India Inc. looks beyond banks for funding

India Inc's dependence on banks for funding appears to be showing a modicum of decline. With the Reserve Bank of India blocking the sub-benchmark prime lending rate route for raising cheap resources from banks from July 1, Corporates have found an effective non-bank alternative by resorting to commercial papers and non-convertible debentures. Ever since banks shifted to the base rate linked lending regime, outstanding credit in the banking system has come down. According to RBI data, since the begining of the second quarter and upto September 10, outstanding credit in the banking system has shrunk by Rs 19,463 crore. However, in the corresponding period last year, bank credit was up by Rs 26,632 crore."Top-rated Corporates have aggressively tapped the debt capital market for mopping up low-cost funds since the begining of this quarter. Besides, they are also dipping into robust internal accruals to finance their inventories",said DMD, CARE Ratings. However, during a liquidity crisis, funding could dry up from debt markets but a bank is unlikely to jeopardise its long-standing relationship with a corporate by choking off funds.(BL 23092010)

Banks turning to chip-based smart cards

In what could be the next big revolution in the banking space, banks in India, which now issue credit and debit cards with magnetic stripes, are trying to move towards clip-based payment cards.
A smart card would not only accentuate greater security, but could also become a multifunctional card. In fact, banks have started pilots already, and "mass roll-out would happen in 2011-2012," said a source in Venture Infotek, a transaction management company recently acquired by French IT services company ATOS ORIGIN. The company has a card bureau in Bangalore with an initial capacity to manufacture 12 million chip cards a year. Banks will look at a smart card as an opportunity to make it a multifunctional card including an ID card, said Ms Shubhalakshmi Panse, Executive Director, Vijaya Bank. Features such a e-purse and loyalty programmes too could be loaded on to this card. Once the smart card gets introduced, it might become both debit and credit cards, she said. In fact, HDFC Bank is already issuing chip-based credit and debit cards alongwith the magnetic stripes. Mr. Parag Rao, Head- Credit Card Marketing, HDFC Bank, said that the magnetic stripe will carry lesser sensitive data and more data will be installed on the chip.(BL 23092010)