companies. While global cues have been helpful, what is the heartening is that FII inflows continue unabated," said Amar Ambani, Head of Research, IIFL.

Besides, a firming trend in Asia and higher opening in Europe on reports of Chinese economy accelerating for the first time in two years and US housing sales jumping to a four-year high further supported the uptrend.

The broad-based National Stock Exchange index Nifty rose by 25.20 points, or 0.42 per cent, to 6,064.40, after touching the day's high of 6,083.40.

Provide banking facilities in each town: RBI guv Subbarao

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/provide-banking-facilities-in-each-town-rbi-guv-subbarao/articleshow/18047416.cms

RBI Governor D Subbarao on Wednesday asked banks to meet the target of providing banking facilities to small towns soon. 

"It is unfortunate that 90 per cent towns of the country did not have banking facilities. The target of RBI is to ensure that every family have a bank account," Subbarao said while addressing a programme here. 

He said that there are six lakh towns in the country, of them one lakh are in Uttar Pradesh. 

"I urge all the banks to soon fulfil target of providing banking facilities in these towns," he added. 

Accepting that inflation had increased in past few years, the RBI governor said that though they had somewhat succeeded in containing it in past two years, it is still there. 

"It is our priority to check price-rise and will remain so", he said. 

On inflow of fake Indian currency notes in the market, Subbarao said that some criminal and anti-social elements were involved in it (circulations of fake notes) and RBI was doing whatever is possible to check its inflow. 

Lonely people more frivolous with money: study

http://www.financialexpress.com/news/lonely-people-more-frivolous-with-money-study/1060717

People who don't have many friends, feel alone at work, or are sad about a breakup are more frivolous with their money, a new study has claimed.

Researchers from Hong Kong found that when people feel lonely or rejected they put a greater value on money. This is because they associate being wealthy with being socially accepted, the 'Daily Mail' reported.

As a result, lonely, sad and rejected people gamble and make riskier, but potentially more profitable, financial decisions in a bid to fit in, researchers said.

"Feeling socially rejected triggers riskier financial decision-making," said authors of the study including Rod Duclos from Hong Kong University of Science and Technology, Echo Wen Wan of University of Hong Kong, and Yuwei Jiang from Hong Kong Polytechnic University.

"In the absence of social support, consumers seek significantly more money to secure what they want out of the social system surrounding them," they said.

During the study, participants were asked to talk about a social situation that left them feeling included, and one that made them feel left out. After each anecdote they were asked to choose between bets with high odds that offered low rewards, or low-odds bets that gave higher payouts.

When the members felt rejected or lonely, they were more likely to choose the higher risk options. However, when they discussed a situation in which they felt happy and accepted, participants were more careful in their money-making decisions.

Banks want PAN rule relaxed for non-deduction of tax at source

http://www.thehindubusinessline.com/industry-and-economy/banking/banks-want-pan-rule-relaxed-for-nondeduction-of-tax-at-source/article4304764.ece

Banks want the revenue authorities to do their depositors, who are economically weak, aged and infirm, a good turn.

They have moved the authorities to allow them to act upon self-declarations made in Form 15G and Form 15H (for non-deduction of tax at source) by the above mentioned category of people even if they do not have a permanent account number (PAN).

Banks, under the aegis of the Indian Banks’ Association, have impressed upon the Finance Ministry (the department of revenue functions under the ministry) that such a move will alleviate the hardship caused to the economically weaker sections, the aged and the infirm.

Further, this would also reduce the administrative burden to the authorities granting income-tax refunds.

Currently, in the absence of PAN, declarations for non-deduction of tax at source in Form 15G or in Form 15H cannot be acted upon and interest earned by the economically weaker sections, the aged and the infirm becomes subject to tax deduction at the higher rate of 20 per cent.

If a depositor furnishes PAN, then banks deduct tax at source at 10 per cent on the interest earned on fixed deposits, if it (the interest earned) is above Rs 10,000 a year.

PAN has been made compulsory for every transaction with the income-tax department.

The number is also mandatory for a number of other financial transactions, including opening of bank accounts, availing institutional financial credits, purchase of high-end consumer item, foreign travel, transaction of immovable properties, and dealing in securities.

A PAN card is a valuable means of photo identification accepted by all government and non-government institutions in the country.

Form 15G is a self-declaration form submitted by individuals below 60 years to banks stating that their income is below the taxable limit. Form 15H is submitted by those above 60.

Meanwhile, banks have sought a hike in the tax deducted at source limit on interest earned on fixed deposits from Rs 10,000 to Rs 50,000 a year.

This hike in the tax deducted at source limit on interest earned on fixed deposits would be in line with rationalisation of tax slabs in the draft Direct Taxes Code and take into account the impact of inflation on returns.

Such a move would reduce considerable paperwork and manpower, both at banks and at the income-tax department.

Federal Bank launches online puja offering services

http://www.thehindubusinessline.com/industry-and-economy/banking/federal-bank-launches-online-puja-offering-services/article4294968.ece

Federal Bank has launched ‘online religious offering services bouquet’ in association with the Sree Padmanabhaswami Temple. 

This enables the devotee to make offerings/pujas without visiting the place. Any credit or debit card or the Federal Bank net banking service (FedNet) may be used for the purpose.

Federal Bank also plans to roll out the service through its merchant-payment system soon. 

The service can be accessed through www.sreepadmanabhaswamytemple.org/pooja.aspx 

www.federalbank.co.in/General_ProductandServices_OnlineReligiousOfferings.aspx.

Banks wary of using a risk-based system to give education loans

http://www.thehindubusinessline.com/industry-and-economy/banking/banks-wary-of-using-a-riskbased-system-to-give-education-loans/article4295163.ece

The Finance Ministry’s move to get public sector banks to usher in a risk-based pricing regime for education loans could prove a non-starter, say bankers. The proposed system is based on assigning ratings to universities, institutes and colleges as well as students.

In the six interactive meetings that banks and Finance Ministry officials had with education institutions across the country over the last year, the latter’s response to the rating concept was mixed.

While some reputed institutions welcomed such a rating model, many others (most South-based institutions opposed the idea) did not want college ratings to be taken up by banks or other external agencies. The fear among many privately run professional colleges is that an adverse rating may lead to students shunning them. Besides, the institutes have to pick up the tab for the rating, which the banks as well as the students can access free of cost.

“With only 10-15 per cent of the student population taking education loans, there is no visible incentive for educational institutions to pay for the rating of their courses by rating companies. Moreover, highly reputed institutions such as IITs, IIMs and NITs may not want to be rated by the credit rating agencies.

“Inferior colleges may also not want to pay for the ratings and have them published. All these factors would make risk-based pricing pegged solely on the rating a non-starter,” said a banker clued in to the developments.

Currently, banks are charging a fixed rate of interest for all education loans (there may be variations subject to the quantum) irrespective of the courses pursued, rating of institutions or student ratings. There has been a widespread demand for charging differential rates.

According to credit rating agency ICRA, the Indian higher education system is one of the largest in the world, featuring over 20,000 institutes and around 13 million annual enrolments.

Muthoot Pappachan Group forays into housing finance, to target low-income group

http://www.thehindubusinessline.com/industry-and-economy/banking/muthoot-pappachan-group-forays-into-housing-finance-to-target-lowincome-group/article4290070.ece

Targeting the lower and middle income group the Muthoot Pappachan Group has forayed into the housing finance segment in Kerala.

Considering the need for housing loans in the State and particularly in the lower income segment, the company aims to build a loan book size of over Rs 250 crore over the next five years.

Thomas Muthoot Executive Director Muthoot Pappachan Group told presspersons here on Wednesday that the housing loans would be offered through branches in Kochi, Kottayam, Thrissur and Kozhikode.

“We see great need and immense scope in the home loan market, especially in the low income segment. The idea is to be a facilitator to every Indian’s dream of owning a house,” he said.

People in the lower middle to lower income group, especially in the informal segment, face difficulties in procuring housing loans as they do not have any income proof. The aim is to reach out to this informal segment through the company’s vast network, he added.

Maneesh Srivastava, CEO, Muthoot Housing Finance Company Ltd said the company would mainly cater to the housing finance needs of customers whose income ranges from Rs 10,000 to Rs 30,000 each month and would offer loans ranging from Rs 3 lakh to 15 lakh, up to 80 per cent of the property value.

The loan repayment period would be up to 15 years and loans would be offered for the purchase of ready property, under-construction houses/ flats, for self construction on owned plots of land and for home extensions.

Over a period of five years, MHFCL aims to lend Rs 1,000 crore to housing finance customers nationally through calibrated growth in the target markets.

IRDA revises norms for life insurance products

http://www.thehindubusinessline.com/industry-and-economy/banking/irda-revises-norms-for-life-insurance-products/article4293481.ece

The Insurance Regulatory and Development Authority (IRDA) has revised the norms for traditional life insurance products at its board meeting held here on Wednesday.

When contacted, IRDA Chairman J. Hari Narayan, told Business Line that the insurance products would now have mandatory minimum death benefit and minimum surrender value.

“The life insurance products have also been aligned with the pension products in some aspects of benefits,’’ the IRDA chief said adding that the aim was to enhance customer protection keeping in view the long-term nature of life insurance products.

“We have earlier reformed linked-products segments and now concentrated on life products,’’' he said.

In June last year, the insurance regulator had circulated draft guidelines on the proposed changes in life insurance products.

It was proposed that the minimum sum assured should be higher by 10 times the annual premium or 0.5 times of the annual premium multiplied by the term of the policy for those who are below 45 years.

For below 45 years, according to the draft, the minimum sum assured is higher by 10 times the annual premium or 0.5 times the annual premium multiplied by the term of the policy or 105 per cent the premium paid as on the date of the policyholder’s death.

Home-loan battle: David co-operative bank takes on Goliath SBI

http://www.thehindubusinessline.com/industry-and-economy/banking/homeloan-battle-david-cooperative-bank-takes-on-goliath-sbi/article4287432.ece

Saraswat Co-operative Bank has pitched its rate of interest and equated monthly instalment on home loans a shade lower than State Bank of India’s in what could be seen as a David vs Goliath challenge..

Saraswat Bank had a business size (deposit plus advances) of about Rs 33,000 crore against State Bank of India’s Rs 20,89,644 crore as at September-end.

The country’s largest multi-state urban co-operative bank is charging home-loan borrowers 9.9 per cent on loans up to Rs 25 lakh and 10.1 per cent on loans above Rs 25 lakh.

India’s largest bank, SBI, is charging home loan borrowers 10 per cent on loans up to Rs 30 lakh and 10.15 per cent on loans above Rs 30 lakh.

On a 20-year home loan of up to Rs 25 lakh and above Rs 25 lakh, a Saraswat Bank customer has to pay a monthly instalment of Rs 958 a lakh and Rs 972 a lakh, respectively. On a 20-year home loan of up to Rs 30 lakh and above Rs 30 lakh, an SBI customer has to pay a monthly instalment of Rs 966 a lakh and Rs 975 a lakh, respectively.

A senior Saraswat Bank official said his bank had priced home loans lower to attract more customers. Moreover, corporate loan growth has been tepid due to economic slowdown. Hence, the thrust is on growing the home-loan book.

Though Saraswat Bank’s pricing is more attractive compared with SBI, the customers of the former will have to contend with processing fee and the requirement to invest in the bank’s shares.

The co-operative bank is charging a processing fee of Rs 5,000 for home loan up to Rs 25 lakh; Rs 15,000 for above Rs 25 lakh and up to Rs 50 lakh; and Rs 25,000 for above Rs 50 lakh.

SBI charges a processing fee of 0.125 per cent for home loans up to Rs 25 lakh; Rs 3,250 for loans between Rs 25 lakh and Rs 75 lakh; and Rs 5,000 for loans above Rs 75 lakh.

Borrowers have to invest 2.5 per cent of the loan amount (subject to a maximum of Rs 25,000) in the shares of Saraswat Bank. This is the case with all urban co-operative banks.

However, investment in the bank’s shares fetches borrowers a dividend. On average, Saraswat Bank has paid 20 per cent dividend in each of the last five financial years.

In the financial year ended March 31, 2012, the co-operative bank’s average cost of deposits was 7.2 per cent. Even if one assumes that this financial parameter remains unchanged, the bank is still earning a spread of 2.7-2.9 percentage points on home loans.

Bank exam for specialist officers to be held in March

http://www.thehindubusinessline.com/industry-and-economy/banking/bank-exam-for-specialist-officers-to-be-held-in-march/article4286681.ece

The Institute of Banking Personnel Selection will conduct a common written examination for the recruitment of specialist officers in public sector banks in March 2013.

According to a notification released on Tuesday, the posts include IT officer, agricultural officer, law officer, among others. The vacancies would be notified by the individual banks in due course.

The online registration of applications will commence on January 10 and will continue up to January 28. Tentatively, the exam will be held on March 16, or 17.

Further details can be had from IBPS Web site.

Canara Bank to pay Rs 25K for debiting excess amount from a/c

http://www.indianexpress.com/news/canara-bank-to-pay-rs-25k-for-debiting-excess-amount-from-ac/1054526/0

Canara Bank has been directed by a consumer forum here to pay Rs 25,000 as compensation to one of its ex-employees for debiting excess amount from his account towards interest of a housing loan taken by him.

The South II District Consumer Disputes Redressal Forum observed that as per the records placed before it, an excess amount of Rs 2,228 was debited from the bank account of the borrower and the amount was refunded by the bank only after filing the complaint.

"The bank checked its system and refunded the said amount on September 17, 2012 after filing of this complaint. We hold it deficient in service.

"We, therefore, direct the bank to pay Rs 20,000 as compensation for harassment... We further direct it to pay a sum of Rs 5,000 as cost of litigation," the bench presided by M C Mehra said.

The complainant, R D Bhargava, an ex-employee of Canara Bank had said in his plea that he had fully repaid the housing loan taken by him but the bank had debited an excess amount of Rs 2,228 from his account towards interest and had also demanded Rs 7,000 as amount overdue.

The bank had refused to issue him a no dues certificate till he paid the amount demanded, Bhargava had alleged.

The bank had been proceeded against ex-parte and its counsel had appeared before the forum at the time of final arguments when it had handed over the excess amount debited from Bhargava's account.

RBI proposal may boost gold loan companies' growth: ICRA

http://www.indianexpress.com/news/rbi-proposal-may-boost-gold-loan-companies-growth-icra/1055706/

The proposal by the Reserve Bank to increase the loan to value (LTV) ratio to 75 per cent from the present 60 per cent is likely to help gold loan companies increase their business volume at a reasonable rate, says a report by rating agency ICRA.

"Standardisation of valuation of gold and increase in the LTV cap from 60 per cent to 75 per cent would help gold loan companies increase business volume," the report said.

It, however, added that the pace of growth of these companies is likely to be much lower than the over 120 per cent compounded annual growth rate (CAGR) witnessed over the last three years.

The K U B Rao committee, appointed by the RBI on gold loan companies (GLCs) was released on January 2. It has proposed to increase the LTV ratio along with a host of other recommendations for monetisation of gold.

The report also acknowledged the positive role of banks and non-banking financial companies (NBFCs) in monetising gold.

Referring to the report, the agency also said gold loan NBFCs may not increase their market share from the present level as banks enjoy a competitive advantage over them.

"As banks enjoy a competitive advantage over NBFCs, and given the healthy risk-adjusted returns and growth prospects in the gold loan segment, banks could step up the pace of growth of gold loans. Were this to happen, the market share of NBFCs in gold loans may not increase from the current 28 per cent by FY12 end," the report said.

State Bank of India rules out rights issue

http://www.thehindubusinessline.com/industry-and-economy/banking/state-bank-of-india-rules-out-rights-issue/article4282871.ece

State Bank of India (SBI) is likely to get a capital infusion of about Rs 3,000 crore from the Centre by March-end, Chairman Pratip Chaudhuri has said.

This capital infusion would not come through a rights issue but in the form of a preferential allotment of shares to the Centre, Chaudhuri said here on Monday.

He made it clear that the bank had not sought any capital and that it was the Government that had indicated infusion of Rs 3,000 crore.

“This (capital infusion by the Government) should happen by March 31,” Chaudhuri said

The capital infusion will be part of the Rs 12,000 crore that the Government intends to pump in various banks this month. The Cabinet may consider capital-infusion proposals of banks this week.

Last fiscal, the Centre had infused Rs 7,900 crore in SBI, taking the Government holding to 61.58 per cent from 59.4 per cent .

On expectations from the upcoming monetary policy review, Chaudhuri said he expected a 50-100 basis-point cut in the cash reserve ratio and a 50 basis-point cut in the repo rate.

Cut lock-in period for tax saving deposits to 3 yrs: Bankers

http://www.thehindubusinessline.com/industry-and-economy/banking/cut-lockin-period-for-tax-saving-deposits-to-3-yrs-bankers/article4283176.ece

Bankers today demanded that lock-in period for tax saving deposits be brought down to three years from five years to channelise more funds into the banking sector.

In a pre-budget consultation with Finance Minister P Chidambaram, bankers also sought permission to issue tax-free bonds like other financial institutions for raising funds and augmenting business.

“Tax saving bonds are already there (with banks), tax saving deposits are already there. So there was a requirement that this lock-in period should be reduced from five years to three years on the tax saving deposits to bring it in line with tax saving ELSS (equity linked saving schemes),” SBI Chairman Pratip Chaudhuri said.

He was talking to reporters after the meeting of bankers with the Finance Minister.

“Some of the banks...made a request that they should also be allowed to issue tax-free bonds as has been allowed to other financial institutions because banks have good distribution network and can finance infrastructure projects,” he said.

Bankers who attended the meeting include Indian Overseas Bank CMD M Narendra, UCO Bank CMD Arun Kaul, Punjab National Bank CMD K R Kamath, ICICI Bank MD Chanda Kochhar, Axis Bank MD Shikha Sharma and Chairman of HDFC Ltd Deepak Parekh.

Besides, RBI Deputy Governor K C Chakrabarty also attended the meeting.

On gold imports, the bankers said the import was also connected to jewellery exports and any efforts to bring down the inbound shipments would affect jewellery exports.

“Any restriction on gold import should be done carefully and in a calibrated manner because gold import has also a correlation with jewellery export,” Chaudhuri said.

Betting on exchange rates, NRIs lose money on India deposits

http://www.thehindubusinessline.com/industry-and-economy/banking/betting-on-exchange-rates-nris-lose-money-on-india-deposits/article4269719.ece

Non-resident Indians pumped in more money than ever before into the country’s banks this fiscal, betting on a depreciating rupee to boost returns. The cumulative value of deposits maintained by NRIs in the country’s banks soared to an all-time high of $67,018 million in September 2012.

But forex fluctuations have not worked in the favour of all NRIs. The cumulative value of deposits maintained by NRIs in Indian banks rose by $8.1 billion during the first six months of FY13. In contrast, actual fund inflows stood higher at $8.9 billion.

The discrepancy in the quantum of deposits vis-à-vis the amount actually maintained in the accounts was due to adverse currency fluctuation, which wiped out nearly $800 million of NRI money.

This does not mean that NRIs have always been on the receiving end of foreign exchange rate fluctuation. In July, NRIs infused $854 million of fresh funds in Indian banks. But the cumulative value of outstanding NRI deposits in Indian banks shot up by around $2 billion, a huge gain for the depositors on the back of foreign currency fluctuation. This came on the back of a 3.5 per cent drop in the rupee exchange rate against the dollar in July from an all-time high of over Rs 57 per dollar in June.

In this regard, the type of account in which NRIs deposited their money also plays a large role in whether they benefit from appreciations or depreciation of the Indian rupee against other foreign currencies. Three types of deposit accounts are available to NRIs: foreign currency non-resident (bank) accounts (FCNR), non-resident external rupee accounts (NRE-RA) and non-resident ordinary (NRO) accounts.

Depositors in NRE accounts would be betting on rupee appreciation against their foreign currency of choice, as their deposits would be maintained in rupees, so appreciation would garner more forex on conversion in their country of residence.

On the other hand, FCNR account-holders would be rooting for rupee depreciation. In case the converse situation occurs, this would result in forex losses for the NRI depositors. In the case of NRO accounts, the deposits would be maintained in rupees and as they are not repatriable, can only be redeemed in rupees.

An analysis of exchange rates during the year reveals that the rupee lost 1.1 per cent against the dollar during January-October 2012. But during April-October, it rose by 5.8 per cent. This highlights how the timing of a deposit, as well as the tenure, can mean all the difference between a significant gain or a sizeable loss on an NRI deposit.

In financial year 2012, NRIs showed a marked preference for NRE and NRO accounts over FCNRs, as the rupee has fallen sharply against the US dollar and other currencies. The quantum of fresh funds pumped into NRE accounts stood at $8.5 billion in 2011-12 and NRO fund inflows amounted to $4 billion. In contrast, FCNRs witnessed outflows of over $600 million.

The trend continued in April-October 2012, with NRE inflows amounting to $11.6 billion, compared to outflows of $138 million from FCNRs and $1.3 billion from NROs. This indicates that most NRIs still expect to see the rupee appreciate against the US dollar and other currencies from its current low levels.

In this regard, it should be noted that against fresh deposits of $10.1 billion during April-October 2012, the cumulative value of deposits maintained by NRIs in Indian banks only rose by $8.2 billion. This indicates that around $1.9 billion of deposits was wiped out during the period, giving NRIs a reason to re-evaluate their strategy.