Indian Banks

The Reserve Bank of India (RBI) has imposed an Rs 25-lakh fine on Jaipur-based private sector lender Bank of Rajasthan (BoR) for violating regulations on five counts.

The central bank has faulted the bank on various grounds, including violating RBI directions on acquisition of immovable property, deletion of records in the bank’s IT system, non-adherence to know-your-customer (KYC) and anti-money laundering (AML) norms, irregularities in the conduct of accounts for certain corporate groups and the bank’s failure to provide certain documents to RBI and misrepresenting that these documents were not available.

The central bank had issued a show-cause notice to the bank. After reviewing replies, it came to the conclusion that the violations were substantial which warranted an imposition of penalty.

G Padmanabhan, the RBI-appointed chief executive of BoR, said the issues pertained to corporate governance concerns for the period 2004-07.

In view of these concerns, the central bank appointed a chief executive, placed two RBI officers along with two independent directors (as RBI nominee) on the bank’s board.

The bank has reviewed the business model of the bank and has decided to put special emphasis on the retail segment instead of the earlier emphasis on large-ticket loans.

The bank had a network of 466 branches which was not being leveraged, Padmanabhan said. After making amends to the business practices, the bank’s exposure to the real estate segment is now within norms.

On the recent Icra downgrade of its Tier-II bonds, he explained that it was partly due to not making provisions for wage revisions, as was the case with most other banks. “Now our liability has crystalised and we have to make provision for wage revision,” he said.

The rating agency has downgraded the bank’s Rs 220-crore Lower Tier-II Bonds from LA- to LBBB+. It also downgraded the LBBB+ rating assigned to the Rs 62-crore Upper Tier-II bonds to LBBB. The long-term ratings continue with a negative outlook.

The rating downgrades reflect deterioration in the quality of the lender’s advances portfolio, which reported a higher-than-expected restructuring, its relatively higher exposure to sensitive sector such as real estate and textile and low net profitability over the last few quarters.

With a provision of Rs 38 crore for non-performing assets, the private bank reported a net loss before tax of Rs 67 crore in the third quarter as against a profit of Rs 74 crore in the previous comparable quarter.

(BS)

Popularity: 15% [?]

The UK-based financial services giant, Royal Bank of Scotland group (RBS), reduced the size of its India asset book by more than a third in 2009.

The beleaguered bank, which is 84 per cent owned by the UK government, has reduced its risk assets in India from 5.56 billion pounds (Rs 39,328 crore) at the end of 2008 to 3.60 billion pounds (Rs 25,458 crore) in 2009.

The sharpest fall was seen in personal assets, which fell from 1.02 billion pounds to 547 million pounds as of December 31, 2009.

Corporate risk assets also fell from 2.58 billion pounds to 3.8 billion pounds at the end of 2009.

As part of its recast, the bank has divided its global businesses into a core group, which the bank plans to retain and the for-sale non-core division. In India, the global banking and markets (GBM) and global transaction services (GBS) divisions are part of the core group while consumer banking and commercial banking businesses are part of the non-core group.

RBS’ core assets in India totaled 2.89 billion pounds while non-core assets were 719 million pounds at the end of 2009. While profit figures for India operations were not revealed, the group reported a net loss of 3.6 billion pounds for 2009, a significant improvement over the 24 billion pounds loss reported in 2008.

The lender has been scouting for buyers for its retail and SME divisions in India, China and Malayasia. Till October last year, Standard Chartered Bank was the front-runner for the businesses but the talks fell through due to disagreements on valuations and lack of clarity on the fate of the branch licences. HSBC is now reported to be one of the contenders for the sale.

The bank recently completed the re-branding of its India operations to RBS from its earlier avatar as ABN Amro Bank. ABN Amro Bank’s profits for the fiscal year ended March 31 in India had dropped 93.09 per cent to Rs 19.39 crore.

The bank had written off debt worth Rs 962 crore in financial year 2009, an almost three-fold increase from previous year’s Rs360 crore. The lender’s consumer banking operations posted an operating loss of Rs230.77 crore at the end of March 2009.

(BS)

Popularity: 5% [?]

A five-member jury selects him for Axis Bank’s sterling performance in 2008-09.

P J Nayak, former chairman and CEO of Axis Bank, is the Business Standard Banker of the Year for 2009. Nayak was the unanimous choice of a five-member jury led by H N Sinor, former CEO of the Indian Banks’ Association.

Though it’s almost nine months now that Nayak has stepped down from Axis, the jury felt he richly deserved the award for the bank’s stupendous performance in 2008-09 when he was in charge. The jury also said one of the key factors for judging the success of a CEO should be how the organisation fared even after he left.

By the time he resigned, the retail assets of India’s third largest private bank accounted for 20 per cent of the total portfolio, while the share of current and savings account balances in total deposits had risen to over 43 per cent.

During his nine-year stint at Axis, the bank outperformed its peers by posting a 48.75 per cent compounded annual growth rate for net profit. Return on assets, too, improved significantly from 0.77 per cent in March 2000 to 1.44 per cent in March 2009.

Apart from Sinor, the other members of the jury were Aditya Birla Financial Services CEO Ajay Srinivasan, J P Morgan India Chief Economist Jahangir Aziz, Mahindra & Mahindra Chief Financial Officer Bharat Doshi and Tata Consultancy Services CFO S Mahalingam.

What is the key to the success of this bureaucrat-turned banker who holds a Master’s Degree in Economics and a Doctorate from Cambridge? Nayak himself provides the answer. In an interview with Business Standard, the details of which has been published in the Banking Annual being distributed with today’s edition, Nayak said, “Banking is not rocket science. You need customer-empathetic people with a commonsensical head on their shoulders”.

That’s the reason Nayak stuck to the basics of banking even when others were lending aggressively. He followed a system of scoring sheets to assess credit-worthiness instead of granting credit cards and personal loans in large numbers. The bank also stayed away from businesses such as two-wheeler loans and small-ticket personal loans, fearing defaults.

The Banking Annual also covers a round-table discussion involving the CEOs of seven leading banks on the topic: “Life after the Crisis”. The panelists were State Bank of India Chairman O P Bhatt, ICICI Bank MD & CEO Chanda Kochhar, Axis Bank MD & CEO Shikha Sharma, Union Bank of India Chairman M V Nair, HSBC India CEO Stuart Davis, Standard Chartered CEO Neeraj Swarup and Citibank India CEO Mark Robinson.

The consensus was that 2010 will be a challenging year when managing liquidity is going to be a big issue in a volatile market. But the opportunities are also limitless because this year is expected to see growth in investment as well as consumption.

(BS)

Popularity: 1% [?]

The country’s largest private sector lender, ICICI Bank, today raised deposit rates by 25-50 basis points (bps), a week after HDFC Bank raised rates for long-term maturities by 25-150 bps. The rate for the 390-day bracket went up from 6.5 to 6.75 per cent, and from 6.25 to 6.75 per cent for 590 days.

The revised rates are effective from today. The banks to have increased interest rates so far are J&K Bank and IDBI Bank apart from HDFC Bank. ICICI Bank and Union Bank had increased rates for one maturity each at the beginning of 2010.

A spokesperson of ICICI Bank said, “ICICI Bank monitors rates on a continuous basis and this revision for a few select fixed-deposit bracket is based on current market conditions.”

(BS)

Popularity: 13% [?]

Public sector banking industry in India continues to hire. Bank of Baroda (BoB) will recruit 3,500 people including officers during the current financial year (2009-10). This will include 2,000 clerks and 1,000 probationary officers.

The bank will also conduct campus hiring at institutes like IIMs and IITs. As many as 200 management students and engineers are planned to hired during the year. In addition to this, the bank will recruit 250 agriculture officers.

Vacancies : 1200 posts (UR-600, SC-183, ST-91, OBC-326) 36-posts are reserved for PWD.
Age Limit : 21 to 30 Years
Pay Scale : (JMG-I) Rs.10000-18240/-
Qualification : Degree in any discipline from a recognized University OR Any equivalent qualification recognized by Central Government. Should be computer literate (Proficient in MS-office, basic applications, internet usage.etc)

Important Dates :

Online Application Open From 15.03.2010 To 10.04.2010
Written Test : 30.05.2010
Payment of fees at BOB Branches From 15.03.2010 To 10.04.2010

Application Fee :

* For SC/ST/PWD candidates : Rs. 50/- (towards postage charges only)
* For all others : Rs.300/- (including postage charges of Rs.50/-)

Click here For more Details

Popularity: 24% [?]

Andhra Pradesh Grameena Vikas Bank

Head Office : Warangal

Recruitment of Office Assistants – 2010

Important Points to remember before making online applications:

a) Please read the Recruitment Notification carefully before making online application. The candidates can click on the following Link to access the Notification document. A print out also can be taken, if they wish.

Notification for recruitment of Office Assistants – 2010

b) The applications are accepted online only. Manual applications i.e., applications printed on white sheet are not allowed / accepted. A link is given below, which, when clicked, will direct the candidate to IBPS website for filling up the online application electronically.

c) Before accessing the online application, the candidates should be ready with the following: (This is a repetition of what is given in notification, for ready reference by the candidates.

a. Payment of applicable fees:

i. Candidates presently residing in our area of operation i.e., the districts of Srikakulam, Vizianagaram, Visakhapatnam, Khammam, Nalgonda, Mahabubnagar, Sangareddy and Warangal, should pay the fees in any of the Branches of Andhra Pradesh Grameena Vikas Bank (APGVB).

ii. Candidates from all other places can pay the fees in any State Bank of India Branches.

iii. There are separate challan forms for payment in APGVB Branches and SBI Branches, which the candidates should download and take printout by clicking on the respective links given below:

In challan forms, the Branch code and name have to be filled up. List of APGVB Branch with codes are given in the Link. In respect of SBI, candidates have to find out the code from the branches, where candidates wish to make payment.

APGVB Challan APGVB Branch Codes SBI Challan

b. The payment of applicable fees should be made before attempting to fill the online application electronically.

c. Candidates are also advised to keep the following information ready before accessing the online application, so as to complete submission of online application within the stipulated period of not exceeding five minutes:

i. The candidate’s copy of the Paid Challan which contains Journal number etc.

ii. Email address of the candidate

iii. Basic details of the candidate

iv. Examination Centre and its code

v. Details of educational qualifications.

d. The notification document contains all details including “How to apply”.

Click here to Apply Online

Click here for FAQ

Andhra Pradesh Grameena Vikas Bank

2-5-8/1, Near Ambedkar Statue, Ramnagar, Hanamkonda – 506 001, Warangal Dist, A.P

Popularity: 24% [?]

The country’s largest lender, State Bank of India (SBI), is looking to acquire a significant stake in Tata Motors Finance (TMFL), the vehicle financing arm of Tata Motors, the largest automobile company in the country.

“Our investment committee would like the bank to take part in the deal and invest some amount (in Tata Motors Finance),” said SBI Chairman OP Bhatt at the sidelines of a seminar without deliberating on the size of the deal.

The bank, however, will not be the majority shareholder. “It will not be small, it will be significant, but not a majority stake,” Bhatt said.

In 2008, SBI had acquired a 91 per cent stake in Global Trade Finance (GTFL), a factoring services company. The promoters of GTFL were Export-Import Bank of India, International Finance Corporation, Washington, and Malta-based FIM Bank.

The deal would enable SBI to gain presence in the commercial vehicle segment, Bhatt said. TMFL, on the other hand, will have access to cheaper money.

“We see a lot of synergy for us. Synergy in terms of business… the commercial vehicle segment, the bus and trucks businesses,” he said. After receiving clearance from its board, the bank will approach the Reserve Bank of India for approval.

The lender, which controls around 15 per cent of the auto loan market, has bcome aggressive in the segment in the last few years. In 2009, in order to make auto loans more attractive, SBI launched a scheme at an interest rate of 8 per cent for the first year. As on December 31, the bank’s auto loan disbursements grew by 46.35 per cent on year to Rs 13,012 crore. TMFL, though experiencing improvement in margins, has witnessed its market share decline, which the company attributed to “active competition from domestic banks.” During the first nine months of the current financial year, TMFL disbursed loans worth Rs 4,446 crore, which is lower by 18 per cent over the same period of the previous year.

(BS)

Popularity: 49% [?]

State Bank of India (SBI) may go for a rights issue in the next financial and will start discussions with the government after the presentation of the Union Budget.

Talking to reporters at the sidelines of a seminar, Chairman OP Bhatt said, “We need some equity and we need it in the next financial year. Our rights issue can be successful, if the government subscribes to it.” Bhatt expects the government to give some indications regarding capital infusion in public sector banks in the Budget.

“There may be some announcements on whether the government wants to give money for bank capitalisation. Based on that, we will start discussions with the government after the Budget,” Bhatt said. The lender seeks to raise Rs 10,000-20,000 crore from the rights issue. Bhatt also said the bank needed to raise around Rs 40,000 crore in the next five years in addition to Tier-II capital and retained earnings.

Popularity: 45% [?]

Credit card issuers are no longer in the midst of a recession and are wooing new customers with eye-popping offers: Save up to 25 per cent on room tariffs at 71 hotel chains across the country with a Citi card; enjoy a 15 per cent discount on SpiceJet online bookings with an HDFC Bank credit card; get a 10 per cent cash-back on your food and entertainment bills anywhere in the country with a Kotak Mahindra Bank card.

However, they are also culling inactive cards and reducing limits for spenders. As a result, nearly 7.5 million cards, or a quarter of the country’s peak credit card base, were removed from circulation in the last 15 months, according to the Reserve Bank of India (RBI( data.

Cash-back offers, where a percentage of the amount spent is deducted from the customer’s credit card bill, seem to be the flavour of the season. Most basic and medium-level credit cards today come with such offers. Late entrants, including Kotak Mahindra Bank, have made it a policy to offer cash-backs instead of reward points.

“Cash-back offers are popular with medium segment card customers, since the users can clearly see the benefits the cards offer. In reward points, a lot of customers keep accumulating them without putting them to use,” said a senior executive at Kotak Mahindra Bank.

At the head of the pack is private sector lender HDFC Bank, which is issuing about 100,000 cards a month, and claims that it accounts for 60 per cent of the new cards issued.

Some bankers feel the recent barrage of offers is because issuers are targeting the same pool of customers with a proven track record of good behaviour. “I wouldn’t say the industry has become bullish yet on new acquisitions. Most of these offers are targeted at keeping existing customers happy in the face of increased competition,” said a senior executive at a medium-sized private sector bank.

One surprising feature of the recent ramp-up in issuances is that a large number of new cards are free for life. Bankers have complained that cards without annual fees are not viable, and some such as SBI Cards have made it a policy not to issue such cards. However, this has not reduced the issuance of free cards. In fact, some banks such as HDFC Bank have gone in the opposite direction and waived the minimum use requirement on free-for-life cards. Others such as Standard Chartered Bank are offering free-for-life Platinum credit cards.

“Once customers become used to a free-for-life credit card, it is not easy to bring back fees. Fees only work for high-end cards, which come with a host of value-added services, but these cards are a very small percentage of the total base and account for an even smaller percentage of revenues,” said Pralay Mondal, country head, retail assets & credit cards, HDFC Bank.

The credit card market continues to attract new players, although the experience of some recent entrants such as Barclays and Axis Bank has been far from positive. Private sector lender IndusInd Bank is contemplating an entry into the credit card business in the next financial year.

“A lot of mistakes were made in the past, but there will be a time when banks become bullish on this segment again. Banks have improved their customer screening processes, and with the advent of Credit Information Bureau (India), they now have more information on potential customers,” said SV Parthasarthy, head of consumer finance at IndusInd Bank.

(BS)

Popularity: 1% [?]

A village adoption scheme was introduced by the banks in 1960s in India with a view to enhancing their visibility besides encouraging agri-lending in a cost-effective manner.

With the passage of time, the scheme faded away. And now, the State Bank of India (SBI), India’s largest bank, has taken a new initiative under its corporate social responsibility programme to revive the scheme, rechristening it as “SBI Ka Apna Goan”.

For this purpose, the SBI has launched efforts in Uttarakhand and other states to adopt villages with the active support of village panchayats.

The main purpose of the scheme is to achieve 100 percent financial inclusion for all BPL families. The scheme would also seek to promote self-help groups (SHPs), farm clubs with the participation of NGOs and other development agencies. The scheme would also focus on credit requirements of all eligible rural households and link community services with SBI banking services.

The SBI has already started identifying villages in this regard. A detail survey has been launched. The bank’s staff members would act as bridge between the villages and the SBI.

In Uttarakhand, the SBI would work in tandem with the state government which has also launched a similar “Atal Adarsh Gram Yojna” in all 670 nayay panchayats. One village in each nayay panchayat will be identified. Under this scheme, the thrust will be on development of social and infrastructure facilities in rural areas to remove regional imbalances.

“In our last meeting with the government, we have been given the task to provide banking facilities in all these villages by the state government,” said an SBI official. The SBI has also convened a meeting at Haldwani this week to give impetus to the scheme.

(BS)

Popularity: 48% [?]

The government is finalising appointment of at least nine public sector bank chiefs and a dozen executive directors who would replace them or fill existing vacancies.

RM Malla is set to move as IDBI Bank chairman and managing director (CMD) from Small Industries Development Bank of India. Malla will replace Yogesh Agarwal, who is expected to take over as the head of the pension regulatory agency.

Sources said Syndicate Bank CMD Basant Seth and Union Bank of India Executive Director S Raman were in the fray to replace AC Mahajan at Canara Bank.

In case Seth moves to Canara Bank, Raman will replace him at Syndicate Bank.

R Ramachandran, who is executive director at Syndicate Bank, is expected to move to Andhra Bank as CMD.

Central Bank of India Executive Director Arun Kaul is set to take over as UCO Bank CMD, once the post falls vacant in June.

Kaul’s colleague at Central Bank Ramnath Pradeep is tipped to take over as Corporation Bank chief.

Anup Sankar Bhattacharya may take over as the new Bank of Maharashtra CMD. He is at present executive director at Chennai-headquartered Indian Bank.

Further, Nagesh Pydah, Punjab National Bank’s executive director, is likely to be appointed as CMD of Oriental Bank of Commerce when the vacancy arises at the year-end.

In addition, HSU Kamath is expected to move from Canara Bank to Vijaya Bank.

Sources said the government was in the process of finalising candidates for Indian Overseas Bank, but a replacement for GS Vedi, who retires as CMD of Punjab & Sind Bank later this year, has not been finalised yet.

In addition, they said, a list of at least a dozen executive directors had also been finalised. Apart from Seth and Malla, who are already chairmen, other bank chiefs were appointed after a round of interviews conducted last week. Sources close to the appointment process said shortlisted candidates would be given the option soon.

(BS)

Popularity: 2% [?]

Large companies may be tempted to borrow abroad to cut their borrowing costs, which could go up once banks come up with new base rates by April, say finance managers.

A fully-hedged overseas loan could be cheaper by 200 basis points than a rupee loan. But, not many banks are willing to lend large sums of money, say $1 billion, as the loan syndication market is yet to pick up.

Last week, the Reserve Bank of India asked banks to create a ‘base rate’, which will replace the prime lending rate (PLR), the benchmark used till now by banks. The base rate will be the new floor price, and will be computed on a cost-plus basis by each bank.

Large companies, who have been borrowing at sub-PLR rates, won’t be able to do so any more, as the base rate will be the new floor price. As a result, borrowing costs could go up marginally for large companies, though they may still get the best rates.

CFOs like Ravi Sud of Hero Honda say large companies may be tempted to borrow abroad to cut costs. Subba Rao, CFO, GMR Group, said borrowing overseas could be cheaper for many companies, but there could be other constraints. ‘‘Assuming ECB (external commercial borrowing) constraints are taken care, currency hedging costs, depending on the tenure, will have to factored in to work out the overall cost. If a company decides not to hedge currency exposure, which has attendant risks, ECBs will be cheaper,’’ he said.

Indeed, ECBs could be cheaper even if companies cover their interest and currency risks, which they would like to cover as Libor is likely to move up. Libor is the London Inter-Bank Offered Rate, a benchmark for borrowing in overseas markets. If you add a spread of 200 basis points to Libor (0.5 per cent), it adds to 2.5 per cent (RBI had said companies could pay a maximum spread of two per cent on Libor for an ECB of up to three-year tenure, and 5 per cent on loans of more than three years).

Companies would like to convert the floating loan to a fixed rate through an interest rate swap, which could cost 2.8-3 per cent for a five-year loan. Similarly, companies would like to cover currency risks by taking a principal-only swap, which would cover the dollar-rupee movement for the life of the loan. This cover would cost another 2.5-3 per cent.

Even after covering the interest risk and currency risks, a five-year ECB would cost a company 8.5-9 per cent as against five-year rupee loans available at 10-11 per cent, said Subramanian Sharma, director, Greenback Forex Services. But, there’s a problem. There are not many foreign banks willing to lend today. ‘‘Money is not available in large amounts (say $1 billion). Foreign banks are still trying to reduce their balance-sheets, and are not in the market to lend,’’ said Seshagiri Rao, CFO, JSW Steel.

It is possible for companies to raise smaller amounts of $50-100 million (Rs 250-500 crore), which provides a window for small and mid-sized companies who don’t have large requirements of funds. Besides other ECB constraints, companies may find it difficult to borrow loans of less than five-year tenure.

There’s still window available at home. The RBI circular on base rate does not cover commercial paper, and companies say if they raise money through commercial paper, banks can still invest in these, below the base rate. They would hope the central bank doesn’t issue a clarification to close this window.

Bankers say the base rate is a new concept but it will be competitive. ‘‘With excess liquidity, the rates had reached absurdly low, where some mutual funds were lending with no spreads or at the same rate at which RBI lends. That phase is over. Over time, the system will adjust itself to stay competitive,’’ said the head of a private bank.

He cites the example of home loans, for instance, where the credit spreads are the same as those on borrowings by AAA-rated companies. ‘‘The financial system will adjust to a low-risk premium,’’ he said. Bankers are not unduly worried about companies rushing to raise money abroad. They point to the recent fund-raising by Tata Motors, where it refinanced nearly $2 billion overseas debt with onshore debt.

Prabal Banerji, CFO, Hinduja Group, feels borrowing abroad would be difficult for, say, infrastructure companies where capital requirement is for the long term because no overseas lender will agree to lend for such a tenure. And, even if they agree, the cost will be so prohibitive that they will breach RBI’s caps on spreads over Libor.

(BS)

Popularity: 2% [?]