Tools RBI uses to contain inflation:

Cash Reserve Ratio This is the portion of funds that banks have to retain with the Reserve Bank. When the RBI increase this percentage, the amount actually available with the commercial banks comes down The RBI increases the CRR to draw out exess money from the banking system and thus check increase in prices. Bank Rate This is the rate at which the BRI lends to other banks. If the RBI increase its lending rate, the ripple effect will be felt across all the other banks that will hike lending rates to continue making profits. Repo Rate If banks face any shortfalls of funds they borrow from the RBI. Repo rate is the rate at which banks borrow money from the RBI. If the RBI reduces repo rates, it will be cheaper for the banks to borrow money. On the other hand, if repo rates go up, borrowing becomes expensive. Reverse Repo Rate: The RBI can borrow money from the banks and offer them a lucrative rate of interest. This is called the reverse repo rate and banks will be very glad to have their money with the RBI for a good interest rate as the money is safe here. When the reverse repo rate is increased, banks find it more attractive to park their money with the RBI, and hence money is drawn out of the system.

Housing Loan Rates

HOusing loan Rates (floating rates) Bank 0to5years 6to10years Over10years Canara Bank 10.75 11.00 11.25 Bank of India 9.50 10.00 10.25 Corporation Bank 10.00 10.50 10.75 Syndicate Bank 8.75 9.25 9.50 Federal Bank 10.50 11.00 11.00 IDBI Bank 11.00 11.00 11.00 ICICI Bank 12.00 12.00 12.00 Vijaya Bank 9.25 9.75 10.00 SBI 10.25 10.75 10.75

RRBs can now attach properties

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act 2002 has been extended to the regional rural banks (RRB) too. Under the Act, banks can now exercise the power to take possession of securities and sell them without the intervention of courts. This would enable RRBs to improve their recovery performance. Karnataka Vikas Grameena Bank (KVGB) senior manager said the bank plans to impart suitable training to all its 401 branch managers on the provisions of the Act so as to enable them to make an effective impact on defaulting clients. He said the bank would enforce the Act against wilful defaulters as it provides power to take possession of securities and sell them without waiting for court directions or police action.

Banks told not to vie for creamy loans

The Reserve Bank of India (RBI) has warned banks against competing to lend to top-rated corporates under the Basel-II regime, saying it could squeeze their margins. The new capital norms require banks to set aside lower capital for loans to corporates with higher credit ratings. Under Basel-II, the risk weight for loans to AAA-rated companies is just 20 per cent against 150 per cent for BB or lower-rated companies. This means banks would have to provide only Rs 1.8 of capital for every Rs 100 lent to an AAA-rated corporate, while they would need to set aside Rs 13.5 of capital for loans to corporates rated BB or lower

PNB picks credit card partners

PNB decided to join hands with American International Group (AIG) for its credit card business.The bank said that its board of directors has approved the setting up of a joint venture bank in Bhutan and the upgradation of Representative Office in Shanghai in China to a branch. PNB has decided to rope in Venture Infotech Global Pvt Ltd - American International Group (AIG) Consortium as joint venture partner for the proposed credit card business subject to approval of the RBI and the Central Governement.

Banks in a position to meet Basel II norms’

The Basel II norms might lead to an increase in the overall regulatory capital requirements for the banks, particularly under the simpler approaches adopted in India, if the additional capital required for the operational risk is not offset by the capital relief available for the credit risk, said Mr V. Leeladhar, Deputy Governor, Reserve Bank of India. Mr Leeladhar was speaking on the implementation of Basel II. He felt that the Indian banks are adequately prepared for its implementation. “We have been scrutinising the progress of every bank for each quarter during the last two years and we are confident that banks are now in a position to meet the requirements,” he said. Basel II is based on three pillars. The Pillar 1 stipulates minimum capital ratio and requires allocation of regulatory capital not only for credit and market risk but also operational risk, while Pillar 2 deals with supervisory review process and Pillar 3 with market discipline which focuses on the effective public disclosures to be made by the banks. The advanced approaches, being data-intensive, require high-quality, consistency and time-series data for various borrowers and facility categories for a period of five to seven years to enable computation of the required risk parameters. It also calls for robust risk management and technological architecture and the highest standards of corporate governance.

IndusInd unveils 3-in-1 account

IndusInd Bank has launched its freedom 3-in-1-account which enables buying and selling of stocks and shares and making payments at the click of a mouse. The account offers customers a whole new way of trading by helping them integrate their bank and demat accounts with their trading accounts, thereby ensuring seamless transactions.

City Union offers anywhere access

The Kumbakonam-headquartered City Union Bank has interconnected its entire network of 175 branches across the country, providing anywhere access to its customers. The bank has also introduced ‘CUB Classic Plus’ - a new current account with special features and freebies such as free cash remittances and deposits (unlimited), demand draft up to Rs 1 lakh/month at no extra cost, and inter-branch funds transfer for free up to Rs 5 lakh/day. These facilities would be available for customers maintaining a minimum quarterly average of Rs 1 lakh in their current account.

Pump more into PSBs or trim stake, Govt told

The Government should either bring down its equity stake in public sector banks below 51 per cent or infuse more capital into them. These banks will require more capital for the adoption of Basel II norms and to meet the growth of the real sectors of the economy, said Dr C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister. “As the growth is at a rapid pace, there is need for injecting equity or enlarging the shareholding of public sector banks. According to analysts, it is difficult to get an exact estimate of the capital requirement of the entire banking industry post-Basel II. Stressing the need for consolidation in the banking sector, which has so far been largely confined to a few private sector banks, Dr Rangarajan said, “As the bottomlines of domestic banks come under increasing pressure and the options for organic growth exhaust themselves, banks in India will need to explore ways of inorganic expansion.”

J&K Bank to launch apple insurance scheme

In a significant step to promote horticulture sector, Jammu & Kashmir Bank has decided to launch a first-of-its-kind apple insurance scheme in the state next week. Bank chairman Haseeb Drabu said J&K Bank has made an investment of Rs 800 crore in horticulture, which needs to be enhanced keeping in view the vast potential of the sector. Drabu also suggested minimising risk factors in the horticulture sector to prompt financial institutions to make greater investments in the sector. He said apple, cumin seed and saffron are ideal products for profitable investments.

Loan recovery may lose muscle

Failed wrestlers and goons are an integral part of the country’s sophisticated financial sector. They are used in large numbers to recover dues from customers. Not averse to using some muscle power on the customer, they invariably get the job done. If the Reserve Bank of India (RBI) has its way, these tough-talking, muscle-flexing men could soon find themselves without a job. The RBI is working on a comprehensive set of guidelines that will make banks responsible for ensuring that their recovery agencies do not recruit individuals with a criminal background. The RBI move follows a sharp rise in complaints from credit-card holders against the recovery methods used by some banks. Recently, the Supreme Court had also expressed its strong reservations against banks recruiting goons for recovering loan dues. This does not mean that defaulters will be protected against the banks. Banking sources said once the new guidelines were in place, all banks would have to ensure that recovery agencies did a thorough background check of their employees, including police verification. The proposed RBI guidelines will also require each bank to publish the names of its recovery agencies, including on its website. Collection agents would be barred from making calls from any other number.

Banks cannot ignore weak spots: S&P

The banking sector in India is highly fragmented, with 53 domestic banks accounting for about 93 per cent of the system’s assets. The top 10 banks together account for 66 per cent of the system (as of March 31, 2006), with the remaining 27 per cent market shared between 43 banks. The banking business benefits from scale, especially with the increasing role of marketing- and technology-based systems. With about three-fourths of the banking systems’ assets in the hands of 29 public sector banks, a meaningful consolidation is not possible until this segment is included in the process. Hence, it is the government that determines the extent and speed of consolidation in the Indian banking system.

SBI`s sale of gold coins

State Bank of India (SBI) on Tuesday launched its scheme of retail sale of gold coins/ingots to the public at 15 branches in Andhra Pradesh. Coins of 2 gm and 5 gm and ingots of 10 gm will be initially sold at these branches. TS Bhattacharya, MD, said the scheme assumed importance as the corporates have started gifting gold coins to their employees as part of their reward and recognition initiative besides growing importance of gold at social functions.

ICICI sells 5.3% stake in Andhra Cement

ICICI Bank Ltd has sold its 5.30 per cent stake in Andhra Cement Ltd thereby reducing its holding in the company to 0.35 per cent from 5.65 per cent. It sold 62,10,997 shares, according to the data available on the BSE.

ICRA to rate IOB loans, exposures

Credit rating agency ICRA said it has signed a MOU with Indian Overseas Bank (IOB) for assigning ratings to the latter's loans and other exposures. The ratings would be done under the standardized approach of the RBI's New Capital Adequacy Framework for Basel-II, the rating firm said in a filing to the Bombay Stock Exchange.

Gold Rates

2 Gram 2205 5 Gram 5240 8 Gram 8295 20 Gram 20570 50 Gram 49900 100 Gram bar 95100

ICICI Bank in ‘phishing’ net?

India's largest private sector bank, ICICI Bank, is now in for a rude shock after a battery of e-mails that said that the bank's website was a victim of phishing, by which fraudsters steal passwords, user-names and other personal data of customers by setting up fake look-alike websites of companies.

YES Bank chalks out mega expansion plan

YES Bank is set for a mega expansion drive. The Rana Kapoor-promoted bank plans to foray into retail broking space and also carve out separate subsidiaries for existing banking segments. Besides, the bank is also looking for private equity investments to enlarge and enhance operations. While the retail broking business will be incorporated as a separate entity, YES Securities, the online transaction platform will be branded YES Direct. In fact, the bank is already looking at private equity placement for the new venture.

CBoP allots 13 cr shares to LKB shareholders

Centurion Bank of Punjab (CBoP) has allotted 13.21 crore equity shares to the shareholders of Lord Krishna Bank (LKB), which was merged with itself recently. The Reserve Bank of India (RBI) approved the amalgamation of LKB with CBoP and had said all branches of LKB would function as branches of CBoP with effect from August 29.

Bank unions defer strike

Bank employees have decided to defer the nation-wide strike called for Wednesday following the Indian Banks’ Association (IBA) assurance to commence negotiations on the unions’ demands within a fortnight.