Southern Banks begin financial inclusion process in villages

South India- based banks such as Corporation Bank, Karnataka Bank have kickstarted the financial inclusion plan as envisaged by the Reserve Bank of India to provide financial services to the rural populations. Most of these financial institutions are also in the process of appointing business correspondents who will work as financial intermediates between banks and the rural people. The Corporation Bank has a plan to extend financial services in 212 villages by the end of this fiscal of which they have already covered around 80% of the villages as of now under financial inclusion plan, said the Executive Director, Corporation Bank. However, the Bank is yet to tie up with any "for-profit" or "not for-profit" organisation to act as business correspondents.
The Karnataka Bank plans to cover 75 villages under the financial inclusion plan in the present fiscal.
Under financial inclusion plan, banks will open no-frills accounts with service provisions like deposit, withdrawal, remittance payment, loan repayment among others excluding cheque services. Vijaya Bank has also recently started its financial inclusion plan from Mandya district of Karnataka.(BS 07.10.2010)

Banks against freeing savings account rate

Bankers, especially from the public sector, are against deregulation of savings bank (SB) deposit rates. At a pre-monetary policy review meeting with the Reserve Bank of India on 4th Oct.2010, they feared this would unleash unhealthy competition in garnering deposits .
At the meeting, called to gauge the views of select bank chiefs on credit and deposit growth, interest rates, deregulation of the SB rate, the non-performing assets situation and the transition from the Benchmark Prime Lending Rate to Base rate-linked lending regime, the bankers are believed to have told the RBI that deregulation of the SB rate could trigger volatility in the interest rate on these deposits.
Currently, the 3.50% interest rate on SB deposits serves as a floor rate for all deposits in the banking system. Once deregulated, the SB rates could fluctuate wildly, depending on the liquidity situation. If call money rates shoot up, SB rates would go up, and vice versa. So, whether the depositor will gain or lose, it will be difficult to assess. At least now there is a certainity that the depositor is earning 3.50 per cent interest daily on SB deposits, said a banker clued into the developments.
"Most banks are against the de-regulation of savings bank rate as they feel it would give rise to competition, and could hit the growth of Current Account, Savings Accounte deposits. Also, depositors have been compensated by the daily calculation of savings bank rate and the de-regulation would not serve any additional purpose", said Dr. K. Ramakrishnan, Chief Executive, Indian Banks' Association.(BL 05.10.2010)

More banks hike base rate

Bank of Baroda, ICICI Bank, HDFC Bank and Development Credit Bank on Tuesday hiked their base rates by upto 50 basis points. This comes close on the heels of PNB, IDBI Bank, Allahabad Bank and Axis Bank and a host of other banks increasing their base rates.
ICICI Bank hiked base rate by 25 basis points from 7.50 to 7.75 per cent. The Bank also hiked the interest rates on fixed deposits of various tenors by 25 to 50 basis points, it said in an announcement on the BSE.
Bank of Baroda hiked its base rate by 50 basis points to 8.50 per cent. The public sector bank said it is raising the rate in response to the Reserve Bank of India's sustained monetary tightening and to lower the impact on cost of funds.
HDFC Bank raised its base rate by 25 basis points to 7.50 per cent from 7.25 per cent. Andhra Bank increased the base rate from 8.25 to 8.50%. However, State Bank of India (SBI) is the lone exception. It has retained its base rate at 7.50 per cent.(BL 06.10.2010)

Companies offer more fixed income options for retail investors

Tight liquidity conditions are prompting more companies to raise public deposits from retail investors. Mutual fund houses, seeing an opportunity in the current regime of rising interest rates, are rolling out a slew of fixed maturity plans (FMPS). And topping this off, financial institutions such as IDFC, REC and Life Insurance Corporation are preparing to make public offers of 10-year "infrastructure" bonds which offer tax benefits. With their expansion plans taking off again, more Indian companies are tapping the fixed deposit market to raise funds from retail investors. Companies from the realty and infrastructure space with huge fund requirements such as Jaypee infratech, Jaiprakash Associates, Ansal Properties and Unitech have been inviting retail deposits at high interest rates starting from 10-10.50% for one year and go upto 11.50-12.50% for a three year term.(BL 04.10.2010)

SBT hikes rates on domestic, NRO deposits

State Bank of Travancore( SBT ) has revised interest rates on domestic and non-resident (ordinary) deposits with effect from 4th Oct.2010. Resident senior citizens will get an additional 0.50 per cent margin on deposits of Rs 5,000 and above for periods of one year and more, Chief Manager, Personal Banking Business Department,SBT said. (BL 04.10.2010)

Govt. may compensate banks on no-frills accounts expenses

The Finance Ministry is considering a proposal to compensate around " 50-60 per cent" of the expenses that banks incur on opening and maintaining each " no-frills account", sources in the banking industry said. Such an incentive may encourage banks to expedite the financial inclusion process,they said.
All banks were asked by the Reserve Bank of India in 2005 to offer no-frills accounts at their branches. These are accounts with nil or low minimum balances, limited facilities and nominal charges that encourage people from economically- weak background to open such accounts.
On an average, each bank incurs a total cost of about Rs. 250 for opening and maintaining such accounts in the opening year and lesser in the subsequent years or if the minimum balance in the account is substantial, the sources said. It is estimated that banks have opened over 50 million " no frills accounts" and these have an outstanding balance of over Rs.5400 crore.(BL 04.10.2010)

Honda Siel ties up with SBI

Honda Siel Cars India announced on Friday that it has entered into a finance programme with the country's largest lender, State Bank of India(SBI).Under the agreement, SBI has approved a line of credit for financing HSCI dealers under the Electronic Dealer Finance Scheme(e-DFS). HSCI and SBI already have a retail finance agreement, under which SBI provides automobile loans to Honda customers at competitive rates. According to Mr. Manas Kumar Nag, Chief General Manager, SME BU, Corporate Centre, Mumbai," This agreement will further give us the opportunity to provide our customers more value-added services at competitive rates, and expose them to our various offerings."(BL 02.10.2010)