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Banking News and Awareness :: 03.04.2013

High-cost deposits may hit 17 banks’ profits:
Seventeen public sector banks’ high-cost deposits and certificates of deposit (CDs) have overshot the target (15 percent of total deposits) set by the Government. This is despite a Finance Ministry directive of September 2012 asking banks to trim such deposits. The average cost of deposits of IDBI Bank was 8.49 percent, Punjab and Sind Bank 8.31 percent, Corporation Bank 8.15 percent and Vijaya bank 8.09 percent – all higher than other banks.

Bank of Baroda to rebalance loan portfolio, exercise caution in lending:
Rebalancing the loan portfolio, exercising caution in lending, and grooming the middle management to take up higher responsibilities are the main focus of Bank of Baroda Chairman and Managing Director S. S. Mundra, who started his career as a probationary officer in Bank of Baroda in 1977. He says that given the pressure on asset quality (bad loans increased from 4,465 crore as of March-end 2012 to Rs 7,321 crore as of December-end 2013), his bank is on a mission to improve the same. The Bank has fairly good balance between domestic business (accounts for 70 percent of the global business – deposits plus advances – of Rs 7,14,051 crore as at December-end 2012) and overseas business (30 percent of global business); the overseas business contributes 25 percent to our bottomline.

IDBI Bank says margins remain under pressure:
IDBI Bank is witnessing some pressure on margins due to continuing high cost of funds and its decision to aggressively cut the lending rates. “The cost of funds has not come down during the current quarter as the deposit mobilisation is slack. This may affect our net interest margin (NIM)”, Executive Director R. K. Bansal told PTI here. 

SBH waives FD pre-closure penalty:
State Bank of Hyderabad (SBH) has waived the penalty for premature closure of all fixed deposits opened or renewed on or after April 1. The waiver would be applicable if the deposit has remained with the bank for at least seven days and interest would be paid for the period of deposit at the published rate. SBH is also launching a new term deposit scheme from April 1 with a maturity period of seven days to 14 days at 5 percent interest for single deposit of Rs 25 lakh and above, according to a release.

Pay for HDFC SMS Alerts :
The HDFC Bank will begin charging its customers from Monday for its InstaAlert SMS service, under which the bank provides real-time alerts on account activities.

Lending likely to outpace deposit growth this fiscal, say bankers :
RBI’s growth projections credit and deposit growth for FY14 is likely to be 16-17 percent and 14-15 percent, respectively. Bankers say, the credit off take is still largely dependent on the retail segment along with agriculture, real estate and small and medium sector enterprises.

Exporters want RBI to raise foreign currency loan limit to $25 b :
M. Rafeeque Ahmed, President, FIEO, told news persons after a meeting, “The RBI had set a $6.5 billion limit on dollar loans to banks, which has been exhausted. We have asked for an increase in this limit to $25 billion so that SMEs can get dollar loans at an interest rate, which is less than 3-4 percent”. Ahmed said that despite many measures being taken by the central bank to push exports, it has not helped much. The RBI had put a cap on forward contract for hedging, which is limited to 25 percent of the contract. Ahmed suggested that the tenure of the special export credit facility, which will expire in June this year, must be extended by one year and that 50 percent of the funds must go to the SME sector.

Corporation Bank plans to test purity of gold pledged with ‘caratometers’ :
To ensure purity of gold pledged with it by borrowers, Corporation Bank is experimenting with caratometers at some of its branches. The public sector bank is testing viability of the caratometer as a risk-mitigation tool, aimed at breaking the borrower-assayer (usually a local jeweller) nexus. The caratometer, which is a scientific and non-destructive method of testing the purity of the precious metal, could be used for a confirmatory test (After the assayer gives his report on the quality of gold), thereby ensuring the purity of gold pledged with the bank by borrowers, said a senior official.

IRDA asks life insurers to submit product planners by month-end :
The Insurance Regulatory and Development Authority (IRDA) have directed all life insurance companies to submit a product planner 45 days before the beginning of every financial year. For the current financial year, the product planners should be submitted before this month end.

Outlook challenging this fiscal, says Karnataka Bank chief :
Karnataka Bank is targeting a business of Rs 78,000 crore for 2013-14, a press release from the CMD said here on Monday that this business would include deposits of Rs 45,500 crore and credit of Rs 32,500 crore in 2013-14. He said that the bank’s business touched Rs 61,300 crore in 2012-13. This included deposits of Rs 36,050 crore and advances of Rs 25,250 crore. The overall credit-deposit ratio of the bank stood at 70 percent. As on March 31, the bank had 550 branches and 504 ATMs located across India.

PNB cuts domestic term deposit rates :
Punjab National Bank has cut the interest rate on single domestic term deposit of less than
Rs.1 crore to 7.50 percent, from 8.75 percent earlier, of maturity period of 180 days to less than one year effective Monday, said the bank in a notice to the Bombay Stock Exchange.

Soon, pay motor insurance based on distance travelled:
Insurance Companies are testing a model, called ‘pay as you go’ insurance, by running pilots. Data is monitored through GPS device installed in the vehicles. The GPS device gathers data based on the mileage and the roads on which the vehicle has run. The insurance company will price the cover based on each of these parameters. Bharti AXA General Insurance is testing the concept by installing GPS devices in the cars of 150 of its employees. (Pg-6/BL­03.04.2013)

CA Institute sets out IFRS roadmap for banks, NBFCs:
The CA Institute is keen that banks adopt International Financial Reporting Standards (IFRS) to prepare their financial statements. The accounting regulator has now recommended what it terms as a roadmap for IFRS implementation by banks. The recommendation follows a request from the banking regulator, RBI. Subodh Agrawal, President, CA Institute clarified that a specific date (not earlier than April 1, 2015) has been recommended to the RBI for ushering in IFRS adoption by banks. (Pg-6/BL-03.04.2013)

Core investment companies can now set up insurance biz:
The RBI has unveiled guidelines for core investment companies (CICs) to set up a joint venture company for undertaking insurance business with risk participation. In its guidelines, the RBI has specified that for floating an insurance venture, the CIC’s owned funds should not be less than Rs 500 crore and it should have earned net profit for three consecutive years. Further, the CIC’s non-performing assets should not be more than one percent of the total advances, and the track record of the performance of the subsidiaries, if any, should be satisfactory. The maximum equity contribution a CIC can hold in the joint venture company will be as per the insurance regulator’s approval, the RBI said in a notification.

Bombay HC denies relief to Vijay Mallya :
In a setback to liquor baron Vijay Mallya, the Bombay High Court on Monday refused to restrain banks from selling the shares of United Spirits pledged as security against loans to Kingfisher airlines. The court order would mean the consortium of 17 banks would be free to sell shares of the subsidiary companies of the UB Group which had been pledged with the lenders under an agreement in 2010. Birendra Saraf, counsel for UB Group, said the banks had informed that one crore shares of Mangalore Chemicals and Fertilisers, a subsidiary of UB Holdings, had already been sold.

Principal PNB under SEBI lens for mis-selling funds :
Capital market regulator Sebi is at an advanced stage of its investigation into allegations that Principal PNB Asset Management formerly, IDBI Principal Mutual Fund – had mis-sold mutual fund schemes three years ago. The probe was sparked by a complaint from Lok Prakashan, publishers of Gujarat Samachar, which invested in two schemes sold by the fund house. Lok Prakashan also alleged that the illegal advice offered by the fund house to its high net worth clients was unfair to retail investors who received no preferential treatment. The regulator can impose a monetary penalty of maximum `1 crore for failure to observe rules and regulations by the asset management company under Section 15 of the Sebi Act.

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