Banking News - February 15, 2014

§  FirstRand Bank to infuse Rs.120-cr capital:

FirstRand Bank is bringing in Rs.120 crore of capital to bolster its balance sheet, Rohit Wahi, Chief Executive Officer and country Manager of the bank said. The capital base of the bank would now go up to about Rs.390 crore. The infusion of capital is being done to compensate for the partial erosion of capital following losses during the past few years as well as building its retail banking infrastructure in the country. FirstRand Bank started operations in India five years ago. It has presence chiefly in the corporate and investment banking segments, and concentrates on the India-Africa trade corridor.

§  Canara Bank, NCML tie up for agriculture finance:

Canara Bank has entered into a partnership with National Collateral Management Services Ltd (NCML) for collateral management and warehousing services. The main objective of the partnership is to assist industries, traders and farmers in financing their capital requirements at all stages of the supply chain, ranging from pre-harvesting to the marketing and export stages. NCML is promoted by IFFCO, Rabo Equity, IFC, Karur Vysya Bank, HAFED, NCDEX, Punjab National Bank, Corporation Bank, Bank of India, Canara Bank, HDFC Bank, ACE Geneva, Indian Bank and YES Bank to provide risk management solutions in the areas of commodity and inventories.

§  To check fraudulent schemes, RBI examining credentials of nearly 35,000 firms: MCA:

The Reserve Bank is examining the credentials of nearly 35000 entities whose particulars were shared with it by the Ministry of Corporate Affairs (MCA) because of raising instances of fraudulent investment schemes. The Ministry had shared a list of 34,754 companies, which carry out financial business but don’t appear to have been registered with the RBI as non-banking finance companies (NBFCs). The central bank regulates NBFCs while all companies have to be registered with the MCA. Corporate Affairs Minister Sachin Pilot said that Serious Fraud Investigation Office (SFIO) has submitted a status report to the government on alleged fraudulent money pooling schemes being run by 54 ‘chit fund companies’.

§  SEBI sets seven-board cap for independent directors:

In a move to promote good business practices, the SEBI board on Thursday approved new corporate governance norms that restrict the number of independent directors on a company board, spell out whistleblower policies, and institute checks on salaries of key managerial persons, among other things. Under the new rules, an individual can serve as an independent director on a maximum of seven listed companies. The SEBI Board also decided that if an individual is a whole-time director in a listed company, he can serve as an independent director in a maximum of three companies. Also, if one has completed five years or more as an independent director, he will be eligible for just one more term of five years. Managerial remuneration will be decided by a compensation committee headed by an independent director.

§  ICRA downgrades United Bank’s Tier- II bonds, CDs:

Rating agency ICRA announced on Thursday a downgrading of United Bank of India (UBI)’ s capital bonds (Tier- II) and certificates of deposit ( CDs), due to a higher than expected deterioration in asset quality, pressures on margins and profitability. The ratings have been put on a watch with negative implications, ICRA stated. It cut the rating for lower Tier- II bonds from AA- to A-. The rating for CDs has been downgraded from A1+ to A2+. ICRA said the revision reflected the considerably higher than expected deterioration in asset quality. On February 11, Fitch, another rating agency, warned UBI’s recent losses might result in the state-run lender’s capital ratios falling below the regulatory minimum and test the regulators approach to the Basel- III capital rules.

§  Insurers allowed to invest in banks’ new instruments:

The Insurance Regulatory and Development Authority (IRDA) has allowed insurance companies to invest in new instruments issued by domestic banks. This includes debt capital instruments, redeemable non-cumulative preference shares and redeemable cumulative preference shares under Tier-II capital. IRDA had earlier allowed insurers to invest in perpetual debt instruments of banks’
Tier-I capital and debt capital instruments of upper Tier-II capital. The regulator has said the debt instrument issued by banks shall be rated not less than ‘AA’ by an independent, reputed and recognised rating agency, registered with market regulator SEBI. Further, if the instruments are downgraded below AA, such investments shall be re-classified as ‘Other Investments’.