Banks still divided on making monthly interest payouts

For people like 62-year-old Padmaja Shastry, a retired professor in Chennai, and 34-year-old Tarunya Singh, a business executive in Pune, the festive season brought cheer from an unexpected quarter: the Reserve Bank of India. With the central bank last month permitting banks to pay interest on savings and term deposits every month instead of every quarter or at longer intervals, customers with such deposits—who also pay interest on loans on a monthly basis—stand to benefit.

“I invariably fall short of money by the end of the second or the third month every quarter. I have a `10-lakh term deposit with SBI (auto-renewed annually), with 9.25 per cent interest. Monthly interest could help me manage my budget better,” says Shastry, who collected interest every quarter so far. For Tarunya, who got a `15-lakh long-term deposit as a gift from her father at her wedding, a monthly interest income will come in handy to pay off her home loan EMI....Read More >> Click here

Issue TDS certificates on time to customers: RBI to banks

The RBI today asked banks to put in place systems to enable timely issuance ofTDS certificates to their customers.  The Reserve Bank in a notification said that it has been brought to its notice that some banks are not providing TDS Certificate in Form 16A to their customers in time, causing inconvenience to customers in filing their income-tax returns.  "The matter has been examined and with a view to protect interest of the depositors and for rendering better customer service, banks are advised to provide to their customers from whose income tax has been deducted at source, TDS Certificate in Form 16A," the RBI said. 

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Foreign banks with complex structures can operate via WOS only: RBI

In a bid to regulate and avoid 2008- type crisis, RBI said foreign banks with complex structures and which do not provide adequate disclosure would have to operate in India only through wholly-owned subsidiaries (WOS).  However, it permitted WOS of overseas banks to acquire private sector banks. The framework for setting up of WOS by foreign banks in India, released by the Reserve Bank tonight, also allowed foreign banks' subsidiaries to list on local stock exchanges. The initial minimum paid-up equity capital or net worth for a WOS would be Rs 500 crore. 

"Banks with complex structures, banks which do not provide adequate disclosure in their home jurisdiction, banks which are not widely held, banks from jurisdictions having legislation giving a preferential claim to depositors of home country in a winding up proceedings, etc, would be mandated entry into India only in the WOS mode," it said. 

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Banks set up self-service branches to offer 24x7 services

Now, you can visit your bank branch at the middle of the night to deposit money and get the funds credited to your account instantly. Banks have started opening unmanned electronic branches that will offer most of the banking services beyond the regular banking hours. ICICI Bank, the largest private sector lender in the country, has already set up 61 such branches across 33 cities. The popularity of this format has persuaded the bank to increase its electronic branch count to 100 by the end of March, 2014.  Consider this: Around 60,000 new customers transact at the bank's existing electronic branches every month. Nearly a fifth of the customers transacting at electronic branches used the services after the regular banking hours and during Sundays and public holidays. In September, 2013 around 1.08 million transactions were carried out at ICICI Bank's electronic branches. "On an average an individual spends about nine to ten hours per day at work. This leaves him with limited time to attend to his routine needs, which includes day-to-day banking. 

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Top 30 defaulters of PSBs account for one-third of total bad loans: RBI

Top 30 loan defaulters of the public sector banks account for one-third of the total gross non-performing assets of state-run lenders, according to the Reserve Bank data.  The gross non-performing assets (GNPA) amount of top 30 accounts of public sector banks (PSBs) stood at Rs 63,671 crore at the end of June 2013.  The total GNPA outstanding of 26 PSBs was Rs 1,82,829 crore.  Thus the top 30 accounted for 34.83 per cent of total gross bad loans.  In case of nationalised banks, top 30 defaulters contributed 43.5 per cent to the GNPA with Rs 48,406 crore. The combined GNPA of 19 nationalised stood at Rs 1,11,209 crore.  The GNPAs of SBI Group, comprising SBI and its five associates, were worth Rs 71,620 crore at the end of first quarter of the current fiscal.  Top 30 loan defaulters of SBI group had a loan outstanding of Rs 15,266 crore or 21.3 per cent of the total loan.  Punjab & Sind Bank tops the chart with 62.53 per cent of GNPA is contributed by top 30 loan defaulters.  Punjab & Sind Bank is followed by State Bank of Hyderabad with 57.50 per cent, Vijaya Bank with 53.64 per cent and Corporation Bank with 53.40 per cent.

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Why PSBs may not be well-equipped to handle increased retail lending

A loan delayed is a loan denied," says a Mumbai-based dealer for Hero MotoCorpBSE 0.50 %, implying how crucial speedy approval and disbursement of a vehicle loan is. "Most public sector banks [PSBs] take more than a week to clear the loan. A private bank approves a loan in hours and disburses the money on the same day," he says, requesting anonymity. While the dealer has been working with private sector banks for 15 years now, he tied up with PSBs only three years ago. The dealer's experience is symptomatic of the way PSBs function in retail lending. Recently, a slew of PSBs like State Bank of IndiaBSE 0.35 %, Corporation BankBSE 2.66 %,Indian Overseas BankBSE 2.98 %, Vijaya BankBSE 2.60 % and Dena BankBSE 5.06 %cut rates on either consumer durable loans or vehicle loans or on both by up to 200 basis points (or 2%) in response to calls from the finance ministry to make these loans cheaper.

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Issue of new banking licences will spur demand for office space: Jones Lang LaSalle

Real estate companies are looking forward to the RBI’s decision on new banking licences almost as eagerly as would-be bankers. New players who secure licences to run banks will have a pressing requirement for office space in a short space of time, says real estate consultancy firm Jones Lang LaSalle. Most retail branches of banks in India operate in a space of around 3,000 sq.ft and Jones Lang LaSalle estimates that new banks will open around 25 branches each in Tier-I cities by end-2014, assuming that the RBI issues the new licences by January. This would result in demand for around half a million square feet of retail space in the first year of the foray, even if just five new licences are issued, it says.
PRIME LOCATION - These spaces are likely to be situated in prime localities. In addition, setting up registered offices, corporate offices and regional headquarters would translate into demand of another 0.5-1 million sq.ft.

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For women, more education means less pay

The more educated a woman, the higher the salary discrimination she faces at work, says a recent study by a faculty member of the Indian Institute of Management, Ahmedabad (IIM-A).  While women with no formal education earn more than their male counterparts, with an increase in educational qualification, the situation reverses. So women with basic education like advanced certificates or diplomas earn 10% less than equally qualified men, but the wage gap shoots up to over 40% in cases where women have master's degrees.  The main reason for this is that in India, there is a general perception that a woman's primary responsibility is unpaid care work, like looking after children and family, and this perception channels them into similar work areas in the labour market, where they are paid handsomely for it.

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Easier entry of foreign banks in India likely to be a pipedream

RBI governor Raghuram Rajan has developed the habit of being in the news for all the right reasons. In a recent announcement, he said that the central bank would unveil new norms for entry offoreign banks in the country which would also allow for takeover of local banks. Naturally, small and mid-sized banks started moving higher on the news. 

However, it is too early to celebrate as allowing foreign banks to acquire Indian banks is difficult if not an impossible task. Apart from the politics involved behind it, the trade unions and the aggressive nature of operations will be a big hindrance.The case of Dhanalaxmi Bank is a case in point, where an aggressive new management could not adjust with the conservative middle management and trade unions.  Selling public sector banks is out of question as it would require legislative changes. No government, especially the current one, would like to commit to a cause which brings it in confrontation with the strong banking unions. 

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India: Taken Over by Foreign Banks?

On October 12, Raghuram Rajan, the new Governor of the Reserve Bank of India, announced that the RBI will soon issue new rules allowing a more liberal entry of foreign banks in India. “That is going to be a big opening because one could even contemplate taking over Indian banks, small Indian banks and so on,” he stated in Washington at an event organized by the Institute of International Finance, a global banking lobby group. The announcement of a reversal of long-standing regulatory policy for banking at an event organized by a lobby group is questionable as the wider developmental and regulatory concerns related to a liberalized entry of foreign banks are yet to be discussed in Parliament. In the Indian context, the key policy issue is — do the benefits of foreign bank entry greatly outweigh the potential costs? 

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Government lenders stressed but investors hopeful

The stress on profitability continues for most public sector banks (PSBs) as they struggle to cope with a rise in assets turned bad, in the current uncertain macroeconomic environment. The higher cost of funds, with a cascading effect on margins, and the absence of trading profits further capped their earnings growth in the second quarter. However, investors seem convinced the worst in terms of asset quality deterioration is over, leading to a sharp rise in banking stocks. Four state-run lenders – Allahabad Bank, Bank of Baroda (BoB), Bank of India (BoI) and Union Bank of India (UBI) – announced their second quarter earnings on Thursday. The shares of these banks gained 7.4-22.7 per cent in Thursday’s trade. The largest among these, BoB , saw its July-September net profit shrinking 10 per cent from a year earlier to Rs 1,168 crore, as it made higher provisions and incurred more expenses. On a yearly basis, provisions and operating expenses increased 33 per cent each. Besides non-performing assets (NPAs), the proposed revision of employee wages also contributed to the rise in provisions.

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Monthly interest from SB account to make them plan, spend

R. Rakki, a homemaker from Mangalore, now thinks of planning her monthly budget with the interest from her SB (savings bank) account. Though the interest from the SB account may not help her plan for all requirements of the house, it will definitely help in meeting some requirements such as paying for milk, electricity etc. This hope comes in the wake of Reserve Bank of India providing an option to banks to pay interest on savings deposits and term deposits at intervals shorter than quarterly intervals. Rakki’s family plans the requirements for the month and prepares a budget for it. Based on the requirements, they (family members) earmark the money from the salary amount of her husband, who works in a private enterprise in Mangalore.

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Banks gain, but borrowers may have to wait

Banks have reason to cheer after the monetary policy announced by the Reserve Bank of India, as their cost of funds is likely to dip immediately. But borrowers may not have a reason to party yet, as bankers are not keen to reduce lending rates immediately. Banks continue to grapple with low-deposit mobilisation and the possibility of further hikes in long-term rates, based on inflation trends.
RELIEF FOR BANKS - The RBI’s monetary policy announcement of Tuesday met expectations on key aspects -- reducing the marginal standing facility (MSF) rate by 25 basis points and increasing the repo rate by 25 basis points. 

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Banks advised to tighten letters of credit sanction norms

The finance ministry wants state-owned banks to follow more stringent norms while issuing bank guarantees or letters of credit to borrowers, concerned that such type offunding results in double financing, which often leads to financial indiscipline among borrowers.  A finance ministry official told ET that the government nominees on the boards of state-run banks have taken up the issue with bank officials, asking them to tighten the rules. In June 2004, the Reserve Bank of India (RBI) had removed all limits on unsecured exposure of banks, which includes bank guarantees, and given bank boards freedom to fix their own policies on such exposures. 

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RBI queries applicants, regulators on new bank licences

Gearing up to issue new bank licences, RBI has shot off detailed queries to over two dozen applicants and various regulators in India and abroad as part of its due-diligence on those seeking to enter banking arena. The Reserve Bank of India (RBI) is in the process of granting new bank licences for the first time in about a decade and preliminary screening process is underway for 26 entities that have submitted their applications. As part of this process, RBI has asked many applicants to provide further details about their promoters, equity structure, financial inclusion programme, proposed banking model, among others, sources said.

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Home buyers in no hurry, expect real estate prices to fall by up to 10%

Home buyers across the country expect real estate prices to fall by up to 10% over the next six months and they are willing to wait for over a year to buy property, a study by IIMBangalore and MagicBricks has found, signalling that festive season offers by developers have failed to attract buyers. The Housing Sentiment Index (HSI) has dropped almost 20% over the past quarter across India, except in Bangalore, where sentiment has improved due to the uptick in IT industry. The aggregate HSI dropped to 93 from 117 in the previous quarter. 

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Moving to big city? Here are tips to manage your finances

Are you moving?   You can be moving over from Nasik to Pune, Tirupur to Coimbatore, Vijayawada to Hyderabad, Bangalore to Mumbai, Delhi to San Francisco or anywhere else too. You could even be moving from Bhatinda to New Jersey in one go. Like the rolling stone saying goes, moving over or relocating especially to a bigger place / city is a learning experience. You have to unlearn and relearn how to walk, talk, dress up, eat, relax, spend and lot more all over again. For Bhuvana it has been one of the most trying yet exciting phases of her life when she recently moved from Chennai to Mumbai. 

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Now, open bank account with Aadhar number without paperwork

The Unique Identification Authority of India (UIDAI) added one more feature which will enable anyone with the Aadhaar number to open a bank account without any paperwork. The private sector lender Axis Bank became first bank to start e-KYC facility which will facilitate Aadhaar registered individuals to walk up to a branch and open an account by merely providing Unique Identification Number (UIN) and scanning his fingerprints. Nandan Nilekani, UIDAI chief launched eKYC facility at Axis Bank headquarters in city today. The bank is starting with 1,000 branches and will roll out the facility across over 2,000 branches by end of the month.  He parried questions on expansion of the facility at other banks, limiting to saying that the numbers will only grow from here.

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No end to banks' woes; NPAs at 4.4% by Mar 2015: S&P

Indian banks will continue to face asset quality troubles till March 2015, and the gross non- performing assets (NPAs) in the system will grow to 4.4% by then, global credit ratings agency S&P said today. "Sluggish economic growth, rising interest rates, and the volatile currency are hurting the country's highly leveraged corporate sector," it said in a note, adding that NPAs will grow to 4.4% by March 2015, from 3.4% in March 2013 due to corporate defaults. The Standard & Poor's report said infrastructure-related segments, metals and mining, commercial real estate and construction-related sectors will continue to show a weakness. 

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Web of regulations could come in way of prospective foreign lenders looking to take over banks

That investors jumped at stocks of old private sector banks last week hoping that they could become takeover targets for a Citigroup, or a HSBC, was surprising to many old-timers. Investors have been here in the past, but only to carry disappointment home. And it may be no different this time.  City Union Bank rose 3.5%, Karnataka BankBSE -5.11 % advanced 14.9%, and Karur Vysya BankBSE -0.48 % climbed 6.1% after the RBI governor Raghuram Rajan in Washington indicated that foreign banks could get a level-playing field in India and they could even acquire functional banks. But what he did not say was the caveat that would accompany that freedom. 

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