UNION BANK GETS NEW ED

Union Bank of India has a new Executive Director in Mr Suresh Kumar Jain. He assumed charge of his new assignment on Thursday. Mr Jain has come in the place of Mr S. C. Kalia, who has now superannuated.

Prior to his latest elevation, Mr Jain was working as General Manager with Bank of India. He had been with Bank of India for more than 33 years. Mr Jain has wide experience in both domestic as well as international banking. He had worked in the London and Hong Kong branches of Bank of India.

SOURCE: http://www.thehindubusinessline.com/industry-and-economy/banking/article2418828.ece

OVER 5,600 COMPANIES DEFAULTED ON LOANS FROM PSU BANKS

Over 5,600 companies have defaulted to the tune of about Rs 51,000 crore in loans taken from public sector banks as on September 30, 2010, Parliament was informed today.

According to the Reserve Bank data, as on September 30, 2010, there were 1,628 non-suit filed accounts, amounting to Rs 17,363 crore, Minister of State for Finance Namo Narain Meena said in a written reply to the Lok Sabha.

He said as per Credit Information Bureau (India) Ltd website, there were 4043 Suit filed accounts amounting to Rs 34,558 crore.

The minister said RBI maintains a list of non-suit filed borrowers of banks and financial institutions (FIs), while CIBIL had a database on suit-filed accounts of Rs 1 crore and above.

To improve the health of financial sector, to reduce the NPAs, to improve asset quality of banks and to create a good recovery climate, RBI and the banks have already taken various steps over the years, he said.

This inter-alia, include prescribing prudential norms for provisioning and classification of non-performing assets (NPAs), Meena said.

He added that guidelines for prevention of slippages, corporate debt restructuring and other restructuring schemes, one-time settlement schemes and enactment of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Act, 2002, are in place for smooth recovery of such loans.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/over-5600-companies-defaulted-on-loans-from-psu-banks/articleshow/9836968.cms

ICBC, TWO MORE FOREIGN LENDERS GET BANKING PERMISSION

Reserve Bank has given permission to Industrial and Commercial Bank of China (ICBC) to start operations in India in 2011, the Lok Sabha was informed on Friday.

Besides, two other banks Rabobank International (The Netherlands) and Woori Bank (South Korea) have also been given approval to expand their presence in India.

In the last calender year, eight foreign banks, including DBS Bank, Credit Suisse AG and Barclays Bank, were given approval by RBI to open branches or expand the existing ones.

As of now, 38 foreign banks are functioning in India through 321 branches.

This information was given by Minister of State for Finance Namo Narain Meena in the Lok Sabha in a written reply.

Replying to another query, the Minister said State Bank of India (SBI) proposes to open additional branches/offices in Bahrain, Bangladesh, China, Germany, Hong Kong, United Kingdom, South Africa and Sri Lanka.

"While giving approvals for opening offices, RBI/ Government of India desires that only banks, which have the capacity to survive in a competitive global market are allowed (to mark their) presence abroad," Meena added.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/icbc-two-more-foreign-lenders-get-banking-permission/articleshow/9837307.cms

SKS MICROFINANCE MAY APPROACH RBI FOR BANK LICENCE

SKS Microfinance, which is passing through rough weathers, may approach the Reserve Bank for a banking licence, according to sources.

"Finer details are being worked out and (SKS Microfinance) may approach the RBI for licence after the Board of Directors approval," a source said.

SKS Microfinance CEO and Managing Director M R Rao said the company does not see any major issue in meeting the eligibility criteria set by the Reserve Bank of India (RBI).

"Our net worth is Rs 1,563 crore and we are already meeting the capitalisation norm. The draft guidelines stipulate that 25 per cent of the branches should be located in rural/unbanked areas. Ninety per cent of our branches will qualify for the same," he said.

Rao said the composition of the board also meets the eligibility criteria with 50 per cent of the positions being held by independent directors.

He said the bank structure brings in a lot more stability by mitigating a few risks present in the micro finance business model.

"Most importantly, as a bank you have funding capability and access to low-cost funds which will help reduce interest rates for borrowers. Of course, the operating cost and compliance cost could increase," Rao told PTI.

The average cost of funds is currently at 12.75 per cent, the source said.

SKS which is passing through rough weathers after the introduction of Andra Pradesh government's Microfinance Act last year, has Rs 1,135 crore outstanding loan amount in the state, leading to severe pressure on company's financials.

The provisions in the Andhra Pradesh MFI Act have hampered its growth in the state, resulting in a five per cent reduction in the company's overall loan portfolio, SKS Microfinance Chairman Vikram Akula said in the annual report.

Analysts, however, feel that the RBI will have to check financial stability of the company before taking a desicion.

"The RBI will have to check financial stability of the company after the huge losses they declared in terms of write offs and provisions. In case they are granted licence, they will get funds 3-4 per cent cheaper," Vaibhav Agrawal, Banking head, Angel Broking said.

The RBI draft guidelines on new bank licences stipulate 25 per cent of the NBFC branches should be located in rural areas. Besides, the minimum capital requirement to set up a bank by a corporate is Rs 500 crore.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/sks-microfinance-may-approach-rbi-for-bank-licence/articleshow/9859521.cms

CORPORATES, INCLUDING THE TATAS, AMBANIS, MAHINDRAS, BIRLAS AND BAJAJ GROUP, RUSH TO ENSURE ELIGIBILITY FOR BANKING SPACE ENTRY

With the RBI proposing the entry of new players in the banking space, over a dozen entities, including those from the Tatas, Ambanis, Mahindras, Birlas and Bajaj Group, have begun firming up their candidature for the coveted few bank licences that could be on offer next year.

The groups interested in seeking a banking licence also include Religare, L&T, Srei Infrastructure and Shriram Capital, along with some public sector entities like PFC, REC and LIC Housing Finance.

While experts believe that clarity was required on the various proposals made by the Reserve Bank of India (RBI) in its draft guidelines, the interested parties have already started working on their readiness and adherence to the terms and conditions put forth by the central bank.

At the same time, almost all the interested parties will be writing to the RBI, suggesting changes relevant to their candidature, in response to the central bank's invitation for public comments on the draft guidelines till next month, a senior official at one such group said.

However, the final guidelines and the eventual award of banking licences were unlikely to come up at least till next year, as certain amendments were required to be ratified in the extant banking regulations by Parliament.

Many of these groups already claim to meet the guidelines proposed by the RBI, but there are still many areas that require further clarity, an official at another such group said.

Many of the interested companies have either already set up advisory panels for their possible banking foray, some are seeking outside support from third-party consultancy and advisory firms and some others are in the process of doing so.

Experts said the draft guidelines need clarity on some clauses, like how the RBI would define diversified ownership and corporate groups and about the chances of public sector companies to bag licences.

"The draft guidelines need clarity on some points like the listing aspect and its definition of corporate groups and public sector companies," consultancy firm Corporate Professionals' Managing Director, Pavan Kumar Vijay, said.

At the same time, investment banking major Morgan Stanley said the RBI guidelines were positive for non-banking financial companies (NBFCs) and housing finance companies and entities like Shriram Transport,LICHF and Reliance Capital could potentially look to convert themselves into banks.

Those who have been vocal about their banking ambitions include Anil Dhirubhai Ambani Group firm Reliance Capital, Religare, Bajaj Finserv, L&T Finance, Srei Infra and M&M Financial Services, while entities like Tata Capital and the Aditya Birla Group are also said to be keen on getting a licence.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/corporates-including-the-tatas-ambanis-mahindras-birlas-and-bajaj-group-rush-to-ensure-eligibility-for-banking-space-entry/articleshow/9860729.cms

HIGHER LOAN DEMAND MAY ERODE BANKS' CAPITAL BASE

An increase in capital requirements in India spurred by robust economic growth is likely to weigh on banks' capital adequacy, which has already started showing signs of erosion. A decline in the core capital base, though still well above the minimum requirement, may necessitate banks to raise equity funds in the long term. "The Capital to Risk (Weighted ) Asset Ratio (CRAR) based on Basel II was 13.86% as at end-June 2011... lower than 14.19% as at end-March 2011," the Reserve Bank of India said in a report.

The assessment is based on unaudited results of banks for the first quarter ended June. However, the central bank observed that the overall capital adequacy of banks is much higher than the minimum requirement. Banks' capital structure consists of Tier I and Tier II capital. Tier I is a measure of a bank's core capital, including equity capital and disclosed reserves, while Tier II is secondary bank capital that includes undisclosed reserves, general loss reserves and subordinated term debt.

The current capital norms require banks to maintain total capital adequacy ratio, comprising Tier I and Tier II, at 9% of risk weighted assets. "Apart from SBI, none of the PSBs (public sector banks) may need significant Tier I capital in the short term. Some of the fast growing, small private sector banks may need Tier I capital," according to a recent report by ratings agency Icra. Though banks have ample capital in their Tier I kitty as per the Basel II requirements, there could be a pressure on equity capital once Basel III norms, expected by April 2013, are in place. Basel III norms propose 8.5% Tier I capital against the current practice of 6% at public sector banks.

"Nine public sector banks have Tier I less than 8.5%, compliance with Basel III norms may dilute the return on equity," said the Icra report. "Going forward, the capital requirements including equity are likely to be substantial for supporting the high GDP growth and the fact that Credit to-GDP ratio, which is currently quite modest at about 55%, is bound to increase substantially on account of structural changes in the economy i.e., financial inclusion programme, increase in loan requirements from more credit intensive sectors such as manufacturing and infrastructure , etc," RBI deputy governor Anand Sinha said last week. Need to raise equity capital in the long term will put public sector banks at a disadvantage due to minimum 51% government holding norm.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/higher-loan-demand-may-erode-banks-capital-base/articleshow/9817458.cms

CORPORATES LIKE TATA GROUP, ANIL AMBANI'S RELIANCE CAPITAL GEAR UP FOR BANK LICENCE BATTLE

Indian corporate houses, eager to enter the banking sector, are gearing up to battle for the few licences that the country's central bank is likely to issue.

Analysts and industry players expect the Reserve Bank of India (RBI) to issue two to five new licences, meaning most of the more than 10 corporate groups that have expressed interest in setting up a bank may be disappointed.

India has not issued a new banking licence since 2004 and has said it will only issue a few new licenses. The central bank is looking to expand access to banking services in a country where more than half of families are outside the formal financial sector.

"Going by the history, I don't think the RBI will issue more than four or at most five licences this time. There will be a lot of filtering, it's going to be stringent," Pradeep Agarwal, analyst with Emkay Broking, said.

Corporate groups including the Tata group and billionaire Anil Ambani's Reliance Capital , which both operate non-banking finance companies (NBFCs), are among those interested in seeking banking licences in a country where lending is growing at about 20 percent a year.

Religare Enterprises , Bajaj Finserv , Aditya Birla group and Mahindra Finance , among others, are also keen to enter the segment.

Religare, controlled by billionaire brothers Malvinder and Shivinder Singh, said on Tuesday it has set up an advisory panel that would help it apply for a licence and is also open to partnership with global lenders.

The Reserve Bank of India's draft guidelines limit foreign shareholdings in start-up banks to 49 percent for the first five years and allow no single foreign owner to hold more than 5 percent. New licence-holders would also be required to list their banks on the stock market within two years.

"They only want serious players who seriously view this business and understand the economics of it over a long period of time," Religare Chief Executive Sachindra Nath told Reuters.

The RBI in its draft guidelines issued on Monday said that it will consider granting licences to private firms with successful track records of at least 10 years and with low exposure to the real estate, construction and broking businesses.

"From a long-term perspective one can grow through banks. Your customer base in a bank is much more diversified, you can sell much more products to your customers, and obviously your funding is easier," said Sam Ghosh, chief executive officer of Reliance Capital.

He said Reliance Capital meets the RBI guidelines and will need to set up a non-operating holding company to seek a licence.

Many firms planning to apply for banking licences already operate non-banking finance companies, which provide mostly small loans to consumers and businesses.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/corporates-like-tata-group-anil-ambanis-reliance-capital-gear-up-for-bank-licence-battle/articleshow/9798426.cms

LOAN SCAM: CBI FINDS INCRIMINATING DOCUMENTS DURING RAIDS

A CBI team has found incriminating documents during raids conducted at the residence and offices of three city-based builders and two former officials of State Bank of Mysore here in connection with a multi-crore loan scam.

The agency seized incriminating documents from the residence and offices of two partners in Prakhar Construction Builders and Developers here besides from M/s Tanushree Homes and Bank Manager as well as Assistant Manager, who were suspended following the scam during in 2006-2009.

Raids were carried out yesterday at Mysore, Bhopal and New Delhi, in connection with three cases registered by the central probe agency following a complaint against them, an official release said today.

According to the CBI, the officials entered into criminal conspiracy with the firms and sanctioned 42 housing loans to apparently ghost borrowers of builders M/s Prakhar Construction on the basis of false documents.

The whereabouts of borrowers is not known and no sale deed is available in respect of these 42 housing loans and the builder firm, causing a loss of Rs 4.47 crore to the bank.

The bank officials are accused of colluding with construction firms and sanctioning loans without verification causing a loss of more than Rs 12 crore.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/loan-scam-cbi-finds-incriminating-documents-during-raids/articleshow/9797489.cms

RAJYA SABHA PASSES SBI SUBSIDIARY AMENDMENT BILL

Rajya Sabha on Tuesday passed a bill which seeks to transfer powers to the Central Government from the Reserve Bank with regard to SBI subsidiary State Bank of Hyderabad with an amendment moved by a BJP member.

The transfer of powers to the Centre has been necessitated after the ownership of the SBI was transfered from the RBI to the Government.

The Bill was passed amid din even as the debate on it remained inconclusive. The Upper House saw repeated adjournments after noon following protests by BJP over appointment of Lokayukta by the Governor in Gujarat. The Government agreed to an amendment by Piyush Goyal (BJP), who detected a technical flaw in the Bill.

He had pointed out that the State Bank of India(Subsidiary Banks Laws) Amendment Bill, 2009, which was before the House, was not the same that was sent to the Standing Committee. As soon as the House reassembled, the BJP members continued their protest trooping into the well.

Even as they were shouting slogans against Gujarat Governor, Minister of State for Finance Namo Narain Meena moved the Bill for consideration of the House.

Before P J Kurien, who was in the Chair, adjourned the House for the day, he asked for a voice vote and approved the Bill.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/rajya-sabha-passes-sbi-subsidiary-amendment-bill/articleshow/9796682.cms

CENTRAL BANK OF INDIA OFFERS SPECIAL DEPOSIT SCHEME

Central Bank of India launched a special scheme offering to double depositors' money in seven-and-a-half years.

The scheme, christened 'Cent Double', will give an annualised yield of 13.33 per cent and is valid between September 1 and December 31, a statement issued here by the bank said.

For senior citizens, the annualised yield stands at a higher 14.93 per cent and the money will double in seven years and three months, it added.

For the metros and urban centres, a minimum deposit to be made under the scheme is Rs 10,000, while for semi-urban and rural centres it is Rs 5,000, it said, adding that the maximum sum which can be invested is less than Rs 1 crore.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/central-bank-of-india-offers-special-deposit-scheme/articleshow/9796259.cms