HDFC Bank not to cut its ATM rollout plans

HDFC Bank does not intend to cut on its automated teller machines (ATM) rollout plan in spite of the Reserve Bank giving an in-principle nod for white label ATMs, which will be operated by non-banking companies, a top official said today.

The bank will not cut its ATM rollout target as a result of the RBI’s draft guidelines allowing non-banking entities to set up ATMs, also called as white-label ATMs, said Mr Rahul Bhagat, HDFC Bank Head (Direct Banking Channels).

Asked about the cost of setting up an ATM, Bhagat said up to 50 per cent of transactions in its existing ATMs are done by non-HDFC Bank account holders, resulting in good fee income, which will take care of the installation cost.

Moreover, he pointed out that when a bank sets up an ATM, it is also about giving the customer a feel of the service that each bank wants to give out on its own.

Meanwhile, HDFC Bank today tied-up with Visa and Monitise—promoted Movida to facilitate mobile—based transactions for its debit and credit card—holders.

Under the service, mobile phone users using any handset and even without Internet connectivity will be able to pay for services like electricity bills and mobile recharges.

HDFC Life opens office in Dubai

HDFC Life, a private life insurance company from India, has launched its first international operations with the opening of its representative office in Dubai.

It is a joint venture between Housing Development Finance Corporation Ltd (HDFC) and Standard Life plc, the leading provider of financial services in the UK.

“The launch of our operations in Dubai is the beginning of HDFC Life’s expansion into the region. The vast NRI population would be able to closely understand the benefits of HDFC Life’s wide ranging product portfolio catering to their protection, investment and savings, and retirement needs.

“The objective of this office would be to serve our existing policy holders and further understand their financial needs better,” Mr Anup Rau, Head, Sales and Distribution, HDFC Life, said at a press conference here.

Commenting on the strategy and reasons for international expansion, Mr M.I. Taher, Vice President and Head, International Business — HDFC Life, said GCC is an important region for the company’s growth and UAE with a large NRI population base, is key to this growth.

“The objective of our operations in Dubai is the first step towards understanding the Gulf market, the customer segments, apart from serving our existing policy holders and further understanding their financial needs. Our presence in this region will help us research the market better and devise new products catering to the specific needs of the NRIs here,” he said.

HDFC Bank in ‘Harvard Business Review’ elite growth list

HDFC Bank has been featured by ’Harvard Business Review’ in a list of 10 companies globally that have grown their net income by 5 per cent every year for the 10-year period ended 2009, the private lender said today.

The list is based on a survey, ‘How the growth outliers do it’, which covered 2,347 organisations, all with market capitalisation of $1 billion.

‘Harvard Business Review’ is a reputed general management magazine.

“These companies have been recognised for prospering over the long-term and being more stable and innovative than their competitors,” the survey report said.

“They (the selected companies) make small bets early and diversify their portfolios, are active acquirers, have processes that support speed and flexibility, build innovations into everyday operations and hold to their talent and keep their senior leadership stable,” it said.

Referring to HDFC Bank, the report said the Indian lender had a history of entering into new growth markets through initiatives like the launch of international debit cards, tele-banking, mobile banking and foreign exchange services, among others.

Besides HDFC Bank, the other Indian company to be featured in the list is IT giant Infosys.

The list comprises three companies from the US, two each from India and Spain and one each from Japan, Slovenia and China.

HDFC Q3 net up 10% on robust loan growth

Mortgage lender HDFC has posted a net profit of Rs 981.25 crore for the quarter ended December 31, 2011, on the back of higher loan approvals and disbursements.

The company had reported a net profit of Rs 890.88 crore for the October-December quarter of 2010-11.

The company’s total income stood at Rs 4,472.51 crore during the quarter, up from Rs 3,321.04 crore in the corresponding quarter last fiscal, Housing Development Finance Corporation said in a filing to the BSE.

As of December 31, 2011, the company’s loan book stood at Rs 1.32 lakh crore compared with Rs 1.09 lakh crore in the year-ago period, it said.

Net profit of the company during the April-December period stood at Rs 2,796.48 crore compared with Rs 2,393.01 crore in the previous fiscal.

Total income during the nine-month period stood at Rs 12,463.25 crore against Rs 9,093.21 crore in the corresponding year-ago period.

Cross currency interest rate swaps

The figures are not comparable as the company changed its accounting policy for cross currency interest rate swaps.

These swaps, which were earlier recorded at fair value, are now being recorded at a higher liability by marking only the foreign currency component to spot rates and excluding the benefit of interest rate differentials, HDFC said.

“... Had the corporation followed the earlier method of accounting... net profit for the nine months ended December 31, 2011, would have been lower by Rs 54 crore,” it said.

Net interest margin

Net interest margin (NIM) of the company stood at 4.3 per cent at the end of December 31, 2011. Gross non-performing loans stood at Rs 1,109 crore or 0.82 per cent of total advances during the quarter.

Shares of the company were being quoted 1.83 per cent higher at Rs 693.90 apiece in the late afternoon trade on the BSE.

Pay for inoperative a/c, cash deposits

You will now have to pay if you don't operate your savings or current account for a year. HDFC Bank, the second largest private sector lender in the country, has decided to charge Rs 50 per month if a customer's savings or current account has remained inoperative for a year.

Brace yourself for more. The bank will also charge its "non-managed" customer if he deposits over Rs 100,000 in cash during a day in their savings account at the home branch. Non-managed customers are typically those clients who do not have a private banking or wealth management relationship with the bank. The customer will have to pay Rs 25 for every Rs 50,000 cash deposit in a day over Rs 100,000 in their home branch.

These fees are part of the new set of service charges introduced by HDFC Bank from January 1, 2012.

According to senior officials at HDFC Bank, the bank introduced these charges after reviewing and benchmarking them with its peers in the public sector, private sector and foreign banking space.

"These charges are not something new. Many of the public sector, private and foreign banks already charge their clients on these grounds. We found some of these charges logical and hence decided to introduce them. For instance, we don't want our savings account clients to use these accounts for business purpose. Hence, we decided to levy a charge on cash deposit at the home branch beyond Rs 100,000 a day" said an official.

The official added that the "managed clients" mostly do large ticket transactions, and hence are excluded from this charge.

The new service charges also include penalty if a standing instruction is rejected, fees on regeneration and physical dispatch of personal identification number (PIN) for phone-banking and internet banking, charges on any deliverable returned due to change in consignee's address.

"Some of these charges are introduced keeping in mind the customers' interest. We want to encourage our customers to generate their net banking PIN online because the scope for fraud increases if there is a physical dispatch. Hence, this charge was introduced. Similarly, we have decided to charge only if a consignment is not delivered because of negative reasons like the consignee has changed the address. There is again a scope for fraud there," said another official of the bank.

HDFC Bank is the first large private banks to introduce new charges and revise existing fees on savings and current account this calendar year.

HDFC Bank has so far not increased the interest rate on savings deposit accounts after the rate was deregulated by the Reserve Bank of India (RBI) late October, 2011. Some of the mid-sized private lenders including YES Bank, Kotak Mahindra Bank, IndusInd Bank, Ratnakar Bank, and Karnataka Bank have already announced a hike in their savings deposit rates.

The bank has also decided to levy a penalty for non-maintenance of minimum balance on monthly basis instead of quarterly basis.

So, a regular savings deposit account holder in one of HDFC Bank's metro or urban branch will have to pay Rs 250 per month if his average monthly balance in between Rs 5,000 and Rs 10,000. If the average monthly balance is less than Rs 5,000 then the charge will be Rs 350 per month.

Earlier, the bank used to charge Rs 750 per quarter for non-maintenance of minimum balance.

The bank has also discontinued the option of maintaining a fixed deposit of Rs 50,000 and Rs 100,000 in lieu of average quarterly balance in the savings accounts.

If the average monthly balance is not maintained, customers will be permitted only three branch transactions through cheques and two cash transactions free of cost in a month. For every additional branch transaction there will be a charge of Rs 75 and the customer will have to pay Rs 100 for every additional cash transaction.

The private lender also said a customer will have to pay Rs 500 if he closes his savings account within a year. The client, however, will not be charged if the account is closed within 14 days. Earlier, the account closure charge was only Rs 100 but only if the account is closed after 14 days and before six months.

The charges on cheques deposited but returned unpaid, photo and signature attestation, address confirmation have been doubled to Rs 100 per instance.

Source: Business Standard

HDFC Bank, ING Vysya objects Wockhardt paying SBI at par with other FCCB holders

HDFC Bank and ING Vysya, domestic lenders to Wockhardt, have objected to the pharma company offering SBI the same treatment as agreed with other FCCB holders who are being paid following the court order.

Wockhardt has agreed to pay SBI Rs 242 crore in instalments. However, in 2009 SBI had settled for preference shares against $40 million FCCB it held.

In a recent meeting of the corporate debt restructuring ( CDR) forum, HDFC Bank and ING Vysya made an observation that SBI should not be paid at par with other FCCB holders since they had already accepted preference share as settlement.

But Wockhardt is forced to pay SBI because of a clause that if the pharma company offers a better deal to any other FCCB holders, the same should be offered to SBI.

Source: EconomicTimes

HDFC Life launches online term insurance plan

Private insurer HDFC Life has augmented its online channel with the launch of ‘HDFC Life Click2Protect’ — an online term insurance plan.

The plan is aimed at those who seek insurance cover at nominal premiums against their liabilities, HDFC Life said in a release issued here.

“HDFC Life Click2Protect is available in more than 750 cities across the country, the highest reach of an online term insurance plan in the industry. The objective of launching HDFC Life Click2Protect is to cater to the needs of informed customers based not only in metros, but also in Tier 2 and 3 cities in the country,” HDFC Life Executive Vice-President and Head, Marketing and Direct Channels, Mr Sanjay Tripathy, said.

This plan is aimed at an informed customer who understands his liabilities, the extent of cover needed and is fairly conversant with online purchase practices.

Click2Protect offers the convenience of experiencing a simple, fast, convenient, transparent, and cost-effective way of buying a life insurance plan, Mr Tripathy added.

Apart from HDFC Life Click2Protect, HDFC Life also offers other online products such as HDFC SL Young Star Super II and HDFC SL Crest.

HDFC Life is a joint venture between Housing Development Finance Corporation Ltd and Standard Life plc, a leading provider of financial services in the United Kingdom.

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

Punjab National Bank raises NRE deposit rates to 9.25 per cent

MUMBAI: The second largest public sector lender Punjab National Bank today increased the interest rates on NRE term deposits ranging one to five year period to 9.25 percent. The rates will be effective from January 1, the bank said in a filing to the BSE.

Last week, many other banks HDFC Bank, Yes Bank, Federal Bank, Allahabad Bank and Dhanlaxmi Bank among others had steeply increased the interest rates on select maturities of NRE deposits.

HDFC Bank increased the interest rates on NRE deposits of Rs one crore and above with a maturity of one to two year to nine percent against 3.82 percent earlier. It has, however, left the NRO deposit rates unchanged.

The state-run Allahabad Bank has also raised its NRE deposits up to 7.5 percent. The Kolkata-based bank will now offer 7.5 percent for one to two years tenor (against 3.82 percent earlier), 7 percent on deposits of two to three years (from 3.51 percent), and 6.75 percent for those above three years (from 3.64 percent).

Also, the Kochi-based Federal Bank and Laxmivilas Bank have also increased its interest rates on NRE deposits for various slabs in order to attract non-resident deposits. Another private sector lender IndusInd Bank also increased pricing 9.25 percent among the state-run banks Dena Bank offers the highest pricing at 9.6 percent. Similarly, Yes Bank came out with a 15 month-and-15 days to 16-month NRE deposit offer, promising depositors 9.60 percent interest.

Source: EconomicTimes

With cost control, ‘we are confident of making profits in 2011'

HDFC Life Insurance, the industry's third largest private player, expects to report profits this year. It will do this by controlling costs, said Executive Director and Chief Operating Officer, Mr Paresh Parasnis, in an interview with Business Line.

A fellow of the Institute of Chartered Accountants of India, Mr Parasnis' responsibilities include driving and spearheading several key initiatives of HDFC Life, such as setting up branches, driving sales and servicing strategy, leading recruitment, contributing to product launches and performance management system, overseeing new business and claims settlement. Excerpts:

The insurance regulator IRDA has released the final IPO guidelines. When do you plan to come out with an IPO?

We have certain business performance expectations internally and we are regularly reviewing all the parameters to achieve and maintain them. Keeping in mind the current industry scenario, we will wait for stability in our performance and the business parameters to be in line with our expectations before taking the company to the public.

On the other hand, we are also awaiting more clarity on the regulatory framework. Though the IPO guidelines have been finalized, the insurance Bill needs clarity on whether FDI can be increased up to 49 per cent.

IRDA has said that embedded value, and not profitability, will be the main criterion for an IPO. What will be the implications for the insurance industry?

Since the Indian life insurance industry is still in its initial stage, the concept of Embedded Value (EV) to arrive at the valuation of a life insurer is a welcome move and a step in the right direction. An internationally accepted norm, EV is the right measure of calculating a life insurer's valuation. It reflects the future revenue that a life insurer would earn, which is not the case with Indian GAAP profits.

When do you expect to break even?

If we see our performance in the first half of the financial year 2011-12, our total premium has grown by 16 per cent. Renewal premiums have grown by 38 per cent — a very good sign and which reflects our persistence. Conservation ratio (individual business) stood at a very healthy 81 per cent in H1, higher than our peers. The 13th Month persistency ratio was at 80 per cent.

Our expense ratio has come down to 11.9 per cent in H1, compared with 20.2 per cent during the same period last year. Continuous monitoring and focused efforts on controlling cost put in last year have helped reduce the operating expense ratio. Capital infusion has been scaled down over the last 3 financial years with no additions in the current fiscal. Generation of surplus on existing policies has reduced the need for capital draw-downs.

All these would start reflecting well on our profitability as we move forward. So we are not only confident of breaking even, but also of making profits this year.

What is your fund raising plan for this year?

Based on our business plan during the start of the financial year 2011-12, the total capital requirement was expected to be around Rs 100-120 crore. Based on our business performance during the first half of this year, and the fact that there has been no capital infusion during this year so far, we expect to manage the year without any capital infusion.

How much does bancassurance contribute to your overall portfolio? Do you see it changing?

Bancassurance's contribution to our overall portfolio has always been about 60 per cent. In the Indian life insurance industry, the bancassurance model has proved to be the most successful and profitable so far. So, we expect bancassurance to continue to contribute a majority share to our overall sales pie. At the same time, however, we are focusing on scaling up our other distribution models such as retail, direct, online, and broker channels.

deepa.n@thehindu.co.in

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.

Now, pay Rs 500 to close your HDFC Bank savings account

MUMBAI: HDFC Bank, the lender with the highest proportion of low-cost deposits to total, has raised charges on closure of savings bank accounts and other services as it attempts to ring fence customers from flocking to rivals who offer higher rates on these deposits.

It is the first lender to raise such charges probably to save its profitability after the Reserve Bank of India freed up the rates that banks pay their customers in their savings bank accounts, said two bankers who did not want to be identified.

For closure of savings account, an HDFC Bank customer, depending on the nature and tenure of the account, will have to pay a fee of Rs 500 and if the average monthly balance falls below Rs 20,000 in nonurban centres, it will charge Rs 500 a month, according to its website listing various charges effective January 2012.

Source: EconomicTimes

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 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

Interest rates have peaked: HDFC

Mortgage leader HDFC's Managing Director Renu Sud Karnad today said interest rates have peaked and there is little possibility of further rate hike.

"I think interest rates have almost reached peak," Karnad said after launching women exclusive credit cards of HDFC Bank here.

The Reserve Bank of India (RBI) had last month raised the repo rate by 25 basis points to 8.50% and the reverse repo rate moved up by a similar percentage to 7.50%.

Repo is the short-term rate at which the Reserve Bank of India lends to banks, while reverse repo is the rate at which it gets funds from banks.

This is the 13th time the central bank has increased interest rates since March, 2010, to tame inflation, which is hovering near the 10%-mark.

Meanwhile, India's economic growth rate slipped to 6.9% in the second quarter this fiscal, the lowest in nine quarters, prompting the government to lower its full-year growth projection to 7.3%.

Karnad said sales in the housing sector are temporarily down in 3-4 cities because prices have escalated very much.

"Sales are down in high-end segment were people are waiting and watching," she said.

On easing of housing prices, she said, if correction will take place, it will happen in Mumbai, Delhi and some parts of Bangalore.

There could be correction of 10-15% in some areas, she added.

Source: Business Standard

HDFC Bank, Vodafone India launch mobile banking product for rural coverage

It's a brief moment in the wintry sun for the handful of curious residents of Jhalsu village as a cavalcade of cars descends there on a quiet Saturday morning. Jhalsu is a dusty hamlet with a population of about 3,500 people and is about 35 km north of Jaipur in Rajasthan.

The Deputy Governor of the Reserve Bank of India, Dr K.C.Chakrabarty, is here along with senior officials of HDFC Bank and Vodafone India, to have a look at their pilot project on financial inclusion through mobile banking and get a first hand impression from villagers.

One reaches Jhalsu through a bumpy and winding narrow road off the main highway connecting Jaipur to the municipal town of Chomu.

The landscape is arid but one notices fairly wide use of drip irrigation on the fields on either side of the road. Enquiries reveal that farmers mainly grow Jowar (barley), mustard and wheat in these parts. There is the odd tractor trailer and the occasional overcrowded jeep (reminds you of the Fevicol advertisement!) that cross your path, indicating clearly that bus connectivity is still poor. As you see a few camel-drawn carts and some old men sitting on charpoys on the roadside, covering their heads with colourful turbans, the stereotype picture one has of Rajasthan is complete.

In the afternoon, Dr Chakrabarty launched HDFC Bank and Vodafone India's national initiative for financial inclusion through mobile banking from Chomu, a couple of km away.

He said, “It's the upper echelons of society who are using mobile banking now. We want the poor also to benefit, especially those in remote villages.”

He pointed out that financial inclusion was not the domain of only public sector banks and was happy that private banks such as HDFC Bank had taken the initiative. He added that the business had to be done in a profitable manner and that the RBI did not want anyone to do this as charity.

Under this initiative, HDFC Bank will be able to use select retailers of Vodafone to represent the bank as sub-agents and enable anyone to send money or withdraw cash through their outlets.

A farmer in Jhalsu village loses a whole day's earnings if he goes to a bank branch, a couple of km away, for a simple transaction like depositing or withdrawing cash.

Like so many other small pockets of India, here too bad roads, poor bus connectivity to nearby towns, limited bank branch network, occasional indifference of bank staff and lack of awareness all combine to make this simple task an ordeal. Now, all he would need to do is visit a Vodafone outlet in his own village to open a HDFC Bank mobile bank account.

He can deposit cash at this outlet, which will reflect on his mobile instantly.

He can choose to withdraw it later or send the money to another person by selecting one of the options available on the mobile and authenticate it with a security PIN. The beneficiary or receiver can go to a Vodafone outlet and collect the money based on the SMS he receives.

Importantly, it is a cheaper option than sending someone cash through a money order via the post office. The money order commission is at present around 5 per cent (at the rate of Rs 5 per Rs 100 sent or remitted). Sending money through the ‘HDFC mobile bank with Vodafone m-paisa' arrangement will cost roughly about Rs 1.5 for Rs 100 sent. At the moment, the maximum amount that can be sent through this arrangement is capped at Rs 5,000 per transaction. This at present costs a customer about Rs 95.

Mr Aditya Puri, Managing Director, HDFC Bank, said that charges would come down in future, once volumes go up. Mr Sunil Sood, Director, Business Operations, Vodafone, said the limits on amounts transacted would be increased later after reviewing their experience a few months down the line.

The partnership has begun in the State of Rajasthan where 2,200 retailers across 320 villages and 54 towns are operational. The national roll-out will happen in phases, officials said.

Business strategies

Financial inclusion but language exclusion!

At the launch function of the HDFC Bank Vodafone mobile banking product, a reporter asked the officials about the fact that when money is sent or received, the medium of communication is still in English. How relevant would it then be given the fact that most villagers (for whom this was being launched) may not be familiar with English?

The top officials of both companies conceded the merit in the argument and also said that they were testing the ‘Hindi' version of the product and would launch it within 45 days. Other language versions would also follow suit in course of time, they said. Mr Rahul Bhagat, Country Head — Retail Liabilities, Marketing and Direct Banking Channels, HDFC Bank, said it was a better option to launch a product and improve it based on user experience rather than wait to create a comprehensive platform but one which would take time to execute.

Distribution muscle but also reputation risk

What makes telecom companies a great partner for banks? Telecom major Vodafone India's Director Business Operations, Mr Sunil Sood, pointed out that there were 850 million connections in the country today. Customers had demonstrated their comfort with the instrument and applications as well as options such as ‘prepaid air time'. Mobile phones would, therefore, be the perfect vehicle to reach out to the masses for financial inclusion projects.

Further, it was the distribution muscle of telecom companies that could make a huge difference. Telecom operators had over 2 million retail outlets covering 4 lakh locations, he said.

HDFC Bank has 2,150 branches in 1,141 cities and 21 million customers. Vodafone has over a million retail outlets and 145 million customers. Select retail outlets of Vodafone (filtered on the basis of integrity, financial strength, liquidity and other parameters) would function as sub-agents of the bank.

That's certainly a quantum leap in distribution reach. But that also brings its own challenges — principally the question of reputation risk. As Mr Bhagat put it, “In remote areas and villages, for all practical purposes, the sub-agent (retail outlet of Vodafone) is the bank. The bank's reputation rests on how he behaves with others.”

vageesh@thehindu.co.in

Interest rates have peaked: HDFC MD

NEW DELHI: HDFC Ltd Managing Director Renu Sud Karnad today said interest rates have reached their peak and there should not be further hikes in the future.

"I think it (interest rate) has already reached the peak and I personally feel there should not be any more hike. The recent hike started hurting industry," Karnad told PTI on the sidelines of a CREDAI Summit here.

Last month, the Reserve Bank of India (RBI) raised the repo rate by 25 basis points to 8.50 per cent and the reverse repo rate moved up by a similar percentage to 7.50 per cent.

Repo is the short-term rate at which the Reserve Bank of India (RBI) lends to banks, while reverse repo is the rate at which it gets funds from banks.

This is the 13th time the central bank has increased interest rates since March, 2010, to tame inflation, which is hovering near the 10 per cent-mark.

Karnad expects inflation to come down by April next year. "There are inflationary pressures of course and it does not seem to be coming down. However, with steps being taken, we hope that by March-April next year, there should be some easing," she said.

Source: EconomicTimes

HDFC to enter education sector

Housing finance major, HDFC Ltd, is planning to set up schools and provide allied services like vocational training or teachers' training programmes.

The company, which already offers educational loans through its subsidiary Credila Financial Services Private Ltd, will now provide financial support for setting up educational institutions or improving existing institutions.

A press release issued on Wednesday, quoted Mr Deepak Parekh, Chairman, HDFC, as saying, “To support such an initiative, we will start with some baby steps and envisage building an education organisation on the principles of efficiency, effectiveness, integrity and transparency which have been so successfully applied and institutionalised within HDFC.”

HDFC's strategy is to enter India's vast education sector by way of participating in the segment of schools. The long-term objective is to create a visible impact on school systems across the country by providing school management and other allied services, apart from setting up initial flagship schools, the release said.

Lending, deposit rates unlikely to go up immediately, say bankers

Borrowers may get a respite from rising rates, but depositors may be in for some disappointment. Banks are unlikely to increase either lending or deposit rates immediately, despite the Reserve Bank of India raising key short-term rates by 25 basis points.

Even savings bank deposit holders hoping to see an increase in interest rates following the de-regulation in SB rates may have to wait a while, as bankers don't expect interest rates to go up immediately. However, transaction costs could go up as a result of the de-regulation, bankers added.

The slowdown in credit demand and the good inflow into retail deposits leading to a comfortable liquidity situation have taken the pressure off banks to offer higher deposit rates to attract more funds, said bankers, speaking to reporters after the meeting with the RBI governor, on Tuesday.

Lending, deposit rates

Mr Pratip Chaudhuri, Chairman, State Bank of India, said that banks are unlikely to raise lending rates immediately. “Our compulsion to raise the rates on the lending side would happen only if deposit costs go up. As of today, all banks are seeing good inflow of retail deposits and liquidity is plentiful. And credit demand is not very strong. So, if deposit costs don't go up, there is no immediate need to raise lending rates.''

The loan growth so far has been funded by the normal inflow in retail deposits, he added. “We will have to increase lending rates only if loan growth picks up in the busy season. In the current situation, most of the banks, at least SBI, have a lot of liquidity. In fact, we are thinking of reducing liquidity,” Mr Chaudhuri said.

Mr M.V. Nair, Chairman and Managing Director, Union Bank of India, said that with the rise in repo rates and the de-regulation in SB rates there is an indication of an upwards movement in interest rates. But since the RBI's stance also indicates that further hikes may not happen and a distinct possibility of inflation coming down to 7 per cent, banks will have to weigh all possibilities before hiking lending rates.

“The RBI's policy stance indicates that going forward pressure on inflation and consequently, on interest rate may come down. Therefore, the decision on hiking lending rates has to be taken after considering the pressure on margins that corporates face, especially the small and medium enterprises. So we need to debate this and take a view,” he said.

SB de-regulation

With regard to the SB rate de-regulation, Mr Chaudhuri said most banks are not in a hurry to hike the interest rates on S/B accounts as the liquidity is comfortable. So they would not be very keen or desperate to raise the rates and lose the cost advantage. In any case, depositors looking for higher yields have moved into fixed deposits or into liquid mutual funds.

“Large value SB depositors are moving into the sweep accounts. So we do not think customers are using SB only for the yield. They are using SB for convenience. Unless there are other competing pressures, as of now, the SB rate would continue where it is, at 4 per cent,'' he said.

SB accounts are used by depositors largely as a transaction vehicle and not to earn interest, said Mr Aditya Puri, Managing Director, HDFC Bank. Customers will also consider the advantage between higher return and the service the bank offers before switching from one bank to another for higher SB rates, he added.

“If SB rates go up one per cent, then the difference you (depositor) would gain in the SB account, which has, say, Rs 10,000, is Rs 100 for a year. It is Rs 8 per month. How much are you willing to sacrifice for the service,'' he said.

If SB rates do go up by 100 basis points or one per cent, then banks' margins would be impacted by 25 basis points at the most, as most banks have a 50 per cent share of current accounts in their CASA accounts (current account, savings accounts). The impact on net earnings of banks could be 10 basis points, Mr Puri added.

Banks with smaller savings deposits to benefit

Mr Uday Kotak, Vice-Chairman and Managing Director, Kotak Mahindra Bank, said the de-regulation in SB rates would lead to an increase in savings bank deposit rates. “Yes, it will lead to increase in savings deposit rates. I think better savings rate for customers. But it is too early to say by how much,” he said.

“It will benefit banks with smaller savings deposits. For us savings deposit is less than 10 per cent of our total liabilities, so we have greater flexibility,” he added.