Bank mergers may affect insurance distribution scene

Bank mergers in India are likely to impact the insurance sector as many insurers have selected banks as their bancassurance partners. Bancassurance is the sale of life, pension and investment products through the branch network of a bank. The recent merger announcement of HDFC Bank and Centurion Bank of Punjab is expected to impact the business of Aviva Life Insurance and ICICI Lombard General Insurance Co. Centurion Bank is the bancassurance partner for these two insurers. The arrangements might be discontinued because HDFC Bank sells life and non-life insurance policies of group companies HDFC Standard Life Insurance and HDFC General Insurance. Insurers find recruiting and training individual agents a time-consuming and costly process. There are also issues like agency attrition and small-sized policies procured by agents. V Srinivasan, chief financial officer of Bharti Axa Life Insurance, said that the one bank-one insurer concept was not right and would lead to skewed scenario. A bank should be allowed to be a broker and sell the policies of different insurers, he said.

PSBs must clear education loans in one month, says FM

Finance minister P Chidambaram on Tuesday said that the public sector banks (PSBs) are required to clear education loans within 15-30 days and they should also institute an online system to clear such loans. This will enable students to download the loan application form, apply online and learn the status of their loan application, he said adding the facility is now provided by all major public sector banks.

Motilal Oswal, IDBI Bank team up for online trading facility

Motilal Oswal Securities Ltd and IDBI Bank on Tuesday announced that they were entering into a strategic alliance to provide online trading facility to the bank’s customers. IDBI customers now have the option of investing in equities, derivatives and IPOs using Motilal Oswal’s online trading platform. On the trading front, Motilal Oswal will provide the bank’s customers instant order/trade confirmation, single margin for equity/IPO/derivatives, “buy now sell tomorrow” and “after market hours” order placement facilities and margin benefit on hedged positions. Corporation Bank has tied up with IL&FS, Religare and Reliance Money; Asit C. Mehta has an arrangement with Union Bank while Bank of India has tied up with Anand Rathi. This is the second such partnership that Motilal Oswal has got into; where last year it had tied up with SBI Bank.

Corpn Bank ATMs at MRPL outlets

The Mangalore-based Corporation Bank and Mangalore Refinery and Petrochemicals Ltd (MRPL) have decided to leverage their respective strengths to provide a bouquet of services to customers in the fuel retail segment. MRPL, which has the approval from the Government to open 500 retail outlets, is planning to open 25 retail outlets under the brand name ‘HiQ’ by December, and Corporation Bank will have the choice of setting up of ATMs at the ‘HiQ’ retail outlets. Mr B.R. Bhat, General Manager (IT), Corporation Bank, and Mr Sanjay Grover, General Manager (Retail Sales), MRPL, said that the two will leverage their strengths to generate greater opportunities from each contact they have with the individual customer.

Staff liabilities may bleed small PSBs

Public sector banks will need to fully deploy an RBI escape clause in provisioning requirements for employee liabilities to ensure their costs do not soar by at least Rs 800 crore each this fiscal. These banks are planning to introduce additional retirement benefits that could cost them up to Rs 25,000 crore. This is more than half their estimated gross profit for this fiscal at Rs 42,000 crore. The proposed package for employee benefits includes pension, provident fund and gratuity. Banking sources said liabilities could vary from Rs 800 crore to Rs 1,000 crore for each bank, depending on employee strength. To make full provision for employee-related costs in a single shot in one year could push a large number of banks into the red. They are, therefore, keen to use the breather provided by RBI on the accounting standards on employee benefits. The AS-15 norm allows them to spread the full provision for staff-related liability over five years. One PSU bank CEO said that while State Bank of India and Canara Bank, which have net profits of Rs 4,541.31 crore and Rs 1,421 crore, respectively, could afford to make provisioning for employee-related costs in one shot without any major impact on their bottom lines, mid-sized banks like Oriental Bank of Commerce and Corporation Bank, with net profits of Rs580 crore and Rs 536 crore, respectively, may need to space out the liabilities. The cost for banks would soar by an additional Rs 5,000 crore in case the government decides to provide an option to all employees to move towards pension benefits in lieu of provident fund. Of the 7 lakh people employed by the 27 public sector banks, about 3 lakh are covered under provident fund.

HDFC Bank, Centurion boards approve 1:29 share swap ratio

Shareholders of Centurion Bank of Punjab would be eligible to exchange 29 shares into one share of HDFC Bank. This follows the board of directors of the two banks approving on Monday a share-swap ratio of 1:29. HDFC Bank’s share closed at Rs 1,422.70, down by 3.5 per cent while Centurion Bank ended the day at Rs 48.25, lower by 14.45 per cent on the BSE on Monday. The entire process of the merger would take about four months for completion. The merged entity will be known as HDFC Bank. Mr Rana Talwar, Chairman of Centurion Bank, has been offered a seat on the Board as non-executive director and Mr Shailendra Bhandari, Managing Director, Centurion Bank, has been invited to join as the Executive Director on the board post merger. “The near-term impact on HDFC’s financials would be moderately negative considering the relatively poor financials of Centurion Bank. It would take HDFC Bank a while to leverage the branch network of Centurion Bank to improve its financials, said Mr Vaibhav Agrawal, Senior Analyst-Banking, Angel Broking Ltd. The draft scheme of amalgamation, the due diligence report and any other matters as required will be considered by the board of HDFC Bank at its meeting scheduled on February 28.

Uco Bank to clean up balance sheet

Kolkata-based Uco Bank has put some Rs 264-crore of nonperforming assets (NPAs) on the block to clean up its balance sheet. This was indicated by Uco Bank chairman & managing director SK Goel. Out of this, around Rs 100 crore of bad loans are likely to be sold off by March 31. Overall, Uco Bank is struggling with bad loans totalling Rs 1,664 crore. “NPAs with a minimum size of Rs 5 crore have been identified for putting on the block,” Mr Goel said. “The bank has recently finalised deals to transfer NPAs to the tune of Rs 44 crore to a few to asset reconstruction companies (ARCs). Negotiations are on for selling off another Rs 60-70 crore of NPAs this fiscal. Talks are at an advanced stage,” Mr Goel said. It is understood that companies like Asset Reconstruction Company (India) Ltd (Arcil), Arsec India Ltd, Pegasus Asset Reconstruction Co have evinced an interest for taking over part of Uco’s bad loan portfolio. This selling off exercise would help the bank. Out of the total NPA, Rs 400 crore is in the agriculture sector and another Rs 450 crore is in the retail segment. It has identified nearly 1.80 lakh bad loan accounts, including nearly 1.44 lakh small accounts. Besides transferring bad loans to ARCs, it has also started negotiating with default borrowers directly to recover bad loans. It has recovered some Rs 213 crore during the first half to September 30, 2007. It is looking to recover another Rs 300 crore by March 30, 2008.

HDFC Bank, Centurion boards okay merger plan

The boards of HDFC Bank and Centurion Bank of Punjab have approved in principle a merger between the two banks. The boards of both banks will again meet on February 25 to consider the share swap ratio after the receipt of the valuation reports. Mr Deepak Parekh, Chairman, HDFC, the promoter of HDFC Bank, said: “We get scale…we will get about 400 branches at one go. Today, size is important in the banking sector. They (Centurion) have good presence in Punjab - thanks to Bank of Punjab, which was merged with Centurion. Similarly, they have a large branch network in Kerala following the merger of Lord Krishna Bank. This would help us leverage the NRI business and probably tap opportunities in the Gulf.”

SBI, ICICI Bank among top 100 global banking brands

Indian banks, barring SBI, and ICICI Bank, come a cropper in the global stage when it comes to their brand value, while their counterparts in China have fared better, according to the findings of a study. In a study by London-based consultancy Brand Finance, only two Indian Banks - the country's biggest lender SBI and ICICI Bank, the largest in the private sector, figure among the top 100 global banking brands. Compared to the Indian brands in top 100, three Chinese banks find a place in the top 25 brands. According to the study, SBI has a brand value of $2,852 million, while for ICICI Bank it is $2,603 million. Industrial & Commercial Bank of China has a brand value of $8,427 million, China Construction Bank is at $7,786 million, Bank of China at $6,741 million.

HDFC Bank, Centurion boards to consider merger

HDFC Bank and Centurion Bank of Punjab (Centurion) on Friday confirmed that they are considering a merger proposal. The boards of directors of both the banks are meeting separately on Saturday to consider “in principle” a possible merger. The boards will appoint independent valuers for deciding on the share swap ratio. After the merger, the combined entity would have a formidable network of over 1,100 branches with a pan-India presence. This would overtake ICICI Bank in terms of branch network (955). However, in terms of balance sheet size, ICICI Bank maintains its lead by a large margin. As on December 31, 2007, the balance sheet size of Centurion Bank of Punjab stands at Rs 25,403 crore and of HDFC Bank at Rs 1.31 lakh crore. ICICI Bank’s balance sheet stands at a much larger figure of Rs 3.76 lakh crore. Centurion has traditionally adopted the inorganic route to expansion. It took over BankMuscat’s Indian operations in 2003 followed by Bank of Punjab in 2005 and the Lord Krishna Bank in 2006. Centurion has a large presence in the North and a considerable exposure to the agriculture sector, thanks to its merger with Bank of Punjab in 2005. Centurion has 394 branches and 452 ATMs with employee strength of around 7,500. HDFC Bank has a branch network of 754 and is understood to have over 200 more licenses in hand. HDFC Bank has 1,906 ATMs in 327 locations

Corp Bank lifts Rs 300 cr from NPCIL for 9.87%

Corporation Bank has piped rival public sector banks in the race to pick up bulk deposits from Nuclear Power Corporation of India (NPCIL). Corporation Bank had bid 9.87 per cent for Rs 300 crore bulk deposits of one year duration from NPCIL and lifted the funds through placement of certificates of deposit. The effective cost after factoring in reserve ratios (cash reserve ratio and the statutory liquidity ratio) was likely to be about 40-50 basis points higher. Besides public sector banks, private banks were also in the fray for the bulk funds. Some of the private sector banks had bid even higher rates of over 10 per cent. The high rates were seen due to tight liquidity conditions as oil refiners were drawing down their credit lines, for funding their dollar purchases. Bankers said a slow down in capital inflows had also resulted in reduced RBI interventions in the foreign exchange markets leading to a shortage of rupee liquidity. Some bankers said that the high bids were also in expectation of firm call rates next month, when advance tax payments begin.

Cheque truncation to save time

Cheque Truncation Solution is a big milestone in the Indian banking industry. It enables cheque clearing on the same day, reducing floating time available for funds. The technology, being implemented from February 1 in the National Capital Region, enables banks to send images instead of paper cheques for clearing and settlement. The US-based NCR Corp was mandated by the Reserve Bank of India to prepare the truncation project for the capital region. In an interview to Prashant K Sahu, South Asia General Manager Navroze Dastur asserts that cheque truncation will benefit both customers and banks, and help reduce frauds. Instead of manually moving the cheque from one bank to another for payment, we would now use images. This will bring down the time required for processing. Earlier, it would take two to three days. Cheques would now be cleared on the same day or the next day, thereby bringing efficiency into the entire banking system.

RBI rejects more equity exposure

The banking regulator has rejected proposals by four banks - Bank of India, IndusInd Bank, Kotak Mahindra Bank and HDFC Bank - to increase their capital market exposure beyond the regulatory cap of 40 per cent of net worth on grounds of excessive market volatility. The RBI has the discretion to allow higher capital market exposure to banks with sound internal controls and robust risk management systems, but the banking regulator decided against exercising it. HDFC Bank had a capital market exposure of 70.58 per cent of its net worth at the end of November 2007. This was before the RBI changed the norms and capped the exposure at 40 per cent of net worth. The exposures of the other three banks were within the regulatory ceiling.

Banks told to reschedule poultry loans

In a major relief to the poultry industry that has been rattled by the bird flu crisis in the last few weeks, the Reserve Bank of India (RBI) has asked the banks to reschedule loans given to the poultry units across the country. RBI wrote to all scheduled commercial banks on Tuesday, providing guidelines to them to give a breather to the poultry industry. It asked the banks to convert principal and interest due (on working capital loans), instalments and interest on term loans due for payment on or after the onset of bird flu into term loans. The RBI suggested that the banks could consider December 31, 2007 as cut-off date for such conversion, and treat the rescheduled or converted loans as current dues. “The process may be completed by April 30, 2008,” Mr G. Srinivsan, Chief General Manager of RBI, said in the letter. After conversion, the borrowers would be eligible for fresh need-based finance. The relief would be extended to all accounts of poultry industry, which are classified as ‘standard accounts’ as of the cut-off date. The apex bank had issued similar guidelines to the banks in April 2006 to bail out the poultry industry.

Bank strike: Conciliatory talks on Friday

A final decision on whether bank employees would go ahead with their planned strike on February 25 and 26 is likely to emerge only after Friday, the day on which conciliatory talks are proposed to be held between Government, bank unions and the Indian Banks’ Association (IBA). Finance Minister, Mr P Chidambaram, is understood to have assured bank unions that he would advise IBA to enter into a time-bound dialogue with them to find expeditious solutions to their demands

Bank of Baroda seeks variable pay, incentives for officers

Bank of Baroda wants to have a separate salary structure for its officers. The bank is trying to be out of the industry-level-wage negotiation with the unions as it wants to introduce incentives and variable pay. The bank has not given the mandate to the Indian Banks’ Association to negotiate with unions for officers’ wage revision, but it has for salaries of the award staff (clerical staff). While acknowledging that securing Government approval may be difficult, Mr A.K. Khandelwal, Chairman and Managing Director, Bank of Baroda, said: “We have made an attempt to at least voice our feelings on this. We will be very happy if the Government wishes to try an experiment with Bank of Baroda and gives us permission.” The earlier wage agreement, between IBA and bank unions, for the period 2002-2007, was signed in 2005 and it ended on October 31, 2007. According to an IBA official, all other 27 PSU banks have given the mandate to IBA for negotiating salaries, except Bank of Baroda. So, it is unlikely that the Government will amend the banking regulations for one bank.

Canara Bank launches online trading facility

Public sector Canara Bank on Monday announced the launch of its online equity trading platform through its wholly-owned subsidiary Gilt Securities Trading Corporation Ld.(GSTCL). The online trading facility, to start with, will be available to all individual savings and current account holders in select CBS-compliant Canara Bank branches in India. It will be extended to all CBS branches in a due course. Besides the trading option, the portal would provide features such as market-related information research report, technical market analysis and sector watch.

Cash withdrawal from ATMs to be free

Banks will now have to make withdrawals from ATMs free of charge for their own customers. Requests for balance enquiries would have to be made free to customers of other banks as well. In a draft circular, the RBI has asked banks to implement these changes with immediate effect. For use of other bank ATMs for cash withdrawals, the RBI has asked banks not to charge more than Rs 20 with effect from March 31, 2008. This will also gradually be made free of charge by April 1, 2009. According to the RBI, some banks had suggested that instead of making the service totally free, number of free withdrawals in a quarter or a month can either be prescribed or left to individual banks. IBA had also suggested that the number of free transactions at ATMs of other banks be restricted to two per month. The RBI has, however, said that a cap on the number of free cash withdrawals in a month is neither desirable nor practical.

Large payments only thru e-mode from April

Payments of Rs 1 crore and above between banks, NBFCs, primary dealers and any other entities regulated by the Reserve Bank of India may be allowed only through electronic mode from April 1. Mr V. Leeladhar, RBI Deputy Governor, said here on Monday that all such payments above the cut-off point done between parties regulated by the RBI should be through Real Time Gross Settlement or National Electronic Fund Transfer. The new guidelines will also be applicable to participants in the RBI-regulated markets such as foreign exchange, money and Government securities markets. The move will not only reduce risk from moving large paper-based value retail payments to safer electronic modes, but will also bring greater efficiency and customer convenience to the payment systems.

Information on operation of ATMs not to be revealed under RTI

Citizens cannot invoke their right to information to compel commercial banks to share the details on operation of their ATMs, the Central Information Commission (CIC) has held. The Commission's observation came as it turned down an RTI application seeking certain information from the country's biggest lender SBI about the operation of its ATMs.

Standard Chartered asked to pay Rs 50,000 compensation

The Standard Chartered Bank has been asked by a consumer court here to pay compensation of Rs 50,000 to logistics firm Kuehne & Nagel (India) Ltd for clearing a bearer cheque of Rs 400,000 without comparing the authorised signatures. Despite guidelines issued by the Reserve Bank of India to all banks not to make payments against bearer cheques of heavy amounts above Rs 50,000, the bank cleared the cheque of Rs 400,000 without carefully comparing the signatures of the signatory with the specimen signatures, so the bank is held guilty for deficiency in service," Justice J D Kapoor of the Delhi State Consumer Disputes Redressal Commission said in his order.

Govt may bank on RBI to push SBS merger with SBI

To get around the legal hurdles in way of merger between State Bank of Saurashtra (SBS) with State Bank of India, the government is planning to ask the Reserve Bank of India to introduce a scheme for the merger. Under the State Bank of Saurashtra Act, RBI can frame a scheme to enable merger with SBI, said a source. The Cabinet was expected to take up the terms and conditions of SBS merger last month.The approval of the terms and conditions for this merger will be crucial because similar conditions will be relevant for the subsequent merger of the remaining subsidiaries of SBI. The law ministry is of the view that the government cannot issue an executive order and repeal the specific legislations governing some of these associates, since they were created by an act of Parliament. In addition, all subsidiaries are also governed by the SBI Subsidiaries Act, 1959. The government needs parliamentary approval to make such changes. Given issues of legal amendments and rationalisation of staff, among others, the government first wants SBS to be merged and then take the experience forward to merge other subsidiaries. Indications are that the employees are on board for the merger as employees of the subsidiaries will be treated at par with SBI employees and will be given the third retirement benefit too, in addition to two, as a result of the merger.

Canara to tap broking biz;SBI to scale up ops

Recognising the potential in the broking space, state-run Canara Bank is mulling a foray in the sector while State Bank of India has plans to scale up its business manifold by next year. Canara Bank, plans to foray into broking along with its wholly-owned broking subsidiary, Gilt Securities Trading Corporation. Presently, SBI's services in broking is limited to online equity tradingHowever, the bank will shortly enrich its portfolio by enabling customer-access to mutual funds and IPOs, a company official said. Kolkata-based United Bank is also understood to have zeroed in on leading broking firm IDBI Capital Markets as its partner from among a group of bidders, including Sharekhan. SBI started its broking operations in 2005 by partnering with Motilal Oswal and with its own subsidiary, SBI Cap Securities last year. Presently, SBI has a minimal presence in the segment, having only around 20,000 customers, but plans to scale up its business manifold by 2009.

Two-wheeler loans go scarce

Banks are going slow on lending for purchase of two-wheelers. Such lending has seen a decline of more than 15 per cent over the past year, said officials from banks which are active in this segment. According to them, high rate of delinquency among customers and the recent norms on appointment of recovery agents have forced banks to go slow in the two-wheeler segment. Centurion Bank, which is a major player, has reduced lending for two-wheelers by almost 50 per cent during 2007-08. Bankers say tighter recovery norms have given customers more scope for avoiding payments. ICICI Bank, the largest player in the segment, said it has stopped lending for two-wheelers in more than 100 locations. Another reason for the slowdown is the higher cost of living.

Coin-vending machine at Corp Bank

In view of the shortage of coins, the Corporation Bank has installed a coin-vending machine at its Car Street Branch in Mangalore. A bank release said here that this is the first of its kind initiative by any bank to mitigate the acute shortage of coins in the city. The coin-vending machine scans the note inserted into it for genuineness and then dispenses coins. There are two hoppers in the machine which can store three types of coins of denominations five, two and one. The General Manager, Mr B.R. Bhat, inaugurated the machine on Friday.

SBI single borrower exposure above RBI norm

State Bank of India's exposure to a single borrower is 16.3 per cent of its net worth, higher than the regulatory cap of 15 per cent, the bank disclosed in its draft red herring prospectus on Thursday. The bank, however, did not name the borrower. The bank, which is coming up with a rights issue, said in the prospectus that it has a high concentration of loans to certain customers and to certain sectors and if a substantial portion of these loans were to become non-performing, the quality of its loan portfolio could be adversely affected. Net non-performing asset of the bank was at 1.44 per cent in October-December compared with 1.45 per cent a year ago. "The 10 largest individual borrowers in aggregate account for 11.1 per cent of the bank's total exposure and its 10 largest borrower groups in aggregate accounted for approximately 18.3 per cent of its total exposure," the bank said. The largest borrower group accounted for 5.3 per cent of the bank's total exposure and for 50.1 per cent of its total capital funds

Centurion Bank bags awards

Centurion Bank of Punjab won two awards at the Global HR Excellence Awards 2008 given at the Asia Pacific HRM Congress held in Mumbai this week. A first time participant, Centurion Bank of Punjab, had sent entries in two categories of awards and won both of them against several hundreds of entries received from across diverse sectors.

RBI raises concerns over govt proposal on currency futures

The Reserve Bank of India has raised several concerns over the government’s proposal to use the existing infrastructure of stock exchanges for introducing currency futures. In its technical advisory committee meeting with market participants yesterday, RBI said that foreign exchange and related activities should be isolated from all other businesses of exchanges and for the participants in the market like banks or brokers. Further, any existing exchange, even if allowed to float a platform for currency futures, should have a diversified shareholding pattern. RBI said exchanges could float separate bourses for the currency futures business as it would become a wholly owned independent subsidiary with separate books. Further, banks who would be the major participants in the currency futures business are regulated by RBI.

Indbank opens trading cafe in Chennai

Indbank Merchant Banking Services (Indbank), a subsidiary of public sector Indian Bank, opened its first 'trading cafe' for stock trading in Chennai. It plans to open another 20 such cafes and 18 new branches during 2008-09 across the country.Indian Bank is the first public sector bank to open such a cafe for stock trading facility, A Subramanian, executive director, Indian Bank, said. Indbank plans to establish around 200 such cafes in tier-II and tier-III cities across the country in a phased manner. The cafes will be opened in residential areas and target mostly housewives and elders, who are largely getting into trading these days, in the middle income families, he added. Customers having a demat account with Indbank or with Indian Bank and a savings bank account with Indian Bank can trade through the cafe, he said.

Dena Bank to auction NPAs

Mumbai-based Dena Bank will auction Rs 188.4 crore of its non-performing assets (NPAs) to bring down gross NPAs below 2.5 per cent by March 2008. “We have finalised a portfolio of 49 borrowers (including operating and closed units) with an aggregate principal balance of Rs 188.40 crore. These loans will be sold in either one or multiple tranches,” a senior bank official said. All of the loans are commercial. Chairman and Managing Director P L Gairola said, ”This process (auction) will help secure better value for these assets than sale through bilateral negotiations.”

More foreign banks keen to open offices here

Anticipating opportunities in India after 2009, foreign banks are queuing up to open offices in India. Two foreign banks have recently announced their plans to start operations here. Royal Bank of Canada, the largest bank in Canada, inaugurated its representative office in Mumbai on February 1. It will provide capital market products, wealth management, correspondent banking and trade finance services. On February 6, Glitnir, the Northern European bank headquartered in Iceland, also announced that it would be filing applications with the Reserve Bank of India to open a representative office here.

Dhanalakshmi rights issue from Feb 19

The rights issue of Thrissur-based Dhanalakshmi Bank will open on February 19 and close on March 19. he bank is aiming at raising Rs 200 crore through the issue at a 1:1 ratio. Each share will be sold at a premium of Rs 52, aggregating the offer price to Rs 62 a share.

Sabre likely to exit CBoP; ICICI, HDFC Bank, IDFC may join race

Centurion Bank of Punjab (CBoP) is back in news. The word is out that the private sector bank, where Rana Talwar’s Sabre Capital has the management control, is in talks with some of the financial institutions and large banks for a possible merger. However, indications are that CBoP is in no hurry to complete a deal. New generation banks like ICICI Bank and HDFC Bank are also believed to be interested in CBoP, but this was denied by ICICI Bank and HDFC Bank. ICICI Bank may have shown an interest to increase its presence in the North and pockets of southern India. For HDFC Bank, acquiring CBoP would give it a more extensive branch network than ICICI. Sabre’s moves may be driven by concerns that policy makers would take a long time in allowing foreign banks to acquire local banks.

FM asks banks to submit report on sugar package in 10 days

The finance minister, P Chidambaram, while meeting the heads of state-run banks in New Delhi on Tuesday, has asked the public sector banks to implement sugar package within 10 days and submit a report before the government. The Indian Banks' Association (IBA), the trade body of bankers, is going to discuss the issue at length during its forthcoming managing committee meet to be held on February 15 in Mumbai. More interestingly, the State Bank of India and few other state-run banks have already issued letters through their circles and regions to comply the government's instruction in this direction. As part of the sugar package that has been announced by the government, full interest subvention would be provided to all scheduled commercial banks, regional rural banks and cooperative banks for the total duration of the loan (four years including two years moratorium). The interest subvention would be limited to 12% per annum of which 5% would be met out of general budget provisions of the Centre and the remaining 7% from the Sugar Development Fund.

Govt holds interview to fill top bank positions

The government conducted interviews for the post of chairman and managing director of public sector banks, in which 11 candidates appeared. In addition, two deputy managing directors from Small Industries Development Bank of India (Sidbi) were also interviewed. The executive directors who appeared for the interview included RS Reddy, (Union Bank of India), KR Kamath and A Parulkar (Bank of India), SC Gupta, (Bank of Baroda), DL Rawal (Canara Bank) and JM Garg (Punjab National Bank). The two Sidbi deputy managing directors interviewed were Rakesh Rewari and Basant Seth. This is for the first time that officials from development finance institutions have been called for selection. Nine public sector bank heads are due to retire this year, starting with A K Khandelwal and C P Swarnkar of Bank of Baroda and Syndicate Bank, respectively, who will retire on March 31. The top jobs in Canara Bank, United Bank of India, Andhra Bank, Dena Bank, Corporation Bank, Vijaya Bank and Central Bank of India will also fall vacant during the course of the year. MD Mallya, CMD, Bank of Maharashtra, is expected to take charge as the head of Bank of Baroda, while Allahabad Bank Chairman AC Mahajan is tipped to head Canara Bank. Among executive directors, Allen Periera of Oriental Bank of Commerce is slated to join Bank of Maharashtra as its head. Periera was not interviewed this time around, as he had been selected as a prospective chairman in the previous round of interviews.

HDFC Bank ATMs upgraded

NCR Corporation has successfully upgraded 1,200 HDFC Bank automated teller machines (ATMs) with its ‘jitter-enabled' card readers that help make common types of skimming attempts ineffective. With this upgrade, all 1,910 ATMs of HDFC Bank are now equipped with ‘jitter-enabled' card readers.

ICICI Bank puts ‘high-risk’ loans on the block

ICICI Bank is understood to have sounded off a couple of foreign banks to buy out its Rs 2,000-crore small-ticket personal loans (STPL) portfolio, it is reliably learnt. Foreign banks such as Deutsche Bank, Standard Chartered and Barclays are understood to have been approached by the bank to pick the portfolio. ICICI Bank has decided to exit this ‘high-risk’ space a couple of months ago owing to the rising defaults in the segment. Currently, ICICI’s collection agency is handling the portfolio until it identifies a suitable buyer, it is learnt. The bank’s total STPL portfolio size is estimated to be around Rs 3,000 crore, of which the bank intends to sell Rs 2,000 crore. By acquiring the portfolio, new entrants in the retail banking space will be able secure a foothold in the market. Almost 70% customers in the portfolio will be good customers and it will enable the player to sell other products to the same customers.

'Staff crunch in public sector banks'

The public sector banks have a shortage of one lakh staff and the shortfall needs to be filled up immediately to cope with rapid expansion plans and provide better customer services. "People are retiring. And the banks also have rapid expansion plans. There is a staff shortage of around one lakh, including officers and other cadre," the General Secretary, All India Bank Officers' Confederation, Mr Amar Pal, said. The situation has come to such a pass that there has been virtually no recruitment for 20 years. Moreover, because of long-drawn recruitment process, it is found that many of those shortlisted for appointment have taken employment elsewhere, he said.

Union Bank imparting special training to officers

‘Plan for the future while competing in the present competitive environment’ is the strategy of Mr M.V. Nair, Chairman and Managing Director of Union Bank of India, for getting his organisation ready to face the challenges in the next decade In this regard, the bank has come out with a unique model, where it picked up 30 officials in the age group of 30 to 40 years for a year-long training at its training college in Bangalore. “It is like a capsule MBA programme. Thirty of them were given 15 projects. These projects are those which the bank wants to implement in future. They work on these projects. I personally monitor them,” he said. “Now the second batch is under going training. Every year, we want to train 30 such officers,” Mr Nair said. Fortunately, attrition at that level has been quite low. As of now, none from the first batch of officers has left. “This year, we are recruiting around 2,500 people at different levels. We also have put in place fast-track promotion process,” he said. Union Bank is planning to cover all its branches under core banking solutions (CBS) by the end of this financial year.

Govt fiat to bulk up PSBs

In a significant move, the finance ministry has issued a directive instructing all government departments and ministries to park with public sector banks at least 60% of the funds under their control and distributed by them to PSUs and state government agencies. The move is aimed at helping nationalized banks garner significant business over their private sector counter parts. Simultaneously, the finance ministry has also directed government departments and PSUs to discontinue the practice of inviting competitive bids for bulk deposits with banks. This, according to the finance ministry, resulted in undesirable competition amongst banks, thereby leading to arbitrary hikes in deposit rates (even in the short term), which has consequences on the economy. Bulk deposits should be placed with the banks conducting the irregular business, the ministry said. The letter stated that as public sector banks had "a special role and importance in the banking industry and in advancing the economic policies of the government, it is important that departments/ministries conduct their business, as far as possible, through public sector banks".

BoE cuts rates by 25 bps

The Bank of England cut its benchmark interest rate by a quarter-point in response to slowing consumer spending and the steepest decline in house prices in a decade. The nine-member Monetary Policy Committee, led by the Governor, Mr Mervyn King, reduced the key rate to 5.25 per cent, the second reduction in three months.

Strike call by bank unions forum

The United Forum of Bank Unions (UFBU) has called upon its member units to strike work for two days on February 25 and 26 to express their protest against the delay in settlement of the long pending demands of the bank employees. The demands, among others, include the proposal to stop merger of public sector banks, the option to join a pension scheme, compassionate appointments, filling up of permanent vacancies through recruitment, putting an end to outsourcing of bank jobs, and early settlement of wage revision. The UFBU has also urged its members to be ready to go on an indefinite strike from the last week of March if these demands still remained unresolved

BoI to raise about Rs 1,360 cr

Bank of India has said its board has approved a proposal to raise about Rs 1,360 crore through an issue of 3.78 crore equity shares. In a notice to the BSE, the bank said it will issue the shares at a price of Rs 360 per share of face value of Rs 10, issued at a premium of Rs 350 per equity share, aggregating to Rs 1,359.81 crore. SBI Capital Markets Ltd, A.K. Capital Services Ltd, Edelweiss Capital Ltd, HSBC Securities and Capital Markets (India) Pvt Ltd, JM Financi al Consultants Pvt Ltd, Kotak Mahindra Capital Company Ltd and Motilal Oswal Investment Advisors Pvt Ltd were the book running lead managers to the issue.

Vijaya Bank eyes acquisition

The Bangalore-based Vijaya Bank is planning to acquire a bank in northern/western India to expand its reach, according to Mr Prakash P. Mallya, its Chairman and Managing Director. “We are definitely looking at inorganic growth. A north-Indian bank has in fact approached us albeit there are no concrete developments thereafter,” Mr Mallya said. The bank, which had done a total business of Rs 73,000 crore as on December 31, 2007, is aiming at closing the current fiscal with a total business of Rs 76,000 crore and a net profit of Rs 450 crore. “We will touch one lakh crore business by 2009-10,” he said. The bank has 1,008 branches across the country and would take the number to 1,050 by the end of March, 2008. On the interest rates, Mr Mallya said there were no plans for a reduction. “There are certain banks which are charging higher rates. Most of them are now announcing a cut. We cannot do it,” he said. Vijaya Bank’s interest rate on housing loans is currently in the range of 9.2-10.75 per cent, he added.

Syndicate Bank opts for QIP route to raise capital

Syndicate Bank has decided to raise its additional capital through the qualified institutional placement route instead of the follow-on public offer programme planned early this year. Syndicate Bank’s move followed the Government’s recent liberalisation permitting public sector undertakings/enterprises to raise capital through placement with placements of equity with qualified institutional buyers (QIB). Bank of India has already received permission to tap QIBs and is poised to make the placement. QIBs include financial institutions, banks, mutual funds, foreign institutional investors registered with SEBI, venture capital funds and multilateral financial institutions. Syndicate Bank’s capital raising involves issuing an additional 8 crore (80 million) equity shares. The equity float was expected to bring down Government stake in the bank from the current level of 66.47 per cent to around 57.64 per cent. The bank currently has a capital to risk weighted asset ratio of 11.99 per cent. However, its tier 1 capital was 6.99 per cent or 99 basis points over the prescribed threshold of 6 per cent. Syndicate Bank also had the flexibility to raise at least Rs 240 crore through perpetual bonds, to push up the tier one capital ratio.