BANK OF INDIA RAISES DEPOSIT RATES BY 75-150 BPS

Bank of India has increased interest rates on big-ticket (wholesale and bulk) deposits by 75-150 basis points across various maturities, effective from Thursday. Interest rates on retail domestic term deposits have also been raised by 25-50 basis points. The maximum increase for large deposits, which cover denominations of Rs 1 crore and above, is in the 91-179 days and 270-364 days maturity buckets. While interest rates for the former were increased to 5 per cent against the earlier 3.5 per cent, the latter’s new rate is 6.5 per cent compared to 5 per cent earlier.

With the interest rates cycle having changed and Certificate of Deposits quoting above six per cent, the bank will review interest rates in April, after the Reserve Bank of India announces annual policy for 2010-11.

The deposit rates have earlier been raised on two accounts. First, there is a rush to garner resources before close of the financial year. Second, all banks look to retain deposits, which come up for renewal on maturity, at a time when consumer inflation is ruling in double digits.

High cost deposits, with rate of interest above 8 per cent and worth Rs 14,440 crore, are maturing in the fourth quarter ending this month. The bank estimated high cost deposits worth Rs 15,100 crore to mature over the next 12 months. Bulk deposits impact net interest margin while wholesale deposits impact liquidity.

Total deposits at the end of December 2009 were Rs 2,06,002 crore with share of low cost deposits (savings and current account) at 33 per cent. The cost of deposits was 5.26 per cent at end of December 2009, down 6.11 per cent from 2008.

Source: http://www.business-standard.com/india/news/boi-raises-deposit-rates-by-75-150-bps/388292/

SBI PLANNING 10-YEAR RETAIL BOND ISSUE NEXT FISCAL

State Bank of India plans to test the waters with a 10-year retail bond issue in the next financial year. To begin with, the bank will mop up between Rs 50 crore and Rs 100 crore through the bond issue, which will carry a market-related interest rate, said the SBI Chairman, Mr O. P. Bhatt.

Market watchers say that if the bank offers an attractive coupon rate, then the long-term (infrastructure) bonds could get a good response from retail investors. The Budget 2010-11 had proposed an additional deduction of Rs 20,000 on long-term infrastructure bonds for income-tax payers over and above Rs 1 lakh deduction allowed on saving instruments.

Resources raised via long-term retail bonds can, to an extent, help banks correct asset-liability mismatches arising from short-term liabilities financing long-term assets.

Source: http://www.thehindubusinessline.com/2010/03/11/stories/2010031151490600.htm

BANK CREDIT GROWS 15.79% YEAR-ON-YEAR

Bank credit seems to be inching towards the target of 16 per cent set by the Reserve Bank of India, going by the fortnightly position of the scheduled commercial banks. According to the latest data, bank credit as on February 26 increased by Rs 4,21,395 crore to Rs 30,98,323 crore, from Rs 26,67,928 crore last year. This is an increase of 15.79 per cent.

Compared to the previous fortnight ended February 12, bank credit increased by Rs 37,64,671 crore from Rs 30,51,676 crore. This is the third fortnight in a row that bank credit has increased. In the earlier fortnight, bank credit had increased by Rs 22,597 crore.

During the fortnight deposits also increased by Rs 63,487 crore to Rs 43,63,330 crore from Rs 42,98,843 crore. Investments decreased by Rs 14,896 crore to Rs 13,79,296 crore from Rs 13,94,192 crore.

Source: http://www.thehindubusinessline.com/2010/03/11/stories/2010031151530600.htm

ROSAIAH ASKS BANKS TO STEP UP LENDING TO MINORITIES, SHGs

The Andhra Pradesh Chief Minister, Mr K Rosaiah, has asked banks to step up lending to the minorities and self-help groups (SHGs). Speaking at the 169th meeting of State Level Bankers' Committee (SLBC), Mr Rosaiah expressed dissatisfaction that the priority sector targets set for the minorities was not met by the banks.


"While 15 per cent of the priority sector lending was supposed to be extended to the minorities before March 31, 2010, only 6.41 per cent was lent. By taking measures such as opening up branches in minorities-dominated areas, banks need to step up lending,” he said.


Observing that the year 2009 was “full of agonies” with drought and floods, the Chief Minister said the position regarding conversion/rescheduling of crop loans according to the Reserve Bank of India guidelines was not satisfactory. There were many field level problems, which were yet to be resolved by banks, he said. The lending as well as distribution of smart cards to SHGs needed to be increased, he added.



The State occupied number one position in the country in SHG-bank linkages programme with an outstanding loan amount of Rs 11,000 crore to about 10 lakh groups.

In the agricultural lending, banks' finance in the State had crossed Rs 62,000 crore. While the target was met in the khariff lending, the rabi crop loan lending was at Rs 5,178 crore against the target of Rs 9,400 crore.

Source: http://www.blonnet.com/2010/03/09/stories/2010030951541900.htm

EASIER LOAN ACCESS TO MICRO, SMALL SECTOR MOOTED

The micro and small enterprises sector will have easier access to credit if recommendations of the Working Group set by the Reserve Bank of India are implemented. The committee has recommended increasing the limit for collateral free loans to the MSE sector from Rs 5 lakh to Rs 10 lakh.

The guarantee fee for collateral free loans upto Rs 10 lakh to Micro Enterprises should be borne by the Credit Guarantee Fund Trust for Micro and Small Enterprices (CGTMSE), said the report. However, the CGTMSE should be allowed to adjust the guarantee fee both downwards and upwards based on the modelling of the dynamically evolving distribution of claims. This will ensure that the CGTMSE remains self-financing and self-sustaining in the long-term, said the report.

The CGTMSE may charge composite, all-in guarantee fee of 1 per cent and lower fees from women entrepreneurs, micro enterprises and units located in North-Eastern Region including Sikkim. The report has suggested exempting the CGTMSE from Income Tax on both guarantee fee and the income on investments, as it is a non-profit organisation.

With a view to simplifying the procedure for filing claims in respect of small loan accounts, initiation of legal proceedings as a pre-condition for invoking of guarantees should be waived for credit facilities up to Rs 50,000, said the report.

Source: http://www.blonnet.com/2010/03/07/stories/2010030752300300.htm

UCO BANK TIES UP WITH HYUNDAI MOTOR INDIA

UCO Bank has signed a pact with Hyundai Motor India Ltd for vehicle financing. This tie-up will give UCO bank a platform from where different products of the bank can be marketed to prospective buyers of Hyundai Motor India cars throughout the country. Thus the bank's retail portfolio as well as customer base can be increased. This has been revealed by Mr. S.K. Goel, chairman and managing director of the bank. In order to increase the competitiveness of the bank's car loan scheme, the product has been modified and interest rate lowered to make it more attractive in the market place.

Source: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/finance/UCO-Bank-ties-up-with-Hyundai-Motor-India/articleshow/5671574.cms

SBI GETS CHINA'S NOD TO DEAL IN YUAN

SBI has obtained permission from the Chinese government to lend in the local currency. It is set to become the first Indian bank to enter yuan business and start lending to Chinese companies in the local currency. SBI will begin yuan operations on March 15.

This is a breakthrough of sorts for the Indian financial sector because the Chinese government is extremely careful about choosing foreign banks that can be trusted to deal in the local currency. Indian companies borrow about 700 million yuan from Chinese banks for supporting their business in China. Most of this business will move to the SBI because they will be more comfortable with an Indian bank.

Besides it branch in Shanghai, SBI is planning to set up two more branches in Guangzhou in south China and in Tianjin, which is close to Beijing. It has a representative office in Tianjin. SBI has requested RBI for permission to upgrade the Tianjin office to a branch. Chinese authorities are expected to grant permission for the branch by the next year.

Source: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/SBI-gets-Chinas-nod-to-deal-in-yuan/articleshow/5670217.cms

BANKS WILL HAVE TO LEND RS.130K CRORE TO MEET TARGET

Banks will have to lend around Rs 130,314 crore in March to meet RBI’s targeted credit growth of 16% for 2009-10. This means that credit in March has to be more than double the Rs 60,000 crore they lent in February 2010.

While banks are still far from their target, there is a possibility that they may yet achieve it, considering that there is a last-month surge towards the end of the fiscal. For instance in March 2009, banks lent around Rs 100,000 crore. In March 2006, the end of a fiscal which saw highpaced credit growth, bank loans had grown by as much as Rs 140,000 crore.

The latest data released by RBI shows that in the second half of February , loans grew Rs 37,646 crore. Incrementally, loans have grown by 11.3% since April, leaving them only two fortnights to complete the year-end target of 16%.

Outstanding bank loans as on February 26 —the last working day of the month — stood at Rs 308,9322.9 crore. Both food and nonfood credit rose by Rs 3,364 crore and Rs 34,282 crore, respectively. At current levels, the annual YoY growth works out to 15.7% while loans have grown by around 11.3% since April. This means that banks have to lend around Rs 130,314 crore in March 10.

Source: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/Banks-will-have-to-lend-Rs-130k-cr-to-meet-target/articleshow/5670089.cms

SBI PREFERS RIGHTS ISSUE TO RAISE CAPITAL: BHATT

According to Mr. O.P. Bhatt, Chairman, State Bank of India, the bank would prefer a rights issue to raise funds for business growth rather than diluting government holding.

The government recently tabled the SBI Act Amendment Bill in the Lok Sabha with an aim to reduce state-holding in the bank to 51 per cent from around 59 per cent now. 

However, Bhatt indicated that the bank is unlikely to go for the rights issue immediately as it has enough capital and good liquidity position at the moment. SBI has a surplus liquidity of close to Rs 50,000 crore, against Rs 75,000 crore in December.

Source: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/SBI-prefers-rights-issue-to-raise-capital-Bhatt/articleshow/5667877.cms

RATING COS MAY UPGRADE GOVT. BANKS ON CAPITAL SUPPORT

Indian banks may be upgraded by international rating agencies, following the government’s decision to recapitalise public sector banks. An upgrade will make it easier for them to raise funds in international markets.

The decision by the government has been termed as credit positive by rating agency Moody’s, an euphemism for stating that their chances for a rating upgrade have improved.

In his Budget last week, Finance Minister Pranab Mukherjee said Rs 16,500 crore ($3.6 billion) will be used to ensure that public sector banks (PSBs) are able to attain minimum 8% tier-1 capital by March 2011. Moreover, an additional Rs 1,200 crore ($260 million) of new capital is currently being infused into PSBs; these are already close to their 51% minimum government-shareholding requirement.

By statute, PSBs’ government shareholding cannot fall below 51%, and there are no plans by Indian authorities to change this law. The funds to be infused into the Indian PSBs originate mainly from a $2 billion loan approved by the World Bank for this purpose. According to Moody’s, recapitalising some of these PSBs appears to be a one-way road for the government, given the banks’ need for fresh equity. Most rated PSBs have already diluted their government shareholding significantly by raising new capital through initial public offerings (IPOs) over the last few years.

State Bank of India chairman OP Bhatt indicated last week that it is hopeful of receiving Rs 10,000-20,000 crore in the form of rights from the government and had expected an announcement on it in this Budget. Other banks have asked for capital in the range of Rs 500-1,500 crore. Among them, Union Bank of India has asked for Rs 1,800 crore, Bank of Maharashtra and Syndicate Bank said they would require Rs 1,500 crore each over the next three years. Dena Bank has asked for Rs 1,200 crore.

Indian Overseas Bank and Oriental Bank of Commerce have sought Rs 1,000 crore each while Punjab & Sind Bank said they have requested a sum of Rs 500-700 crore. Andhra Bank has asked for Rs 1,150 crore. The government has yet not announced the allocation of capital to each bank.

Over the short-to-medium term, PSBs are likely to be adequately capitalised, thus providing them with financial flexibility to implement future growth plans in a relatively underbanked market. The capital infusion will also allow PSBs to meet any possible more stringent regulatory requirements.

Source: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/Rating-cos-may-upgrade-govt-banks-on-capital-support/articleshow/5660807.cms