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Dec 30, 2008

30.12.2008

PNB slashes prime lending rate to 12%
Anticipating a further reduction in interest rates by the central bank, Punjab National Bank on Monday announced a 50 basis points cut in its benchmark prime lending rate from 12.5 per cent to 12 per cent with effect from January 1, 2009. With this, PNB’s lending rates will be the lowest among its peer banks. Currently, State Bank of India’s BPLR is the lowest among public sector banks, at 12.25 per cent. Bank of Baroda and Bank of India had last week announced cut in BPLR by 75 basis points to 12.5 per cent with effect from January 1. PNB had earlier cut BPLR from 14 per cent to 13.5 per cent with effect from November 1, 2008, and further to 12.5 per cent from December 1, along with reduction in retail lending rates. PNB is hopeful of maintaining its Net Interest Margin at 3.4-3.5 per cent, despite the reduction in rates, Dr Chakrabarty said. The cost of funds will go down by 100 basis points by the middle of next year,” he said. PNB also announced a cut in deposit rates by 100 basis points, from 9.5 to 8.5 per cent, for deposits of one year to less than three years. The aggressive reduction in deposit rates is corresponding to the cut in lending rates, he said. The bank also reduced interest on floating rates housing loans and fixed rate car loans by 50 basis points. Mumbai-based Dena Bank, too, announced a reduction of 75 basis points in its BPLR from 13.5 per cent to 12.75 per cent and a reduction of 25 to 100 basis points in deposits across maturities, with effect from January 1, 2009.

IDBI Banks cuts deposit rates

IDBI bank has reduced the interest rates on retail term deposit by 50-150 basis points in the maturity period of 46-90 days up to 10 years, with effect from January 1 and also realigned its maturity buckets. The bank is introducing a longer maturity term deposit of 1,100 days with interest rate for normal depositors at 9.5 per cent per annum and at 10 per cent per annum for senior citizens instead of the existing 890 term deposit. The new deposit is also available from January 1.

Banks resposible for delivery of ATM pin, card

In case of misuse of debit cards, banks cannot escape responsibility by saying that they have delivered the card and the personal identification number (PIN) at the address mentioned in the application. A bank customer has approached the Ombudsman with a complaint about withdrawal of funds through unauthorized use of his card. Though he did not receive the card, he found that Rs 25,000 was debited from his account. The Ombudsman, said that the card and PIN should have been delivered to the complainant in person or to his authorised representative only under his proper acknowledgement. The Ombudsman asked the bank to not only reimburse the Rs 25,000 withdrawn from the complainants account but also pay interest at savings bank rate and an additional amount to meet the expenses relating to follow-up of the complaint.

PSU banks’ unsecured loans up 41% in FY08

Unsecured loans by public sector banks grew 40.9% in FY08, higher than the growth recorded by private sector banks which collectively recorded a 39.7% growth during the same period. These loans typically comprise a host of personal loan products that are riskier than secured loans. They are predominantly advances to individuals and include small-ticket education loans, credit card receivables, loans against salaries and consumer durable loans. Notably, among the banks with a perceptible portfolio of unsecured loans, many smaller banks- private and public-have more than doubled their unsecured loan portfolio, like Allahabad Bank (140%), Central Bank of India (104%), Indian Overseas Bank (106%), Karur Vysya Bank (101%) and Catholic Syrian Bank (144%). As a whole, the banking sector extended Rs 5,72,160 crore as unsecured loans in FY08, up 41.6% from Rs 4,04,067 crore in FY07. In line with the industry trend, new-age banks like ICICI Bank (31%) and HDFC Bank (40%) also have recorded a steady growth of their unsecured loan portfolios. These loans carry higher risk weights but are often extended at a significant premium to the benchmark prime lending rates of a bank.

ATMs on wheels to help banks expand reach

Technology is expected to be a key enabler in meeting the banking needs of a large section of the population in India. Despite the large network of banks spread across rural areas, more than 50% of the population does not have access to formal financial services. With the RBI's directive for financial inclusion, banks are trying to reach the unbanked areas through channels such as biometrics, smart card technology and handheld devices. These technologies are helping banks expand both in urban and rural markets. One such interesting service is providing banking services at the doorstep through mobile automated telling machines (ATMs). The vans are equipped with a 42-inch plasma TV with a DVD player which can be used by the bank for informing its customers about various products and offerings. Services being offered on mobile ATMs include cash withdrawal, fund transfer, cash against credit cards, mobile recharge, balance inquiry, mini statement and utility payments.