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Staff Training Centre, Salt Lake, Kolkata
Important News
highlights : Banking & Finance
News Update 1st
June to 30th June 2004
Compiled by: Abhijit Kr Ghosh, Faculty
01-06-2004
ICICI Bank can?t
seize Mardia assets
Mardia Chemicals has obtained a stay order
against ICICI Bank from the DRT Ahmedabad precluding the Bank from attaching
their property at Surendra Nagar in Gujarat. The decree was passed ex-parte
with ICICI Bank?s counsel failing to be present to argue the case giving the defendant relief upto 01-07-2004
Economic Times.
02-06-2004
SBI to brew life into Bengal Tea Industry
The tea industry , starved of bank credit,
will soon get a breather, thanks to the decision of SBI to communicate the
recommendation by IBA on
restructuring tea loans to its operations in West Bengal. SBI Chairman
assured the local
Tea Industry that it could look forward to a greater co-operation from the
country?s leading bank in the matter, while addressing the members of Bharat
Chambers of Commerce.
The SBI chief said the bank had to set up Central Processing Cell at LHO for processing of loan proposals of Rs 2
crores and above. These units will be responsible for speedy decisions and
loans will be the sanctioned within a month. The bank has identified a few
major growth areas which includes retail credits which will be one of the
most effective drivers in future, agriculture and small medium
enterprises. In semi rural areas, SBI
plans to play a key role in extending loans for housing projects, and
Infrastructure projects will also attract attention. While other sectors
demonstrate enough growth potential , SBI Chairman said that bank will watch
developments in the SME sector for augmenting the loan portfolio.
Business
Line
Stringent Know Your Customer soon.
The Centre is considering a RBI proposal which entails
stringent norms for banks to source information from clients such as
Corporates. Political parties, Trusts, Associations and Funds. For existing
clients, one year time frame may be extended and salaried class may not be
subjected to such stringent norms. The suggestions made under Sec 35(A) of the
Banking Regulations Act are aimed at strengthening the KYC framework.
According to banking sources, RBI proposes to make the norms mandatory for
all banks across the board. As per the proposal , banks have to prescribe
their own framework to source client details and check their authenticity of
the data received.. Greater emphasis will be put on clients with overseas
operation and use funds for overseas operation.
Business Standard.
04-06-2004
Interest rates to remain soft
According to the new FM, interest rates will
continue to remain under soft
interest regime and inflation contained under 5% level. Fears of high fiscal deficit have and government
borrowings had hardened the yields in the bond market- a signal indicating north bound movement.
The perception was also influenced by higher inflation rate.
Economic
Times
IT exports grow 31% in 2003-04
The Indian software and services industry is
expected to cross the $ 20 BILLION marks in the current fiscal, with exports
likely to maintain the current growth
momentum of 30-32% over 16.3
billion according to the estimate of NASSCOM survey. The total revenues that software and services sector
, including that of the domestic market rose 28.2% exports registered 30.5% growth in 2003-04. According to the Chairman NASSCOM, this year had
been of remarkable achievement with
two IT majors ?WIPRO & INFOSYS
entering the billion dollar club
taking the figure to three
with TCS.
Business Standard
SBI to focus on retail ,global trade for 16% growth in
2004?05
India?s largest commercial bank ,SBI will
focus on four areas including retail banking to achieve a growth rate of 16%
during the current financial year. According to the Chairman, Bank is looking
for 16.5% growth in advances and 15% in deposits in 2004-05 for which
will be focusing on retail banking, project uptechs infrastructure and
international trade. The Chairman pointed out that that in project uptech,
bank is planning increased penetration in auto components, rice mills ,
brassware, agri pumpsets, fresh water aqua among others and actively
considering setting up of a strategic business unit for focusing on infrastructure projects. This apart, the bank would focus
on other core sectors for development
of economy like telecom, petroleum,
oil, gas, paper & paperboard, hotels et-al for increasing business.
The bank is also expecting to double the profit of $ 40 million in 2003-04
during current fiscal. The bank?s focus in international trade will be driven
by the principle of ?follow the Indians? i.e. trying to open branches in each
of the places where Indians are
living in large numbers. In retail, Bank is focusing in Contract
farming where big companies e.g. HLL re involved. Bank has registered a 57.7%
increase in Education loan
disbursement and Housing Loan disbursement by 40.3%. SBI?s Housing Loan
portfolio is currently the third largest in the country after ICICI Bank & HDFC. In Car loan
bank registered a 51.7% growth and is
the largest financier of Maruti Cars while financing under tie up
arrangements grew by 117% during the previous financial period.
Financial Express
05-06-2004
Banks must follow Basel II
RBI said on Friday that the Indian Banking
system has the capacity to migrate smoothly to Basel II norms. However, the
cost of compliance
to banks and supervisors could pose a
regulatory challenge , while introducing risk based supervision in 23 banks on a pilot basis. With
the gradual implementation of banking sector reforms over the past decade,
the Indian banking system has shown significant improvement on various
parameters, has become robust and showed ample resilience to shocks in the
economy. In its Annual Policy 2004-05 , RBI has asked banks to draw a roadmap
by end December 2004 for migration to Basel II and review the progress quarterly.
Economic Times
07-06-2004
Medium term bank deposits
still popular despite rate cuts.
An examination of the residual maturity of
deposits for 18 public sector banks reveals that about 42% of their deposits
are from this category. These 18 banks together accounted for deposits of Rs
7,40,264 crores
as of end March 2004. That was about half the deposits in the banking system
as on that date. The depositor preference for a medium term deposit has not
changed much over the past decade. Notably, the maturity pattern was stable
despite the decline in the interest rate during the period.
Business Line
08-06-2004
SBI rules out VRS for now
SBI is an organization ?in transition? and
will re-examine its staff strength only after ?two or three years?.
11-06-2004
IBA appeals to SC for Sarfaesi Act revision.
The IBA is likely to appeal to Supreme Court for a
revision to Sec-17 (2) of SARFAESI Act which the apex court had debarred
unconstitutional in April this year. The IBA may request the Court asking defaulters to submit a
pre-deposit of atleast 25% of the amount claimed by lenders before they file
an appeal with DRT. This it feels
could act as a ?deterrent? in erring
defaulters in case they wanted to appeal against attachment of asset by the
Respective banks. In another development, IBA has appealed against the
decision of RBI for reconsideration , its directive for declaration of
dividend subject to a three year consecutive track record of NPA lower than
3%, and a capital adequacy ratio of
11%.
PSU Bank?s profit up 37% to Rs 15,650 crores
State owned banks reported their highest ever collective
net profit of Rs 15,650 crores in 2003-04 , an increase of 36.6% over the
previous year. The State Bank Group , which includes the SBI plus seven
associates accounted for a collective Rs 5,619 crores which was 27% increase over the previous year?s net
profit. As a result of lower
growth, SBI group?s share of net
profit has fallen to 36% this
year from almost 39% last year.
Economic
Times
12-06-2004
Technology to help Banks add value to
products
Technology may help banks to add value to
their core products and develop a sustaining competitive advantage. Quality
human resource
is also important for technology to play its potential role in improving the
effectiveness of technology implementation , bankers feel. Various dimensions
of value addition to the core products through technology may be security of
transactions, convenience through multiple delivery channels, speed of
transaction processing and cost effectiveness. Cutting edge technology and
quality human resource are important for banks and once a bank has these
assets, right product and right process will follow.
Financial
Express.
PNB to focus on zero NPA target
PNB is working on a plan to bring down its NPA to zero percentage by the end
of this financial year. PNB currently has NPA coverage of 91% , and bank is aiming at recovery and active
monitoring on the loan portfolio to have a check on this figure.
13-06-2004
Bank
credit up Rs 308 Crores, Deposits up 3%
Bank credit rose by Rs 308 crores in the fortnight ended May 28th
to Rs 8,64,705 crores as compared to fall of Rs 683 crores in the fortnight
ended May 14th.Non-food credit of scheduled commercial banks fell
by
Rs 972 crores while food credit rose by Rs 1280 crores in the same period.
During the fortnight, Deposits rose by 3% , where demand deposits were down
by Rs 2413 crores, and term deposits rose by Rs 6972 crores. Bank?s
investment in G-Sec during the fortnight ended were higher by Rs 10,987
crores as compared to the negative investment of Rs 1628 crores in the preceeding
fortnight.
Financial Express
13-06-2004
SBI Life premium can be paid at SBI ATMs
SBI Life has launched a facility for payment
of premiums through SBI
ATMs for policy holders through any
of the 2000 SBI ATMs. This facility
is yet another demonstration of SBI Life? s intent to make it convenient
for the general public to acquire and
own life insurance protection.
Business Line
14-06-2004
SBI kicks off bad debt
drive via Circle level recovery cell
SBI has decided to go all out on a country wide bad debt recovery
drive by setting up a Circle level debt recovery cells in all 14 Circles.
The drive has been initiated with an aim to fulfill the Bank?s target of
bringing down the net NPA below 2% by March 2005. Initially bank
has decided to set up a centralized
recovery cell at the Corporate
Centre to monitor the process of NPA recovery throughout the
country, but later found the operating of the centralized cell difficult
in view of the vast branch net work and hence decided in favour of
distributed Circle level recovery cells. Each of these Circle level cells
are proposed to be headed by DGM ranking senior Officials with
targets for each Circle.
Financial Express
18-06-2004
Credit off take is improving in SBI
SBI finds a good credit pick up in corporate,
agricultural & services sectors and is much better than last year.
According to the Chairman, several
corporates are talking to them for modernization and upgradation projects and
the Bank is maintaining the projected growth rate of 16.5% .The bank had
experienced a 53% growth in infrastructure financing in the previous
year and expects a robust growth this
year too particularly in the power sector. In the Agricultural sector, the
bank has a target of disbursing Rs 2800 crores in FY ?05?. The major chunk of
the year?s credit growth is expected to come from Tractor Loan , as was the case last year. Additionally in SSI
sector, SBI has a target of disbursing Rs 1500 crores in FY 05.
SBI is the first Indian bank opening branch in Australia
SBI has opened a full fledged branch in Sydney, Australia, and Mr. Ashok
Khurana (CEO) said that the branch will aim to promote and facilitate greater
trade ties between India and Australia.
Business Line
SBI misses the deadline for core banking plan, defers it to 2005
The bank had earlier planned to network 400
branches under core banking solution by March 2004, but actually only 43
branches could be done. Indicating the deferment proposal , SBI Chairman said
the core
banking project was delayed since the software requires more fine tuning. As
against 3000 branches envisaged for networking, the bank has revised it to
2000 branches for networking under CBS by FY O5.
Implementing the core banking solution(CBS) will bring SBI at par with new
private sector banks and even the PSB?s like Union Bank of India, Canara
Bank, PNB have implemented their
first phase of CBS. Out of
SBI?s 43 branches under CBS, 40 are SBI branches, two from associate bank and
one foreign branch. According to the Chairman, SBI is going ahead with the
BPR programme. Also plans for overseas acquisition
of medium sized banks and will consider tie-ups with non core subsidiaries.
Business Standard
19-06-2004
RBI eases
rules on bank?s unsecured exposure
RBI have since liberalized the norms on
unsecured exposure of banks The move enables bank boards to set the limit on
such exposure themselves. Till now, banks were required to limit their
commitment by way of unsecured exposure in such a manner that 20% of a bank?s
outstanding unsecured guarantee plus the total of outstanding unsecured
advances should not exceed 15% of the
total outstanding advances. This issue follows the RBI annual monetory policy
statement, and the Banks had asked for flexibility in the rules because of an emerging trend of financing
borrowers based on their estimated cash flows rather than on collateral Banks
would also be required to make an additional provision of 10% i.e. a total of 20% of the total
outstanding advances in the substandard category to cover expected loss on
unsecured exposures. Provision @ 100% on doubtful and loss assets shall
continue.
Banks for inclusion of
customer data on national identity card
ATM Cards, Credit Cards may be a thing of the
past, if the Govt agrees to a proposal by banks to embed customer information
in the ?multi purpose national identity card? (MNIC) being tested currently. According to
experts, once the customer information is embedded in MNIC chip, there will
be no need to carry assorted cards that a customer now does. The pilot is
currently tested by Office of the Registrar General of India in 13 states
(J&K, Uttaranchal, MP, WB, Assam, Tripura, Tamil Nadu, Pondicherry,
Gujrat,Punjab, Goa, Rajasthan.) This card will finally replace Election
Identity card and will be free of cost issued. It will carry photograph of
the citizen, as well as his /her fingerprint and the smart chip will contain
personal information( health, driving license, family income etc)
Business Standard
25-06-2004
DRT upholds
Mardia suit against ICICI Bank
The DRT has upheld an appeal by Mardia
Chemicals Ltd against a recovery suit filed by ICICI Bank on the grounds that
the Board is
yet to complete its proceedings in
the matter. DRT Mumbai stayed
the proceedings in an order passed on 21-06-2004.Mardia Chemicals has filed a reference with the BIFR in May
2003
Housing cornered chunk
of bank credit in FY 2004
Gross bank credit to Housing increased 55.1%
in 2003-2004 compared with a
growth of 38.4% in 2002-03 on account
of tax incentive and declining interest rate. Housing loans accounted for
15.4% of incremental gross bank credit during FY 2003 compared to 9.2% for
the FY 2002. The disbursals were Rs 33,841 crores in FY 2004 as against Rs
14,746 crores in FY 2003.The report said that foreign banks in
comparison to PSB?s have placed increased thrust on consumer financing which enabled them to enjoy consistently
higher yields
and margin.
RBI revises the crop loan norms
RBI announced that the crop loan granted
for short duration will be treated as NPA if the instalments of principal and interest remains
overdue for two crop seasons. The
revised guidelines will be effective from Sept. 30th and is in
line with the recommendation in the annual policy statement.
Business Standard
25-06-2004
Contract
Farming gathers momentum
The Ministry of Agriculture has called for information on the extent
and nature
of corporate involvement in contract farming. A CII note
on the same shows that companies like
Escorts Krishi Sansar , Mahindra Shubhalav, Satnam Overseas & Tata Chemicals currently have anywhere
40,000 and 1,00,000 acres under
Contract Farming. The crops include durum wheat, basmati rice, potatoes,
soybean, mustard, coriander, pomegranates and grapes. The ministry is keen in
the project due to the viability of its mechanism and as a reform
initiative for improving a lot of farmers as also the prospect of
sustaining the 8% GDP.
Financial Express
26-06-2004
Hospitals Body for
treatment loans from Banks, FII?s
The Association of Hospitals in its
pre-budget memorandum to the finance ministry has urged that Banks and FI?s
Should be encouraged to provide loan facilities for urgent treatment. The
Association stated that many of the patients needed urgent life saving
treatment which would leave no scope for mustering funds to meet the expenditure. These loans should
also have tax exemption in the hands
of the recipients. as also the interest payable on it . Association also
represented that the various medical equipments and products that are used as
implants should be exempt from customs & excise duties for these
hospitals.
Banks to assign Capital charge for market risk.
RBI has asked Banks to assign explicit
capital charge for market risks on the lines of the Basel Committee
guidelines in a phased manner over a two year period. Market risk is the risk of losses in on balance sheet
and off-balance sheet positions
arising out of the market price movement. For the equities in the bank?s
book, an additional risk weight of
2.5% will be assigned to capture
market risk. Banks are required to maintain capital charge for market
risk on securities included in the
held-for-trading category, open-gold position limit, open-
forex position limit , trading
position in derivatives, and to also include derivatives entered into for
hedging trading book exposure by 31st
March 2005. With this, Bank?s overall minimum capital requirement will be the sum of capital requirement for
credit risk plus market risk in the trading book. The computation of capital
charge method for market risk will be according to the
standardized method and duration method (for market risk).
Financial
Express
Dena Bank look to outsiders to fill VRS
vacancies
Dena Bank has decided to turn to the markets
for recruitment of middle management executives of the level of DGM and GM .
With the constraints on compensation
the bank will target largely officials from public sector banks. The
move comes after an exit of large number of senior level executives
following VRS scheme introduced two
years ago.
Economic Times
29-06-2004
RBI panel soon
on SME Debt restructuring
RBI would shortly constitute a special
working group for debt restructuring of small and medium enterprises (SME?s)
in line with
the CDR for big companies. Experts group to be constituted will suggest
guidelines on the mechanism of debt restructuring for SME?s. It is observes
that CIBIL jointly promoted by RBI, SIDBI and IBA would play an important
role in this process. According to RBI, huge gross NPA?s of the SME?s is the main reason for poor credit flow to
the sector in the country. Delayed payment of receivables and technological
obsolescence also hindered credit
flow to the SME sector.
Business Line
30-06-2004
Banks jack up conversion
charges on housing loans
Observers find that Banks are quietly charging hiking conversion charges by
50 bps to 150 bps for changing the floating rate housing loans to fixed rate
interest. Besides there will be one time penalty of 1% -2%. Though the
conversion charges varies between the banks, it was observed by experts that PSB?s have decided to keep the
conversion rate in the 1% -2% band.
Banking sources opines the increasing rush for switching floating rates to
fixed rate as the reason behind. Suggest for taking long term view on their
20 year exposure instead of short term views as present phenomenon can come
3-4 times.
Economic
Times
30-06-2004
Employee productivity
growth slows down in PSU Banks
The growth in productivity of the 7,49,169
employees of the 27 PSB?s have slowed down in the FY 2004. The productivity
growth were 34.2% in FY 2004 compared
to 37.1% in FY 2003 and 67.8% in FY 2002. However the operating profit per
employee in PSB?s rose from Rs 3.93 lacs in FY 2003 to Rs 5.27 lacs in FY 2004. Vijaya Bank with 102% growth in
productivity per employee tops the chart
followed by Syndicate Bank and Allahabad Bank. The Business per employee of
the 27 PSB ?s witnessed a growth from Rs 215 lacs to Rs 248 lacs
where the toppers were in seriatim Oriental Bank of Commerce, Corporation
Bank, Union Bank of India and State Bank of Patiala.
30-06-2004
Govt explores Bonds
to tap black money
The Finance Ministry is exploring the option
of launching long tenure bearer bonds or infrastructure bonds to unearth
unaccounted money and use it to fund the development needs of the country.
According to Govt sources unlike the Voluntary Disclosure Scheme 1999, the
bearer bonds will not provide amnesty to tax evaders. While the revenue dept.
will not seek any details on the origin of funds being invested in bearer bonds,
it would be free to go after money launderers in the future.
Business
Standard
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