Gold Selling Rates (09.09.2007)

2 Gram 2205 5 Gram 5245 8 Gram 8295 20 Gram 20570 50 Gram 49900 100 Gram bar 95100

HDFC, Fidelity pick Corp Bank stake in NSE

Corporation Bank has offloaded its stake in the National Stock Exchange by 0.27 per cent. Fidelity Trustee Corporation and HDFC Ltd have together picked up the stake sold by the bank for Rs 35 crore on September 7. Earlier this year a host of institutional investors such as Industrial Development Bank of India, State Bank of India, SBI Capital Markets Ltd, Corporation Bank, Union Bank of India, Bank of Baroda, Canara Bank and Oriental Bank of Commerce had sold part of their stakes in the NSE.

Foreign banks looking beyond metros

The Reserve Bank of India would like foreign banks to get a flavour of semi-urban India and the rural hinterland. The branches of foreign banks that have been approved between July 2006 and June 2007 are mostly in smaller towns and tier-2 and tier-3 cities. Of the 13 branches for which permission was given, only one branch belonging to Shinhan Bank has been allowed in New Delhi. Most foreign banks follow a strategy of first setting up base in metros – Mumbai, New Delhi, Kolkata and Chennai. Then, in the next stage, they move to the mini-metros such as Bangalore, Hyderabad, Pune and Ahmedabad. Foreign banks in India have got approval from the Reserve Bank of India to open 10 branches and seven representative offices during the July 2006- June 2007 period. There are currently 29 foreign banks operating in India with 268 branches. There are also 34 other foreign banks that have representative offices. The share of foreign banks in the business done in the country (deposits and advances) has been hovering between 5 - 7% during the past decade.

ICICI Bank ties up with City Union Bank

ICICI Bank has tied up with City Union Bank (CUB) to provide its Money2India (M2I) online platform services to CUB customers. Under the tie-up, the non-resident Indian (NRI) customers of CUB will be able to transfer funds to their beneficiaries (CUB customers) in India. Besides online transfer of funds to CUB accounts, the remitter can also request for issuance of demand draft payable at over 2,300 locations across the country

Andhra Bank to hire in a big way

Andhra Bank will be hiring about 2,000 personnel in different categories over the next three years to strike a balance between retirements and new business needs. “The human resource needs of banks are now varied. In line with the business growth, we will be hiring clerks, probationary officers, market/finance executives, legal officers, rural development/agricultural officers, IT professionals and analysts,” Mr Kalyan Mukherjee, ED, said. The bank, which has indicated its likely foray into insurance, would also be needing domain experts in insurance. “We are not looking at big institutes like IITs and IIMs for campus recruitment. We are focusing on mid-sized institutes to bring in rural people, as we believe in employment inclusion,” Mr Mukherjee said.

Syndicate Bank's Premium Savings Account

The Bank has introduced a Premium Savings Account at e-banking branches that combines full safety, easy liquidity and highest possible interest. The salient features of the scheme are as under A unique 'Sweep out, Sweep in' facility offered at our e-banking branches ensures that while the customer's money earns solid interest as a fixed deposit, it turns liquid to meet his urgent needs. That too at no extra cost. Average monthly balance of Rs.10000/-to be maintained in the Premium Savings Account. Balance available in the account in excess of Rs.10000/-on any day gets automatically swept out into a fixed deposit for 180 days in units of Rs.1000/-. In the event of shortfall in SB for meeting your clearing cheques or for other urgent needs, the fixed deposit is swept back into the Premium Savings Account in required number of units of Rs. 1000/- free of cost. No penalty is charged for breaking the fixed deposit prematurely. However, the amount swept out earns interest for the period run at the applicable rate. Even while breaking the fixed deposit, only the most recently converted fixed deposit is first broken to minimise interest loss to the customer. Only those amounts swept out of your Premium Savings Account are eligible for sweep in and not other fixed deposits. When fixed deposits mature at the end of 180 days, the Bank will renew the principal every 180 days while crediting the interest to the savings account. Rs.100/-per month is levied as service charges whenever the monthly average balance in the Premium Savings Account goes below Rs.10000/-

Canara Banks CanChamp Deposit Scheme

SB CANCHAMP DEPOSIT SCHEME Basically an SB deposit for children WHO CAN OPEN Children upto the age of 12 years (i.e. till 11 years, 364 days) WHAT IS THE MINIMUM DEPOSIT Initial deposit can be any nominal amount with a minimum of Rs.100/- RATE OF INTEREST As applicable to SB deposits. Presently 3.5% per annum CHEQUE BOOK Cheque books are not issued under the scheme JOINT ACCOUNT Joint accounts cannot be opened under the scheme OTHER FACILITIES • Nomination facility is available • C-Net Banking facility is available (For view only) • Loan eligibility card for educational loan as per the then prevailing educational loan scheme • Attractive Savings Box to cultivate the habit of savings among children • Attractive photo folder cum personal details with 16 pouches to store photos of the child and record memorable moments • Free collection of cheques/DDs gifted to the child upto Rs. 25,000/- per annum (In Indian Rupees or foreign currency) • Conversion of the account into regular SB account after the child attains majority

State Bank of Patiala offers e-trading

The State Bank of Patiala has launched a 3-in-1 account e-trading facility in association with SBICAP Securities Ltd. It is an online trading facility which will allow the account holders of the bank to trade on BSE and NSE - equity and derivatives segment without the hassle of running around to a broker’s office for placing orders. SBICAP will provide demat account and trading account to the bank’s account holders. Apart from account holders of State Bank of Patiala, SBICAP already offers its e-broking services to the account holders of State Bank of Indore and will extend similar services to the account holders of other SBI associate banks in the near future.

Award for Canara Bank CMD

The Hyderabad-based Institute of Practical Accountancy (IPA) has conferred ‘Lifetime Achievement Award’ on Mr B.N. Rao, Chairman and Managing Director, Canara Bank, for his professional excellence and contribution to the banking and financial sector. Prof K.C. Reddy, Chairman of AP State Council of Higher Education, presented the award to Mr Rao.

Allahabad Bank cuts home loan rates

Allahabad Bank has reduced interest rates on fresh housing loans under various maturity buckets by 1 per cent, both on fixed and floating schemes.

Bank as a neighbour

A survey by market research firm IIMS Dataworks shows that Indian consumers rarely distinguish between banks in their decisions to opt for the one over the other. They go for the bank that comes their way, for one reason or the other. "Only very high income groups make a choice to go to a particular bank, others just walk into the nearest bank branch,” says K C Chakrabarty, chairman and managing director, Punjab National Bank (PNB). About 60 per cent of the working population still do not have bank accounts, he added. While State Bank of India (SBI) dominates the mind space almost as a singular monolith, PNB’s brand recall seems to be in line with its status as the second largest public sector bank in the country. Among the relatively low income segments, the only private bank that has any significant brand recall is ICICI Bank

Bank of Maharashtra in pact with LIC

Bank of Maharashtra in association with Life Insurance Corporation of India has launched two products, Maha Suraksha Deposit Scheme and MahaGrih Suraksha scheme. Under the Maha Suraksha Deposit Scheme, deposit holders get life cover under a one-year renewable term insurance plan of LIC of India. Deposit account holders between 18 and 59 years of age, who opt for the scheme, would be eligible for an insurance cover of Rs 1 lakh on life, at a low premium. The Maha Grih Suraksha Scheme provides life insurance cover to the housing loan borrowers of the bank through LIC under “Group mortgage redemption assurance scheme” (GMRA).

Indian Bank revises rates on term deposits

Indian Bank has revised the interest rates on domestic term deposits with effect from September 1. Interest rate for the 7-14 days period for an investment of Rs 15 lakh is at 3.5%, while that for the same period for Rs 15 lakh to less than Rs 1 crore is at 4%. Interest rate for the 30-45 days period upto Rs 1 crore is at 4.5%. The bank has fixed interest rate on deposits for 46-90 days for Rs 15 lakh at 5.25% and for Rs 15 lakh to less than Rs 1 crore at 5.75%. Term deposits for 91-179 days for investment upto Rs 1 crore is at 6.5% and that for 180-364 days is at 7%. For a period of one year to less than three years, the interest rate is at 9%. For 3 years to less than 5 years, the interest rate is at 8.75% and for five years and above at 8.50%.

PSB Director resigns

Punjab and Sind Bank (PSB) Director, Mr Harcharan Singh Josh, has resigned from the board of the bank, which is fully state-owned. The Government order accepting his resignation was received by the bank a few days ago, sources in the Board said. Mr Josh, who was one of the five non-official directors in the bank’s board, had a face-off with the PSB Chairman, Mr R.P. Singh, over alleged favouritism in sanctioning Rs 150 crore loan without collateral and at lower interest rate to Orbit Resorts expansion project. The PSB Chairman had contended that politically affiliated directors were attempting to frustrate the debt recovery measures of the bank.

India's sub-prime market proves a prime opportunity

Like the US, India too has a subprime market and it is booming. The success of early entrants like Citi Financial and GE Money has encouraged several others to enter the consumer lending business, nearly half of which is a sub-prime market. These include players like HSBC (Pragati Finance), Stanchart (Prime Financial), Fullerton India, DBS Cholamandalam and Indiabulls. Industry sources say Barclays, Deutsche Bank and AIG are eyeing the segment, which includes private lenders like ICICI Bank and HDFC Bank, which entered in 2004. What’s attracting them is an estimated $10-11 billion market for unsecured credit, which is growing at 25-30 per cent, according to Citi Financial Managing Director Sandeep Soni. The smaller players are growing at 50 per cent or more. "It’s an untapped market. There’s an opportunity to expand the market like in telecom," said Rajeev Yadav, head of personal loans at GE Money. A typical sub-prime customer is the self-employed, neighbour-hood retailer or a trader who needs credit to buy goods and grow their business. He may be filing a tax return (most show an income of Rs 70,000-80,000), but it doesn’t truly reflect his cash flows. "Many of these people do huge business in cash; there’s no way it can be registered on paper. If he maintains an average bank balance of Rs 2,000-3,000 and that’s increasing or services an EMI of Rs 1,500 on credit card or another loan, it shows he has cash flows. Banking tells us about a guy’s character, about his cash flows."

Demand for home loans slowing down

The demand for home loans has slowed down over the past few months due to rising property prices and high interest rates. The number of applications for home loans and registrations of new flats have come down, say bank officials and analysts. The stricter prudential norms for the real estate sector have pushed up property prices across the country. According to Mr Sunil Rohokale, General Manager, Mortgage Finance and Real Estate, ICICI Bank. “Interest rates have increased by 250-350 basis points in the last 18 months. Also, the property prices have increased by as much as 40-50 per cent in the same period. Customers have been hit by a double whammy,” he said. Mr H.N. Sinor, Chief Executive, Indian Banks’ Association, said that there is need for some kind of relaxation of the prudential norms with regard to sectors such as housing, as the sector is seeing a slowdown.

SBH deposit mop-up drive

State Bank of Hyderabad (SBH) will launch a nation-wide ‘Deposit Mobilisation Utsav’ from September 1. During the one-month programme, an additional interest of 25bps per annum would be offered on all term deposits for a period of one year and above. Coinciding with the campaign, the bank would also be launching two new deposit products - Recurring Deposit Plus and Current Account Plus. These account-holders would be offered free Internet banking facility, free ATM/debit card, free multi-city cheques, and free accident insurance cover. The bank had set a goal of opening more than three lakh new accounts during campaign and mobilise over Rs. 3,500 crore of deposits.

Bank of Baroda cuts home loan rates

Bank of Baroda reduced the rate of interest on housing loans up to 50 basis points. The bank said the new rates would be applicable to all new housing loans sanctioned on or after September 1, 2007. The new floating rates for loans up to Rs 20 lakh range from 10 to 11 per cent for periods from five years to 25 years. For loans of above Rs 20 lakh, the rates vary from 10.25 per cent to 11.5 per cent. In case of fixed rate option, the revised rates on loans up to Rs 20 lakh range from 11.25 per cent to 12.5 per cent for periods from five to 15 years. For loans of more than Rs 20 lakh, the rates are between 11.5 and 12.75 per cent. The reduction in rates is merely to realign with the market.

Canara Bank bags SME award

The Centre has conferred the first award under 'National Awards for Excellence in Lending to Micro and Small Enterprises for the year 2006-07' on Canara Bank. The award instituted by the Ministry of Micro, Small and Medium Enterprises was in recognition of the bank's performance in lending to micro and small enterprises sector during the year 2006-07. The award was presented by the Prime Minister, Dr Manmohan Singh, in New Delhi to Mr MBN Rao, CMD of Canara Bank. The bank increased its lending to micro and small enterprises (MSEs) by Rs.3,261 crore during the year, recording an impressive growth of 49.48 per cent over March 2006.

The Sub-Prime Drama

In India, banks have what is called a Benchmark Prime Lending Rate (BPLR) which is supposed to be the basic lending rate beyond which markups are added for borrowers with lower credit rating. Sub-PLR rates, i.e. rates lower than this BPLR, are offered only to the top class borrowers. In the USA, however, the best rates are offered to 'prime' borrowers and it is the sub (below) prime borrowers who are quoted rates with a premium or markup loaded, depending on their credit rating. Therefore, sub-prime refers to the (lower) quality of the borrower and this kind of borrower is usually charged a higher rate than a 'prime' (best) borrower. According to Wikipedia, subprime lending, also called B-Paper, near-prime, or second chance lending, is a general term that refers to the practice of making loans to borrowers who do not qualify for the best market interest rates because of their deficient credit history. It is risky for both lenders and borrowers due to the combination of high interest rates, poor credit history, and murky financial situations often associated with subprime applicants. A subprime loan is offered at a rate higher than A-paper loans due to the increased risk. Subprime lending encompasses a variety of credit instruments, including subprime mortgages, subprime car loans, and subprime credit cards, among others. The term "subprime" refers to the credit status of the borrower (being less than ideal), not the interest rate on the loan itself. Generally, subprime borrowers will display a range of credit risk characteristics that may include one or more of the following: i) Two or more loan payments paid past 60 days due in the last 12 months, or one or more loan payments paid past 90 days due the last 36 months; ii) Judgment, foreclosure, repossession, or non-payment of a loan in the prior 48 months; iii) Bankruptcy in the last 7 years; iv) Relatively high default probability as evidenced by, for example, a credit bureau risk score (FICO) of 660 or below (depending on the product/collateral), or other bureau or proprietary scores with an equivalent default probability likelihood. About 21% of all mortgage originations from 2004 to 2006 were subprime, up from 9% between 1996 and 2004, as per chief economist for Moody's Investors Service. Subprime mortgages totaled $600 billion in 2006, accounting for about one-fifth of the U.S. home loan market. Many of the sub-prime mortgages were offered at special schemes offering below-market rates for the first few years of the mortgage but escalating thereafter. Consumers took these mortgages hoping that they could refinance them after a few years at an affordable interest rate. On the other side of these transactions, rapid developments in financial engineering allowed mortgages of all types to be packaged into pools and sold as high-yielding securities to a range of investors from third-tier banks to sophisticated hedge funds. Thus both homeowners and buyers of such securities got caught in this cycle. The tricky part was that after a few years, the artificially-low mortgage rates were required to reset to levels more in line with current market rates, which, in all likelihood, would be higher than the initial low rate levels. If house prices continued to increase, homeowners would still find it profitable to refinance their mortgages at affordable interest rate levels. However, beginning in late 2006, the realty bubble started to burst. Two events that were assumed to have a low probability in a booming market in fact happened: first, interest rates increased and second, home prices began falling. This led to sub-prime mortgages resetting at shockingly high rates, with homeowners missing payments and banks foreclosing accounts. On the other hand, banks and other financial institutions holding the mortgage-backed securities incurred losses and had to sell their assets. It is estimated that in the next five years $1 trillion in adjustable rate mortgages will reset, with sub-prime mortgages making up the majority. Resets of mortgages this year are estimated to occur at rates that are about four percentage points higher than the current rate on 30-year home loans. The virtuous cycle of mortgages turned sour. Banks and other institutions cut back their lending, not only for mortgage-related activities, but also for other activities, as liquidity fell. As the impact spread from the US to Europe and then globally, central banks rushed to inject liquidity into their respective markets in order to stem the tide. The US Federal Reserve Board announced a half a percentage point cut in the discount rate (the rate at which it lends to commercial banks) to 5.75 per cent on August 17 alongwith other measures to boost liquidity. The impact of this crisis has been felt as far as in India, where the stock market showed a steep fall from around mid-July'07 onwards (Sensex on 16 July'07 was 15,311, dropping to 14,195 by 17 Aug'07) as FIIs starting drawing down their investments in emerging markets to create enough cash for meeting their obligations in the US market. However, it is to RBI's credit that the early actions taken by it to stem credit to the booming real estate market in India by raising provisioning requirements and risk weights, besides warnings about heating up of this sector, stopped banks from overextending themselves to this sector like US banks. Rising property rates as well as interest rates on housing loans also contributed towards lowering excess demand, especially from second time home loanees. The Indian banks having branches abroad were also not much affected as their exposure to mortgage backed securities had been quite low. Ultimately, fund flows to the Indian stock market will improve as the fundamentals of the Indian corporate sector continue to be good. Meanwhile, the fall in the stock markets had the side-effect of weakening the (appreciating) rupee to over Rs 41 levels against the US$, and this would be welcomed by the Indian IT majors and other exporters like the textiles sector, as their dollar-denominated pay cheques will now fetch them a higher revenue.