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)

Core-Banking software developed for small banks

Perfect Software Solutions Pvt. Ltd., a venture by a group of IT technicians based in Kozhikode, has developed a core-banking software that can be used even by small banking institutions such as cooperative banks at a minimal cost. The software, styled"Score" can be operated on windows and linux platforms, according to Mr. K.C.Biju,Managing Director of Perfect Software Solutions. He said that small co-operative banks could not adopt core-banking software solutions developed by companies outside the state and avilable in the market because of the exorbitant expenses involved. The software developed by the company will make avilable all the details of the customers of every branch of the bank on a single platform. This will enable customers carry out transactions from any of the branches and the details of the transactions would reach their mobile phones through SMS.(BL 20092010)

PM reviews financial inclusion efforts

The Prime Minister,Dr. Manmohan Singh, on Friday reviewed the progress made on the financial inclusion front by the Bankers in the country.
He was briefed on the efforts being taken to reach banking services to the 73,000 rural habitations, having population of over 2,000 people (according to the 2001 census) by March, 2012. The efforts include use of technology- based models,as well as banking intermediaries such as business correspondents. Besides the Reserve Bank of India Governor, Dr.D. Subbaro,the others present on the occasion include,Mr. R.Gopalan, Secretary(Financial Services),Ms.Usha Thorat,RBI Deputy Governor and Dr. K. C. Chakrabarty,RBI Deputy Governor.(BL 18092010)