Axis Bank reappoints Shikha Sharma as Managing Director

Axis Bank has reappointed Shikha Sharma as Managing Director for a further period of 3 years.

The board has approved the reappointment of Shikha Sharma as Managing Director and Chief Executive Officer of the bank for a further period of three years with effect from June 01, 2012 to May 31, 2015, Axis Bank said in a filing on the Bombay Stock Exchange (BSE).

The reappointment will be subject to approval of the Reserve Bank of India and subject to confirmation by the shareholders of the bank at the next general meeting, it said.

The bank had appointed Shikha Sharma as its Managing Director in 2009.

Source: Business Standard

Axis Bank travel currency card volume crosses $2 bn mark

Private sector lender, Axis Bank today said sales and usage volumes for its travel currency card used for international travel have crossed USD 2 billion.

In a statement issued here, the bank claimed it holds 48 percent market share in the segment currently and that this is the first time anywhere in the world that any bank has crossed USD 2 billion in sales for such a card.

The city-based bank said the product, launched in 2003 crossed, had surpassed the USD 1 billion mark in 2009.

The card allows users the ability to top-up money in 11 currencies by paying in rupee terms. The money is converted to the international currency of choice at the prevailing exchange rate and customers can use it for transactions abroad, the statement said.

Source: Financial Express

Axis Bank Q3 net up 24% on robust interest, fee incomes

Axis Bank's net profit increased by 24 per cent to Rs 1,102 crore for the quarter ended December 31, 2011, from Rs 891 crore in the corresponding year-ago quarter, on the back of robust growth in both interest and fee income.

The bank's performance in the just-ended quarter was satisfactory, although it was a challenging quarter, said Mr Somnath Sengupta, ED and CFO, Axis Bank.

Growth in fee income was broad based and from all segments such as retail, corporate and treasury. Advances growth too was across all segments, although retail advances grew at a faster pace than corporate, small and medium enterprises and agriculture.

Retail advances grew by over 32 per cent, large and mid-corporate by 19 per cent and SME by 21 per cent.

“We have been focusing on retail loans — home and auto loans — for some time now because it was a small segment for us. The share of retail loans to total advances has increased to 22 per cent from 20 per cent last year. Also, generally there was lower demand in corporate and infrastructure loans, though that was not why we focused on retail segment,” Mr Sengupta said.

While rise in cost of funds by 155 basis points led to a slight decline in Net Interest Margins, the 32 per cent growth in low-cost CASA (current and savings accounts) helped to protect margins to some extent.

Going ahead there could be some contraction in NIM as cost of funds may go up on account of migration from demand deposits to term deposits.

In the December-ended quarter, the bank added Rs 535 crore to gross non-performing assets (NPAs). Gross NPAs increased to Rs 1,915 crore (Rs 1,483 crore). Accordingly, provisions have increased to Rs 422 crore (Rs 314 crore).

“NPAs are a challenge for all banks. We don't expect gross NPAs to increase more,” Mr Sengupta said.

About the huge growth in deposits, Mr Sengupta said the bank focused on CASA and placed lot of emphasis on retail term deposits.

Credit growth

In the fourth quarter, credit growth is likely to pick up as banks try to meet their priority sector requirements, he added.

Within non-interest income, trading profits were lower at Rs 118 crore (Rs 135 crore), due to diminishing trading opportunity in the high interest rate environment, Mr Sengupta said.

Shares of Axis Bank closed at Rs 1,008, up 5.9 per cent, on the BSE on Friday.

priyan@thehindu.co.in

SBI trims housing loan processing fee

Country's largest lender State Bank of India has halved the home loan processing fee, a move which could be followed by other public sector lenders in the coming days.

The bank has slashed processing fee on home loan above Rs 75 lakh to Rs 10,000 from Rs 20,000, while for loans between Rs 30-75 lakh, the fees has been reduced to Rs 6,500 from Rs 10,000 earlier, a senior SBI official said.

The new fee structure is applicable starting January 11, the official added.

The official, however, added that the processing fee for loans below Rs 30 lakh continues to be 0.25% of the loan amount.

The reason for slashing fee is to promote home loan products of the bank, the official said.

Competitors like ICICI Bank and Axis Bank charge 0.5% of the loan amount for home loans -- both floating and fixed both.

At the same time, Bank of Baroda levies a charge of 0.4% of the loan amount or maximum limit of Rs 50,000, while Bank of India charges Rs 20,000 flat fee for housing loans between Rs 25-75 lakh.

According to another public sector bank official, banks could offer some incentive to promote home loan product above Rs 30 lakh as there has been some moderation in this segment.

It could be in the form of lowering of fee or some concession in rates if interest rates don't come down by the end of the current fiscal, the official added.

In other retail loans, particularly auto loans, some banks are offering concession in rate as well as waiving of processing charges to garner higher share.

Some bankers also feel that the processing fee may go up in the medium term. However, charges are likely to remain stable for the next couple of months.

"Since most of the banks have done away with pre-payment charges, I feel the processing charge in the industry as a whole would tend to go up in the medium term if not in the short run," Axis Bank Head (consumer lending and payments) Jairam Sridharan said.

Last year, housing finance regulator National Housing Bank had directed all housing finance companies to desist from imposing a pre-payment penalty on home loan borrowers. Subsequently, many banks announced abolition of such charges.

SBI, Bank of Baroda, Bank of India, Punjab National Bank are some banks which scrapped pre-payment charges.

Source: Business Standard

SBI slashes processing fee for greater home loan pie

MUMBAI: State Bank of India (SBI) has slashed processing fees on home loans by half, a move aimed at garnering a larger pie in the home loan market and giving competition to private banks and housing finance companies.

"The decision is aimed at creating goodwill. With regards to fees charged from retail customers, SBI will charge only to the extent of covering its cost and not earn profit on it," said a senior official from the bank on condition of anonymity.

The bank has reduced processing fee on home loan above Rs 75 lakh to Rs 10,000 from Rs 20,000. For loans in the range of Rs 30 to Rs 75 lakh, the fees has been lowered to Rs 6,500 from Rs 10,000 earlier. The processing fee for loan below Rs 30 lakh continues to be 0.25% of the loan amount.

The reduction in the rates follows a decision taken by the policy committee chaired by SBI chairman Pratip Chaudhuri. The new charges will be effective from January 11. Axis Bank and ICICI Bank charge 0.5% of the loan amount sanctioned as processing fee, while housing finance leader HDFC charges 0.50% of the loan amount with a cap of Rs 10,000.

So, on a loan of Rs 50 lakh currently, SBI's processing fee would be the cheapest among the four banks - it would be stand at Rs 6,500 as against Rs 25,000 (0.5% of Rs 50 lakh) charged by ICICI Bank and Axis Bank, and Rs 10,000 by HDFC. This is yet another aggressive stand taken by SBI to grab the home loan pie.

In November, SBI was the first bank to do away with pre-payment penalty on floating and fixed rate loans. "In an environment where all banks are moving towards zero pre-payment charges, we believe processing fee in the industry would tend to rise over a period of time," said Jairam Sridharan, head - consumer lending and payments at Axis Bank. "Also, the waiver of pre-payment penalty will only encourage customers to prepay more loans, more frequently.

Therefore, it is not sustainable to have a lower processing fee." "At a time when corporate sector is going through a lot of pain, SBI may prefer to decelerate its corporate loan book and expand its retail loan book. And this move may be aimed at that," said Hemindra Hazari, head of research - institutional equities at Nirmal Bang, a broking firm.

Source: EconomicTimes

Axis Bank ranks number one in bond syndication market for 2011

Axis Bank maintained number one position in domestic bond syndication market for the fourth consecutive year, according to data released by Bloomberg. The private bank ranked first in year 2011 cornering 16% of market share in a year where corporates raised Rs 174700 crore through issuance of bonds.

Power Finance, HDFC, Rural Electrification, IDFC and LIC Housing Finance were top debt issuer contributing to 42.4% of total borrowings in the bond market.

Axis Bank arranged Rs 29700 crore while ICICI Bank, the number two arranger, had 13% market share and helped corporates raise Rs 22,700 crore in 2011.

Meanwhile State Bank of India pipped Kotak Mahindra Bank, Citi, A K Capital to emerge 9th in the list from 14th position it held last year. SBI arranged bond of Rs 6300 crore.

Similarly Real Growth Securities and IDFC Capital moved in higher position. While Real Growth was ranked 16th from 24th, IDFC was at 19th from 35th a year ago.

Bloomberg data shows that A K Capital and Barclays Capital lost out to their rivals. A K Capital was ranked 12th in 2011 from 8th position it held last year. Its market share also shrinked 2.8% from 5% a year ago. Similarly, Barclays was pushed to 5th position from 3th position last year. The British bank had market share was 6.9% from 8.5% last year.

Source: EconomicTimes

Government may borrow $9.5 billion by pledging property & shares of ITC, L&T and Axis Bank

MUMBAI: Government plans to borrow up to Rs 50,000 crore ($9.5 billion) by pledging property and shares to bridge the budget deficit, Reuters quoted Bloomberg news agency on Thursday, citing unnamed government officials.

Shares in companies such as cigarette-to-hotels group ITC, engineering conglomerate Larsen & Toubro and Axis Bank held by a state-controlled fund could be offered as collateral to raise the cash, Bloomberg said.

The cash will be used by a newly-created fund manager to buy stock in state-run companies and help the government's Rs 40,000 crore divestment programme for the fiscal year that ends in March, it said.

Revenue deficit and gross fiscal deficit of the government in April-September this fiscal were higher than that in the same period last fiscal mainly due to large refunds under direct taxes.

Revenue deficit and gross fiscal deficit of the government in April-September this fiscal were higher than that in the same period last fiscal mainly due to large refunds under direct taxes.

Gross tax collections during the period were reported at 39.6 per cent of Budget Estimates. These were 43.4 per cent lower than that recorded in the year ago period.

In the direct taxes, corporation tax collections showed a moderate growth of 3.4 per cent due to large refunds while personal income tax increased by 17.3 per cent against budgeted growth rates of 21.5 per cent and 16.2 per cent, respectively, for FY-12.

Among the major indirect taxes, collections from customs duty and service tax showed growth rates of 22.5 per cent and 37.5 per cent, respectively, during April-September 2011 as against budgeted growth rates of 15.1 per cent and 18.2 per cent.

Global finance major Citigroup has said the Indian government's fiscal deficit could widen to 5.8 per cent of the GDP in 2011-12 on account of lower tax mop-up, slippage in its PSU divestment programme and the spiralling under-recoveries of oil companies.

The Centre also said it will not be easy to restrict the fiscal deficit to 4.6 per cent in 2011-12 on account of uncertainty on the disinvestment front and a likely increase in subsidies, but maintained that the slippage will be minimal.

Source: EconomicTimes

19 banks penalised for flouting derivative norms

The Reserve Bank has imposed penalties on 19 commercial banks, including SBI, HDFC Bank, ICICI Bank and Citibank, for violating norms on derivatives, Parliament was informed on Tuesday.

RBI has informed that they had imposed penalties on 19 commercial banks on April 26, 2011, for contravention of various instructions issued by RBI in respect of derivatives such as failure to carryout due diligence in regard to suitability of products and selling derivatives products to users not having risk management policies, Minister of State for Finance, Mr Namo Narain Meena said in a written reply in the Rajya Sabha.

RBI has issued show cause notices to banks. In response to this, banks submitted their written replies, he said.

“On a careful examination of the banks’ written replies and the oral submissions made during the personal hearings, the Reserve Bank of India found that the violations were established and the penalties were thus imposed,” he said.

While a fine of Rs 15 lakh each was slapped on Axis Bank, Barclays, HDFC Bank, ICICI Bank, Kotak Mahindra and Yes Bank, Rs 10 lakh each was imposed on Citibank, BNP Paribas, SBI, Credit Agricole —CIB, Development Credit Bank, ING Vysya Bank, Royal Bank of Scotland and Standard Chartered Bank, he said.

Besides, a fine of Rs 5 lakh each was slapped on Bank of America, DBS Bank, Deutsche Bank, HSBC and J P Morgan Chase Bank, he added.

Mr Meena also said that RBI has informed that the estimated loss of Rs 33,000 crore in the foreign exchange derivative transaction may not be the actual losses but the gross Market to Market (MTM) gains or losses to the customers.

Bank of Baroda selected as best public sector bank in India: Report

Bank of Baroda and Karur Vysya Bank have been selected as the best banks in the public and private sectors, respectively, at the national level for this year by a jury appointed by the State Forum of Bankers Clubs in Kerala.

The awards in the various categories would be presented at a function here on December 17, the State Forum of Bankers Club President L R R Warrier and General Secretary K U Balakrishnan told reporters here.

Minister of State for Consumer Affairs, Food and Public Distribution K V Thomas will present the forum's 'Businessman of the Year' award to NRI businessman B Ravi Pillai, the Managing Director of the Dubai-headquartered RP Group of companies.

Kerala Finance Minister K M Mani will present the best bank award in the public sector category to Bank of Baroda Managing Director and CEO M D Mallaya, while State Excise Minister K Babu will present the best bank award in the private sector of K Venkitaraman, the CEO and Managing Director of Karur Vysya Bank.

Justice V R Krishna Iyer will present the best bank award in the rural development category to V K Saigal, the Chairman of North Malabar Gramin bank, and the best bank award in the new generation banks category to IndusInd Bank Ltd Managing Director and CEO Romesh Sobti.

Corporation Bank and Indian Overseas Bank were adjudged the second and third best banks in the public sector and Lakshmi Vilas and City Union Bank in the private sector, respectively.

Among the new generation private banks, YES Bank and Axis Bank have been selected for the second and third slots.

About 27 parameters, including the banks' deposits, advances and NAP level were taken into consideration while selecting the best banks, Balakrishnan said.

Source: EconomicTimes

Credit growth will start picking up next year, says Axis Bank MD

Credit growth, which has been moderating over the last two years, will start picking up next year, said Ms Shikha Sharma, Managing Director and Chief Executive Officer, Axis Bank.

“Credit growth is directly linked to what is happening in the economy. Our belief is in the long term growth of the economy so we expect credit to pick up,” Ms Sharma told newspersons on the sidelines of a CII leadership summit here on Friday.

The slowdown in credit offtake was primarily on account of a dip in demand from large corporates. “The industry was on a tightening mode, they were looking at leveraging their existing investments rather than pumping in fresh investments,” she said.

Growth in credit would be fuelled by a moderation in interest rates on the back of easing inflation. The annual wholesale price index-based inflation rate in October rose 9.73 per cent compared to 9.72 per cent in September.

“As interest rates begin to moderate, which should happen next year, on account of a moderation in inflation, we should see credit picking up,” Ms Sharma said.

Ms Sharma, however, said it would be difficult to predict the exact time when this (interest rate softening) would happen.

Talking about asset quality, Ms Sharma said that asset quality will follow the economic cycle. “Non-performing assets will follow the economic cycle. If the economy slows down then there could be a rise in NPAs. However, banks have become very cautious and are looking at diversifying risks,” she said.

Replying to a query on the possibility of restructuring of accounts, she said, “In the present economic scenario it is inevitable that companies will have a cash flow mismatch. Banks should take a call on which companies are fundamentally strong and are just facing a temporary cash flow mismatch before considering the possibility of restructuring.” There was some stress in the mining and textiles sectors, she added.

shobha@thehindu.co.in

Axis eyes to increase retail loan book share to 30%

MUMBAI: The third largest private lender Axis Bank today said it is working towards taking its retail loan-book to 30 per cent of the total assets over the next three to four years, as it sees the retail loan segment as a large market opportunity going forward.

"We want to increase the share of our retail loan-book to 30 per cent of our total asset book over the next three to four years from the present 21 per cent," Axis Bank senior Vice-President and Head (consumer lending & payments) Jairam Sridharan said here.

He was talking to reporters after launching Insta PIN, a facility that allows a customer to receive the ATM PIN, if lost, on the mobile phone through the bank's IVR system.

Explaining the strategy behind this aggressive retail loan growth strategy, Sridharan said going forward the bank sees retail loan growth will be driven by the small towns and Tier 2 & 3 cities.

"If the latest numbers are any indication, already this is visible as only 60 per cent of the loan business now comes from the top eight metros, which was over 85 per cent a couple of years ago. Going forward, this will only increase from small towns."

Towards achieving this, the bank is increasing the number of its focused branches from the present 650 spanning 100 cities, mostly Tier 2 & 3 centres, he said.

Again, the bank has 85 exclusive loan processing centres, apart from the 1,446 branches in 953 locations. Axis has overseas offices in Singapore, Hong Kong, Shanghai, Colombo, Dubai and Abu Dhabi.

In the first half of this fiscal, the bank's retail loan book stood at Rs 29,328 crore, which clocked a CAGR of 26 percent since 2008, Sridharan said.

Of this as much as 76 per cent is home loan, 13 per cent auto, 4 per cent personal loans, 2 per cent credit cards and 5 per cent non-schematic exposure which primarily includes over draft on current accounts and fixed deposits, he said.

The industry average for retail home loan is 66 per cent, Sridharan informed.

The bank had a retail customer base of one crore (active debit cards) and a credit card base of 6 lakh by the end of the last fiscal.

The bank hopes to close this in the current fiscal at 1.15 crore and 8 lakh respectively, Sridharan said, adding its credit card business is already in cash profit now since the massive run-on after the 2008 crisis.

Its credit card book size stood at Rs 515 crore last fiscal and there is no delinquency now, despite the rising interest rates, Sridharan added.

Within the industry, HDFC Bank leads in retail loan with as much as 50 per cent of its assets coming in from this segment, followed by ICICI Bank with 40 per cent, SBI with 23 per cent, Axis at 19 per cent and IDBI Bank with 18 percent as of March 11, Sridharan said.

For the September quarter, Axis posted a net profit of Rs 920 crore, up 25 per cent from Rs 735 crore in the year ago period on growth in both interest as well as non-interest income. Net interest income rose 24 per cent to Rs 3,688 crore from Rs 2,429 crore last year.

Source: EconomicTimes

Axis Bank to raise Rs 1,500 cr from bonds

Private sector lender Axis Bank today said it would raise Rs 1,500 crore through bonds to fund its business growth.

The board has passed a resolution approving allotment of unsecured redeemable non-convertible subordinated debentures on private placement basis as the bank's Lower Tier II capital aggregating to Rs 1,500 crore (including green shoe option of Rs 500 crore), Axis Bank informed the Bombay Stock Exchange (BSE).

Allotment of the debentures will be listed on the BSE and the National Stock Exchange, it said.

The bank will pay a coupon rate of 9.73% a year on the bond having tenure of 10-year, it said.

Source: Business Standard

Axis Bank launches PG banking course

Axis Bank has launched a one-year post graduate diploma in banking services jointly with Manipal University. It is a full-time residential programme for graduates. Those who complete the course will be absorbed in the Assistant Manager grade by Axis Bank, said a press release issued by the bank.

Some of the other banks that offer similar programmes include ICICI Bank, HDFC Bank, Bank of Baroda and Kotak Mahindra Bank.

State-run banks led by State Bank of India to install 40,000 ATMs

MUMBAI: State-run banks led by State Bank of India plan to install 40,000 automated teller machines, or ATMs, across the country to widen their reach in what will be the biggest such exercise by local lenders. This time, all the government-owned banks will join hands to install what are known as white-label ATMs, which are not owned by any single bank and where the entire operation is outsourced.

Last week, SBI sought offers from vendors for setting up 40,000 ATMs, twice the number the bank currently has. SBI owns the maximum number of ATMs in India. Of the 74,743 ATMs in the country, SBI had 20,084 at the end of March 2011, according to a survey by Atos Worldline, which specialises in electronic payment services.

Recently, a tender was issued on behalf of all state-run banks within days of the finance ministry directing them to adopt a unified approach on installing ATMs. A senior finance ministry official told ET that the government was in talks with the Reserve Bank of India for issuing guidelines on white-label ATMs.

The new ATMs will be rolled out in a phased manner in 2012-13. At least 25% of the 40,000 ATMs will be installed in the first quarter, 40% in the second quarter, 25% in the third quarter and the rest by the end of the fourth quarter. A banker, who did not want to be named, said the ATMs will be installed across geographies, with each geography being allotted to various state-owned banks depending on their presence in such locations.

Going by the tender issued by the SBI, the selected vendor will have to enter into separate agreements with each individual bank. There is resistance from the RBI to approve white-label ATMs since they are owned by non-banking entities, which means they do not fall under the purview of the banking regulator.

In case of any dispute between such entities and banks, the RBI may not be able to step in given the ambiguity on the regulation of such entities. RBI's worries also stem from the fact that white-label ATMs do not carry the brand name of any bank, making it difficult for a customer to know whom to contact in case there is a problem with the cash-dispensing machine. A bank officer said to resolve this dilemma, there is a proposal to make the lead bank in an area responsible for the ATMs in their region.

The lead bank will pay the vendor and take ownership of the ATM, the officer said not wanting to be named. Bankers are scheduled to meet senior finance ministry officials next month to work out the detailed plans relating to the installation of the ATMs. White-label ATMs may provide stiff competition to private banks, such as HDFC Bank, ICICI Bank and Axis Bank, which are among the top-five banks in the ATM segment. SBI has the largest share in the pie, with 27% of the ATMs, followed by Axis Bank and ICICI Bank, with 8% each. HDFC Bank, Punjab National Bank and SBI's associate banks have a share of 7% each.

Source: EconomicTimes

Axis Bank launches young bankers program

KOLKATA: Axis Bank in association with Manipal Global Education Services ( MaGE) has launched the 'Young Bankers' Program, an initiative to attract young graduates to a career in banking with Axis Bank.

This one-year full-time residential programme to be conducted at Manipal University Bangalore campus will impart knowledge and skills in banking, etiquette and grooming, enhanced communication skills and other soft skills.

Upon successful completion of the program, the students will be awarded a post-graduate diploma in banking services by Manipal University and will be absorbed in the assistant manager grade by Axis Bank.

Speaking on the occasion, Rajesh Dahiya, president, HR, Axis Bank said, "This programme is aimed at equipping graduate students with the necessary knowledge and skills for a career in banking with Axis Bank."

Manipal Global Education Services president - distributed learning V Sivaramakrishnan said: "Our aim is to provide quality education and training with strong industry connect and this MoU reflects that. We are sure this association will pave the way for many active collaborative engagements that will benefit the BFSI industry."

The program includes classroom sessions of nine months split into three trimesters followed by an internship of 3 months at any Axis Bank branch/office across the country. The bank will provide financial support to the students during the one-year period.

Source: EconomicTimes

Axis Bank monitoring infra exposure

Mumbai: India's No. 3 private lender Axis Bank is closely monitoring its exposure to infrastructure projects, a senior official said, joining other Indian banks who have turned cautious amid a slowdown in the sector.

India has been beset by policy gridlock over the past year as a spree of corruption scandals has put the government on the back foot, slowing reforms. Big-ticket projects have been delayed awaiting environmental clearances or access to coal.

The bank has been selective in its approach to finance infrastructure projects, V. Srinivasan, executive director, corporate banking, told Reuters in an e-mail.

Our exposure to infrastructure is well within prudential levels set up by the bank and exposures are being closely monitored, he said.

Rising interest rates, high inflation and worsening global conditions are also dragging down near-term business sentiment in India.

Last week, the chief executive of India's second biggest lender ICICI Bank said the bank was being selective in lending to real estate and power projects.

Larsen & Toubro, India's biggest engineering conglomerate, is targeting overseas revenue growth as part of a strategy to beat a slowdown in Asia's third-largest economy.

Over the last few months, there has been a slowdown in new project financing requests on account of policy uncertainty and volatility in offshore and local markets, Srinivasan said.

At 11:44 a.m, shares of Axis Bank, valued at $7.66 billion, were trading 2.11 percent higher at 987.65 rupees in a firm Mumbai market.

The bank's shares have dropped more than 28 percent this year. The banking index has fallen 27 percent in 2011.

Source: Financial Express

Banks to offer higher returns on NRI deposits to lure dollars

MUMBAI: A runaway currency has pushed the Reserve Bank of India to make interest rates more tempting for NRIs to bring in dollars. As the rupee closed at a new low on Wednesday, RBI allowed banks to offer higher return on dollar as well rupee deposits parked by NRIs.

Banks can now give 125 basis points over London Inter-bank Offered Rate, or Libor - the benchmark rate in international money markets on foreign currency non-resident accounts against a mark-up of 100 basis points permitted till now.

On non-resident (external) or rupee deposits, the interest rate cap has been raised to 275 basis points over Libor, from 175 bps. "It will help to improve sentiment," said Parthasarathi Mukherjee, president (treasury and international Banking) at Axis Bank. The six-month Libor is at 0.71%.

Earlier in the day, the rupee fell to a low of Rs 52.37 to the dollar, but recovered to an intraday high of Rs 51.75 on suspected dollar sales by the Reserve Bank of India. But despite intervention and the central bank's move to lift the $100-m cap on banks for swap, the local currency ended at 52.37.

Such swap transactions, where corporates enter into deals with banks to swap rupee loans to dollar, banks sell dollar in spot market and buy in forward. But the market did not feel that this will help to increase dollar supply. Global stock markets plunged to a six-week low on Wednesday after China's manufacturing activity in November dropped to a 32-week low, contributing to existing worries about US economic growth and Europe's debt worries.

Tracking the weakness across markets, India's key indices hit a two-year low as foreign investors dumped shares, unnerved by the uncertainty in the rupee's slide which closed at a record low of 52.37 against the dollar. The Sensex dropped 365.45 points, or 2.27%, to end at 15,699.97, but off the day's low of 15,478.69.

The Nifty fell 105.90 points or 2.20% to close at 4706.45. Brokers said several foreign ETFs, which are facing redemptions at home, were selling aggressively.

Stop-loss triggers at many hedge funds and foreign banks set off after the Nifty fell below 4700 mid-way through the session, precipitating the decline. But for the short-covering later, indices would have ended much lower. Foreign investors sold shares worth Rs 1186.42 on Wednesday, according to provisional data.

"Investors in India are more worried about the domestic events than the issues in the US and Europe. There is a total chaos in the currency market, with no uncertainty about where the rupee is headed," said Sandip Sabharwal, CEO-portfolio management services of broking firm Prabhudas Lilladher.

Finance minister Pranab Mukherjee on Wednesday attributed the stock market crash to withdrawal of funds by foreign investors and depreciation of the rupee.

"The rupee's underlying fundamentals still appear weak to us, especially the absence of yield support at this important moment for the currency. Indeed, there is the outside chance of an onshore USD squeeze being the catalyst which propels USD/INR to the 54.8 technical objective," said Stewart Newnham and Yee Wai Chong, analysts at Morgan Stanley.

The decline on Wednesday pushed the Nifty below the 200-week moving average of 4776, analysts said. "This is a sign of further weakness in the market as this is a long-term trend indicator," said AK Prabhakar, senior VP, Anand Rathi Securities. The MSCI Asia Apex fell 2.5% after the indications of weakening in China, the world's secondlargest economy, came a day after the US cut its Q3 growth figure.

China's preliminary HSBC manufacturing Purchasing Managers Index fell sharply to 48.0 in November compared with a final reading of 51.0 in October. The euro fell 1% after Belgian newspaper De Standaard said that the planned rescue of Franco-Belgian bank Dexia is unworkable.

The report triggered worries that France's AAA credit rating may be under threat. Report said the European crisis is making it tough for European banks to access dollar funding in money markets. Euro/dollar cross currency swaps, which measure the cost of swapping euros into dollars, are at the most expensive levels since 2008, according to reports.

Source: EconomicTimes

Axis Bank to step up lending to small businesses

Private sector lender Axis Bank today said it will maintain its growth in the Small and Medium Enterprises (SME) segment and is targeting to grow the loan book by up to 25 per cent over the next two years, despite concerns over asset quality in the context of rising interest rates.

The bank holds a 5 per cent market share in the overall SME segment at present, which gives it enough scope to grow, said Mr Rajendra D. Adsul, President, SME for Axis Bank.

Admitting that higher interest rates are adversely affecting the corporate sector and the SMEs, Mr Adsul said that the bank is not experiencing any stress from its clients. “We have not received requests for restructuring of loans from SMEs,” he added.

Mr Subir Gokarn, RBI's Deputy Governor, had recently said at an SME summit, that banks need to be cautious and balance their risks while lending to SMEs.

The SME portfolio at present constitutes 15 per cent of the bank's overall loan book, which stood at Rs 1.40 lakh crore as on September 30 and the bank will grow its SME book by 20-25 per cent over the next two years.

Engineering, infrastructure and pharmaceuticals are the sectors in the SME space that the bank feels are doing well and commercial real estate, export-oriented companies and textiles are among those where the bank is cautious about lending.

The bank currently serves the segment through 32 SME centres and six SME cells.

A 'rational' look at bank pay soon as RBI readies guidelines on banking sector remuneration

MUMBAI: RBI is readying a set of guidelines on the banking sector remuneration to ensure that private and foreign lenders in India do not go overboard in their attempt to rope in high-profile bankers and denting their bottomlines.

The banking regulator, which has in the past expressed concerns about fancy compensation packages of private and foreign bank chiefs, is working on the guidelines of Financial Stability Board ( FSB) and Basel Committee on Banking Supervision (BCBS) to draft its principles for banking sector remuneration.

Compensation of bank chiefs has irked RBI for some time. In July this year, it warned that employees were too often rewarded for increasing short-term profits without adequate recognition of risks their activities posed to their organisations. "These perverse incentives amplified excessive risk taking that severely threatened the global financial system,' it said in its July policy review.

The central bank's views have received some broader support.

"Some rationality has to be brought in when it comes to compensation principles. The compensation of the chief executive officer of a bank and senior management should be commensurate to the size, scale aand complexity of their operations," said RH Patil, chairman, Clearing Corp of India and an independent director on the board of Axis Bank.

Earlier, RBI had turned down Kerala-based Federal Bank's proposal to offer a salary of 1 crore and stock options to recruit Bala Swaminathan, a top corporate banker with Standard Chartered Bank. Swaminathan subsequently joined Merrill Lynch.

In the past, the central bank had also raised concern on the compensation package offered to Axis Bank chief Shikha Sharma and bonuses Bank of America Merrill Lynch offered its India country head Kaku Nakhate.

"At times the compensation and bonuses given to treasury heads of foreign and private sector banks are higher than the salary of the banks' CEO," said a foreign bank chief.

Grow your own gnome

Source: EconomicTimes

Growth across all segments boosts Axis Bank profit in Q2

Mumbai, Oct 22: Axis Bank reported a 25 per cent increase in net profit to Rs 920 crore in the July-September 2011 quarter against Rs 735 crore in the corresponding period last year.

Growth across all segments of business helped the bank post good results, said Mr Somnath Sengupta, Executive Director and Chief Financial Officer, Axis Bank.

Focus on core biz

“This was a good quarter as growth was well balanced. We will focus on core business going ahead,'' he said.

Credit growth will probably slow down for the banking sector, but Axis Bank will clock above average industry growth rate, he added.

Retail loans grew at a faster pace than corporate loans, as there was demand for home and auto loans.

Within the corporate loans segment, there was higher demand for working capital loans, while the demand for capital expenditure came from loans which were sanctioned earlier, Mr Sengupta said.

Non-performing assets increased due to slippages across all sectors. Going ahead, the bank would continue to focus on improving its credit quality, Mr Sengupta said.

Income from trading declined by 76 per cent to Rs 28 crore (Rs 108 crore).

Cost of funds increased, especially due to interest rates on term deposits going up in September. But it is not an alarming situation as liquidity is good.

The net interest margin improved over the preceding quarter as well as the corresponding year-ago period driven by stronger build up in CASA deposits, stable funding rates and a pick up in loan yields.

But the current level of NIM cannot be sustained and it will moderate. For the current fiscal the bank is targeting NIM in the 3.25 and 3.5 per cent range.

“Our ability to pass on further cost to borrowers will probably be limited. We will have to wait and watch,'' Mr Sengupta said.

H1 profit up 26%

For the six-month period ended September, the bank posted net profit of Rs 1,863 crore, up 26 per cent from Rs 1,477 crore in the corresponding period last year.

While capital adequacy ratio has dipped slightly, it is still comfortable and there is no immediate need for capital. The bank will look at raising capital only in the next financial year, Mr Sengupta said.