:::::SRI S.B. RODE, OUR BELOVED PRESIDENT, AICBOF AND OFFICER DIRECTOR ON THE BOARD OF CENTRAL BANK OF INDIA HAS BEEN COOPTED AS GENERAL SECRETARY, AICBOF IN E.C. MTG. HELD AT MUMBAI ON 24.02.2014:::::MR. S.C. GUPTA, GEN. SECRETARY OF OUR AHMEDABAD UNIT HAS BEEN COOPTED AS PRESIDENT, AICBOF::::::WE CONGRATULATE THEM AND WISH THAT THE OFFICERS' MOVEMENT IN CENTRAL BANK OF INDIA WILL BE TAKEN TO NEW HEIGHTS:::::LONG LIVE CBOA:::::LONG LIVE AICBOF::::::LONG LIVE AIBOC:::::

BANKS HAVE TO GROW 5-FOLD TO MEET FUNDS NEEDS BY'15: MCKINSEY

Domestic banks will have to scale up their asset size five times over the next five years, if they want to cope with demand for capital from an economy that is clipping at near double-digits,says an industry report.

The report, prepared by McKinsey & Company, says the No 1 bank in the country (without naming State Bank) will have to scale up its asset size to USD 800-900 billion by 2015 from the current size of USD 200 billion (March 2009), while the No 10 will have grow to USD 90-100 billion by then.

The report further says the No 1 Chinese lender will have to grow its size to USD 4,000-4,500 billion by 2015, up USD 1,700 billion in 2009, while that of the No 10 lender will be USD 800-900 billion against the present USD 190 billion.

"A fast growing Asia will need USD 400-450 billion in capital by 2015, of which USD 380 billion will be for Chinese and Indian banks," the McKinsey report, titled Sustainable growth through inclusive institutional credit flow, said.

The report further says by 2014, the combined revenues of the domestic banks will be USD 73 billion, while that of China it will be USD 433 billion. But does not mean that foreign banks can have a quick run either in the country or in China, warns report. Because, the report says, "over 60 per cent of these revenue pool are subject to access restrictions that limit the traditional branch-based approach."

The report also says that by 2014, the five largest emerging Asian economies-China, India, Indonesia, Malaysia and Thailand-will alone account for 45 per cent of the banking assets and over 60 per cent of market capitalisation of all Asian banks, including those of the developed Asia -- Japan, Korea, Taiwan, Singapore Hong Kong and Australia.

SBI EYEING BANK ACQUISITION IN INDONESIA

To expand its operations in Southeast Asia, State Bank of India is on a look out for acquisition of a bank in Indonesia in cash deal not exceeding USD 100 million (about Rs 450 crore).

Indonesian market provides high growth potential and SBI has identified 2-3 banks for possible acquisition, a senior official of SBI said.

SBI currently has a subsidiary in Indonesia called PT Bank SBI Indonesia with a network of six branches. Last year, the name of PT Bank IndoMonex was changed to PT Bank SBI Indonesia.

Since increasing of branch network would take time, the official said, adding inorganic growth route is easier and quicker way of expansion.

As per the Indonesian law, an entity cannot run two banks simultaneously. The acquirer has takeover only those banks where owner or majority holders should completely exit of the acquired bank and the entity is merged.

The country largest bank, SBI, has 125 foreign offices spread across 23 countries including Singapore, USA, Canada and Mauritius at the end of March 2010.

For the second quarter ended September 2010, SBI net profit grew merely by 0.4 per cent to Rs 2,501.3 crore in the second quarter against Rs 2,490 crore in the year-ago period, owing to higher provisioning for bad assets.

UCO BANK SIGNS ON AS REGISTRAR FOR UNIQUE ID PROJECT

UCO Bank has signed a Memorandum of Understanding with the Unique Identification Authority of India (UIDAI).

The MoU was signed by Mr Ajai Kumar, Executive Director of the bank, with Mr Ashok Pal Singh, Deputy Director General of UIDAI, according to a press statement issued by the bank.

The MoU would enable the bank to act as one of the registrars for UID projects and leverage its existing infrastructure for implementation of UID projects.

The bank has already drawn its financial inclusion plan for providing banking services to around 9,800 unbanked villages in the country. The bank plans to do the enrolment for financial inclusion along with the enrolment on behalf of UIDAI, the release said.

RBI ASKS BANKS TO DISCLOSE LOAN PROCESSING CHARGES

The Reserve Bank of India has asked banks to disclose all charges involved in processing and sanction of loan applications in a transparent manner.

“Banks must disclose ‘all in cost' inclusive of all such charges involved in processing/sanction of loan application in a transparent manner to enable the customer to compare the rates/charges with other sources of finance,” the RBI said in a notification.

The information should also be displayed in the Web site of the banks for all categories of loan products, the central bank said.

The RBI has asked banks to disclose information such as fees payable for processing the loan application, the amount of fees refundable if loan amount is not sanctioned or disbursed, pre-payment options and charges and penalty for delayed repayments. In addition, banks have been asked to disclose the conversion charges for switching loan from fixed to floating rates or vice versa, existence of any interest reset clause and any other matter which affects the interest of the borrower. The RBI has asked banks to ensure that all such charges and fees are non-discriminatory.

PSU BANKS NOT AFRAID OF FURTHER OPENING OF SECTOR: PNB CHIEF

According to Mr. K.R. Kamath, Chairman and Managing Director, public sector lenders are not afraid of further opening of the banking sector.

While inaugurating the 5th National Conference organised by the Jaipuria Institute of Management (JIM) on changing role of the banking sector, Kamath said the public sector banks did well after the RBI in 1993 issued licences for opening of banks, currently known as new generation private sector banks.

As the Reserve Bank contemplates issuing more banking licences, he said, "PSU banks will further reform themselves to meet the growing aspirations of the customers who "want more (services) for less (charges)".

Entry of more players, Kamath added, "will enhance competition and will benefit the customers."

The RBI has already come out with a discussion paper, outlining various pros and cons for norms like minimum capital requirements for new banks and promoters contribution, caps on promoters shareholding and other shareholders, foreign shareholding.

Business houses and entities like Reliance Capital , IndiaBulls, Religare , IL&FS, IDFC, IFCI and Aditya Birla Financial Services are reported to be keen to enter the banking sector.

India presently has 27 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, 4 local area banks, 1721 urban cooperative banks, 31 state cooperative banks, and 371 district central co-operative banks.

Pointing out that banks have now become financial service providers, the PNB chief also raised the issue of dual regulation and conflict of interest which can become a problem in the days to come.

"While RBI regulates banking operations, IRDA (Insurance Regulatory and Development Authority) regulates insurance...such a duality could lead to conflict of interest and other major problems," Kamath said, pointing out that PNB itself was into banking as well as life and non-life insurance segments.

Besides PNB, there are several state-owned banks, which have entered the insurance sector.

Earlier, the government had to intervene in the turf war over regulation of Unit Linked Insurance Products (ULIPs) between IRDA and market regulator Securities and Exchange Board of India (SEBI).


IIFB COURSE FOR BANK STAFF

The Indian Institute of Banking and Finance (IIFB) has launched a course in customer services and standards for frontline bank employees . Speaking to ET, IIFB director DR Bhaskar said, “We brought this course in the face of deteriorating standards in banking services.

Banking Codes and Standards of India has laid down certain norms. Bankers will be introduced to how they can increase the efficiency of these services. There would be a half-yearly exam.” RBI deputy governor KC Chakrabarty, who also handles the customer service portfolio, said that banks should also put in place a system to measure the level of customer service to verify improvement after employees attend the course.

DIFFERENCE WITH RBI OVER BAD LOANS RESOLVED: BHATT

State Bank of India (SBI) has resolved differences with the central bank over classification of bad loans, according to bank’s chairman OP Bhatt. He said the bank has addressed the differences by increasing provisioning in some cases and, in other cases, convincing the Reserve Bank of India (RBI) that its provisions are adequate.

“The bank has 15 auditors on its panel and all of them have been appointed by the RBI. So, there is no case that the bank mis-stated its financial performance,” said Mr Bhatt, responding to media queries on RBI’s inspection report for March 2009, which said that SBI has not classified a substantial portion of its loan as bad loans, which in turn helped them show higher profit.

 “There have been some genuine interpretation differences. The issue has now been resolved. So, either they have accepted our argument or we have provided for the loan,” he added. The bank had set aside Rs7,076 crore in the first half of this fiscal year, up 91% over the corresponding quarter.

On retail bond issue, Mr Bhatt pointed out that the bank would like to tap the retail market with a bond issuance every quarter.

On the rights issue which the bank plans to launch by the end of this fiscal year, Mr Bhatt said that bank has received a verbal approval for the rights issue, although the bank has to yet receive a written approval. The government would need to invest close to Rs12,000 crore to retain its share in the bank.

He added that the government would either choose to invest in rights issue or keep its cash neutral. In the past rights issue, the government had issued Rs10,000-crore bonds and the bonds were subscribed by the bank, so that they there is no immediate pressure on fisc.

Meanwhile, he said that SBI is in advance stage of planning its maiden euro bond issue which will have a tenure of five years.

UNIQUE ID AUTHORITY PICKS VIJAYA BANK AS REGISTRAR

Vijaya Bank will now be a registrar for the UID project, and the bank signed a memorandum of understanding (MoU) with Unique Identification Authority of India (UIDAI), according to a press release issued by the bank. The UIDAI was set up by the Centre for issuing unique identity numbers.

With this, the bank has become a partner in the efforts of UIDAI, said Mr Albert Tauro, Chairman and Managing Director, Vijaya Bank, said in the release. The bank would now be able to make enrolments for the project. He added that the bank would set up a core team to oversee the implementation of UID project in the identified places and districts in co-ordination with other constituents, account holders, technology providers, BC Service Providers and other associates.

‘TEASER' HOME LOAN, STILL A PROFITABLE PRODUCT: SBI CHAIRMAN

According to Mr. O.P. Bhatt, Chariman, State Bank of India is still positive about the ‘teaser' home loan products despite the Reserve Bank of India's norms on additional provisioning for such products.

State Bank of India, in February 2009, had launched special home loan scheme where in the bank charged a fixed rate of 8.0 per cent for the first year. The scheme will end by December when the bank will take a call on whether to continue it further, said Mr Bhatt.

He added that the home loan scheme was a function of the huge liquidity the bank had in the previous financial year.

Despite the tightening of the of the liquidity situation, Mr Bhatt added, “The situation has changed but it has not changed so as to warrant the special home loan product to become an unprofitable or a risky product. It is very much a profitable product for State Bank.”

The RBI had asked banks to increase the standard asset provisioning for all teaser rate home loans to 2 per cent from 0.4 per cent previously. Teaser loans are loans where interest rates are comparatively lower in the first few years, after which they are reset at higher rates.

Mr Bhatt had earlier pointed out that the ‘special home loan' scheme was a good customer acquisition strategy for the bank. For SBI, all the incremental credit demand for housing loans was coming under the scheme, he said. The RBI norms are expected to push up the bank's cost of funds by 5-10 basis points.

Earlier this week, Housing Development Finance Corporation (HDFC) said that it will take a call on the continuation of its teaser loan scheme depending on whether other banks decide to continue with their fixed rate schemes. HDFC's fixed rate scheme ‘Dual Advantage 5' is open till November 30.

SUBSIDY-BASED LENDING MODEL IS UNSUSTAINABLE: GOKARN

Lending based on a subsidy model is unsustainable for banks and will not aid financial inclusion, according to the Reserve Bank of India Deputy Governor, Dr Subir Gokarn.

Lender needs to lend at a cost which is lower than the return generated to make it viable. A commercially unviable credit delivery system will not aid financial inclusion, he added.

Financial inclusion
Speaking on the need for financial inclusion, Dr Gokarn said that access to credit was just one aspect. There was a need to offer other financial products and improve access to financial markets, a point stressed upon by ICICI Bank and State Bank of India as well.

Outlets
“The mere presence of banking outlets does not mean financial inclusion has taken place,” said Dr Gokarn.

Ms Chanda Kochhar, Managing Director and Chief Executive Officer, ICICI Bank, said financial inclusion tends to be measured by whether micro-credit is reaching people.

But financial inclusion can be truly achieved if people are able to deposit that small amount of money. Products such as affordable insurance and micro-insurance need to be made available to the public, she said.

Lender must know how the money is utilised, and how much revenue is expected.

The loan should lead to a significant increase in the borrower earnings so that he can repay the loan, Dr Gokarn said.

Role of identity
He also stressed the role of ‘identity' to help borrowers move within national boundaries without worrying about identity proofs to meet the most basic KYC guidelines. The roll out of the unique identification system will make a huge contribution to financial inclusion, he said.

ROBUST INTEREST INCOME FAILS TO IMPACT PROFITS OF PUBLIC SECTOR BANKS IN Q2

An analysis of the September quarter results of 23 public sector banks reveals that the robust growth in net interest income (NII) has not boosted the bottom line to the expected level.

While these banks saw a 54 per cent year on year growth in NII, their net profits grew only by 16 per cent for the quarter. Bank of Maharashtra, State Bank of Mysore, Union Bank and UCO Bank witnessed a fall in net profits compared with the September 2009 quarter. Though not strictly comparable due to the merger of State Bank of Indore, SBI's net profits were flat.

Increased provisions
A closer look at the numbers reveals that fall in ‘other income' growth and increased provisions (inclusive of write-offs, mark to market losses and standard asset provisioning) seem to be the key reasons for the subdued performance.

For example, from about Rs 141 crore last year, UCO Bank's provisions moved up to Rs 580 crore in the September 2010 quarter. Its net profits fell by 43 per cent.

On the other hand, Bank of India's net profits grew by 91 per cent, its provisions being 13 per cent lower. Amount set aside for provisions for these 23 banks grew 112 per cent on a year-on-year basis.

Although other income growth in a few cases such as Bank of Baroda and SBI was supported by an increase in fee-based income, a steep fall in treasury income and negligible profits on sale of investments in many other cases ensured that, overall other income growth fell by 6 per cent.

Attributed predominantly to restructured assets and agricultural debt waiver, gross NPAs of public sector banks increased by 33 per cent over the same period last year.

While gross NPAs of State Bank of Mysore and Andhra Bank rose 114 per cent and 94 per cent respectively, Vijaya Bank was the only exception, with gross NPAs seeing a 12 per cent decline over the second quarter of 2009.

Net NPA ratio did go down to 1.06 from 1.16 last year for Canara Bank and from 1.46 to 1.32 for Vijaya Bank ; but, on an overall basis, despite higher provisioning, net NPA ratio stood at 1.14 this quarter ( about 1 in September 2009 ).

On the brighter side, the trend of strong growth in net interest income (NII) witnessed in the June quarter has continued. Net interest margins (NIM) also expanded for almost all these banks.
Thanks to re-pricing of loans and liability management, Central Bank of India witnessed a 134 per cent rise in NII while its NIM jumped to 3.14 from 1.81 a year ago. NII of IDBI Bank too showed a 152 per cent growth.

Like in the June quarter, the growth in loan book has supported NII this time too. For all the 23 banks put together, total advances grew by 22 per cent. Allahabad Bank (37 per cent) and Corporation bank (33 per cent) recorded the maximum growth.

This implies that the rise in NII and better margins was aided as much by improving advances as by lower cost of funds, shedding of high cost bulk deposits and rising lending rates. Interest earned went up by 17 per cent on an average while the year-on-year growth in interest expenses was 2 per cent.

ROBUST INTEREST INCOME FAILS TO IMPACT PROFITS OF PUBLIC SECTOR BANKS IN Q2

An analysis of the September quarter results of 23 public sector banks reveals that the robust growth in net interest income (NII) has not boosted the bottom line to the expected level.

While these banks saw a 54 per cent year on year growth in NII, their net profits grew only by 16 per cent for the quarter. Bank of Maharashtra, State Bank of Mysore, Union Bank and UCO Bank witnessed a fall in net profits compared with the September 2009 quarter. Though not strictly comparable due to the merger of State Bank of Indore, SBI's net profits were flat.

Increased provisions
A closer look at the numbers reveals that fall in ‘other income' growth and increased provisions (inclusive of write-offs, mark to market losses and standard asset provisioning) seem to be the key reasons for the subdued performance.

For example, from about Rs 141 crore last year, UCO Bank's provisions moved up to Rs 580 crore in the September 2010 quarter. Its net profits fell by 43 per cent.

On the other hand, Bank of India's net profits grew by 91 per cent, its provisions being 13 per cent lower. Amount set aside for provisions for these 23 banks grew 112 per cent on a year-on-year basis.

Although other income growth in a few cases such as Bank of Baroda and SBI was supported by an increase in fee-based income, a steep fall in treasury income and negligible profits on sale of investments in many other cases ensured that, overall other income growth fell by 6 per cent.

Attributed predominantly to restructured assets and agricultural debt waiver, gross NPAs of public sector banks increased by 33 per cent over the same period last year.

While gross NPAs of State Bank of Mysore and Andhra Bank rose 114 per cent and 94 per cent respectively, Vijaya Bank was the only exception, with gross NPAs seeing a 12 per cent decline over the second quarter of 2009.

Net NPA ratio did go down to 1.06 from 1.16 last year for Canara Bank and from 1.46 to 1.32 for Vijaya Bank ; but, on an overall basis, despite higher provisioning, net NPA ratio stood at 1.14 this quarter ( about 1 in September 2009 ).

On the brighter side, the trend of strong growth in net interest income (NII) witnessed in the June quarter has continued. Net interest margins (NIM) also expanded for almost all these banks.
Thanks to re-pricing of loans and liability management, Central Bank of India witnessed a 134 per cent rise in NII while its NIM jumped to 3.14 from 1.81 a year ago. NII of IDBI Bank too showed a 152 per cent growth.

Like in the June quarter, the growth in loan book has supported NII this time too. For all the 23 banks put together, total advances grew by 22 per cent. Allahabad Bank (37 per cent) and Corporation bank (33 per cent) recorded the maximum growth.

This implies that the rise in NII and better margins was aided as much by improving advances as by lower cost of funds, shedding of high cost bulk deposits and rising lending rates. Interest earned went up by 17 per cent on an average while the year-on-year growth in interest expenses was 2 per cent.

PUBLIC SECTOR BANKS LEAD THE PACK IN OPENING ATMS

Public sector banks are taking the lead in spreading the reach of ATMs in the country. Offsite ATMs of public sector banks grew by 70 per cent to 16,883 (9,898) in the 2009-10 fiscal, according to the RBI's Report on Trends and Progress.

The State Bank Group itself more than doubled its offsite ATMs to 9,836 in the 2009-10 fiscal against 4,193 in the previous fiscal.

The other nationalised banks increased their offsite ATMs to 7,047 sites against 5,705 in the previous fiscal, a growth of almost 24 per cent.

The increase in the reach and number of ATMs has also resulted in a growth in the number of cash withdrawals going out through ATMs. According to Mr P.A. Kalyan Sundar, General Manager IT, Bank of India, nearly 75 per cent of all cash withdrawals are made through ATMs.

The growth of ATMs from private sector banks, on the other hand, has been more muted.

From 8,324 offsite ATMs in 2008-09, the private sector has only added 1,520 sites to go up to 9,844 offsite ATMs in the 2009-10 fiscal, a growth of 18.2 per cent.

The total number of ATMs as of end-March 2010, by public sector banks grew by 49 per cent to 40,680 (27,277). The SBI Group nearly doubled its number of ATMs to 20,978 in 2009-10 against 11,339 in the previous fiscal.

The total number of ATMs by private sector banks grew by 20 per cent to 18,447 in 2009-10 against 15,320 in the previous fiscal.

The report stated, “Growth in ATMs, which had been generally on a steady rise in the recent years, was 37.8 per cent in 2009-10. More importantly, the growth in offsite ATMs too was comparably high at 44.6 per cent during the year. At end-March 2010, the percentage of offsite ATMs to total ATMs stood at 45.7 per cent for all scheduled commercial banks.”

PRANAB ASKS BANKS TO IMPROVE ASSET QUALITY

Expressing concern over the fall in profits of the country's banks in 2009-10, the Union Finance Minister, Mr Pranab Mukherjee asked them to improve asset quality in order to be able to support India's nine per cent growth in the coming years.

“The asset quality of banks has deteriorated and the coverage ratio of provisions showed a fall at the aggregate level reflecting a weakening cushion to meet NPA (non-performing assets) losses,” Mr Mukherjee said.

“India with growth trajectory heading towards nine per cent or more in the coming years is placed at a critical juncture.

“Banking sector needs to support this growth momentum in the economy while giving due attention to the asset quality and prudent provisioning to balance emerging returns and risks,” he said after releasing The Bankers' Beacon, a book on Union Bank's history written by journalist Mr M.V. Kamath.

Though the Indian banks have emerged from the global financial crisis in relatively good health, challenges still remain, the Minister cautioned.

He said India compares poorly with OECD as well as many of the Asian peer group countries on financial inclusion.

Though in the recent years there has been an with increase in the penetration of bank branches and ATMs in the country, performance in meeting agricultural and weaker sections sub-targets remains relatively weak, he pointed out.

According to the RBI, of the six lakh habitations in India only about 30,000 have commercial bank branches, Mr Mukherjee added.

“On an average there are less than three bank branches per 100 sq km of land area and this ratio is worse for rural areas and for the North-eastern region. In 2009, deposits mobilised in rural bank branches were merely nine per cent of total deposit mobilised by banks and the share of rural credit in total credit of banks was even lower at seven cent,” he said.

“The percentage of people having any kind of life insurance cover is just 10 per cent while the percentage of non-life insurance is merely 0.6 per cent,” he said.

He added that, “banks, therefore, need to step up efforts towards financial inclusion using the instrument of scale neutral technology as this would help in bringing the vast population into the ambit of formal finance and also boost future economic growth coupled with equity.”

BANK OF BARODA CHIEF SEES LIQUIDITY EASING UP SOON

Bank of Baroda and Central Bank of India expect to beat RBI's year-end projection of 20 per cent credit offtake for the industry. While Bank of Baroda is expecting a credit growth of 23-24 per cent in the current fiscal, Central Bank of India is expecting a credit growth of 22 per cent.

Mr M.D. Mallya, Chairman and Managing Director, Bank of Baroda, said the bank expects a deposit growth of 21-22 per cent by end-fiscal. However, he ruled out an immediate an immediate increase in deposit rates. On liquidity, Mr Mallya said the tightness in the system should ease soon.

Mr O.P. Bhatt, Chairman, State Bank of India, said the fluctuating liquidity levels have made it difficult for banks to plan ahead. “Off late liquidity has been yo—yoing. There is not enough comfort on liquidity, so businesses and banks can't plan for a long period”, he said.

Liquidity has been tight in the banking system for some time now. Banks have been borrowing more than Rs one lakh crore from the Reserve Bank of India prompting RBI to announce liquidity easing measures.

Mr S. Sridhar, Chairman and Managing Director of Central Bank of India, said the bank may review the base rate in December.

According to Mr Mallya, the credit offtake in the banking system may fall short of 20 per cent.

LIQUIDITY TO REMAIN TIGHT

Liquidity continued to remain tight in the system with banks collectively borrowing more than Rs 1,15,000 crore from the RBI under the liquidity adjustment facility. According to bankers, the demand for funds from banks at the beginning of a new fortnight is causing a liquidity crunch. In addition, demand for funds on account of Power Grid's Rs 7,500-crore follow-on offering is also exacerbating the liquidity deficit.O n Tuesday, call rates had ended at 7.10-7.15 per cent. Under the first liquidity adjustment facility conducted by the RBI, there were 41 bids for Rs 71,020 crore in the one-day repo auction. In the reverse repo auction, there were 2 bids for Rs 1,750 crore. In the second LAF, there were 37 bids for Rs 48,375 crore in the repo auction. In the reverse repo auction, there were 2 bids for Rs 100 crore. In the CBLO auction, there were 504 trades for Rs 31,317.85 crore in the range of 6.15-6.45 per cent.

BIG-SIZE BANKS NECESSARY TO MEET ECONOMY DEMAND: LENDERS

Two of the country's biggest lenders called for larger banks with scale and capital to meet the growing needs of the country, which is growing at a faster pace and is poised to attain double-digit economic expansion.

Stating that the balance sheet size of this (SBI) bank is at par only with the tenth largest lender in China, State Bank of India Chairman O P Bhatt said that in the next 5 years, there would be an addition of up to 500 million people to the middle class, which would demand huge support from banking and financial sector.

The public sector banks will have to play a pivotal role in helping the large middle class populace meet its aspirations, he said, expressing reservations if the state-owned institutions' had wherewithal to meet the demand.

Bhatt also expressed concerns if there was enough liquidity to fund the growth, saying the situation was not at "comfort" level.

ICICI Bank's Chief Executive and Managing Director Chanda Kochhar said Indian banking sector would have to grow at 25 per cent every year or 2.5 times over the next five years if our country were to sustain the 8-10 per cent per annum growth rate.

Agreeing with Bhatt, she said, the country needed to deepen the bond, debt and take-out financing markets so that banks could meet the funding requirements necessary for infrastructure development.

The Government has set a USD 1-trillion investment in the infrastructure sector in the twelfth five-year plan period and is on the way to set up a Rs 50,000-crore dedicated infrastructure fund.

Both Bhatt and Kochhar said achieving the financial inclusion objective would not be enough to fuel growth and help the vast majority of the poor jump out of poverty. They said financial conclusion would have to be complimented by holistic approach with attention in areas like education, health and vocational training.

Bhatt said in the next 5-7 years the banking and financial services industry would face a severe capacity crunch in terms of talent to serve the growing needs of the middle class.

INDIAN OVERSEAS BANK TO FLOAT SOFTWARE SUBSIDIARY

According tot Mr. M. Narendra, Chairman and Managing Director, Indian Overseas Bank (IOB) plans to float a banking software subsidiary to tap the Asian and African markets. The decision to float a software subsidiary was taken when another bank approached IOB for the banking software.

The banks's software team comprises of 240 people, 100 of whom were recruited last year.

Many banks are mulling spinning off their software divisions, experts say. State Bank of India had recently partnered tech company Tata Consultancy Services to develop software for the financial services sector.

BANKS CAN FREEZE AN ACCOUNT THAT'S UNUSED FOR TWO YEARS

How many accounts do you have and how many do you actually use? If you don’t withdraw money or carry out any transaction from your account through the bank’s ATM , branch or website, for a period of more than a year, the bank terms your account as inactive. If the account is kept unused for almost two years, it is classified as ‘dormant’. If your account is being classified as ‘inactive’, you cannot operate it through the ATM/phone or internet banking.

The reason is that bank systems do not identify inactive accounts. Different banks follow different criteria to define such accounts. For HDFC Bank, it’s out 12 months,ICICI Bank —15 months while foreign banks like Citibank, HSBC and Standard Chartered Bank classify an account as inoperative if no transactions have taken place for two years.

According to the IBA model policy on bank deposits, banks have the right to transfer such unused accounts to a separate dormant / inoperative account status. But the bank has to inform the depositor of all the relevant charges applicable on such dormant / inoperative accounts before they freeze their accounts. Most bigwigs such as SBI , HDFC Bank or ICICI Bank do not charge any penalty. Barclays Bank charges a penalty of `250 excluding service tax.

However, you can’t use the account or any banking service linked to the account. If the account has been ‘inactive’ for more than a year, you have to give a letter for activation of the account signed by each of the account holders. You are also required to submit a photo identity such as a passport, driving license, etc. for each account holder.

All account holders (including joint account holders) have to visit the bank in person. If you hold an account for some share dividends or for some investment reasons, ensure you carry out transactions once in while in such unused bank accounts. This saves you from the trouble of reactivating the account and the costs attached (if any).

Withdraw cash at a branch or an ATM, make a cheque payment, and transfer funds through either of the banking channels at least once a year. It will save you the effort of filling forms and visiting the branch to reactivate the account.

KOTAK MAHINDRA BANK UPS DEPOSIT RATES BY UP TO 0.25%

Kotak Mahindra Bank today hiked its deposit rates on several maturities by up to 0.25 per cent.

Deposits of two years and above up to and inclusive of 1,000 days, 1,002 days and above but less than three years, three years and above but less than five years and five years and above up to and inclusive of 10 years, will now bear an interest of 8 per cent, as against the earlier 7.80 per cent (up by 0.20 per cent).

Deposits of 271 days to less than one-year have also seen a hike in rate by 0.25 per cent, from seven per cent to 7.25 per cent.

The lender had hiked its base rate and BPLR (Benchmark Prime Lending Rate) by 0.25 per cent earlier to 7.75 per cent and 16.25 per cent, respectively.

For deposits of 390 days and 700 days, the bank has increased interest rate by 0.25 per cent each to 7.75 per cent and 8 per cent, respectively.

BANKS INCREASE EXPOSURE TO CAPITAL MARKETS

It takes robust technology, sound risk management capabilities and aggressive employees for banks to do business in the capital market segment, say market experts and this is corroborated in RBI's latest report on trends and progress in banking for 2009-10.

The report observed that bank credit to capital markets grew 22.1 per cent year on year to Rs 67,402 crore as of March 2010.

Private sector banks clocked the highest percentage increase of 46.8 per cent when it came to capital market lending. It is interesting to note that new generation private sector banks such HDFC, ICICI, Axis and the like grew this business by a huge 55.9 per cent while their old generation counterparts such as Karur Vysya, Lakshmi Vilas and City Union Bank reduced their exposure by 8.1 per cent. PSU banks and foreign banks increased their exposures to capital market by 12.7 and 8.1 per cent respectively.

Analysts say that new generation private sector banks do not have legacy issues to contend with.

Along with capital markets, real estate and commodities, all classified by the RBI as ‘sensitive sectors', constitute one fifth of the total bank credit (19.6 per cent in FY10), says the RBI data. Commercial banks' exposure to real estate went up 10.4 per cent to Rs 5,79,814 crore while exposure to commodities was marginally positive at 1.5 per cent to register Rs 911 crore.

ANAND SINHA MAY BE ELEVATED AS RBI DEPUTY GOVERNOR; USHA THORAT STEPS DOWN

Mr Anand Sinha, Executive Director, Reserve Bank of India, is likely to be elevated as the new Deputy Governor following Ms Usha Thorat, Deputy Governor, relinquishing charge of her office.

The portfolios (Legal Department, Department of Currency Management, Rural Planning & Credit Department, Urban Banks' Department, Department of Banking Operations, Department of Expenditure & Budgetary Control, Department of Banking Supervision, Premises and Central Security Cell) handled by Ms Thorat will be temporarily looked after by the Deputy Governor, Ms Shyamala Gopinath.

ALLAHABAD BANK TO RAISE RS 1,400 CR IN H2 FY11

According to Mr. J.P.Dua, Chairman and Managing Director, Allahabad Bank plans to raise up to Rs 1,400 crore in Tier-II during the second half of the current financial year 2010-11.

The bank has applied for the Reserve Bank of India's approval for three branches in Shanghai, Dhaka and a second branch at Kowloon in Hong Kong.

The bank will open 47 domestic bank branches during the fiscal.

The bank was targeting a total business of Rs 2,20,000 crore during the current fiscal, with a growth of around 25 per cent over 2009-10.

Meanwhile, the bank has decided to keep the base rate unchanged inspite of hike in key rates by 25 basis points recently.

SBI Q2 PROFITS FLAT ON HIGHER PROVISIONING FOR BAD LOANS

State Bank of India has reported flat profits for the quarter ended September 30 due to higher provisioning for non-performing assets and Rs 547 crore towards an increase in employees' wages.

The bank is also likely to go for another retail bond issue in January, of around Rs 1,000 crore, Mr S.S. Ranjan, CFO, SBI, said. It had raised a similar amount in October from a retail bond issue and expects to make similar issues every quarter.

"The loan loss provision of Rs 2,162 crore made in the quarter includes Rs 449 crore made in excess of the RBI's provisioning norms to enable the bank to reach a provision cover ratio of 62.78 per cent," it said in a statement. The Reserve Bank of India in October last year said it would require banks to increase the minimum provision ratio to 70 per cent from 10 per cent.

Consolidated net falls 22%
Its total income for the quarter rose 11.8 per cent to Rs 23,813 crore. SBI's total business grew 14 per cent to Rs 1,95,428 crore at the end of the September quarter.

On a consolidated basis, SBI reported a 22.2 per cent decline in consolidated net profit to Rs 2,437.1 crore for the second quarter. The consolidated total income, however, increased 14.6 per cent to Rs 37,925.4 crore. "The drop in consolidated profits is because of the Rs 854 crore loss posted by the State Bank of Indore, which was acquired in August this year," said officials.

Interest rates
On the bank's position on interest rates, Mr O.P. Bhatt, Chairman, SBI, said, "The liquidity is tight and we think the credit growth will pick up, which indicated an upward bias of interest rates in the short term."

SBI expects an 18-19 per cent credit growth for the year and a 14-15 per cent deposit growth.


FEWER COMPLAINTS AGAINST FOREIGN, NEW PRIVATE BANKS IN 2009-10

The share of complaints received by the banking ombudsman against foreign banks and new private sector banks, which had been on an uptrend in recent years, showed signs of slowing down in 2009-10.

Though the number of complaints against private banks was marginally higher at 22,553 (21,982 in 2008-09) their share in the total complaints has come down to 28 per cent from 32 per cent. The number of complaints against foreign banks fell to 11,450 from 11,700 (from 17 per cent to 14 per cent)

The decline in the share of complaints against foreign banks and new private sector can be attributed to a reduction in the card-related complaints, which was one of the main reasons for an increase in the past. Complaints against private sector banks and foreign sector banks fell to 4,725 (5,950) and 4,258 (5,737), respectively.

Among the private sector banks, ICICI Bank and HDFC Bank saw a fall in the number of credit card complaints.

However, complaints against public sector banks rose 26 per cent to 41,924 (33,141).

In 2009-10, SBI group alone accounted for little less than one-third of the total number of complaints received by SCBs, the RBI report on trends and progress in 2009-10 showed.

The number of complaints against SBI increased to 18,939 (15,306).

The total number of complaints received by the banking ombudsman rose by almost 15 per cent for the year 2009-10, according to the data released by the RBI.

The largest number of complaints was regarding credit, debit and ATM cards. The banking ombudsman received 18,810 complaints on this account, as against 17,648 in the year-ago period.

Though the largest number of complaints received was with respect to credit, debit and ATM cards, there was a decline in the share of such complaints in 2009-10. These complaints constituted only 24 per cent of the total number of complaints, as against 26 per cent in 2008-09. Complaints on account of core banking business of banks, particularly deposits and loans, also showed a fall during the year.

The Banking Ombudsman office received a total 79,266 complaints at its 15 offices in 2009-10, as against 69,117 complaints in 2008-09.

The three centres of Mumbai, New Delhi and Chennai accounted almost 44 per cent of the total complaints in 2009-10.