Banks meet on cards for base rate consensus

To put a lid on the guessing game by the banks on each other's base rate , the country's top bankers will meet soon -at the behest of SBI- to discuss the new loan pricing mechanism. The meeting would precede SBI's base rate announcement on June 15,a fortnight before its roll out ,the SBI Chairman said. Most banks are yet to decide about their base rate and the parameters to be taken into account for calculating the new benchmark. A key parameter is the cost of funds, which can cause a huge variance across banks. For example, if a bank takes overnight cost of funds ,which is very low,its base rate will also be significantly lower from a bank,which, for example, takes one-year average cost of funds into account.
Last year,a committee constituted by RBI, reviewed the present system of benchmark prime lending rate and decided to replace it with a base rate.The base rate will be computed after taking into account all costs,including the cost of deposits, the negative carry on CRR and SLR,overheads and employee expenses.Banks cannot lend to any category of borrowers below the base rate.(BS 27052010)

Edelweiss keen on banking foray,awaits RBI norms

Mumbai-based financial services firm Edelweiss is eyeing a banking foray,according to investment bankers. It will be joining the growing list of corporates,including Anil Ambani-promoted Reliance group, Aditya Birla group, Shriram Capital and Religare, which have already made known their intentions to seek a banking licence. Most of the players are waiting for the Reserve Bank of India (RBI) to come out with a fresh set of guidelines that would allow new private players in the banking sector after which they are expected to approach RBI for a banking licence.(ET 27052010)

PNB ties up with OICL

Punjab National Bank has tied up with Oriental Insurance Company Limited to offer a floater Health Insurance Policy covering the proposer and family under one sum insured.The product was launched by the Circle Head,PNB,Ernakulam at Kochi.The scheme is applicable to all PNB customers and employees.Under this,the beneficiary and family members(comprising the spouse and two children)will be covered in one policy and one sum assured.The sum insured floats for all the beneficiaries under the policy.The policy covers beneficiaries between the ages of 3 months and 80 years. (BL 26052010)

SBI to lend Rs20,000 Cr for 3G funding

State Bank of India (SBI) will be lending Rs 20,000 crore for telecom companies to pay for licences for the Third Generation(3G) mobile services. The rate of interest will be decided in one-to-one talks with the operators to whom SBI will be lending, said bank's chairman .The 3G funding would impact the liquidity of the bank in a big way. The SBI chairman said that as on March 31,2010,the bank had Rs40,000 crore liquidity,about 50% of which would go for 3G funding.On the business focus ,the chairman further said that the first focus of the bank would be in retail- home loans and auto loans in particular-followed by the corporate sector. The bank is expecting a 20% credit growth in 2010. (BL 23052010)

For banks,green is the new black

India's leading banks are seizing opportunities in an emerging low-carbon economy.Last December IndusInd Bank inaugurated Mumbai's first solar-powered ATM as part of its 'Green Office Project' campaign titled 'Hum aur Hariyali'. State Bank of India,as part of its green banking policy ,plans to set up captive windmills to generate 15 Mw of power in Tamil Nadu, Maharashtra and Gujarat.A new study by PricewaterhouseCoopers(PwC) commissioned by the Indian Bank's Association(IBA) and The Climate Group confirms that India's leading banks are recognising and seizing opportunities in an emerging low-carbon economy. For instance, in coal technologies, ICICI Bank introduced innovative concepts like deep benefication of coal(coal washeries) and coal bed methane. It is seen that public sector banks are less involved in voluntary initiatives and appear to be postponing action until regulation is in place. However, as an exception, The new Green Home Loan Scheme from SBI will support environmentally -friendly residential projects and offer various concessions.These loans will be sanctioned for projects rated by the Indian Green Building Council (IGBC) and offer several financial benefits-- a 5% concession in margin,0.25%concession in interest rate and processing fee waiver.(BS 22052010)

NHB bullish on reverse mortgage loans

With its new reverse mortgage loan-enabled annuity scheme(RMLeA)offering senior citizens assured lifetime payments instead of the earlier cap of 20 years,National Housing Bank(NHB) is expecting more takers for the product.It is in talks with banks and insurance companies to expand its pool of RML facilitators. While the concept of RMLeA itself has been a slow starter in India,NHB feels the new offering is more attractive to borrowers in terms of higher payments and better risk mitigation.NHB,which is the principal agency to promote housing finance institutions,launched the scheme in India in 2007. Reverse mortgage seeks to monetise the owner's equity in the house. This involves senior citizen borrowers mortgaging their house to a lender ,who then makes periodic payments to the borrower during the latter's lifetime. The borrower need not repay the principal and interest to the lender during their lifetime. On the borrower's death or on borrower leaving the house permanently,the loan along with accumulated interest is settled through sale of the house.The borrower's heir can also repay or pre-pay the loan with interest and release the mortgage without sale of property.Around 23 banks took up the RML scheme which include State Bank of India,Punjab National Bank, Bank of India and Indian Bank.According to NHB, as of March 31,2010,around 7000RMLs of Rs 1400 crore have been sanctioned. (BS 22052010)

Axis Bank inks largest ATM outsourcing deal

In what is the largest ATM outsourcing deal in the country,Axis Bank has entered into an agreement with two third-party service providers to increase its ATM count to more than 9000 within the next 18 months. The country's third largest private sector lender has signed contracts with Prizm Payment Services and AGS Infotech to set up and manage 5000 ATMs on a purely variable model according to someone with knowledge of the development. Axis Bank had 4293 ATMs as on 31st March, 2010.Prizm will set up 3500 ATMs while AGS Infotech will set up 1500 ATMs. Since it is a fully outsourced deal, the bank will not incur capital expenditure.The ATMs will be owned and managed by the two service providers.Axis Bank will only be responsible for cash settlement and will pay the service providers a fee per transaction.(BS 16052010)

Bank of Rajasthan to merge with ICICI Bank

Bank of Rajasthan is to be merged with ICICI Bank.The boards of both banks which met separately granted in-principle approval for the merger.In a statement, ICICI Bank said it has entered into an agreement with certain shareholders of the BOR for amalgamation of the bank with itself with a share swap ratio of 25:118.The merger is not likely to have any material impact on ICICI Bank's capital and the only advantage is a readymade branch network. Post merger ,ICICI Bank's branch network would go up to 2463. This is the third merger for the bank after it took over Bank of Madura and Sangli Bank.(BL 19052010)

YES Bank plans retail banking products

YES Bank plans to introduce customised retail banking products in order to cater to specific segments of customers in the country. The bank plans to introduce products such as home loan, personal loan,education loan and credit cards to offer a complete bouquet of services to its customers ,according to Mr Somak Ghosh,Group President ,Corporate Finance and Development Banking, YES Bank.The bank would focus on professionals such as doctors,lawyers and accountants, among others to bring out customised home loan products typically for loans above Rs25 lakhs,he said. The bank plans to set up about750 branches and 3000 offsite ATMs over the next five years in order to scale up its retail business,Mr Ghosh said. (BL 13052010)

6 million credit cards cancelled in 2009-10

Banks cut down sharply on issuing credit cards and also closed a number of cards in 2009-10.Six million credit cards or about a quarter of the total number of cards a year ago went out during the last fiscal.The number of cards in circulation as of March 2010 was 18.3million ,a level last seen about five years ago,data from the Reserve Bank of India show. Rising defaults in the credit card industry as well as unsecured personal loans portfolio by customers as a consequence of the slow down in the economy a year ago forced a number of banks to rethink their growth strategy .Besides ,regulatory warnings and court structures about aggresive recovery practices of many banks also forced them to go slow in the business. Apart from cutting down new issuances ,banks also began to cut credit limits for existing customers as part of a de-risking exercise.(BL 13052010)

Exim Bank to look at new markets

Export-Import Bank of India(Exim Bank)is planning to conduct in- depth research on countries in Africa and Latin America to help Indian businesses explore trade and investment opportunities there.This move comes in the wake of slowdown in the country's exports to the recession-hit Western economies.
The Development Financial Institution (DFI)says its proposed country studies will go a long way in helping Indian companies venture into non-traditional markets for exports and investments.'While information on Western economies is easily available ,the same is hard to come by in the case of Africa and Latin America.The DFI is planning to conduct detailed research on these two countries so that indian companies can use it to make informed decisions on tapping these markets for exports or for making investments',said Mr TCA Ranganathan,Chairman and Managing Director,EXIM Bank,at a press meet (BL 08052010)

Banks will extend insurance to 'all' villages in Karnataka

Commercial banks in Karnataka are planning to extend insurance and other banking services to targeted beneficiaries to all villages with a population of over 2000.The banks have prepared financial inclusion plans(FIPs)to provide banking facilities to all villages by way of a regular brick and mortar branch or using information and communication technology through banking correspondent(BC)model.These services will be provided using appropiate technology back up.In this regard ,all banks have submitted their board approved FIPs as directed by RBI.The banks will meet the target of March 2012 set by the government of india for providing banking facilities to all villages with 2000 and above population,Basant Seth, chairman and managing director,Syndicate Bank and convenor,SLBC,said.(BS 08052010)

SBI picks 2 US firms for point-of-sale terminals deal

State Bank of India has zeroed-in on two US-based companies -Visa international and Elavon Inc as joint venture partners for setting up a network of point-of-sales(POS)terminals across the country.The two foreign partners will help India's biggest lender with payments technology solutions for its ambitious plan to roll out six lakh POS terminals at merchant establishments over the next five years.POS terminals are devices seen in retail and hospitality establishments for processing credit cards ,debit cards,smart cards and other electronically submitted transactions in a traditional retail environment.A retail POS system includes a computer ,monitor,cash drawer,receipt printer,customer display,barcode scanner, integrated card processing system,a signature capture device and a customer pin-pad device. The merchant swipes the customer's card at the terminal or keys-in payment information and the terminal does the rest.In the future ,the bank is also envisaging use of POS for mobile top-ups,utility bill payments,booking of railway and movie tickets.(BL06052010)

Bajaj Finserv awaits RBI nod for banking foray

Bajaj Finserv ,financial services wing of the Bajaj Group is keen to foray into banking sector. Bajaj Finserv MD Sanjiv Bajaj said that they are a zero-debt company having an idle cash of Rs800 crore and would like utilise the resources to venture into banking.The final guidelines from the Reserve Bank of India on awarding new banking licences are awaited before the proposed plan in banking foray is taken forward.The two new segments that the firm is likely to venture in near future include mutual fund and wealth management.(FE 06052010)

Financial inclusion

The government is open to the idea of providing financial support to banks for implementing financial inclusion as the lenders fear that the move may be unviable in initial years.The government in a recent meeting with banks expressed it was open to the idea of subvention in initial years. The government met representatives of 32 banks to identify the challenges facing them for implementing financial inclusion.The government has embarked on an ambitious plan to cover all villages having a population of more than 2000 to have banking facilities by March 31,2012.There are about 64000 villages in the country with a population over 2000 lacking a formal banking channel.The central bank is currently reviewing the plans on financial inclusion submitted by banks.RBI had asked banks to submit their board-approved p;ans of financial inclusion for 2010-11 (BS 06052010)

Forex limit for overseas travellers hiked

Travellers going abroad can now carry more foreign currency.The RBI has increased the permissible limits for authorised dealers and money dealers selling foreign exchange to people travelling abroad from $2000 to $3000.In a circular issued,the RBI said authorised dealers and full-fledged money changers can sell foreign exchange in the form of foreign currency notes and coins upto $3000 to travellers proceeding to countries other than Iraq,Libya,Islamic Republic of Iran,Russian Federation and other Republics of Commonwealth of Independent States.(BL 05-05-2010)

Online banking frauds

Minister of State for Finance Shri N.N.Meena informed the Parliament that Online banking frauds are on the rise with the number of cases more than doubling over the past three years.The number of internet frauds rose from 102 in 2007 to 113 in 2008and 269 in 2009 involving an amount of Rs2.51crore,Rs5.53 crore and Rs5.90 crore respectively.The minister further said that the RBI has cited compromises on password and other safety measures as the main reason for the occurance of such frauds.RBI has already taken measures to check such frauds such as making it mandatory for banks to put in place a system for providing additional authentication and validation,an online alert system for card holders in case of transactions of a value of over Rs5000,redressal of grievances for wrongful billing and reporting of cases to police and ensuring follow-up action.(BS 05-05-2010)

New models of SBI ATMs

State Bank of India is shortly coming out with varied models of ATMs such as Solar ATM,Rural ATM with bio-metric functionality,multi purpose kiosks and Talking ATMs,which will help visually challenged customers operate the ATM with ease.All the ATMs of SBI Chennai circle are enabled with image capturing facility and the average cash dispensed a day is Rs 100 crore.(BL 05-05-2010)

SBI teaser home loan scheme

Despite the increase in policy rates -repo&reverse repo-and cash reserve ratio by 25 basis points,fund-flushed State Bank of India(SBI)has extended its teaser home loan scheme though with a marginal modification and for the second time till June30.The existing scheme was expected to be over by 30th April.In the modified scheme,the interest rate to be charged by the bank will be 8%for the first year and 9% for the second and third years.However,differential floating interest rates would be charged from fourth year onwards,a senior official of the bank told on condition of anonymity.While the bank would charge an interest rate of 9.25%(2.5%less than the State Bank advanced rate)on the loan amount upto Rs50 lakh,interest rate for the loan amount beyond Rs 50 lakh would be 9.75%(or 2%less than the SBAR)from the fourth year, said the official.(FE 03-05-2010)

Mobile money transfer

With the pilot project in Pune doing extremly well, Nokia expects mobile money transfers to take root and grow.At a strategy sharing session recently Nokia described its vision for mobile money services roll-out in India,a business with enormous revenue potential.
The RBI has permitted YES Bank to provide mobile money services in association with Nokia.(Obopay,a Californa-based compay in which Nokia has a stake offers the technology back-up for YES Bank).The pilot in Pune will end in a couple of months,the result of which will presumably be inputs for the RBI to regulate the roll-out of the services in India(BL 30-04-2010)

Banks can now appoint any individual as BC

With the objective of ensuring greater financial inclusion and increasing outreach of the banking sector, RBI had earlier allowed banks to engage NGOs,micro finance agencies and self-help groups for identification of borrowers,processing of loan applications,helping recovery and such other support services.In 2006 the RBI
had allowed banks to use intermediaries as BCs for providing financial and banking services.Banks can now engage any individual including those operating common service centres to work as business correspondents(BCs).BCs conduct banking business as agents of banks at places other than the bank premises.The central bank will issue operational guidelines seperately.The business correspondents are paid commission fees as per RBIguidelines while banks follow KYC norms while undertaking banking activities through them. (BS 030510)