Public sector banks set up financial inclusion drive

Public Sector Banks are planning to go the extra mile with their financial inclusion efforts. While the Government has asked them to provide basic banking services to all unbanked villages with a population of over 2000 by March 2012, the Banks are gearing up to cover even villages with population of between 1000 to 2000. This was indicated by top public sector banks at a meeting held to review the progress made by banks in achieving the financial inclusion plan for 2010-2012 at the Indian Banks' Association on Thursday. Over 73,000 unbanked villages in the country have been allotted to different commercial banks for coverage through the bank's financial inclusion plans. (BL 24092010)

RBI asks banks to beef up deposits

Worried over bank's reluctance to increase deposit rates despite its signal, the Reserve Bank of India(RBI) has prodded banks to beef up efforts to mobilise deposits. At a recent meeting with the country's top bankers, RBI officials , led by Dy.Governor Subir Gokarn, expressed concern over the tardy growth of term deposits. Deposit growth has been just 14.44% for the year to August 27, far below RBI's projection of 18%. This is mainly due to unattractive rates. With inflation close to double digits, the real returns are negative. Though RBI raised repo and reverse repo rates by 25 and 50 basis points (bps), respectively, on September 16, most banks are yet to take its cue. A day after, the country's largest lender, SBI, said it was not likely to raise rates before 3-6 months. According to bankers, the regulator wants that availability of money should not be a constraint to corporate India's growth. Banks,on the other hand, do not see an immediate need to raise rates as demand for loans has not picked up significantly. Banks credit growth till now has been in line with RBI's projection of 20% for 2010-11.Rather than raising term deposit rates, which are more stable, banks are rushing to raise short-term funds. (BS 23092010)

Bankers say no to RBI on savings rate deregulation

Bankers are putting up stiff resistance to Reserve Bank of India's (RBI's)move to deregulate the interest rate on savings bank accounts-the last bastion of administered rates. Banks benefit from low-cost savings deposits.The Central Bank wants to free the savings deposit rate to smoothen monetary policy transmission, which it feels is hampered by the current fixed-rate regime.
At 3.50% a year, interest on savings bank accounts is the only remaining regulated rate in the banking system- and a highly contentious one, given its impact on the common man. However, banks fear that making this low-cost product market-driven will only create instability. As a result, banks have told RBI that the time is not ripe for such a move. The Central Bank had called a meeting of top bankers where their views on this sensitive issue had been sought.
"The Savings Bank interest rate acts as an anchor for other rates. One of the fallouts of deregulation would be that when there is a squeeze on liquidity, the rates could rise to the level of fixed deposit-rates",said the chief of a bank, who attended the meeting.
The country's top bankers, including MD & CEO of ICICI Bank, MD,SBI,MD,HDFC Bank, Regional CEO for India & South Asia of Standard Chartered Bank will meet with RBI Dy.Governor,Subir Gokarn on Tuesday.(BS 23092010)

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)

Banker to wealthy Indians, too

Customers can meet in the Sapphire conference room, keep their valuables in the Topaz locker room and freshen up in the Opal dressing room. This is State Bank of India's(SBI) 'by invitation" 4000 sq.ft. branch called "Kohinoor Banjara", which will cater to Hyderabad's swish set.Minimum opening balance :Rs 1 crore. The country's largest lender is carrying out a curious experiment on the assorted group of people that make up wealthy India. This crorepati branch in the tony Hyderabad neighbourhood of Banjara Hills will offer frills that include personalised relationship managers, a round-the-clock locker facility, doorstep pick-up and drops. However, wealth management, advisory and related services-considered derigueur for private banking-will be provided only at the branch. The Bank has set itself an ambitious target as far as clientele is concerned, from prosperous Hyderabad businessmen to Tollywood film stars. It acquired 25-30 clients within four days of operations,a SBI executive said. Predictably, SBI's crorepati branch has created a buzz within banking circles.(BS 21092010)

Indian Bank to disburse Rs 100 crore through SHGs

Indian Bank plans to sharpen its focus on financing through self-help groups(SHGs) targeting disbursement of Rs 100 crore this fiscal. The Bank has since disbursed Rs 335 crore to about 33000 SHGs across the country, with focus on the Southern States in the last 3 years as advised by Mr.V.Ramagopal, the Executive Director. The Bank, which has a network of 27 special branches handling this category of financing, plans to open 7 more such branches this year. SHG members are utilising the loan amount for various income generating activities such as tailoring, pickle making and small scale textile business. The members also organise exhibition-cum-sale as part of their marketing initiative.(BL 21092010)