YES Bank plans to expand branches in south to 150

YES Bank, which claims to be the country's fourth largest in the private sector, plans to grow its branch network to between 120 and 150 in the South by year 2015.

This is a sub-target set by the Version 2.0 growth mode that the bank has embarked on since year 2010, says Mr R. Ravichander, bank's Group President and Head Business Development - South.

VERTICAL CLIMB

The bank has been pushing retail business this year as part of Version 2.0. Rather than seek to negotiate a ‘gradient' in terms of achieving incremental targets, it has been bracing itself for a ‘vertical climb' and accomplished till date.

Mr Ravichander said this while speaking to newspersons on the occasion of the launch of the Thiruvananthapuram branch, second in the State after Kochi that opened three years ago.

Version 2.0 is valid for a period of five years from 2010 to 2015, and has mainly set three targets for the bank — growing balance sheet to a size of Rs 1.5 lakh crore (Rs 72,000 crore currently); expanding branch network to 750 (340); and number of employees to 12,000 (5,200).

SAVINGS BANK RATE

It also aims to grow its CASA (current accounts and savings account) from the 17-20 per cent range to 30 per cent by 2015. The bank was the first off the block to raise the savings bank rate to 6 per cent within an hour's time of the deregulation announced by the Reserve Bank.

It has since raised the rate to 7 per cent, and is a market leader. Also, a Yes Bank ATM cardholder is allowed unlimited access to his account, free of cost. The bank has also plans to enter the credit card business, Mr Ravichander said, without elaborating any further.

Uniquely positioned as a ‘knowledge bank' from launch, it has sought to promote what are considered growth/sunrise sectors of food and agri-business, life sciences, energy, infrastructure, media, entertainment and sustainable development.

KNOWLEDGE PARTNER

It has also acted in consort with various institutions and industry bodies such as CII, Ficci, Assocham in its status as knowledge partner and brought out many research papers.

It has looked to induct people from sectors that are critical to the economy to enable the bank to ‘speak the same language' as and when it transacted business with these very sectors.

This was a conscious decision on the part of the bank since it knew that turnaround times were getting shorter in a growingly competitive field.

The young age of the bank is also reflected in its average age of the employees, which is 28. It has also been among the highest recruiters from the B-schools. Last year saw 171 B-school graduates being placed with the bank.

Mr Ravichander said three more branches would be opened in Kerala by March-end.

These are at Changanassery, Malappuram and Kannur. The Version 2.0 mode envisions a branch network of not less than 15 in the State by year 2015, he said.

The State has a lot of business potential from the bank's point of view, with the remittance economy, the food and agriculture and SME/MSME sectors suggesting themselves as immediate choices for business.

The bank already has an impressive list of client list in the State. It is also looking to engage the State Government proactively and has developed tailor-made solutions to serve this sector. 

vinson@thehindu.co.in

YES Bank ties up with Buldana society for doorstep service

YES Bank, which is keen to enhance its priority sector lending, has tied up with the Buldana Urban Cooperative Credit Society to help the Society with its new customer service initiative entailing door-step para-banking services.

The Society has launched a new doorstep service, called Nano Teller, where the credit society employee visiting the customer's house can help him make a deposit or allow withdrawal up to Rs 10,000 from his savings account.

The cash handling would be done by the society's employee using a small swipe card machine and a cell phone.

The society based in Buldhana, Northern Maharashtra, has a business mix of over Rs 3,500 crore.

Through its 230 branches it caters to the business needs of over one lakh customers, who are mainly located in the rural and semi-urban areas of the State.

Mr Ajay Desai, Head of Financial Inclusion at Yes Bank, told Business Line that the bank is providing the National Electronic Fund Transfer (NEFT) facility as a back-end support to the new service. The society is a customer of the bank and by providing NEFT facility it is only adding value to the relationship, he said.

The private sector bank is seeking to leverage its relationship with the Society to source agriculture and micro and small enterprise loans to fulfil the statutory priority sector lending targets.

Mr Shirish Deshpande, CEO of Buldana Urban, said that the service was recently launched in Pune and the society is planning to launch it in another 130 locations across the State.

Due to the initiative, the customer base will get broad-based and also increase the quantum of low cost saving deposits. The society will get money at cheaper interest rate, he added.

Mr Sandeep Pimple, CEO of Upass, an IT solution's company which has developed the mobile software for Buldana Urban said that Nano Teller will help the credit society in servicing remote villages in the State.

A swipe card machine and a low-end mobile will eliminate the requirement for a society branch and other infrastructure like computers and leased lines, he said.

rahulw@thehindu.co.in

CRR cut on expected lines: YES Bank official

Dr Shubhada M. Rao, President and Chief Economist of YES Bank Ltd, said that the CRR cut of 50 basis points in the third quarter review of monetary policy 2011-12 by the Reserve Bank of India is in line with expectation.

Speaking to Business Line over phone, Dr Rao said: “I think our call has come right in terms of being in line with expectation. We did see structural kind of factors creeping into the liquidity deficit. We had anticipated CRR cut of 50 basis points. Quite clearly this is what has got effected.”

Stating that growth, particularly investment-led growth, is the larger concern today, she said that is what the RBI has begun to address. Stressing the need to spur and provide impetus to investments, she said this obviously cannot be done in isolation. This needs to be very comprehensively backed by the policies at the Government level, because monetary policy alone cannot bear the burden.

Dr Rao said that it has to be complemented with Government measures. “To spur investments, we need a combination. If the Government shows its indication through the Budget, that is the time we believe there is the complementarity in effort. Then the RBI can back it up with a cut in repo by 50 basis points.

Stating that there are still upside risks in inflation, she said the trajectory of inflation is in line with what the RBI has in mind. “There are no nasty surprises on inflation yet. But with upside risks, they have not therefore hurried on rate call on repo rate,” she said.

If the inflation does indeed pan out the way it has been anticipated by March going well below 7 per cent, then we will see a chance of the RBI cutting the repo rate in March, she added.

vinayakaj@thehindu.co.in

Yes Bank, Indiabulls Securities in alliance

The securities broking firm Indiabulls Securities and mid-sized private lender Yes Bank today entered into a mutually beneficial cross-selling alliance to offer premium security and capital market services to the customers of Yes Bank and complete banking services to the customers of Indiabulls Securities.

This two-way referral arrangement will benefit customers through its superior services and will have multiple options for trading in equity shares, online or off-line, an IndiaBulls statement said.

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

YES Bank hikes savings bank rate by 100 bps

YES Bank has hiked interest rate by 100 basis points to 7 per cent on savings bank deposits with balances of over Rs 1 lakh.

The bank offers 6 per cent interest on savings bank deposits for balances below Rs 1 lakh.

This is the second time that YES Bank is hiking interest rate on savings bank deposits after the RBI deregulation.

For the non-resident savings accounts (NRE and NRO), the bank has raised the interest rates by 200 bps to 6 per cent for balance of up to Rs 1 lakh and by 300 bps to 7 per cent for over Rs 1 lakh balance, said a press release issued by the bank.

Further, the interest rates on NRE Fixed Deposits, which were earlier regulated and linked to LIBOR, has also been increased to mirror the resident term deposit rates of 1 year and above, with a peak rate of 9.6 per cent currently. This is in response to the recent development where the RBI deregulated the non-resident deposit rates, said the release.

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

Muthoot to write down a ‘family constitution'

The Kerala-based Muthoot Group is “thinking of having a written down family constitution,” the Muthoot Finance Ltd's Managing Director, Mr George Alexander Muthoot, said here today.

Speaking at the third edition of the Family Business Conference organised here by the Madras Esplanade Round Table 30 and Chennai Business School, Mr Muthoot said that up till now the group just followed a tradition, but it would have a ‘family Constitution'.

The conference deliberated on how to sustain a family-run business down several generations. Two speakers at the conference — Mr Muthoot and Mr Vellayan Subbiah of the Murugappa Group — stressed the importance of having regular family meetings to thrash out any differences.

“We have our differences but they all get sorted out,” Mr Muthoot said.

He said that often issues within a family were small and personal, like some members of the family indulging themselves. Whenever such complaints came to him from some family member he would “turn a blind eye”, he said. That approach “has stood us in good stead,” he added. Pointing out the salient differences between professional-run and family-run businesses, Mr Subbiah said that while the former set great store in values such as innovation and empowerment, the latter put their faith more in values such as courage and dignity.

Mr Subbiah said that over 5,000 family-run companies existed in the world, and over 3,000 of them were in Japan. Most of the 3,000 are “deliberately small” and only 6 per cent of them employ over 300 people. Typically, they are conservative and invest much in skills and loyalty of their employees.

Speaking on the subject of raising finance, Ms Kavita Venugopal, Group President and Chief Risk Officer, Yes Bank, said that when it came to funding, banks these days look at aspects such as corporate governance, transparency and regulatory compliance, apart from business plans and potential.

Prof Nandini Vaidyanathan, Founder and Mentor, Carma Ventures, gave several examples of how the digital media was transforming the way businesses are being conducted today. Listening to social media is an indispensable aspect of today's business, she said.

mramesh@thehindu.co.in

Spurt in ATMs as banks look to shore up fee-based income

The relaxation of norms for using ‘other bank' ATMs by the Reserve Bank of India in 2009 seems to have encouraged banks to set up more ATMs across the country in order to garner fee-based income, acquire new customers as well as to service the existing ones.

There has been a 24 per cent growth in the number of automated teller machines set up by banks to 74,505 ATMs as on March 2011, according to statistics available in the latest ‘Report on Trends and Progress of Banking in India' released by the Reserve Bank.

The central bank had initially completely waived off transaction charges for using ‘other bank' ATMs for a customer. However, later this was restricted to five transactions (financial and non-financial) a month.

The ‘Indian Payment Card Industry Survey 2011', conducted by Atos Worldline suggests that the number of ATMs is likely to increase to over 92,000 in 2011-12.

Banks consider ATMs to be an integral part of their branding, service delivery and expansion strategy. Therefore, most of them are enriching their ATM service offerings and increasing their ATM base.

The spurt in the number of ATMs can also be attributed to banks' attempt to divert customers away from branches to alternative channels to enhance efficiency.

Public sector banks seem to have taken a lead in the expansion process by installing more number of ATMs. More than 65 per cent of the total 74,505 ATMs belonged to the public sector banks as at end-March 2011, the central bank data said.

Setting up an ATM entails a cost of about Rs 5 lakh. “It is worth making this investment as an ATM brings down the overall transaction cost to a great extent. Moreover, we earn interchange revenue which adds to our fee-based income,” said Mr S. L. Bansal, Executive Director, United Bank of India.

Off-site ATM

The Reserve Bank report, however, suggests that the percentage of off-site ATMs to total ATMs witnessed a marginal decline to 45.3 in 2010-11 from 45.7 in 2009-10.

“From the point of view of banking penetration, off-site ATMs have more relevance than on-site ATMs. Out of the total net increase in ATMs last year, only 44 per cent were off-site ATMs,” the RBI report said.

Explaining the reason for the lower percentage of offsite ATMs, Mr Aspy Engineer, President, Direct Banking, YES Bank, said, “Public sector banks have a huge branch network so their natural choice will be to set up an ATM at their branches first and then to look for offsite ATMs.”

Central bank prefers higher deposit and lower lending rates

Asks banks to settle for lower margins, boost efficiency.

The Reserve Bank of India has exhorted banks to improve the country’s savings growth rate by offering higher rates on deposits, even if it means bringing down the net interest margin (NIM).

“The NIM of the Indian banking system is higher than that in some of the other emerging markets, even after accounting for mandated social sector obligations such as priority sector lending and credit support for the government’s anti-poverty initiatives,” the central bank said in the Trend & Progress report on banking released here on Monday. NIM is broadly the difference between the interest earned and interest expenses.

The current term deposit rates are around 9.5 per cent for maturities between one and three years.

The RBI has also said lenders should give out loans at lower rates of interest to boost investment through efficient channelising of savings in the economy. According to the report released by the central bank, the average NIM for scheduled commercial banks on the whole increased to 3.69 per cent in 2010-11 from 3.29 per cent in 2009-10. “While a higher NIM contributes to profitability, it also implies a higher cost of financial intermediation in the economy, which is considered a sign of inefficiency,” the RBI explained.

The central bank also said savings bank deposits may no longer remain a cheap source of funds for banks.

“The upward revision in the savings bank deposit rate from 3.5 per cent to four per cent and deregulation of the interest rate on savings bank accounts may improve savings deposit mobilisation going forward. However, in a competitive environment, with the deregulation of interest rates, savings deposits will be no longer be less expensive as they were in the past,” the RBI said. Following the deregulation, four private sector banks, YES Bank, IndusInd Bank, Kotak Mahindra Bank and Ratnakar Bank, have raised the rate by 150-200 basis points. Public sector banks, which control more than 70 per cent of the deposit market, are yet to announce a hike in their savings bank interest rates.

The RBI noted savings bank mobilisation decelerated in 2010-11 and the shift of funds was towards term deposits, which offered attractive interest rates. While the growth in savings bank deposits was 21.8 per cent in 2010-11 as compared to 26.9 in the previous year, term deposit growth improved to 18.2 per cent from 12.9 per cent.

“An interesting development about the consolidated balance sheet of scheduled commercial banks in 2010-11 was the deceleration in the growth of savings bank deposits and demand deposits with a corresponding acceleration in the growth of term deposits. This could be due to the prevailing higher interest rate environment making term deposits more attractive as compared to demand and savings bank deposits,” the RBI said.

Source: Business Standard

Savings rate hike on deposits flight: SBI

Country's largest lender State Bank of India (SBI) today said it will take a call on increasing interest rate on savings accounts if there is a flight of deposit to other banks.

"There had been accretion (to savings bank deposits)," SBI Chairman Pratip Chaudhuri said when asked whether the bank was planning to raise interest rate as was done by some private sector lenders.

"If we see there is flight or shift of deposits, then we will take a call," he said, explaining bank's stand on saving rate.

Last month the Reserve Bank deregulated interest rates on savings deposit accounts. Earlier, banks were mandated to give four per cent interest rates on such deposits, but with the freeing of rates, several private sector lenders, like Yes Bank and Kotak Mahindra Bank, have hiked rates to 6 per cent.

Even RBI Deputy Governor Subir Gokarn today said that the deregulation would increase competition amongst banks ks for retaining customers.

Speaking about extending banking facilities in villages with population of over 5,000 people by September 2012, Chaudhuri said "we have to open bank branches."

Besides, Finance Minister Pranab Mukherjee after his meeting with the bankers and SBI chief on financial inclusion here today said that the target of extending Rs 4.75 lakh crore short term crop loan for the current fiscal would be surpassed.

On covering 10,721 villages with banking service in West Bengal and eight north eastern states, Mukherjee said so far 4,969 villages had been covered and rest would be done within March 2012.

Source: Financial Express

Bank of Maharashtra not to raise savings bank rate

KOLKATA: Bank of Maharashtra said it is not going to raise savings bank rate immediately as it feels savings deposits are not interest sensitive.

Its chairman and managing director Anup Sankar Bhattacharya told ET: "I don't feel the urge to raise interest rate on savings deposit."

Reserve Bank of India has deregulated the savings bank rate last week which has prompted small private banks like IndusInd Bank, Kotak Mahindra Bank and Yes Bank to raise the rates. Earlier, the rate was fixed at 4%.

IndusInd Bank said it will offer 5.5% rate for balance up to Rs 1 lakh and 6% for over Rs lakh. Kotak Mahindra Bank and Yes Bank raised the rate 200 basis points to 6% for deposits over Rs 1 lakh.

Bhattacharya said the competition for savings deposit mobilisation will largely be limited in urban centres and his bank mobilises a bulk of its deposit from rural and semi-urban centres without much competition.

The Pune-based state-run bank has 1.20 lakh crore savings bank customers of whcih 1.14 lakh core have below Rs 1 lakh deposits.

Source: EconomicTimes

No savings bank rate hike for now, says SBI chief

The State Bank of India Chairman, Mr Pratip Chaudhuri, on Tuesday ruled out any immediate increase in its savings bank account rate, saying that the largest Indian bank is confident of the people’s continuing trust in the various facilities being provided to them by SBI.

“No major bank has increased the interest rates on deposits in SB accounts. Those who have done it are not big ones,” he told reporters after the annual conference of SBI’s Chief General Managers (CGMs) here, when asked whether SBI plans to increase the rates in the wake of deregulation of rates by the RBI in the second quarter monetary policy review last week.

Three private sector lenders — YES Bank, Kotak Mahindra Bank and IndusInd Bank — have increased the interest rates on SB deposits by up to 200 basis points over the last few days.

Replying to a question, Mr Chaudhuri said the Government is committed to infuse capital in SBI by March 2012 and take a decision on the kind of recapitalisation needed. “It is in the process in the Finance Ministry.”

The SBI chief said it was difficult to predict whether rate hikes would curb inflation. The RBI is targeting to bring it down to 7 per cent by March 2012. If that happens, the central bank could possibly halt any further hike, he added.

Asked about home loan tenures, he said since the average life of a new house is seen as 30 years, SBI is considering increasing tenure of home loans to up to 30 years.

He said there was no deceleration seen in the individual home loan accounts and, in particular, the demand was robust in the premium segment. But there is stress in some sectors of economy such as agriculture, textiles, engineering and SMEs. “Any slowdown in core industries is not good for favourable collection," he said.

Obopay rolls out mobile payment service for Nokia users

With mobile banking steadily gaining pace, the service providers are gearing up to make the most out of it. Obopay, a mobile payment service provider, is all set to expand across the country on the back of a tie-up with handset manufacturer Nokia. The company had earlier joined hands with Union Bank of India and YES Bank.

The prepaid service is currently available in 130 cities in India and going ahead will be available at more than 200,000 Nokia Priority dealers, 2,300 branches of Union Bank of India and 214 branches of YES Bank. “Over the past two quarters there has been more than 50% growth on a monthly basis hence ensuring faster uptake of the service across the country,” said Deepak Chandnani, chief executive officer, Obopay. He said that the company is in talks with other banks and the service will be available across the country by end of this financial year.

An individual need not have a bank account to make use of this service. A prepaid mobile account can be opened with the help of a photo identification card and address proof. The service allows an individual to transfer money, make utility bill payments and recharge mobile phone accounts. Money can also be transferred from one bank to another with the help of National Payments Corporation of India.

In order to promote cashless transactions, Reserve Bank of India had raised the limit of mobile banking from Rs 1,000 to Rs 5,000 per transaction in May 2011. According to NPCI, the total amount transferred via mobile phones crossed Rs 3.17 crore while the issuance of Mobile Money Identifier (MMIDs) neared 15 million in September 2011.

Source: Business Standard

SBI may raise saving deposit rate by up to 125 bps

State Bank of India (SBI) on Friday indicated that it could increase interest rate on savings bank accounts by up to 1.25 per cent in view of competition following freeing of such rates by RBI.

“On an average...we are expecting 100-125 basis points increase in the funding cost of savings bank,” said Mr Pratip Chaudhuri, Chairman, SBI. Earlier this week, the Reserve Bank had deregulated the savings bank deposit interest rate with immediate effect giving banks freedom to determine their own rates.

Immediately after the announcement, private sector Yes Bank, a relatively small player, had raised savings rate by 200 basis points to 6 per cent.

Banks now offers 4 per cent on savings bank accounts.

He, however, said, “We would not be the first mover,” adding that SBI will not be too worried as it has 34 per cent of its total deposits in saving bank accounts on account of is wide distribution network. “We will have to see how other banks play it out and then we will take appropriate policy action,” he added.

High savings deposit rate likely to dent banks' profits

Fears of banks’ earnings plummeting in a deregulated savings deposit rate regime appear to have gripped investors, with most analysts hinting that profitability may come under pressure due to higher cost of funds amid slowing growth in advances.

“The rise in the savings deposit rate will increase pressures on banks’ profitability,” Suman Chowdhury, head of Crisil Ratings, said.

The rating agency expects the lenders’ return on asset ratio to shrink by five basis points (bps) because of higher savings deposit rate, even if banks increase their transaction and service charges on such deposits.

The Reserve Bank of India yesterday allowed banks to decide on their own the interest rate on savings deposits. The central bank, however, asked banks to pay a uniform rate on savings deposits up to Rs 100,000 irrespective of the amount in the account.

Lenders may offer differential rates on deposits above Rs 100,000, but there should not be any discrimination between customers on interest rates for similar deposit amounts. Banks have been paying four per cent interest on savings deposits.

The move was not well received by investors, as bank shares plunged yesterday in an otherwise strong broader market. The 12-share Bank Nifty closed 1.41 per cent down, though the benchmark 50-share S&P CNX Nifty ended 1.83 per cent higher.

“We think this is a positive move for the economy, even though it is a negative for banks, as it will increase their funding costs,” Tushar Poddar and Prakriti Shukla, economists with Goldman Sachs, said in a note.

Economists and analysts fear in the short term, the deregulation may lead to a rate war, with small and medium-sized banks looking to strengthen their retail deposit bases will hike their savings deposit rates aggressively.

It took no time for YES Bank, the youngest lender in the country, to increase its savings deposit rate by 200 bps to six per cent. The private lender’s share of low-cost deposit was only 11 per cent at the end of September.

Other lenders such as IDBI Bank, Canara Bank, Bank of India, Federal Bank and Union Bank of India that have relatively lower share of the savings deposit base, are expected to raise rates soon.

“This change (deregulation of the savings deposit rate) is likely to result in an upward pressure on the deposit and interest rate trajectory in the near term, given the ongoing tightness in liquidity,” Siddhartha Sanyal, chief economist of Barclays Capital in India, said.

Industry experts said some bank stocks that were enjoying a premium over their peers because of strong retail deposit base, may be re-rated.

SMC Global Securities estimates if the savings deposit rate rises by 100 bps, banks profitability could be reduced by 12.9 per cent. “In the short term, it can be said the deregulation of interest rates on savings accounts is a real game-changer,” Jagannadham Thunuguntla, strategist and head of research at SMC, said.

Source: Business Standard

YES Bank Q2 net climbs 33%

Mumbai, Oct 20: YES Bank’s net profit increased 33 per cent to Rs 235 crore in the second quarter ended September 30, 2011 from Rs 176 crore in the corresponding quarter last year.

A strong growth of 23 per cent in net interest income and a huge increase of 63 per cent in non interest income helped the bank post good growth during the second quarter, said a press release from the bank.

Total advances rose 13 per cent to Rs 34,194 crore, while deposits rose 10 per cent to Rs 44,076 crore.

The huge growth in non interest income was on the back of strong growth in transaction banking, financial markets and financial advisory business that showed continued traction year-on-year and sequentially, said the press release.

Net interest margin was at 2.9 per cent.

For the six-month period ended September 30, 2011, the net profit increased 36 per cent to Rs 451 crore from Rs 333 crore in the year-ago period.

Shares of YES Bank fell 1.38 per cent to Rs 286, on the BSE, after the results were announced. The Sensex was down by 317 points.

New generation banks build 14 per cent market share in deposits & loans

MUMBAI: Since RBI last licensed private banks over 10 years ago, new generation private lenders have built a market share of 14% in deposits and also loans, which is much higher than the combined share of close to 12% of foreign banks, old generation private banks and regional rural banks.

That is a reflection of the impact created by these banks, which forced state-run banks to shake off their slothful way of functioning and focus on customers and better service standards and product offerings. In 1993-94, RBI granted in-principle approvals for 10 entities to promote private banks.

They included two finance companies - 20th Century Finance and CRB Finance - the Times Group and Hindujas, financial sector professionals Ramesh Gelli; Darshanjit Singh and Harpreet Singh, besides the ones promoted by HDFC, erstwhile UTI and IDBI and later the development financial institution ICICI, which reverse merged with ICICI Bank.

Just before the licences were issued, CRB was caught in the centre of a scam and the in-principle approval was cancelled. Only five entities have survived since then - HDFC Bank, the UTI-promoted Axis Bank, IDBI Bank and the Hinduja-promoted IndusInd Bank.

During this period, Times Bank and Bank of Punjab were acquired by HDFC Bank while GTB, promoted by Ramesh Gelli, was acquired by Oriental Bank of Commerce.

Later in 2002, RBI licensed two more banks, Kotak Mahindra Bank and YES Bank, promoted by Rana Kapoor and others.

Over the past 15 years, new generation private banks have given government-run banks, which even now control 70% of the market in terms of deposits and advances, a run for their money by leveraging on technology.

Earlier in terms of product offerings and premium service, foreign banks were at the forefront. New generation private banks bridged that gap by providing efficient services at competitive rates, forcing foreign banks to change tack and PSU banks to embrace technology.

However, unlike last time, the challenge for new banks will be greater, given intense competition and focus on rural inclusion.

Source: EconomicTimes