News

Capital rejig -- to look attractive Public sector banks hoping to go public have to clean up their books and reduce their bloated equity base. The likes of Indian Bank, Central Bank of India, United Bank of India and Punjab & Sind Bank are in the process of doing just that. They do this in two stages. In the first stage, they ask the Government to write off the accumulated losses against the capital infused by the Government. In the second stage, a portion of the remaining equity (afte the write-off) is converted into preference capital that will carry an interest rate of about 8%, subject to government approval. Indian Bank, for instance, set off accumulated losses of about Rs.3,800 crore against its capital base of Rs.4,574 crore. It further got the Government to convert about Rs.400 crore of equity into preference capital. Following there steps, the bank's earnings per share improves from a little over Rs.1 per share to nearly Rs.7 (before conversion to preference) and about Rs.14 per share after conversion based on March 2006 earnings. HDFC Bank gets notice on credit card promises The Monopolies and Restrictive Trade Practices Commission (MRTPC) issues a notice of inquiry to HDFC Bank for not preventing direct selling agents from making false promises to its credit card customers. The report alleged that the customers were not told the terms and conditions when they signed the documents given by direct selling agents (DSAs) and the card holders come to know about the terms only after receiving the plastic money. The report also said the customers are not revealed schedule of charges to be levied by the bank, the method of calculating interest rates and penal charges. HDFC Bank has outsourced credit card selling business to 11 companies in the National Capital Region. These companies appoint DSAs to sell the credit cards. Customers are not informed that DSAs are not employees of HDFC Bank, the report said. Tax Deduction at Source (TDS) --- Senior Citizens The RBI has told several commercial banks not to deduct interest tax payable on fixed deposits of senior citizens. Senior citizens are eligible for tax exemption on the interest earned on fixed deposits for which they have to submit Form 15 H and Form 15 G to their respective banks. The Finance ministry is receiveing complaints that several banks are deducting tax even after senior citizens submit the forms. Most of the banks to whom notices have gone are in public sector, ICICI Bank is the only private bank. DCB to consider raising FII limit Development credit Bank Ltd board is meeting on November 24 to discuss options to raise capital and increase the cap of FII investment.