Indian Banks

Showing signs of tight liquidity at the end of the financial year, banks turned net borrowers at the Reserve Bank of India’s (RBI’s) liquidity adjustment facility (LAF) on Monday.

For the first time in the current financial year (2009-10), the amount borrowed from the RBI repo window exceeded the amount banks parked at the reverse repo window. While one bank borrowed Rs 900 crore for a day, four banks placed a demand for Rs 445 crore, RBI said in a statement.

Bankers said the strain on resources was due to temporary mismatch in the system and did not reflect shortage of funds. The average amount parked with RBI on a daily basis has been declining significantly since the beginning of the month. The market expects pressure on resources in the remaining two days of the financial year.

“Liquidity has been shrinking and credit growth has been good. Disbursements have picked up significantly, which is why liquidity has shrunk,” said the head of treasury with a Mumbai-based large public sector bank.

According to data released by RBI, scheduled commercial banks, including regional rural banks, recorded 16.04 per cent credit growth at the end of March 12 on a year-on-year basis. This is above RBI’s projection of 16 per cent credit growth in this financial year.

Meanwhile, the central bank said it would conduct additional repo and reverse repo operations under LAF on March 30 and 31 to meet the year-end liquidity requirements.

The inter-bank overnight market did not show signs of pressure, as call rates remained in range of 2.75-4.65 per cent. Total volume in the call segment was Rs 11,607 crore. It was Rs 22,356 crore in the repo segment and Rs 51,460 crore in the collateralised borrowing and lending segment, according to Clearing Corporation of India data.

Pointing to immediate concerns, a dealer with an associate banking unit of State Bank of India said some banks were keeping ready cash to manage till April 5, which would be the first full working day of the new financial year (2010-11).

Banks have begun unwinding large investments in mutual fund (MF) schemes, especially liquid funds, to avoid higher capital charge at the end of the financial year. Their outstanding investment in MFs stood at Rs 108,516 crore as on February 26.

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Popularity: 11% [?]

Taking ahead the process of consolidating associate banks, State Bank of India (SBI) has decided to issue 34 of its shares for every 100 shares of State Bank of Indore to its minority shareholders. This is the second such consolidation within the group after State Bank of Saurashtra was merged with the country’s largest lender in August 2008.

The central board of SBI on March 26 approved a proposal to issue 1.16 lakh shares (of Rs 10 each) to minority shareholders of the Indore-based associate bank, SBI informed the Bombay Stock Exchange. The acquisition is subject to the approval of the government of India.

Last week, SBI Chairman O P Bhatt indicated that the merger could happen in the first quarter of the next financial year (2010-11).

Following the merger, SBI’s issued capital would rise to Rs 635.08 crore from Rs 634.97 crore. State Bank of Indore posted a net profit of Rs 37.84 crore for three months ended December 2009, down from Rs 70.46 crore a year ago. Its total income declined to Rs 752.05 crore from Rs 803.66 crore a year ago.

After the merger, SBI would be left with five associate banks — State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad. State banks of Bikaner and Jaipur, Mysore and Travancore are listed entities.

Meanwhile, SBI said its two new businesses — general insurance and custodial services — have started operations. For general insurance, it has formed a joint venture with Insurance Australia Group (IAG). The business would be written within a limited geographical area with a few commercial products. The subsidiary would commence full-scale operations later during the year, SBI said. For custodial services, it has teamed up with French financial group Societe Generale. The company expects to do business of approximately $10 billion in its first year itself.

Popularity: 11% [?]

Any further hike in policy rates by the Reserve Bank of India(RBI) is expected to dampen the demand for the residential real estate segment due to the rising cost of home loans.

RBI recently hiked the repo and reverse repo rates by 25 basis points to check the spiraling inflation in the country. Any further rate hike is also expected as the RBI has hinted to do so in order to suck excess liquidity from the market.

However, the only silver lining for the real estate players is that banks are yet to raise home loan rates despite the hike in policy rates.

“In the post-hike scenario, we don’t see any kind of impact on demand for residential houses as banks are yet to raise rates. However, any further hike in policy rates is expected to put pressure on demand as banks will follow suit,” J C Sharma, managing director of Shobha Developers said.

He also said that as long as home loan rates stayed within single digit, the present demand would persist.

Presently, home loan rates are hovering in the range of 8-9 per cent with schemes of teaser loans floated by some banks.

“There is a clear indication by RBI of tightening rates and rolling back of stimulus package. However, it is yet to be seen how the policy rate hike is transformed into a rise in home loan rates,” H S Upendra Kamath, executive director, Canara Bank said.

He also said that though there would be some kind of a hike in housing loan rates, that would not be abrupt to destabilise the demand scenario.

In addition to home loan rates, policy rate hike will fuel higher lending rate by banks. So, real estate players with higher cost of funds are expected to pass this cost to the consumers, which in turn may see price rise in this segment.

As per a CRISIL report, residential market is expected to turn positive this year owing to improvement in affordability, steady economic growth and greater liquidity.

A research report of Fitch also notes that fundamentals of Indian real estate sector is improving as seen by better liquidity and improved demand in the residential segment. However, concerns of moderately adverse policies still remain as economic conditions become more stabilised, the report says.

“Demand from residential segment remains robust as of now and any rate hike will work as a deterrent for this sector. However, demand will not be substantially impacted,” Shailesh Kanani, an analyst of Angel Broking said.

He also said that real estate players had again started raising prices in residential segment, which could negatively impact demand scenario with further rate hike.

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Popularity: 24% [?]

ICICI Venture is likely to invest Rs 120 crore in Star Health and Allied Insurance Company Limited — the single largest private health insurer in the country — for a 15- 20 per cent stake.

This would value the insurance company at Rs 600-800 crore.

Star Health was seeking capital to meet its solvency margin requirements. At the end of March 2009, solvency margin of the insurer stood at 1.38 per cent against a prescribed limit of 1.50 per cent.

The Chennai-headquartered Star Health is a joint venture between Oman Insurance Company, ETA Ascon group (a business conglomerate in West Asia) and insurance professionals in India.

This would be the maiden investment for ICICI Venture from its new India Advantage Fund 3, which recently mopped up $500 million. South India- based boutique investment banking firm Mape Group is the banker to the transaction.

When contacted, spokespersons for ICICI Venture and Star Health declined to comment on the issue.

Star Health was the first standalone health insurance company in the country. During the last financial year, Star Health reported a net profit of Rs 7 crore on a premium income of Rs 512 crore.

The insurer saw over two- fold increase in the premium income during 2008-09 from Rs 168 crore in 2007-08.

The Indian health insurance industry has grown at an annual rate of over 35 per cent since the opening of the sector in the year 2000. But the market continues to be significantly under-penetrated in comparison with other countries. Per capita private health insurance in India is estimated at $1.1 in comparison with $2,300 in the US or $63 in Brazil.

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Popularity: 22% [?]

Corporation Bank is a leading public sector bank, invites online applications from Indian Citizens for the post of Probationary Officer and Specialist Officers Cadre.

Recruitment Process – 2010-11

1. Recruitment of Probationary Officers:

Please click here for:
a] Advertisement/Notification:
b] Online Application:
c] Format of Receipt:

2. Recruitment of Specialist Officers:

Please click here for:
a] Advertisement/Notification:
b] Online Application:
c] Format of Receipt:

Popularity: 39% [?]

Canara Bank Recruitment Project 2010 applications are invited from Indian Citizens for appointment to the posts: Probationary Officers (post code 1) and Probationary Clerks (post code 2). Eligible candidates are requested to apply On-line .

Important Dates:

Closing Date for on-line registration : Probationary Officer – 24.04.2010, Probationary Clerk – 25.03.2010
Written Test : Probationary Officer – 04.07.2010, Probationary Clerk – 18.07.2010

1. Probationary Officer [JMGS-I] – 500 Posts (SC-76, ST-38, OBC-136, UR-250, PWD-23)
Age Limit : 21 – 30 years
Pay Scale : Rs.10000-470/6-12820-500/3-14320-560/7-18240
Qualification : Graduation with First Class with 60% [SC/ST/PWD candidates – 55%].

2. Probationary Clerk – 1000 Posts
Age Limit : 18 – 28 years
Pay Scale : Rs.4410-215/3-5055-335/3-6060-470/4-7940-500/3-9440-560/4-11680-970/1-12650-560/1-13210
Qualification : Pass in 10+2 with 60% [SC/ST/PWD candidates – 55%] OR a pass in Graduation.

Application Fee:

Probationary Officers : SC, ST, PWD – Rs. 50/-, Others – Rs.300/-
Probationary Clerks : SC, ST, PWD – Rs. 50/-, Others – Rs.200/-

How To Apply : Download Online Application for Probationary Officer, Probationary Clerk.

Popularity: 17% [?]

In less than 24 hours, two public sector players—IDBI Bank and Union Bank of India—announced their foray into over Rs 781,000-crore mutual fund (MF) industry, though both have taken different routes.

While IDBI Bank decided to go solo, Union Bank has partnered Belgian asset manager KBC. By doing so, Union Bank has followed peers such as State Bank of India, Bank of Baroda and Canara Bank that have tied up with foreign partners.

IDBI Bank announced the launch of its asset management business on Thursday, while Union Bank of India announced its entry on Friday.

Other than Union Bank of India, Bank of Baroda has a tie-up with Pioneer Investments, a global asset manager. Canara Bank has a joint venture with Robeco Groep NV of the Netherlands and, in SBI Mutual Fund, the partner is Société Générale Asset Management.

Most of the public sector banks forayed into the MF business in early 1990s, but could not compete with the private sector players once the sector was opened to them around the same time.

“You cannot expect a banker to run an asset management company. Different skill sets are required for it,” said Dhirendra Kumar, chief executive officer of Value Research.

Among the top 10 fund house in terms of asset under management, based on the Association of Mutual Funds in India’s February data, three are in the public sector, and among them, only SBI Mutual Fund is owned by a bank. Experts said initially the banks continued to focus on their lending business, but the rise of equity markets since 2003 led them to re-focus on the MF business.

“The launch of the asset management business is in line with the bank’s long-term vision to emerge as a leading universal bank. IDBI Bank’s established brand name and extensive branch network will enable our asset management company to grow at a fast pace and become a leading player in the business,” said Yogesh Agarwal, chairman and managing director, IDBI Bank, while launching the MF business in Mumbai yesterday.

Union Bank of India Chairman and Managing Director MV Nair said the current penetration level of asset management companies indicated the vast untapped potential. The fund house has a vision to be among the top 10 in five years. It is targeting an average asset under management of about Rs 12,000 crore in three years.

Kumar of Value Research said the huge distribution network of public sector banks through their branches was an advantage which would be difficult for a standalone asset management company to match.

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Popularity: 16% [?]

SBI General Insurance today launched its operation in a limited geographical area. It has received regulatory approval for two products in the fire and property segment.

“We have got approval for two products in the property segment. We plan to roll out pan-India operation in the next four-five months. We will start from Mumbai as of now,” said RR Belle, managing director and chief executive officer, SBI General Insurance.

At present, SBI General is in the process of setting up its comprehensive IT infrastructure and is expected to commence full scale operations later during the year.

SBI General is a joint venture between SBI and Insurance Australia Group IAG with 74 per cent and 26 per cent share in the capital structure. SBI has invested Rs 111 crore for its 74 per cent equity, while IAG has pumped in about Rs 542.10 crore (including about Rs 500 crore premium) for its 26 per cent stake. It got the final (R3) regulatory approval in December 2009.

Entering into the market now will help SBI get corporate clients, as most of the policies get renewed in April. In addition, it will get advantage of SBI’s 14,000 branches and a huge client base, mostly in retail and small & medium enterprises segments.

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Popularity: 86% [?]

Four small banks across the US were seized by regulators on Friday evening, ticking up the year’s bank failure tally to 41.

The continued parade of bank collapses comes as the Federal Deposit Insurance Corp (FDIC) is pulling back on loss-share agreements designed to lure bidders into taking on the assets of troubled banks.

Two of the banks that were seized were in Georgia, which has accounted for about one-sixth of all failures since the beginning of 2008.

Unity National Bank of Cartersville, Georgia, had about $292.2 million in assets, and McIntosh Commercial Bank of Carrollton, Georgia, had about $362.9 million in assets, FDIC said. Georgia is paying the price for overly aggressive lending during the housing boom, particularly speculative commercial real estate loans.

The other two institutions that failed were Key West Bank of Key West, Florida, which had $88 million in assets, and Desert Hills Bank of Phoenix, Arizona, with $496.6 million in assets.

The FDIC found buyers for the deposits of all four banks, and entered into loss-share agreements with all of them.

FDIC said that it had reduced the amount of losses it was willing to share with buyers of failed banks, indicating the agency’s increased confidence in the market for these banks’ assets and in the overall economy.

The agency said it would no longer take on 95 per cent of the share of potential losses for certain assets of failed banks. It would continue an 80:20 loss share in some transactions, the FDIC said.

“As a result of better pricing, more competitive bidding and an improving economy FDIC feels that it can explore this step,” an agency spokesman said.

Through the end of 2009, FDIC entered into 94 loss-sharing agreements, with $122 billion in assets under loss share.

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Popularity: 10% [?]

Tamil Nadu-based City Union Bank (CUB) is planning to raise around Rs 1,000 crore over the next three years to support its business target of Rs 50,000 crore by 2013-14. The bank had said, the incremental funds will be raised through rights issue, qualified institutional placements (QIP) or through preferential allotments.

Speaking to Business Standard, N Kamakodi, executive director, City Union Bank said, “If the bank has to grow at the rate of 30 per cent we have to increase our capital over three years.”

In the last three years the bank had raised Rs 200 crore through rights issue and through preferential allotments. “We would require another Rs 1,000 crore incremental funds over the next three years to reach our business target.”

The Kumbakonam-based private bank had set a target of Rs 50,000 crore total business by 2013-14. This includes Rs 27,000 crore deposits and Rs 23,000 crore credit. The bank is likely to close the present fiscal with a total business of Rs 16,500-17,000 crore compared to Rs 13,700 crore last year.

CUB’s networth is around Rs 850 crore presently, and will be increased to Rs 1,000 crore by December 2010, said Kamakodi. The bank which had reported Rs 122.13 crore profit after tax (PAT) in year-ended March 31, 2009, is likely to close this fiscal with a PAT of Rs 150-155 crore.

The target will be achieved mainly through branch expansion. Presently, the bank has 222 branches and had applied licence for another 62 branches with Reserve Bank of India. “Our focus will continue to be the South, especially Tamil Nadu, where for another 10 years we have space to grow,” said Kamakodi.

Of the new branches, 50 per cent will come up in Tamil Nadu, while 25 per cent of them will come up in the other three southern states and 25 per cent across the rest of the country, he added. Recently, the bank opened branches in Madhya Pradesh, Rajasthan, Punjab and Uttar Pradesh. This year the bank plans to open branches at Chhattisgarh and Orissa.

He added, while one-third of the business will come from the existing clients, the rest will come from new branches and new clients. “This will be our fifth year in a row we will grow 20-25 per cent in all parameters,” he said.

For instance, credit growth was 20 per cent for the bank during the present fiscal, while the industry average is around 16 per cent. The bank is likely to close the present fiscal with a credit portfolio of around Rs 6,700 crore.

“We started witnessing pick-up in credit, for instance in June the utilisation was around 58 per cent which has now increased to 80 per cent,” said Kamakodi.

Commenting on NPA, he said, Gross NPA is around Rs 120 crore and Net NPA is around Rs 65 crore. “These NPAs are backed with immovable collaterals, so it is not alarming,” said Kamakodi.

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Popularity: 10% [?]

Private sector lender Axis Bank today said it is in talks with Max New York Life to acquire up to five per cent stake in the latter.

“We are in talks with Max New York Life to pick up a less than five per cent stake. We are working on the valuation and the result of the talks will be known soon,” Axis Bank Executive Director and CFO S Sengupta said here.

The bank has tied up with Max New York Life to distribute the latter’s life insurance products beginning April 1 after ending its relationship with MetLife.

“Our distribution tie-up will be on, irrespective of whether we acquire a stake in Max New York Life or not,” Sengupta said. Max New York Life is a joint venture between the US-based New York Life and Analjit Singh’s Max India.

A stake, even a small one, will indicate a strong relationship between Axis Bank and Max New York Life, besides creating value for the bank, Sengupta said.

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Popularity: 19% [?]

The country’s largest private sector lender, ICICI Bank, has received qualified full banking (QFB) privileges from the Monetary Authority of Singapore (MAS) for its branch operations in the city-state, the Indian lender announced today.

The licence permits ICICI Bank to conduct business from 25 locations in Singapore. “However, in the near term, the bank will focus on increasing its presence in corporate, commercial, wealth management and direct banking businesses, both in Singapore and in the Association of Southeast Asian Nations region, by capitalising on strong trade and investment flows with India,” said an ICICI Bank spokesperson.

The country’s largest lender, State Bank of India (SBI), is the only other Indian bank to enjoy QFB privileges in Singapore.

Under the Comprehensive Economic Cooperation Agreement between India and Singapore, implemented in August 2005, both are to provide QFB status to three banks from each other.

India has given QFB privileges to Development Bank of Singapore and United Overseas Bank.

As of December 31, 2009, the government of Singapore holds a 1.53 per cent stake in ICICI Bank.

Currently, the Singapore branch offers international loan syndication services, trade finance, comprehensive deposit and wealth management products and treasury operations to support the bank’s international operations.

Incidentally, the Singapore branch was the first overseas branch of ICICI Bank. MAS had granted ICICI Bank a licence to transact banking business in Singapore from August 1, 2003.

A little more than a quarter of the ICICI Bank’s asset book consists of international assets. As of December 31, 2009, the bank had international assets worth Rs 46,600 crore on its books.

The lender has presence in 18 countries apart from India and currently enjoys a full-bank status in Canada, the UK, Bahrain, Russia and Sri Lanka

ICICI Bank said it had no plans of setting up a subsidiary in Singapore as of now.

Chanda Kochhar, managing director and chief executive officer, ICICI Bank, said, “We are delighted to receive this approval since it will further strengthen our footprints in corporate, commercial, wealth management and direct banking services in Singapore. We expect to see significant increase in our client base in the region having strong India connections.”

(BS)

Popularity: 23% [?]