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Re: Banking News.....
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Thumbs up Re: Banking News..... - October 2nd, 2007

hey ,

it was really full of knowledge...,
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Re: Banking News.....
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Re: Banking News..... - October 3rd, 2007

Banks’ deposit rate offers keep govt on alert

MUMBAI: There is a growing concern in the government over banks offering high rates to mop up deposits. The finance ministry this week has asked public sector banks (PSBs) to give details on their deposits structure — the tenure of the liability and the interest paid on it. According to bankers, the government fears that high rates will endanger banks’ books and also discourage investments in small savings schemes.

However, if banks respond to the query by reporting only their card rates displayed at the branches, it will not reflect the true cost of funds in the industry. This is because a large part of bank deposits are bulk placements by institutions and corporates, who are offered discretionary rates, which are significantly higher than card rates offered to retail savers. For instance, as late as last week, two state-owned banks offered between 9.99-9.97% to get Rs 1,000 crore bulk deposits from a Delhi-based state-owned company. At the individual level too, banks have two sets of rates — one under special schemes and the other their regular rates.

Already, the interest rate offered by banks is far more attractive than that offered by the government. Currently, the government is paying 9% to senior citizens and a maximum rate of 8% on other schemes, post office monthly income saving scheme, NSC and PPF. Against this, banks are offering a maximum rate of 9 to 9.25% to retail deposits.

If banks are to offer higher rates on deposits, they have to price their loan likewise in order to earn adequate margins. Bankers feel that the government is apprehensive that if banks offer higher rate on deposits, it will put pressure on the overall interest rate structure in the system. This will also hurt the government’s borrowing programme and cost its pays for completing the infrastructure project it undertakes.

Interest rate structure is widely debated not only among bankers at meeting among the chiefs of large private and public sectors at Indian Banks’ Association (IBA) — a body of bank management, but also in meetings between bankers and RBI as well as bankers and the FM.

In fact, IBA had issued an advisory note to all banks in July asking them not to charge over 9% for more than 400 days. However, with the State Bank of India — the country’s largest bank in terms of total assets — on a massive deposit drive, there are fears that banks may undercut others to win back market share. Banks have been increasing their market share by 25 basis points every quarter.
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Re: Banking News..... - October 3rd, 2007

Banks find way to save CAR monies

NEW DELHI: Banks are looking at introducing a clause, unconditionally cancellable, into loan contracts that will exempt them from allocating capital against the loan amount still to be drawn. The clause will also give them the right to cancel disbursement unconditionally.

This will help banks save on allocation of capital under the new capital adequacy norms that will come into force from March 2008.

Banks will soon need to allocate capital against unavailable loan limits under the norms. At present, banks allocate capital only against amount outstanding.

“It does not make sense for banks to set aside capital against unavailable loans. Banks need to have more information on the borrowing schedules of customers. This will help banks gauge their capital requirement. Banks can now introduce the unconditionally-cancellable clause that will decrease the amount of capital to be allocated,” a banker said.

Banks will need to take an undertaking from borrowers who are included in this clause, in the terms and conditions of the loan documents. Banks say that legally, this clause will give them the authority to cancel further disbursements unconditionally. At the time of taking a loan, borrowers are given a sanction letter for the duration of the loan, this is a practice globally.

“RBI has indicated that if a clause allows banks to unconditionally cancel unavailed loans, there will be no capital charge for the undrawn amount. But at this stage it is not clear how will banks operationalise such a clause. RBI has to approve internal practices of banks as far as this is concerned,” a banker said.

The guidelines issued in April 2007 set the stage for implementing Basel II norms. Spearheaded by Punjab National Bank, a group of bankers team has been constituted under the Indian Banks Association to oversee the implementation of Basel norms in the banking sector. The group meets every quarter.

RBI has said that the it will not extend the deadline for banks to implement the next stage of capital adequacy norms. Under the new norms, banks will have to set aside more capital on account of credit, market, and operational risks.

Local commercial banks with overseas offices have to adopt the Basel II norms latest by March 2008. Banks, which only have the local presence, can implement them by March 2009 to fulfill these norms.

Basel norms which have been put in place by the Bank for International Settlements (BIS), which is the central bank of all central banks.

It is estimated that the new capital adequacy norms might increase the overall regulatory capital requirement. The capital allocated on account of operational risk will be 15% of the gross income. A part of this increase can be offset by the relief due to credit risk on account of lower risk weights, bankers say. A rough estimate put a capital requirement of Rs 50,000 crore for banks to implement the norms.

The guidelines prescribe a risk weight of 150 basis points for sub-investment grade borrowers and a 100-basis-point increase on unrated corporate borrowers.
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Planning to buy a house? Good news!
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Planning to buy a house? Good news! - October 9th, 2007

This festive season your dream home may just be within your reach. The slowdown in retail asset growth and competitive pressure have forced banks to reduce rates on retail loans.

After HDFC reducing floating home loan rates by 50 basis point, it is now the turn of Axis Bank, which has reduced its floating home loan rates by 50 basis points to 10.50 per cent for existing and new customers.

Kotak Mahindra Bank has also reduced its floating home loan rates by 50 basis points. ICICI Bank, the largest private sector bank in the country, last week cut its retail loan rates, except for home loans, by 50 basis points.

However, it is important to note that the reduction in rate is on floating rate loans, which can be increased at the discretion of the bank depending on the market situation.

"We are offering a discount to both existing and new customers. The bank's home loan portfolio constitutes around 54 per cent of the bank's total assets. A majority of the home loan portfolio comprises floating rate loans. Competition in the home loan market among other factors prompted us to take this decision,'' said Imtiaz Ahmed, assistant vice-president, mortagages, Axis Bank. The bank's mortgage reference rate is pegged at 13.25 per cent.

"The 50 basis points reduction will not have any major impact on the bank's cost of funds. This offer is on floating rate loans, which can be hiked if cost of funds increase over time,'' said Asok Kumar, executive director, Axis Bank.

"These are marketing tricks to increase demand as interest rates on retail loans are far from easing. The interest rate stance will depend on the Reserve Bank of India's mid-term monetary policy steps. There is no hope of the regulator reducing rates,'' said a banking analyst. The RBI will announce the mid-term annual policy statement on October 30.

Public sector banks are under pressure from the government to reduce interest rates as there are signs of a demand slowdown. State Bank of India's (SBI) asset liability committee will be meeting next week to take a call on interest rates.

At present, SBI offers 50 basis points discount on home rates plus a reduction in processing charges in Mumbai and Goa circles since Ganesh Chaturthi. Bank of Baroda, Industrial Development Bank of India and State Bank of Bikaner and Jaipur have also revised mortgage rates downwards.

Meanwhile, Dena Bank has decided to cut its lending rates for fresh home loans, by 50 basis points from October 10.

The discount on lending rates, fixed as well as floating rate options, will be applicable till December 31, 2007. Canara Bank has also slashed its home loan rates by 50 basis points across tenures for fresh loans.


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Re: Banking News.....
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Re: Banking News..... - October 15th, 2007

IDBI reduces floating home loan interest rate by 0.50 per cent

MUMBAI: IDBI Bank has reduced its home loan floating interest rates by 0.50 per cent to 10.50 per cent.

The new rate will be applicable on fresh home loans disbursed between October 12 and December 31, the bank said in a press release issued here on Monday.

IDBI has also launched a special "buy now, pay later" scheme wherein buyers of properties under construction can choose to avail of a moratorium period of up to 18 months for payment of equated monthly installments.

The bank has also decided to reduce its processing fees to a nominal Rs 1,000 during this period.


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Re: Banking News.....
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Re: Banking News..... - October 15th, 2007

For a change, both lenders and borrowers willing to float

MUMBAI: For years when bankers offered floating rate loans, corporate borrowers haggled for fixed loans. It was the other way round when banks insist on a fixed rate. Now, for the first time, lenders and borrowers are thinking alike on interest rate. Both want to do business at floating rate, thanks to the uncertainty. Lenders as well as borrowers are clueless which way rates will move in the coming months.

Borrowers are opting for floating rate, betting on a possible softening of interest rates; lenders on the other hand fear that due to the global imponderables and growing uncertainties around liquidity, it may be risky to fix the return they earn on the loan. As a result, after several years, lenders and borrowers are comfortable with floating rate loans.

Between end 2000 and early 2005, when interest rate plummeted — by over 500 basis points — banks were keen on giving fixed rate loans while corporates were interested only in paying a floating charge. Both were trying to derive the benefits of a change in the interest rate cycle.

When the rate cycle turned in late 2005, corporates began demanding fixed rate loans to prune their costs while banks were pushing floating rate loans. In absence of adequate loan demand, many large banks had disbursed loans to oil companies at a fixed rate of 7% for 3-5 years in early 2005. At that time, many banks which were not comfortable with fixed rate structures, agreed to offer fixed rate loans with a reset clause after six months to one year. But by late 2006, when liquidity had tightened, banks were offering only floating rates, anticipating interest rates to move up while corporates demanded fixed rate loans.

Currently, banks feel that they would be in a better position to lend on floating rate basis to protect their margins despite improved liquidity and expectations of a possible dip in interest rates. They fear that if rates move up in the next few years, they would lose out on a 5-year rate asset since the cost on deposits would be higher than the returns from the loan, resulting in negative margins. “We have always lent on a floating rate basis. That is a business we know better,” said a credit head of large public sector bank.

Bankers say there are too many uncertainties on the interest rate front, which has prompted them to lend on a floating rate basis even as there are expectations that interest rates may fall. “Liquidity can tighten anytime. If there is a capital flight from India, if the credit demand improves or if the central bank raises the cash reserve ratio, liquidity may dry. At that point, a floating rate loan book would protect our margins,” said a chairman of another bank.

Top rated corporates, however, continue to bargain for best rates. Most corporates with over Rs 10-crore credit limit have multiple banking facility and are thus in a position to switch to another bank even if the difference is that of five basis points.


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Re: Banking News..... - October 15th, 2007

Indian Bank Jul-Sep net profit up 46%

MUMBAI: Indian Bank has posted a net profit of Rs 247.60 crore for the quarter ended September, a growth of 46.34 per cent from Rs 169.19 crore recorded year earlier.

Total income has risen from Rs 1,176.31 crore in the year-ago quarter to Rs 1,493.14 crore in the quarter ended September 2007. This represents a growth of 27 per cent.

At 2:37 pm on BSE, Indian Bank shares were at Rs 153, up 2.10 per cent.


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Re: Banking News..... - October 16th, 2007

Union Bank of India plans to add 200 branches this fiscal

MUMBAI: Public sector lender, Union Bank of India (UBI), on Tuesday said that it plans to add more than 200 branches during the current fiscal.

On an expansion drive and having opened 124 branches last fiscal, UBI has chosen the organic route for growth, it said in a statement issued here today.

With the economy expected to grow at unprecedented levels, there is a growing need for banking products and services in many parts of the country.

"Not only are segments of the population hitherto out of the ambit of the banking system, approaching banks for their banking needs, but existing customers are also in need of newer banking products and services," the bank said.

It was in anticipation of this need, that UBI planned to add more than 200 branches during this fiscal, the bank said.


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Re: Banking News..... - October 16th, 2007

Australian pension funds may invest Rs 1,300 cr in KGPL

MUMBAI: Four Australian pension funds — Westscheme, Statewide Superannuation Trust, SAS Trustee and Public Officers Superannuation Fund — are in advanced talks to invest over Rs 1,300 crore in Konaseema Gas Power (KGPL), a gas-based power project in Andhra Pradesh.

The deal is expected to close shortly, people familiar with the matter said. This will be followed by an IPO in the first half of 2008. If concluded, this would be one of the largest power sector investments by any Australia-based superannuation fund. Senior company officials confirmed the fund-raising plans in response to an email questionnaire, but declined to reveal any detail.

People close to the matter said Access Economics, an Australia-based economic consulting firm, is advising investors for the pre-IPO placement. The funds will be utilised for setting up a 820-MW plant at a cost of about Rs 3,000 crore. This would be the second phase of the project.

The project is likely to be implemented by June 2009. The four funds are likely to take about 74% equity in the company, which would result into about 32% stake post placement. Sources added that about 26 crore shares would be placed to the funds at a price of about Rs 45-50 per share. Further, BSE-listed VBC Ferro Alloys, that holds about 11 crore shares constituting 28% in the company, would also be allotted additional three crore shares in the second phase.

The company has been promoted by leading players such as L&T, IL&FS, LIC, GIC, IDBI, International Power Vision, The Infrastructure Fund of India (TIFoI) and VBC Ferro Alloys among others. Each of these institutions holds about 5% to 10% in the company with Hyderabad-based VBC Ferro Alloys holding about 28%.

The KGPL plant is located near the Krishna-Godavari basin. In its first phase, KGPL has already implemented a 445-MW power plant supplied by Siemens, while engineering, procurement & construction (EPC) is by L&T and operation & maintenance is by NTPC.

The project cost of Phase-I was about Rs 1,400 crore. Phase-I is ready to become operational, but gas supplies have not yet started. As a result, project cost increased to about Rs 1,800 crore.

KGPL has tied up for gas supply which is likely to commence from March 2008. The company has also signed an MoU with Power Trading Corporation for sale of power generation and has the option of other possibilities like Maharashtra, Karnataka, Gujarat for sale if it is successful in getting better pricing.

The IPO is expected to be announced in the first half of 2008, once KGPL gets gas supply and power generation starts in June 2008. However, details about the equity dilution have not been finalised at this stage.


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Re: Banking News..... - October 17th, 2007

ICICI Bank sees 70% growth in pvt banking business

NEW DELHI: ICICI Bank is expecting, on an average, a surge of 65-70% in its private banking business, with the first generation Indian entrepreneur coming of age, 15 years after economic reforms kicked in 1991. The demand is driven by the need to segregate private wealth from professional wealth, inheritance of large properties and ESOPs to executives, officials said.

"With the ongoing bull run at the Indian stock markets and the number of domestic entrepreneurs maturing after 15 years of liberalisation, we expect a growth of 65-70% in the domestic private banking market," ICICI Bank's global private banking head Anup Bagchi told reporters here on Monday. This business usually consists of managing wealth of those who have surplus investment income of over Rs 10 lakh annually.

He said the personal wealth industry of the Asia-Pacific region is estimated at around $7.6 trillion, and as per estimates, India has witnessed the second largest growth in its high net worth individual (HNIs) population at 18.3%, with Singapore leading with 20% growth.

He said the bank was already catering to over 1.5 lakh customers in this market, out of which a significant number was from the fast-growing millionaire club in India. However, he declined to disclose the total business of the ICICI Bank's private banking division. The term HNI refers to individuals and families that have an asset base of Rs 1 crore to Rs 5 crore.

The services offered by the bank include transaction banking, credit requirements, surplus investment management and protection products. Equity, structured products, real estate, private equity investments are other avenues. The bank also helps in diversifying risks for concentrated stock holdings.

The division was recently presented the 'Outstanding Regional Private Bank-Asia Pacific' award at the 17th Private Banker International Wealth Management Summit 2007, he said.

Mr Bagchi said since India does not have any inheritance tax, investors could diversify their income by investing in unlisted companies apart from the traditional private trust route. Considering the number of people buying houses worth Rs 1-1.5 crore, growing number of S-Class Mercedes cars and block deals of over Rs 100 crore at stock exchanges, one could imagine the potential in this market, he said.

"The bank has also successfully developed global capabilities in offering a wide range of banking financial solutions from our offshore offices which span 18 countries," Mr Bagchi said. He said ICICI Bank is well poised to offer private banking with a large branch network and its capability to offer various kinds of services.


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