Central Bank of India cuts interest rates on home loans

Central Bank of India has cut interest rates on home loans by between 25 and 50 basis points for a period of one month from February 20 to March 31. The bank has also waived off the processing fees on home loans, said a press release.

The bank has reduced interest rates on housing loans up to Rs 30 lakh having maturity of 10 years to 25 years to 10.75 per cent (11 per cent).

Similarly, interest rates on housing loans of Rs 30 lakh and above and up to Rs 75 lakh having maturity of 10 to 25 years have been reduced to 11 per cent (11.5 per cent).

Interest rates on housing loans of Rs 75 lakh and above having maturity up to 10 years have been reduced to 11.25 per cent (11.5 per cent). For loans of the same amount having maturity of 10 years and above and up to 25 years, the rate has been reduced to 11.25 per cent (11.75 per cent).

Banks are trying to shore up their loan portfolios as the financial year draws to a close. According to the Reserve Bank of India's fortnightly credit report, as on Jan 27, the total bank credit was at Rs 43,51,329.85 crore, lower than Rs 43,54,477.44 crore in the previous fortnight.

On Friday, Bank of Maharashtra had cut the Base Rate by 10 basis points, with effect from February 21, and waived off processing charges for loans up to Rs 25 lakh.

Central Bank plans to hire 2,700 personnel this year

One of the oldest state-run banks, Central Bank of India is on a massive recruitment exercise, a senior official of the bank said here. The bank plans to recruit 2,700 people this year to add to the 3,200 recruited last year.

Ms Vijayalakshmi R. Iyer, Executive Director, Central Bank of India, said that this number would be exclusive of the addition in specialised segments such as treasury operations, legal, and so on. “The recruitment exercise was triggered by large number of retirements. Around 1,500 to 1,800 are retiring every year, over the last two years and in the next three years.”

Good response

She said the bank had gone to about 20 institutions across the country last year to hire people.

“The response was phenomenal. The number of applications was four-five times the number of vacancies and filtration was a mammoth task.”

“Interestingly, a good number of engineers are joining the bank,” said Ms Iyer. While complimenting their quality and sincerity, she did express some concern as to whether they would continue to work in a bank in the long run or were just looking at the job as a stop-gap arrangement.

Pact with IBPS

She said, “We are in fact trying to do locational recruitment and to the extent possible post them closer to their home town. We have since inked a pact with IBPS (Institute of Banking Personnel Selection) for clerical recruitment.”

Admitting that manpower management was a challenge, the experienced banker said, ‘We find the younger generation highly tech-savvy. They take a lot of initiative in connecting with the customers and are good at customer acquisition. This is a welcome change.”

lnr@thehindu.co.in

Central Bank may recast loans to power utilities

Public sector lender Central Bank of India may go in for restructuring of some of its loans given to power companies in the current quarter.

"We have a total exposure of around Rs 12,000 crore to the power distribution companies (discoms) and some of them are likely to be restructured in the current quarter (January-March)," a top bank official told PTI. Of late, banks have been concerned about their advances to the SEBs (state electricity boards) of Tamil Nadu, Bihar, Rajasthan, UP, Haryana, MP and Punjab, which according to the rating agency Crisil, are the most vulnerable ones.

A recent Crisil report had said that losses of discoms rose 24 per cent to Rs 27,500 crore between 2006-07 and 2009-10 and may rise to Rs 35,000-40,000 crore in 2010-11, mainly because of the problems the utilities are facing like no rise in tariffs for longer period by states and non-recovery of dues.

On the back of rising concerns relating to distribution companies, many banks have already started restructuring the loan accounts of these firms. Punjab National Bank, which had recast Rs 2,500 crore of loans in the second quarter, has said out of this amount as much as Rs 1,800 crore was from the Tamil Nadu SEB. Similarly, UCO Bank, Bank of Maharashtra along with 11 others had restructured around Rs 7,000 crore of loan extended to Uttar Haryana Bijli Vitran Nigam last month. Bank of Maharashtra has recast about Rs 1,100 crore of debt of the Rajasthan SEB. Industry experts say rising cases of debt recast in the power sector will increase the provisioning requirement of the banks. In case of any standard asset restructuring, the provisioning requirement for commercial banks will increase to 2 per cent from 0.4 per cent, which in turn will adversely impact their profitability.

Source: Business Standard

Golden Peacock Award for Central Bank

Central Bank of India received the Golden Peacock Award for innovative product/service for its retail product Cent Sahayog launched in October 2011.

Designed to strengthen the micro and small manufacturers and service providers (MSE) through a process of fast credit delivery, this product aims to bring this largely un-banked segment into banking fold. Instituted by the Institute of Directors (IOD), the Golden Peacock Awards are declared annually for excellence in the fields of quality, training and innovative product/service among Indian industries.

Government to interview executive directors for bank CMD post on January 12

MUMBAI: The appointments committee is slated to interview candidates for the CMD post at government owned banks on January 12. Earlier the interviews were fixed on January 4.

The appointment's committee includes D K Mittal, secretary, department of financial services and deputy governor of Reserve Bank of India Anand Sinha among others.

Ten executive directors of public sector banks will be considered for CMD post at six banks.

These candidates include S.S. Mundra from Union Bank of India, R V Iyer and Rajiv Dubey from Central Bank of India, Ashwini Kumar of Corporation Bank, Archana Bhargava from Canara Bank, V Kannan from Oriental bank of Commerce, Rajeev Rishi from Indian Bank, Rakesh Sethi from Punjab National Bank A K Datt of Dena Bank and Ms Subhalakshmi Panse of Vijaya Bank.

The candidates are being selected to fill vacancies in fiscal year 2012-13 in Bank of Baroda, Bank of India, Canara Bank, Dena Bank, Allahabad Bank and United Bank of India.

Sources from the industry say that on January 13 the appointments committee will interview 42 general managers for the executive directors post.

Source: EconomicTimes

SBI, 14 other banks to get Rs 16k-cr funds by March

About two months after the Moody’s downgraded outlook on Indian banks on concerns over asset quality, the finance ministry has proposed to infuse Rs 15,000-16,000 crore in about 15 public sector banks by March 31, 2012. More than one-third of this amount (Rs 6,000 crore) is likely to go to the country’s largest lender, State Bank of India, while the demand for most other banks is less than Rs 1,000 crore each. SBI saw its financial strength rating cut by Moody's earlier this fiscal.

Those who are not likely to get capital infustion include Canara Bank and Central Bank of India.

To shore up the capital base of public sector banks amid rising bad loans, the Department of Financial Services, is seeking an additional Rs 10,000 crore in the third supplementary demand for grants to be tabled in the Budget session of Parliament in February, which might further distrub the fiscal consolidation story. The Budget had provided for Rs 6,000 crore for bank recapitalisation in 2011-12 and nothing from this has been given to banks yet. “We need to strengthen the capital base of our banks at a time when non-performing assets (NPAs) are rising. Almost all banks will be recapitalised, including those which have a tier I capital (core capital including equity and disclosed reserves) of 8 per cent and above,” said a finance ministry official.

The department has written to the banks asking them to take all necessary approvals and be prepared for capital infusion after Parliament’s approval is received by the end of the financial year.

However, another official in the Department of Economic Affairs, which will sanction the requirements, said a final decision on actual requirement of banks this year would be taken after looking at the capital adequacy ratio (CAR) and tier I of the banks at the end of quarter ending December 31, 2011.

CAR or a ratio of bank’s capital to its risks signifies a bank’s health. The higher the CAR, the better is the financial condition of the bank. Finance Minister Pranab Mukherjee has repeatedly said that the government was committed to 8 per cent Tier I capital, core measure of a bank’s financial strength, in all public sector banks by March 2012.

Another official said since the government’s fiscal situation was tight only those banks would be capitalized which have a tier I of 8 per cent or lower in December-end.

Globally the tier I requirement is only 4 per cent, but in India the regulator has fixed it at 6 per cent and the government wants it higher at 8 per cent to provide adequate buffer. For CAR, the regulatory requirement is 9 per cent, but the government wants it above 12 per cent.

The Planning commission has already given its approval for a Plan allocation of Rs 14,000 crore for bank recapitalisation this year. Last year also the government had infused over Rs 20,000 crore in banks.

Meanwhile, a committee headed by Finance Secretary Rs Gujral, has assessed the capital infusion needs of state-run banks over the next 10 years. The report, awaiting the approval of the finance minister, is expected to be released next month. The panel may suggest a holding company structure which can raise money globally to meet the capital requirements of banks. However, the government would not take that route to infuse capital this year since there is very little time left.

Capital infusion became critical for Indian banks after Moody's downgraded outlook on the banks to 'negative' from 'stable' over concerns that domestic monetary tightening and a potential global economic crisis would severely affect their profitability and asset quality. NPAs rose 34 per cent in July-Sep 2011. It had also lowered SBI's financial strength rating in view of its deteriorating asset quality.

SBI was earlier planning to come up with a right issue of Rs 20,000 crore, but the government was not willing to subscribe to the issue given its fiscal situation. The Centre's fiscal deficit has already toched 6.7 per cent of GDP in the first half of this fiscal. For the first seven months, fiscal deficit stood at over 74 per cent of the Budget target for the entire 2011-12. The target is to rein in fiscal deficit to 4.6 per cent of GDP in this financial year against 4.7 per cent in the last fiscal.

Source: Business Standard

Govt to interview 10 EDs for banks CMD post on January 4

MUMBAI: The appointments committee will interview executive directors of ten public sector banks on January 4, 2012 for CMD post in six banks.

The ten candidates called for the interview include S.S. Mundra from Union Bank of India, R V Iyer and Rajiv Dubey from Central Bank of India, Ashwini Kumar of Corporation Bank, Archana Bhargava from Canara Bank, V Kannan from Oriental bank of Commerce, Ravi Chatterjee from Syndicate Bank, Rajeev Rishi from Indian Bank, Ashwani Kumar from Corporation Bank and Rakesh Sethi from Punjab National Bank.

The candidates are being selected to fill vacancies in fiscal year 2012-13 in Bank of Baroda, Bank of India, Canara Bank, Dena Bank, Allahabad Bank and United bank of India.

Meanwhile, the government has yet to issue notification for the post of executive director in bank like Indian Overseas Bank and Andhra Bank, Even as the candidates names have been cleared.

Source: EconomicTimes

BoI scraps pre-payment fee on fixed & floating home loans

Bank of India on Saturday became the second major bank, after the SBI, to abolish the pre-payment charges on both fixed and floating rate home loans, with immediate effect.

“We have decided to implement the Damodaran committee recommendation on customer service. Accordingly, we have decided to give total liberty to our home loan customers, both on floating rates as well on fixed rates to switch if they choose to do so irrespective of the source of funds, including takeover by another lender,” a BoI official told PTI.

Before this, Bank of India, which has a home loan book of worth Rs 15,000 crore, used to charge 2.5 per cent penalty on the outstanding amount in case of pre-payment.

The country’s largest lender, State Bank of India (SBI), and the largest private sector bank ICICI Bank, had on November 25 abolished pre-payment penalty on home loans.

While the SBI had done away with pre-payment charges for loans on fixed and floating interest rates irrespective of source of funds, ICICI Bank will continue to charge 2 percent on the outstanding amount of fixed-interest loans.

Earlier this week, another state-run lender Central Bank of India too had waived pre-payment charges on its fixed rate home loans.

The Reserve Bank on October 25 had indicated that it was planning to scrap prepayment charges altogether saying in such a product the customer is taking the complete risks.

However, banks are allowed to charge appropriate pre-payment penalties in the case of fixed rate loans.

Within a few days, the National Housing Bank had asked mortgage players to abolish the charges through a circular.

But RBI is yet to issue a circular on this. Normally an RBI directive/advice becomes mandatory only after a circular.

Government clears creation of new ED slot in public sector banks

KOLKATA: Large state-run lenders like Bank of Baroda and Punjab National Bank will get a third executive director (ED) on their board from next April, while smaller banks like Dena or United Bank will get their second ED.

The government has just cleared the Khandelwal Committee's recommendation to this end, two chief executives at state-run banks said. Banks with more than Rs 3 lakh crore business are considered as large entities.

The government has created the new slot in six large banks and said the third executive directors will be responsible for human resource development and technology.

Bank of India, Canara Bank, Central Bank of India and Union Bank of India are dubbed as large banks and will benefit from this move. This is in step with the director-HR position that exists in public sector undertakings like ONGC, Indian Oil, HPCL or BPCL.

"Creation of the ED position for HRD is an important step in the banking industry as this will help in bringing human resource development under board's direct attention," said AK Khandelwal, who headed the HR reform panel and submitted a series of recommendations in June 2010.

The government has also created a second executive director's position in five small banks having a business of less than Rs 1.5 lakh crore. Bank of Maharashtra, Dena Bank, Punjab & Sind Bank, United Bank of India and Vijaya Bank fall in this category and their second ED will also be responsible for HRD and technology. All these banks have one ED at their top deck at present.

Source: EconomicTimes

Central Bank waives pre-payment on housing loans

Central Bank of India has decided to waive pre-payment penalties on floating rate housing loans with immediate effect.

"In deference to Reserve Bank of India's suggestions, the bank has decided to waive penalty on pre payment of all floating rate housing loans irrespective of the source of funds of the borrowers," Central Bank of India said in a statement.

With this waiver, there will be no pre-payment penalty on all floating rate housing loans of the bank for both new as well as existing borrowers, Central Bank of India Chairman and Managing Director M V Tanksale said.

The Mumbai-based state-owned lender had already waived pre-payment penalty on fore closures where the borrowers were making payments from their own sources.

Last month, State Bank of India and ICICI Bank decided to abolish pre payment penalty.

Housing finance companies has already been barred from charging foreclosure charges.

In October, the sector regulator National Housing Bank (NHB) directed all the housing finance companies to desist from imposing a pre-payment penalty on home loan borrowers.

The levy of charge on borrowers for pre-closure of housing loans by housing finance companies has been considered further by the NHB in the light of subsequent developments and it has been decided that hereafter, housing finance companies should not charge a pre-payment levy or a penalty on pre- closure of housing loans, the regulator had said in a notification.

In addition, the NHB has also directed all the housing finance companies to have a uniform and not differential rates of interest for old and new borrowers that have the same credit or risk profile.

Source: Business Standard

CB sheds Rs 5k cr of high cost deposits

Mumbai: Central Bank of India has shed around Rs 5,000 crore of high cost deposits in the first half of the current fiscal to protect its net interest margin (NIM), a top official of the public lender has said.

"Shedding of high cost deposit is necessary in the current interest rate environment. At Central Bank of India, we have shed around Rs 5,000 crore of high cost deposits in the first half of this fiscal," Executive Director V R Iyer said.

She said the bank is continuously evaluating its deposit portfolio to adjust high cost of borrowing in the present environment.

The city-based public sector lender, which has been witnessing a deposit growth of over 18 per cent in the first eight months of this fiscal, is also hopeful of posting around 20 percent growth in advances during this financial year.

"Though advances are little subdued as of now, we are hopeful of posting a 20 per cent growth in advances in the current fiscal," Iyer said.

About sectors which are showing growth in advances, she said except corporate, others like agriculture, retail and MSME sectors are witnessing good demand in credit as of now.

"We are not facing any pressure on retail or MSME loan portfolio till this time."

About capital raising plans, she said the bank is well capitalised to support credit growth and doesn't need capital in the current fiscal.

The bank had raised around Rs 2,500 crore capital through a rights issue in April to support its growth.

“We have a headroom to raise capital through issuance of tier-II bonds but we are not looking at it in the current fiscal.”

The bank posted 35 per cent decline in net profit to Rs 244.25 crore in the second quarter despite a 34.5 per cent spike in income to Rs 5,234 crore.

Source: Financial Express

Central Bank eyes financing redev projects

Mumbai: Central Bank of India is developing a special home loan product that will allow it to directly finance housing redevelopment projects here, a senior official of the state-run lender has said.

There are hundreds of flats/housing societies that need redevelopment in the metropolis, especially in the island city. But the existing financing model does not allow banks to fund the residents directly or even to the societies, but only a developer/builder.

Also, the exiting regulations do not allow a lender to finance for the cost of the demolition of the old building as well financing the residents for their temporary stay. And if the Central Bank has its way, then it is going to change.

"We are developing a special home loan product that will enable us not only to directly fund the residents of old buildings but also to meet the demolition cost apart from cost for finding a new accommodation during the redevelopment period," Central Bank General Manager Ram Sangapure, who is the man behind this idea.

Explaining the rationale for such a product, he said, "If the Reserve Bank allows them to launch this product, it will greatly help the residents benefit from the TDR (transfer of development right) sales. Currently, developers make huge money out of TDR sales, as they return the newly-developed flats the original owners for free.

TDR means making available certain amount of additional built-up area in lieu of the area relinquished by the owner of the land, so that he can use the additional space either himself or sell it to another in need of the extra built-up area.

Many builders in the centuries-old city such as HDIL and Lodha are heavily into redevelopment market, which is worth thousands of crores.

"The advantage of such a funding is that either the residents can get larger space on additional payments to the society or the society can sell them and pay back the loan before maturity," Sangapure said.

Asked whether the bank has approached the RBI for permission, Sangapure replied in the negative and said the product is yet to be finalised.

He further said the bank is also looking at ways to fund the elderly residents of such projects as they don't have much income barring the pensions.

On whether such a product will bring down the redevelopment financing market, he said it was unlikely as if approved this will be only product in the market.

Already four-five societies have approached the bank for direct financing. And the market is so vast as there are tens of hundreds of old buildings that need redevelopment, Sangapure said, adding the public lender is also talking to Mahda, the state housing development authority.

On whether the bank has set target for this, he said these four-five projects alone will be worth around Rs 96 crore and the initial target is to fund at least 10 societies.

Central Bank is a small player in home loan market, with an exposure of only Rs 6,000 crore as of the September quarter, which was a 22 per cent growth year-on-year.

On whether the bank is facing any delinquencies on the home loan front, he said the bad loan assets in the home mortgage was 3 per cent as of Q2.

Source: Financial Express

No second round of debt restructuring for Kingfisher by banks

Banks have no plans to carry out a second round of debt restructuring of the ailing Kingfisher Airlines which has an outstanding loan of around Rs 6,419 crore, Parliament was informed on Friday.

“State Bank of India, leader of the consortium (of 11 lenders to Kingfisher), has stated that at present, there is no plan,” Minister of State for Finance, Mr Namo Narain Meena, said in a written reply in Lok Sabha.

He was replying to a question on whether lenders are planning to carry out a second round of restructuring of loans to help Kingfisher.

The Minister further said the airline has a total outstanding loan liability of Rs 6,419.60 crore, which include Rs 9,730.37 crore provided to Kingfisher for non fund based activities.

SBI, the minister said, has an exposure of Rs 1,457.78 crore, followed by IDBI Bank (Rs 727.63 crore), Punjab National Bank (Rs 710.33 crore), Bank of India (Rs 575.27 crore) and Bank of Baroda (Rs 537.51).

The other lenders which have provided funds to the airlines include ICICI Bank, Central Bank of India, United Bank of India, UCO Bank, and Corporation Bank.

SBI has already exceeded the exposure limit of Rs 1,436.1 crore in Kingfisher.

Of the total outstanding of Rs 6,419.60 crore, Rs 750.10 crore has been converted into cumulative redeemable preference shares and Rs 553.10 crore as non convertible cumulative redeemable preference shares to be redeemed after 12 years.

Mr Meena further said that Kingfisher is scheduled to start repaying loans to SBI from September 2012. “Servicing of interest is being done with some delay,” he added.

Central Bank to reduce high-cost deposits, push retail lending

In the current scenario of rising interest rates and slowing economic growth, banks are facing a slowdown in the inflow of new corporate-loan proposals, increasing cost of resources and asset quality deterioration.

Mr M.V. Tanksale, Chairman and Managing Director, Central Bank of India, tells Business Line how his bank is coping. The public-sector bank is consciously bringing down the proportion of high-cost bulk deposits in total deposits, focusing on lending to retail, the priority sector and mid-corporate segments, and holding recovery camps for small-ticket loans which have turned bad. Excerpts:

On credit growth

More or less, we are growing in line with the industry. Credit growth is around 14-15 per cent on year-on-year basis. The story is similar on the deposits front. There is definitely a slowdown in credit offtake on year-to-date basis. While retail and priority sector segments are still better off, slowdown is seen on the corporate side.

Credit disbursement on the corporate side is happening mostly from the already existing sanctions pipeline. The existing sanctions pipeline is still good with us but new proposals are not really pouring in.

If at all proposals are coming in then we have reservations, particularly if there is a power project proposal. Firstly, we have to contend with the sectoral cap issue. So if the room is not there then we have to be very selective. Secondly, unless there are proper tie-ups (environmental clearances, raw material linkages, power project agreement, etc) we will not jump into the relationship. Thirdly, unlike in earlier times, if there is a proposal where we could commit to an exposure of Rs 300-400 crore, now we are committing to Rs 100-150 crore. This is for the simple reason that the room available is less and we would like to accommodate more number of players. There is no blanket ‘no' to anything. Even if it is a real-estate-development project, if it is in the affordable housing space then will look at it. But when it comes to commercial real-estate projects, I don't think we are looking at proposals from this segment at all.

Realigning

balance-sheet

We are sincerely working towards realigning our balance sheet by reducing the corporate loan component and increasing the retail and priority sector loan components. So, hopefully, some improvement will be there in the coming few quarters. The results will probably be seen by March 2012. We are very clear that our bank needs to focus on the bottom line rather than the top line.

I am moving across the country, talking to a cross-section of employees to impress upon them the fact that we are a bank with 3,800 branches, we have the requisite technology at our disposal now, and we have the complete range of products and services to compete in the market. We must work for a return on assets (ROA) of 1 per cent. If our ROA is required to be at this level then we will have to look at balance-sheet management properly — where are we loosing out on the income, where can we reduce the cost.

So, it is our constant endeavour to control costs. Obviously, when the high-cost bulk deposit component is reduced the cost of deposits gets reduced. We may not at the same time match this with the same proportion of growth in CASA (current account and savings bank deposits) or core term deposits but we can definitely reduce the high-cost deposit composition.

Reducing high-cost deposits and stepping up mid-corporate exposure.

We can definitely reduce the component of high-cost deposits in our total deposits to 30 per cent from about 33 per cent. Given a chance, we would really like to bring it down to 25 per cent or so by March 2012. It all depends on how exactly the scenario (liquidity and credit offtake) emerges. But we would like to keep it below 30 per cent. We would definitely like to maintain CASA deposits at around 32-33 per cent, which was the position as at March-end 2011, and probably cannot be improved in the current scenario.

But this can be improved by tweaking high cost deposits. If we are able to cap high-cost deposits then CASA deposits will go up, maybe, from 33 to 34 per cent. We are redeeming high-cost, bulk deposits. We will not be maintaining high liquidity just in order to show the balance-sheet size. We will not be worried about the balance-sheet size. We will be worried about the balance-sheet size only through retail liabilities and retail assets.

If we have to improve our yields (on advances) then we will have to selectively go for mid-corporate exposure rather than bulk exposure (large corporates) where the yields are really less. So, we will look to increase our mid-corporate exposure. We are not bullish on taking a Rs 500 crore exposure at the Base Rate. Our corporate-loans exposure is around 63 per cent, which we would like to bring it down to around 58 per cent. For retail customers, whatever rates we are offering are sustainable but for bulk customers who want something extra we cannot offer them that.

Non-interest income

Another avenue on which we are working on is non-interest income. We are developing the marketing team which will push third-party products. The importance of syndication and processing fee is being emphasised. For example, if we do one syndication proposal of Rs 500 crore for a public-sector undertaking, we don't get any processing fee. But if we do five syndication proposals of Rs 100 crore each in the private sector then we earn a good processing fee. So, we are very clear what we want to do. The results will be visible, maybe, after a couple of quarters.

Asset quality

We put our entire bank on the core-banking platform only in December 2010. So, we will be doing a part of the asset recognition through system as of September-end 2011 and remaining part we will be able to do in the next two quarters. This needs lot of data-cleansing. This is one reason impacting the asset quality (of banks). If there is stress on borrower accounts due to market scenario, restructuring has to be done under corporate-debt restructuring. For small-ticket loans, the best way to improve asset quality is to hold recovery camps and have very objective one-time settlement scheme. So, we recently revisited out one-time settlement scheme, particularly for the small-ticket borrowers (those with a loan outstanding of up to Rs 10 lakhs), look objectively at their repayment capacity and get into settlements fast. So, we don't hang on to the cases for years on end. If we can really improve the mechanism for recovery through recovery camps and have a proactive approach to the borrowers through settlements, the recovery improves. Borrowers also get enthused as they close the old loan and become eligible for fresh loans in the future. Some of the borrowers may have fallen on bad days due to circumstances as they could not generate sufficient cash flows to repay. So, the right approach is to proactively reach out to them rather than through the process of recovery mechanism through notices and court.

Capital raising

In April, we went in for a rights issue and raised almost Rs 2,400 crore. So, with that we are adequately capitalised. Unless credit growth goes beyond 20 per cent, I don't think we need any capital, at least till December. Up to 20 per cent credit growth is sustainable with the current level of capital. If at all some small capital dose is required, we will go through the qualified-institutional-placement route. Neither the current market scenario is conducive for capital-raising nor do we have compulsion. At least in 2011-12 we don't need any capital. In 2012-13 also we should be able to support ourselves because we have enough headroom available in tier 2 capital. If the credit growth is substantially good then I think the capital demand will really come up only in 2013-14.

Rising Interest rates Hurting growth

It is hurting growth in a way that probably people are not going in for investment credit. What is most important for the economy is that investment credit should happen on an ongoing basis and it is the consumption credit which should get calibrated which determines inflation. So somewhere if the consumption credit gets regulated and calibrated and the investment credit happens on a normal basis, I think, it will be good for the economy. Investment credit is definitely determined based on the interest cost because you have to decide for 15 years the internal rate of return based on certain assumptions. We all started with a base rate of 8 per cent a year-and-a-half back, today we are 10.75 per cent. So, for corporates who had factored in 8 per cent interest cost and maybe an interest rate sensitivity of 1-1.5 per cent, unless they are also able to transmit the cost, it becomes very difficult for them to manage.

ICICI Bank recalls hundreds of credit and debit cards after cloning scare

CHENNAI: ICICI Bank is recalling hundreds of credit and debit cards after being warned by the Chennai city police that customers' data have been stolen. Officials from other banks - private and national - said they were also initiating similar steps.

On October 5, the city police had busted a card-cloning racket. Initially, they received complaints from 64 card users and the number has been increasing ever since.

"Apparently data of several people have been stolen and misused. We advise card users to change their PIN immediately ," said central crime branch deputy commissioner S Radhika.

But neither the police nor the banks have been able to estimate the number of customers affected. The police have arrested Umesh Balaravindran , a Sri Lankan national living in Chennai, and four of his associates who are believed to have cloned credit cards using skimmers that copy data from ATMs. The police said they also bought card details put up on a website. Now the police have reasons to believe that more such gangs could be operating in Chennai and other cities.

Last week, ICICI either blocked or cancelled several cards following breach or suspecting problems. An ICCI spokesperson said the cards will be replaced free of cost within six working days.

"We continuously monitor all card transactions of our customers. If there is some suspicion in any transaction , we call the customer... We advise all customers to be careful, but there no need to panic," the bank spokesperson said.

Many banks have IPS officials on deputation from National Association of Software and Services Company ( Nascom) to monitor such frauds. They also work in collaboration with the city police.

Central Bank of India, which has 25 ATMs in the city, has categorized them as of high, medium and low risk. Officials said nearly 15 of the bank's ATMs are in the highrisk category. "We have CCTVs in all these ATMs apart from armed guards," a spokesperson said.

Source: EconomicTimes

Central Bank to open 101 branches on single day

Pune, Oct. 21: The Central Bank of India will open 101 new branches across the country on December 21, 2011 to mark completion of 100 years of its existence.

The bank also plans to open new ATMs to take their number all over India to 2011, Mr Mohan Vasant Tanksale, Chairman & Managing Director of the bank, said.

On his maiden visit to its Pune Zonal Office, Mr Tanksale said that the western part of Maharashtra held vast potential for increasing business. More customer-friendly products and facilities are in the pipeline and will be launched shortly, he added.

Ms Sandhya Dalal, Head Cashier of Bajaj Residential Area Branch, who foiled an attempt of dacoity at the branch by her presence of mind, was felicitated by the CMD during his visit.

Central Bank launches direct taxes payment facility

New Delhi, Oct. 21:Central Bank of India has launched a direct taxes payment facility through the bank's ATM network. This facility was inaugurated by Mr C. R. Sundaramurti, Controller General of Accounts, at the bank's Connaught Circus branch in the Capital on Thursday.

Speaking on the occasion, Mr Sundaramurti urged banks to provide IT-enabled services so as to make banking a hassle-free experience for all. Mr M. V. Tanksale, Chairman and Managing Director of the bank, and Executive Directors, Ms V. R. Iyer and Mr R. K. Dubey were present on the occasion.

SBI, Central Bank, Syndicate, Canara extend home loan tenor upto 30 years as rate hikes bite hard

MUMBAI: After goading by the Government and fearing risks to asset quality, a number of state-run banks, led by SBI, Central Bank, Syndicate and Canara, have decided to raise home loan tenors to 25 to 30 years or till the borrower touches 70, well past the working age.

State Bank of India took the lead and has reportedly decided to extend the tenor of home loans by 10 years or up to 30 years, while others are doing this on request.

"We have decided to increase the home loan tenure by up to 10 years to 30 years and up to the age of 70, depending on the customer profile. Our Managing Director (S Krishna Kumar), is likely to announce this tomorrow," a senior SBI official told PTI, requesting anonymity. Kumar, who heads the national banking vertical at SBI, could not be reached for comments.

Fearing more bad loans in the system as interest kept on rising following tight monetary policy being under taken by RBI, the Finance Ministry had recently written to the public sector banks (PSBs) to increase the loan tenor instead of increasing the monthly repayment (EMI) amount.

However, all the banks that PTI contacted for reaction on the issue, said this guideline has been in existence for many years now and they had been implementing it on case to case basis. Over the past 19 months, RBI has increased interest rate by 325 basis points (one basis point is one-hundredth of a percent) to 8.25 per cent to batten down stubbornly high inflation, which stood at 9.72 per cent in September.

Generally, home loans are scheduled for 20 years and in some cases up to 25 years, if the borrower will not be retiring by then at 65. Typically on an average, a 25 bps spike in interest rate can push up EMI for a 20-year loan by Rs 17 per lakh. With regular hikes by RBI, EMIs have been stretched too far.

The RBI has hiked policy rates by 325 basis points since March 2010, following which most banks have raised lending rates by up to 250-300 bps making loans dearer. Central Bank of India Chairman and Managing Director M V Tanksale, too, said his bank is open to requests from the borrowers over increasing loan tenors.

"The important question is the cash flow of the borrower, if it increases, he/she does not require an increase and vice versa. I think this has been a very proactive step on the part of the government to issue such a directive."

When contacted the Mangalore-based Syndicate Bank Chairman and Managing Director B Seth said, "we have always been giving this option to our customers, even before the Ministry's letter. The whole point is to keep our asset quality and we offer such options to customers on request."

Source: EconomicTimes

LIC loan scam: Fresh CBI probe into DB Realty

Mumbai: Nearly a year after it busted an alleged bribes-for-loans scandal involving LIC Housing Finance, some public sector banks and a host of private companies, the CBI has quantified the loans disbursed in the case at Rs 12,000 crore.

The agency has also registered a fresh Preliminary Enquiry (PE) against DB Realty, as it allegedly availed of a loan of Rs 300 crore even though it failed the eligibility norms for corporate loans.

The CBI had last November claimed that it had smashed a massive loan racket and alleged that a Mumbai-based financial services company, Money Matters, was bribing senior officials of PSU banks and financial institutions for large-scale corporate loans.

It had arrested eight people, including the CEO of LIC Housing Finance, and top officials of Money Matters, LIC and the banks, but said quantification of size of the loans could be done only at a later stage in the probe. All the accused have since been released on bail.

The agency had registered five cases in the alleged scam and filed its first chargesheet in February. The rest were filed last week. The chargesheets name LIC Housing Finance CEO Ramchandran Nair, LIC’s Secretary (Investment) Naresh K Chopra, Bank of India General Manager R N Tayal, Punjab National Bank’s Deputy General Manager Venkoba Gujjal, Money Matters CMD Rajesh Sharma, its officials Suresh Gattani and Sanjay Sharma, and Central Bank of India Director (Chartered Accountant) Maninder Singh Johar.

“During our investigation we found DB did not pass even the basic eligibility for such corporate loans, but LIC Housing Finance sanctioned them a loan of about Rs 300 crore,” said a senior CBI officer from the probe team.

The new PE against DB was filed after investigators found a mismatch in the financial data of the company. “Numbers were inflated, forged and original documents too show astronomical figures,” the officer added. The enquiry was handed over to the Bank Security and Fraud (BS &F) cell last month.

LIC Housing Finance CEO Nair, the CBI alleged, played a key role in getting loans sanctioned for DB. “Nair’s assets multiplied in the last four years. He owns property worth nearly Rs 40 crore,” the officer said, adding that a Disproportionate Assets (DA) case has been registered against Nair, Gujjal and Chopra by the CBI’s Anti-Corruption Cell in Mumbai. The Delhi unit of the cell has registered a DA case against Johar.

The chargesheets allege that Nair, in connivance with Money Matters CMD Rajesh Sharma, would get loans sanctioned and earn commissions. While the CBI is still unsure if the 40 beneficiaries who availed loans though Money Matters were aware of its alleged dubious ways, it says DB Realty knew of the scam.

The chargesheets also allege that in 2009-10, similar loans were availed by the Mantri Group, another leading real estate company. According to the CBI, Rajesh Sharma had paid Nair a bribe of Rs 45 lakh to get a Rs 100 crore loan sanctioned for Mantri. In an affidavit filed before the CBI, Mantri denied any involvement in the scam.

The chargesheet also says that of the total commissions earned by Money Matters, 45 per cent came from LIC Housing Finance while the rest was contributed by Punjab National Bank, Bank of India and Central Bank.

Senior lawyer Harihar Bhave, who represents Nair, said he could not comment as he was yet to get the chargesheeet. “We would not know what exactly the chargesheet claims. We have not been able to get a copy of the chargesheet so far,” he said.

COMMENT FROM DB REALTY SPOKESPERSON

DB Realty has provided all documents as requested by the CBI and is cooperating fully. At this stage, we cannot disclose the subject matter or details of what has been shared with the CBI.

DB Realty would like to clarify that there has been no allegation of inflation of net worth, forgery of documents or the company not meeting the qualification parameters for the loan availed. DB Realty would also like to state here that of the Rs 188 crore availed from LIC, currently, only an amount of Rs 27 crore is outstanding. Again, a reflection on the low debt ratio of the company. All documents relating to the net worth of DB Realty and its group/associate companies are in the public domain viz. the DRHP and the Annual Reports and the same can be verified independently.

Also, we would like to clarify that there is no chargesheet filed against DB Realty or any of its officials in the LIC Housing matter.

As a reputed publication, DB Realty requests you not to publish factually incorrect and unverified information. Such false allegations only point to mala fide intentions aimed at hurting the image of the company. In such a situation, we will be left with no option but to take legal recourse against the publication.

Source: Financial Express

Loan scam: Top brass chargesheeted

Mumbai: CBI has filed charge sheets in four cases registered by it last year against senior officials of a public sector bank and a private company for allegedly receiving kickbacks in sanctioning of loans.

Chargesheets have been filed against former LIC Housing finance CEO Ramchandra Nair, the then General Manager of Bank of India R N Tayal, the then Deputy General Manager of Punjab National Bank Venkoba Gujjal and Rajesh Sharma, Chairman and Managing Director of private financial services firm Money Matters.

The charge sheets also named two employees of Money Matters - Sanjay Sharma and Suresh Gattani - as accused.

According to CBI, the accused bank officials colluded with the private company to sanction large loans to housing firms, overriding mandatory conditions for such approvals. They were also gathering confidential business information from financial institutions.

According to the charge sheets, Nair took a bribe of Rs 16 lakh, Tayal of Rs 45 lakh and Gujjal of Rs 25 lakh.

All the accused have been booked on the charge of criminal conspiracy under section 120-B of IPC and various sections of Prevention of Corruption Act. CBI had earlier also filed a charge sheet against Maninder Singh Johar, Director of Central Bank of India in the same scam.

In the first charge sheet, CBI said the probe showed the then Secretary (Investment) LIC had received Rs 16 lakh as illegal gratification in three installments from the CMD of Mumbai-based private Financial Services Company.

In the second case, CBI said the CEO and Director, LIC HFL, had allegedly received Rs 45 lakh as illegal gratification from the CMD of the Mumbai-based private company for sanctioning high value loans to the client of accused private Financial Services Company, the spokesperson said.

In the third case, the then General Manager, Bank of India, had allegedly received Rs 25 lakh as illegal gratification from the CMD of the Mumbai-based private Financial Services Company for sanctioning high value loans to the client of accused private Financial Services Company, the CBI alleged.

In the fourth case, CBI alleged the then Deputy General Manager of Punjab National Bank, Delhi, had allegedly received Rs 7.5 lakh as bribe against the demand of Rs 20 lakh from the CMD of Mumbai-based private Financial Services Company for sanctioning high value loans to the client of accused private Finanial Services Company.

While all the accused were arrested soon after the cases were registered against them on November 22 last year by the economic offences wing of CBI, the accused were released on bail later.

During searches conducted by CBI, the agency had claimed to have found investments in crores of rupees by the accused bank officials in real estate.

The agency also claimed to have recovered documents showing Nair allegedly made Rs two crore investment, Gujjal's real estate investment was put at Rs 2.5 crore and Tayal's at Rs one crore.

The agency had also recovered cash and gold and silver jewellery from the accused's residences. Rs 21 lakh and gold ornaments worth the same amount was recovered from Gujjal's house, Rs 2.5 lakh in cash and Rs 20 lakh in bank accounts was seized from Nair's residence and Rs four lakh and 1.2 kilograms gold and one kilogram silver were found in Tayal's residence.

CBI has also told the court that it was further probing the scam and may file supplementary charge sheets.

Source: Financial Express