10TH BIENNIAL GENERAL BODY CONFERENCE OF CBOA HELD

Central Bank Officers’ Association, Karnataka conducted its 10^th Biennial General Body Conference on 28^th August at Hotel Due Drops, Bangalore. Sri N. Mohan Kumar and Sri E.R. Sarath Kumar were elected as President and General Secretary of the Association. While Sri P. Manjunath was elected as Treasurer, Sri T. Nagaraju as Dy. General Secretary and Regional Secretary, Bangalore apart from other Office Bearers and Managing Committee Members.

On behalf of Central Bank Officers’ Association, Andhra Pradesh, we wish the newly elected team a great success.

CENTRAL BANK OF INDIA LAUNCHES NEW DEPOSIT SCHEME” CENT DOUBLE

Central Bank of India on the eve of Centenary Celebrations launches a new deposit scheme “Cent Double” for the existing as well as prospective customers of the Bank. The scheme will be valid from 1st September 2011 till 31st December 2011. In this scheme the money is doubled in 71/2 years for general public and 71/4 years for Senior Citizens with a annualised yield of 13.33% and 14.93% respectively.

The minimum deposit of Rs. 10,000/- in Metro and Urban centres and Rs. 5000/- in Semi Urban and Rural centres and the maximum deposit is less than one crore.

SOURCE: https://www.centralbankofindia.co.in/upload/news/Press_Editors_Press_Release_cent_double.pdf

NEW GENERATION BANKS BUILD 14 PER CENT MARKET SHARE IN DEPOSITS & LOANS

Since RBI last licensed private banks over 10 years ago, new generation private lenders have built a market share of 14% in deposits and also loans, which is much higher than the combined share of close to 12% of foreign banks, old generation private banks and regional rural banks.

That is a reflection of the impact created by these banks, which forced state-run banks to shake off their slothful way of functioning and focus on customers and better service standards and product offerings. In 1993-94, RBI granted in-principle approvals for 10 entities to promote private banks.

They included two finance companies - 20th Century Finance and CRB Finance - the Times Group and Hindujas, financial sector professionals Ramesh Gelli; Darshanjit Singh and Harpreet Singh, besides the ones promoted by HDFC, erstwhile UTI and IDBI and later the development financial institution ICICI, which reverse merged with ICICI Bank.

Just before the licences were issued, CRB was caught in the centre of a scam and the in-principle approval was cancelled. Only five entities have survived since then - HDFC Bank, the UTI-promotedAxis Bank, IDBI Bank and the Hinduja-promotedIndusInd Bank.

During this period, Times Bank and Bank of Punjab were acquired by HDFC Bank while GTB, promoted by Ramesh Gelli, was acquired by Oriental Bank of Commerce.

Later in 2002, RBI licensed two more banks, Kotak Mahindra Bank and YES Bank, promoted by Rana Kapoor and others.

Over the past 15 years, new generation private banks have given government-run banks, which even now control 70% of the market in terms of deposits and advances, a run for their money by leveraging on technology.

Earlier in terms of product offerings and premium service, foreign banks were at the forefront. New generation private banks bridged that gap by providing efficient services at competitive rates, forcing foreign banks to change tack and PSU banks to embrace technology.

However, unlike last time, the challenge for new banks will be greater, given intense competition and focus on rural inclusion.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/new-generation-banks-build-14-per-cent-market-share-in-deposits-loans/articleshow/9790552.cms

CBOA-AP CIRCULAR NO. 18 DATED 01.08.2011

CBOA-AP issued its circular No. 018 dated 01.08.2011 on Countrywide Strike on 5^th August 2011. We are placing the same here for our readers.

CIRCULAR NO.: GS: 2011: 018                                          Date: 01.08.2011

TO ALL OFFICERS                                                              PLEASE CIRCULATE

Dear Friends,

We reproduce hereunder the Circular No. CIRCULAR/GS/2011/15 dated 25-07-2011 received from our Federation for your information.

With best regards                                                                      

Yours sincerely

Sd/-

(C.A. MALLIKARJUNA RAO)

GENERAL SECRETARY

………………………................................................................................

“PREPARATIONS FOR COUNTRYWIDE STRIKE ON 5^TH AUGUST 2011 ON WAR FOOTING- OUR FRIENDS ARE GETTING WARMED UP

MARCH ON COMRADES MARCH ON FOR THE GREAT STRUGGLE

We have been receiving reports from all over the country about the hectic preparations and the various activities that are being planned by our State Units and also the affiliates in co-ordination with the local co-ordination committees of the United Forum of Bank Unions. It is beginning of yet another bitter battle with the Government, who have been adopting various measures, that are against the interest of the country. The Government has failed to learn lessons from the past experience. The failure of economies of the Western World led by the US recession, for having blindly followed the so called globalization as well as the opening up of the economy, has not come handy to our policy makers in the country.

The financial sector is a sensitive one. We zealously guarded this industry in particular the Banking which is the custodian of the resources of the community, in particular the domestic savings reflecting their hard work and commitment to the cause of the economic prosperity of the country. The Government wants to place these huge resources at the disposal of the multi-nationals and also the industrial houses, knowing very well their objectives are to make super profits and not to use this resources for the emancipation of the common people of the country. It is in this background, the United Forum of Bank Unions have decided to independently fight against the moves of the Government to protect the ownership of the Banking Industry under the Government control. Several other issues which are equally important for the benefit of the common man and the initiative of the Government to divest the equity of the Public Sector with a view to raise the resources which could very well be raised through other means as well as the liberalization of the foreign direct investment etc., are fraught with grave risk to the economic progress of the country.

Friends, we were in the forefront ever since the Government initiated attack on the Public Sector Banks and its attempt to dilute its equity to hand it over to the Private Sector. We succeeded to a great extent to reduce the speed and impact which the Government wanted to create through its initiative to a considerable extent. However, the struggle has to continue as the Government is bent upon the implementation of its reforms in the financial sector. Hence, we should consolidate our strength and carry forward the struggle against the perpetrators of the globalization and other policies, which are inimical to the interest of the common man in our country.

The issues were already detailed in our earlier circular. We would give the details of the programme chalked out by the United Forum of Bank Unions to enable our State Units and Affiliates to go ahead with the plan of action:-

(i)            Holding of State-level UFBU meetings to discuss and implement further programmes.

(ii)           Deputation to the CMDs/MDs of all Banks by leaders of the UFBU constituent unions in each Bank and submitting the memorandum wherever this programme has not been undertaken so far. Joint demonstrations can be held on that day before the Central Offices of the Banks

(iii)          Meetings and Conventions to mobilize our members as well as to solicit support of other trade unions.

(iv)         Display of posters before all branches/offices.

(v)          Distribution of leaflets to all customers and general public about our demands.

(vi)         Letters from UFBU to all Central Trade Unions seeking their support and solidarity.

(vii)        Letters from UFBU to political parties seeking the support to our demands.

(viii)       Letters from UFBU to Members of Parliament requesting them to raise our issues in the Parliament during the session.

(ix)         Press meet/press release, etc between 25^th and 30^th July, 2011.

(x)          Lunch- time or evening time demonstrations in all branches/centres on 20-07-2011 and 01-08-2011.     

(xi)         Dharna in all State Capitals on 27-7-2011.

(xii)        Centralised Mass Rallies/processions in all cities and towns on 02-08-2011.

(xiii)       Demonstrations in all branches on 4-8-2011.

(xiv)       ALL INDIA BANK STRIKE: 5^TH AUGUST, 2011: Demonstrations and Rallies.

Apart from the common action programmes, we would also impress upon our affiliates to take initiative to organize the following activities to keep our rank and file fully equipped with the developments and to jump into action at short notice.

a)    To organize the State Units meeting and chalk out details for the implementation of the action programme in a meticulous manner;

b)    To draw up a plan of action for holding meetings/seminars/conferences at different parts of the State with particular reference to the District Head quarters etc., The senior leaders available locally should be requested to address these meetings;

c)    To plan demonstrations and rallies at major places

d)    To give wide publicity to the strike through Press Meet, Press release etc., and also the Posters Campaign as already conveyed by the United Forum of Bank Unions;

All the State Units are requested to forward to us, detailed report of the activities for the successful implementation of the programme.

Friends, let us move forward and convey our strong protest against the proposed moves of the Government and to defend the Public Sector Banks as well as the old Generation Private Sector Banks with full force at our command. We are confident that the entire rank and file would rally round the Confederation and make all our programmes a grand success.

                                                                       

OFFICERS’ COMMUNITY   ……     ZINDABAD

A.I.B.O.C.                               ……     ZINDABAD

A.I.C.B.O.F                             ……     ZINDABAD

C.B.O.A.                                 ……     ZINDABAD

JOINT DISCUSSIONS WITH OUR FEDERATION WERE HELD AT CENTRAL OFFICE ON 27^TH & 28^TH JULY 2011. VARIOUS ISSUES WERE DISCUSSED. DETAILED CIRCULAR FOLLOWS

CBOA-AP CIRCULAR NO. 17 DATED 19.07.2011 ON FITMENT FORMULA

CBOA-AP issued its circular No. 17 dated 19.07.2011 on fitment formula on promotion from Clerical Cadre to Officer Cadre Scale-I. We are placing the same here for our readers.

CIRCULAR NO.: GS: 2011: 017                                          Date: 19.07.2011

TO ALL OFFICERS                                                              PLEASE CIRCULATE

Dear Friends,

We reproduce hereunder the Circular No. CIRCULAR/GS/2011/14 dated 15-07-2011 received from our Federation for your information.

With best regards                                                                      

Yours sincerely

Sd/-

(C.A. MALLIKARJUNA RAO)

GENERAL SECRETARY

………………………..............................................................................

"FITMENT FORMULA ON PROMOTION FROM CLERICAL CADRE TO

OFFICER CADRE SCALE I

We are happy to inform you that after a long drawn negotiation, the Federation has finally settled the Fitment Formula on promotion from clerical to officer cadre Scale I, with the management. A circular No.CO/IRP/358 dated 17^th June 2011 has been issued by the management on this score.

28^th May 2011 is one more important day in the history of our Federation when for the first time settlement has been reached on Fitment Formula for promotees to Scale I. This achievement is the result of a long drawn struggle in and outside the Court for more than 20 years.

Our Federation had objected to the Fitment Formula that was signed as a settlement with the workmen organization (AICBEF – AIBEA) in 1991, after the conclusion of the bipartite settlement/ Wage Revision for employees/officers covering the period of 1987 to 1992. There was an anomaly of loss of one or two increments for some of the promotee officers in that formula. Our Federation had discussed this matter on a number of times at various levels, but the management did not take any initiative to redress the problems of the officers who would substantially lose throughout their career. The Federation was forced to seek the intervention of the Hon’ble High Court of Bombay in the matter. The Hon’ble High Court had granted an ad-interim stay on the operation of the new Fitment Formula signed between the management and the workmen union in 1991. Thereafter the Writ Petition was admitted and ad-interim injunction was confirmed. The management appealed before the Hon’ble High Court for removal of the injunction which was not considered by the Court.

In accordance with the stay order, the bank was advised to continue the Fitment Formula of 1986 for officers who were promoted even after 1991. The promotees between 1986 & 1991 had already been given fitment in accordance with 1986 formula. The petition was disposed off in 1995 by a Single Judge Bench in favour of the Federation after several hearings. As per the judgement, the bank was advised to discuss the Fitment Formula with AICBOF for arriving at a negotiated Formula and until such time to continue to apply the 1986 Formula.

The management appealed against this judgement before the Division Bench of Hon’ble High Court of Bombay. The workmen union AICBEF (affiliated to AIBEA) impleaded in the case. After a number of hearings held in the matter the appeal was disposed off in 2003. The bench upheld the judgement of the Single Judge bench and dismissed the appeals of the bank and the workmen union (AICBEF-AIBEA).

On 30^th January 2010 the first round of discussions was held for arriving at a Fitment Formula. Thereafter the discussions have been held on several occasions in May 2010, December 2010 etc. After protracted discussions, the Fitment Formula was signed on 28^th

May 2011.

During the period 1991 and 2011 there has been a number of changes in the salary structure of officers and employees. There were 4 Industry-Wise Wage Settlements for Officers and Employees covering the period 1996 – 1997, 1997-2002, 2002-2007 and 2007-2011. At the time of filing the petition in 1991 there were 3 stagnation increments available to the clerical staff which were thereafter increased in successive Wage Settlements to 4, 5, 6 and 7.  There were only 2 stagnation increments in Officer Grade Scale I which have now been increased to 4. The clerical staff promoted to officer cadre who were in the stagnation stage from 3 to 7 were given the same basic pay as of 2^nd stagnation increment. In effect there was no fitment at all for such clerical staff on promotion. Similarly those clerical staff who had passed CAIIB Part I and/or Part II during the stagnation stages were also deprived of CAIIB increment on promotion to officer cadre Scale I. The present settlement of the Fitment Formula provides for a proper fitment to all such clerical staff who have been promoted between 3^rd and 7^th stagnation stages as well who have passed the CAIIB (Part I and Part II) during the stagnation stages. 

After the last Bipartite Settlement/Wage Revision in 2010, IBA has also circulated a formula suggesting to the banks for fitment for promotees from clerical to officer cadre. However IBA has also advised the banks to arrive at a settlement with the concerned unions/Association.

The Fitment Formula now settled with the management is better than the IBA’s suggested formula.

There has been a long delay in the settlement of Fitment Formula, because the matter was in the Court and thereafter took a lot of time in negotiation. All the promotees to Scale I on or after 1^st January 2010 shall be fitted as per this formula. All officers who are/were in the services of the bank and who were affected due to fitment as aforesaid ( 4^th to 7th stagnation stages and CAIIB increment during stagnation) will now be provided relief/re-fitment but the arrears will be payable from 1^st January 2010.

We advise all officers who were affected by the fitment on promotion to Scale I to make application to the branch and the Regional Office immediately. The officers may also contact our Unit General Secretaries/Federation’s Office, should they require any further clarification.

This is yet another historical event in the saga of our Federation. This was possible because of the unstinted support and confidence of the officers in the Federation. Let us continue our efforts in achieving better benefits for the officers.”

OFFICERS’ COMMUNITY   ……     ZINDABAD

A.I.B.O.C.                               ……     ZINDABAD

A.I.C.B.O.F                             ……     ZINDABAD

C.B.O.A.                                 ……     ZINDABAD

CBOA-AP CIRCULAR NO. 16 DATED 11.07.2011

CBOA-AP issued its circular No. 16 dated 11.07.2011 on UFBU Strike. We are placing the same here for our readers.

CIRCULAR NO.: GS: 2011: 016                                       Date: 11.07.2011

TO ALL OFFICERS                                                PLEASE CIRCULATE

Dear Friends,

We reproduce hereunder the Circular No. CIRCULAR/GS/2011/13 dated 07-07-2011 received from our Federation for your information.

With best regards                                                                   

Yours sincerely

Sd/-

(C.A. MALLIKARJUNA RAO)

GENERAL SECRETARY

……………………….................................................

 “ TO SYNCHRONISE OUR STRIKE DURING PARLIAMENT SESSION UFBU DECIDES TO CHANGE THE STRIKE DATE FROM 7^TH JULY TO 5^TH AUGUST, 2011 -   RESPOND MASSIVELY

Pursuant to the clarion call given by UFBU and the unanimous Declaration adopted in our National Convention, bank employees and officers had been moving forward towards our All India Bank Strike on 7^th July, 2011.

There have been enthusiastic response to the programmes and mobilization is also in full swing.  In the meantime, we were expecting the Parliament Session to be convened in July so that our Strike will get echoed in the Parliament too.  But the Parliament Session has been convened from 1^st August, 2011.  In this background a meeting of the UFBU was held on 30^th June 2011 in Chennai wherein it was felt expedient to re-adjust our Strike date suitably with a view to synchronise it with the Parliament Session.  After discussion, it has been decided that our All India Bank Strike be postponed from 7^th July to 5^th August, 2011.

Further, upon representations from our Unions in RRBs, Co-operative Banks and Daily Deposit Collectors to include their demands to enable them to wholeheartedly participate in the programmes/ Strike action, it was decided to accede to their request.

Friends, all our unions and members would observe that after our Convention, the attacks are only being intensified. OECD Report has recommended wholesale banking sector reforms.  USA is also pressurising for banking reforms in India to be expedited.  Government’s thinking is not too different from these.  Hence, our unity and strike actions are important.

We have already informed the IBA, all Bank managements and the Chief Labour Commissioner, Government of India about the postponement of the strike.  

As decided in our UFBU meeting, we are adding the demand: “Settle the demands of employees/officers of Regional Rural Banks, Co-operative Banks and the Bank Daily Deposit Collectors.”  

The following preparatory programmes are given for implementation by all our Unions:

(i)             Holding of State-level UFBU meetings to discuss and implement further programmes.

(ii)    Memorandum signed by all employees and officers to be submitted to the Branch Manager/Incharge of the offices before 15-7-2011 (wherever this programme has already not been completed).

(iii)      Deputation to the CMDs/MDs of all Banks by leaders of the UFBU constituent unions in each Bank and submitting the memorandum wherever this programme has not been undertaken so far. Joint demonstrations can be held on that day before the Central Offices of the Banks.

(iv)         Meetings and Conventions to mobilize our members as well as to solicit   support of other trade unions

(v)           Display of posters before all branches/offices

(vi)          Distribution of leaflets to the customers and general public about our demands

(vii)        Letters from UFBU to all Central Trade Unions seeking their support and solidarity.

(viii)       Letters from UFBU to political parties seeking their support to our demands.

(ix)       Letters from UFBU to Members of Parliament requesting them to raise our issues in the Parliament during the session

(x)           Press meet/press release, etc between 25^th and 30^th July, 2011

(xi)        Lunch-time / evening time demonstrations in all branches/centres on 20-7-11 and 1-8-11.

(xii)        Dharna in all State Capitals on 27-7-2011

(xiii)      Centralised Mass Rallies/processions in all cities and towns on 2-8-2011.

(xiv)      Demonstrations in all branches on 4-8-2011

(xv)       ALL INDIA BANK STRIKE: 5^TH AUGUST, 2011: Demonstrations and Rallies.

LET US MAKE THE 5^TH AUGUST STRIKE A CLEAR WARNING SIGNAL TO THE GOVERNMENT.

MARCH ON TO 5^TH AUGUST, 2011 STRIKE.”

                                                                        

OFFICERS’ COMMUNITY ……    ZINDABAD

A.I.B.O.C.                              ……     ZINDABAD

A.I.C.B.O.F                            ……    ZINDABAD

C.B.O.A.                                ……    ZINDABAD

NO THREAT TO EXISTING PLAYERS

Listed Indian banks may not have too much to fear from the RBI's decision to allow new players into the banking space.

The RBI's draft guidelines for issue of new bank licences sets fairly high entry barriers and stringent criteria for new corporates or business groups seeking to foray into the banking space.

For one, new banks in the private sector tend to take considerable time to acquire scale, as rolling out a branch network and acquiring clients as well as luring retail deposits will be an uphill task with the market is already served by 41 listed banks, and many unlisted and cooperative banks.

Kotak Mahindra Bank and Yes Bank, the newest entrants, started off operations way back in 2003-04, but have so far managed to garner only 2 per cent share of total advances between them. In terms of branch network as well, the total network is close to 600 branches as against the formidable branch network of 13,577 for SBI.

In fact, the banking system has mopped up around Rs 21 lakh crore more business (deposits plus advances) in the last 18 months even as new bank licences were being mulled, making the task harder for new entrants. Further, a larger number of licences issued may create competition among the new banks before it impacts incumbent banks.

Two, the RBI wants the new entrants to start out with 25 per cent of their branches in un-banked areas. That may be a tall order as existing banks have to adhere to this norm only for their new branches. Adhering to these norms right from the start will entail higher operating expenses.

Three, while new entrants have the option of taking over old private sector banks, the M&A route to gain scale would require a lot of capital as old private banks (being perpetually regarded as acquisition candidates) have strengthened their books and seen valuations shoot up due to restructuring of operations. Such acquisitions are also subject to RBI approval.

The RBI's norms such as a minimum capital requirement of Rs 500 crore, a 12 per cent capital adequacy at the outset, immediate adherence to priority lending norms and requirements such as a 10-year track record and “diversified” holdings for new corporates entering this business, set the bar quite high for new players.

That the new banks have to list within two years is going to prove a tough task too for the new kids on the block, given the difficult market conditions and the large universe already listed banks.

Amid these requirements, NBFCs with a diversified retail business appear to have better chances of transitioning to banks, given their scale (loan book) and branch network in un-banked areas. If all assets are not applicable to be transferred to the bank, only a few assets can be transferred allowing a head start.

Bajaj Finserv and L&T Finance Holdings, which have non-operating holding company model, seem to be among the most well placed

SOURCE: http://www.thehindubusinessline.com/industry-and-economy/banking/article2409532.ece

FINANCIAL INCLUSION – THE CHALLENGES AHEAD

The RBI's thrust on financial inclusion while issuing the guidelines for new banking licences is welcome.

Many public sector banks (which started off as private banks 70-80 years ago) would not exist today but for the strong idealism and intuitive reaching out for financial inclusion on the part of their founders.

NOBLE HISTORY

The founder of Syndicate Bank, Dr T.M.A. Pai, for instance, was instrumental in taking banks to villages with his innovative schemes.

Dr N.K. Thingalaya, who served the bank as Chairman and Managing Director, says that the bank introduced pigmy deposit scheme in 1928 for collecting very small amounts of four annas (25 paise) from the doorsteps of the customers. This has been considered as one of the first steps in financial inclusion.

  

These days every bank claims to have completed ‘n' numbers of villages under the financial inclusion programme – although mere identification of villages and nominating business correspondents is not tantamount to complete inclusion of the village in the banking network.

It is a well known fact, oft repeated by Indian bankers, that around six lakh villages in the country still do not have banking facility. Nearly four years after the launching of financial inclusion programme in the country, we are still identifying and targeting villages to be included under this programme.

NBFCs are Aspirants

Having service points – either in the form of brick and mortar branches or in the form of business correspondents – is vital for the establishment of the banking network in rural areas. Many NBFCs serving in the areas of auto financing and gold loan are aspiring for the new banking licences.

Some of them have presence in semi-urban and some in rural areas but it will be a difficult task to extend their network in rural areas ‘organically'.

HR Challenges

The lack of trained manpower to work in un-banked areas could be a major challenge for new entrants. But the banking system itself can provide the solution – just tap the retiring public sector bank employees, in the next three years.

At the end of March 31 2010, public sector banks had 31 per cent of their branches in rural areas. If the new banks can hire these retiring employees, as any corporate does while hiring talent for its new business, it can solve that problem.

Tech Costs not a deterrent

These days PSBs and private banks depend on business correspondents and technology for taking banking operations to rural areas. The cost factor need not be a deterrent for taking financial inclusion forward, going by the example of Corporation Bank.

Mr B. Sambamurthy, conceptualised branchless banking in Corporation Bank during his tenure as CMD there, using technology in rural areas through handheld devices and banking correspondents.

CULTURAL FACTORS AND OTHER CHALLENGES

Some factors that need to be considered are business models suited to the requirements of the regions concerned. What works in the north may not work in south, or in the different parts in the same State.

If banks only look at the profitability of their products in rural areas, it may not help serve their purpose of financial inclusion in the immediate future.

If a BC can take steps to make the customer use two or three products of the bank and build his own micro enterprise, then financial inclusion will never be a charity or obligation for them.

A blend of technology, available human resource, and a reasonably large financial infrastructure in rural areas should come in handy for the new aspirants to take forward the cause of financial inclusion.

SOURCE: http://www.thehindubusinessline.com/industry-and-economy/banking/article2408902.ece

BANKS FIX MARCH DEADLINE TO COMPLETE FINANCIAL INCLUSION

Banks in Andhra Pradesh have set a target to wrap up coverage of financial inclusion plan across the State before March 2012.

Under the plan, all villages with a population of over 2,000 will be provided with banking services. So far, banks have completed implementation of the plan in 3,338 villages, against the target of 6,661 villages.

Andhra Bank has taken the lead in this regard with a total number of 1,060 villages allotted to it — it has, so far, covered about 400 villages.

The Indian Banks Association (IBA) has advised banks to cover villages with a population of below 2,000 also. At the national level, out of the total six lakh villages in the country, only about one lakh have been identified with population of over 2,000. The Reserve Bank of India has advised that banks should also make it a point to cover the surrounding villages with a population of over 2,000.

At a recent meeting of the sub-committee of the State Level Bankers Committee (SLBC), it was pointed out that reallocation of villages is still pending in some districts.

Latest statistics indicate that 14 districts in the State have declared 100 per cent financial inclusion through opening of No Frills account. These districts include Adilabad, Anantpur, Guntur, Bellore, Srikakulam and Vizianagaram. Another eight districts, including Visakhapatnam, Khammam and East Godavari have achieved financial including in the range of 80-95 per cent.

Under the RBI's model scheme for opening Financial Literacy and Credit Counselling Centres (FLCCs) by lead banks, the SLBC has informed that at present six FLCCs are functioning in the State, including four opened by Andhra Bank.

Meanwhile, the State Government is extending financial inclusion through implementation of the A.P. Smart Card project, which has created an electronic platform for the delivery of banking service even to far-flung villages. Out of the 22,767 gram panchayats in the State, enrolments have been completed in 22,087 and payments have commenced in 16, 424 panchayats. It has also taken an initiative to provide Unique Identification, Aadhaar, to every resident.

SOURCE: http://www.thehindubusinessline.com/industry-and-economy/banking/article2409423.ece

POWER, SME LOANS WEIGH DOWN STATE-RUN BANKS

High exposure to sectors such as power and small and medium enterprises, or SMEs, threatens to weigh down state-run lenders as slowing economic growth and a policy impasse hurt companies in these sectors.

Some of India's top state-run lenders have reported a rise in their outstanding restructured loans. Punjab National Bank, Canara Bank, Bank of Baroda and Bank of India have high-risk loan portfolios. Over the past few quarters, most public sector banks reported a rise in bad loans while their counterparts among private banks showed that their asset quality was relatively stable.

In the April-June 2011 quarter, provisions or funds set aside for bad loans by banks rose almost 100% for state-run banks at a time when private banks posted a decline of close to 30%.

The gross ratio of non-performing loans (NPLs), of all banks rose marginally to 2.52% at the end of June '11 compared with 2.35 % in March '11.

Power, textiles, real estate and SMEs are some of the sectors which are more vulnerable to a change in macroeconomic conditions.

A slowdown in the economy coupled with interest-rate tightening to cool inflation is already hurting companies in these segments. Of the total loans to the power sector, the share of public sector banks is 7.2%.

According to a report by UBS Investment Research, close to 40% of power exposure (which is 3.2% of the total loans) is expected to turn into NPLs, or restructured loans. Canara Bank, Corporation Bank and IOB have an exposure of more than 15% to this sector and could well take a big hit if the sector is impacted further.

SMEs comprise another sensitive sector which is expected to feel the heat with interest rates on the boil. Indian banks have an exposure of close to 17% to this segment.

Some of the banks such as State Bank of India are already under pressure due to bad loans given to the mid-corporate and small enterprises sectors over the past couple of quarters. The realty sector too has been hit but Indian banks appear to have been chastened after the experience of 2008.

Their exposure to the commercial real estate sector is a shade below 2%, thanks to a regulatory fiat, although ICICI, Axis, and Bank of Baroda appear to have raised their share of commercial real estate loans.

If some of the restructured loans turn to bad loans over the next year or so, lenders such as PNB and Bank of India could be impacted, considering that their restructured loan book is high. The slide in bank stocks reflects this risk of NPLs to some extent.

While valuations appear more reasonable now, given weakening macroeconomic conditions, investors may choose to be selective and buy stocks with the lowest asset quality risks. In this context, private banks may continue to trade at a premium due to relatively low-asset quality risk.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/power-sme-loans-weigh-down-state-run-banks/articleshow/9777444.cms

RBI CLOSER TO ALLOWING COMPANIES TO SET UP BANKS

The Indian central bank on Monday said it will allow private sector companies that do not have large exposure in the real estate, construction or broking sectors to apply for licences to set up banks.

India has not issued a new bank licence since 2004, and the government wants more banks in order to increase access to banking services in a country where more than half of the households are outside the formal banking system.

In its draft guidelines, the Reserve Bank of India (RBI) said companies with a successful track record of at least 10 years will be eligible to form banks.

However, companies with 10 percent or more of their income generated from real estate, construction or broking activities in the last three years will not be eligible to apply for new bank licences, the central bank said.

The RBI said it will be selective in issuing licences. Other rules include a minimum capital requirement of 5 billion rupees ($109 million) and a limit of foreign shareholdings in start-up banks of 49 percent for the first five years. The limit for existing private sector banks is 74 percent currently.

Shares in some non-bank finance companies, expected to seek banking licences, rose sharply following the release of the draft rules.

Bajaj Finance ended 15 percent higher, while Reliance Capital, IFCI, SREI Infrastructure, Shriram Transport Finance and Mahindra & Mahindra Financial Services ended 2.5 to 11 percent higher.

Corporate houses such as the Tata group, the Anil Dhirubhai Ambani Group, the Bajaj group and the Mahindra group, all of which operate non-bank finance companies, are among those expected to seek banking licences.

The central bank has proposed that new banks be set up under a wholly-owned holding company, which would be registered as a non-bank finance company with the RBI under which the bank as well as all the other financial companies in the group would be registered, the RBI said. 

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/rbi-closer-to-allowing-companies-to-set-up-banks/articleshow/9784462.cms

RBI'S NEW BANK LICENSING NORMS - CORPORATES WILL NEED A MINIMUM CAPITAL OF RS 500 CRORE TO OPEN A BANK

The Reserve Bank of India on Monday released on its website, the Draft Guidelines for "Licensing of New Banks in the Private Sector". The Reserve Bank has sought views/comments on the draft guidelines from banks, non-banking financial institutions, industrial houses, other institutions and the public at large by October 31, 2011.

Final guidelines will be issued and the process of inviting applications for setting up of new banks in the private sector will be initiated. After receiving feedback, comments and suggestions on the draft guidelines, and after certain vital amendments to Banking Regulation Act, 1949 are in place.

Key features of the draft guidelines are:

(i) Eligible promoters: Entities / groups in the private sector, owned and controlled by residents, with diversified ownership, sound credentials and integrity and having successful track record of at least 10 years will be eligible to promote banks. Entities / groups having significant (10 per cent or more) income or assets or both from real estate construction and / or broking activities individually or taken together in the last three years will not be eligible.

(ii) Corporate structure: New banks will be set up only through a wholly owned Non-Operative Holding Company (NOHC) to be registered with the Reserve Bank as a non-banking finance company (NBFC) which will hold the bank as well as all the other financial companies in the promoter group.

(iii) Minimum capital requirement: Minimum capital requirement will be Rs 500 crore. Subject to this, actual capital to be brought in will depend on the business plan of the promoters. NOHC shall hold minimum 40 per cent of the paid-up capital of the bank for a period of five years from the date of licensing of the bank. Shareholding by NOHC in excess of 40 per cent shall be brought down to 20 per cent within 10 years and to 15 per cent within 12 years from the date of licensing of the bank.

(iv) Foreign shareholding: The aggregate non-resident shareholding in the new bank shall not exceed 49 per cent for the first 5 years after which it will be as per the extant policy.

(v) Corporate governance: At least 50 per cent of the directors of the NOHC should be independent directors. The corporate structure should be such that it does not impede effective supervision of the bank and the NOHC on a consolidated basis by the Reserve Bank.

(vi) Business model: Should be realistic and viable and should address how the bank proposes to achieve financial inclusion.

(vii) Other conditions:

The exposure of bank to any entity in the promoter group shall not exceed 10 per cent and the aggregate exposure to all the entities in the group shall not exceed 20 per cent of the paid-up capital and reserves of the bank.

The bank shall get its shares listed on the stock exchanges within two years of licensing.

The bank shall open at least 25 per cent of its branches in unbanked rural centres (population upto 9,999 as per 2001 census)

Existing NBFCs, if considered eligible, may be permitted to either promote a new bank or convert themselves into banks.

(viii) In respect of promoter groups having 40 per cent or more assets/income from non-financial business, certain additional requirements have been stipulated.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/rbis-new-bank-licensing-norms-corporates-will-need-a-minimum-capital-of-rs-500-crore-to-open-a-bank/articleshow/9782698.cms