Rural Rollout Oblgation for New Banks – RBI
Taking a leaf from the Indian Telecom Success story and to emphasize more on inclusive growth story, the RBI is considering a rural and semi-urban stint for the new banks in order to strengthen its prospects of financial inclusion for the unbanked people of India.
A finance ministry official has quoted of saying
new entrants may only be allowed to open branches in rural areas for the first two years and the subsequent period will depend on the basis of their direct lending to the agriculture sector, opening of no-frill accounts and other financial inclusion criteria
India Term – Fixed Deposit Rates Rising
HDFC Bank, over the weekend, raised deposit rates by a sharp 50-150 bp, which follows the 25-50 bp rate hike by ICICI Bank and IDBI earlier this month. Notably, this deposit rate action has come, even as system liquidity currently appears adequate (reverse repo outstanding at about USD 15 bn). As the loan growth (14.8% currently) accelerates and central bank tightens, this liquidity will also dry up soon.
As deposit growth (17%YoY) has fallen to a four-year low, with real deposit rates negative, banks need to raise rates. Read more
Punjab National + Union Bank Asset Quality Concerns Surface
PNB’s profits were up 0.5% yoy (+9% qoq, in-line with estimates) and were supported by its high NIMs (expands further), robust loan growth (well above industry), strong deposit franchise and some trading gains in 3Q. However, delinquencies increased substantially (mainly in the agricultural segment) and coverage levels dropped meaningfully – suggests caution given its large (16% of book) agri portfolio.
PNB’s margins expanded more than estimated to 384bps, driven by liability repricing. NPL uptick, lower coverage raises concerns on sustainability of earnings. Expect an EPS of Rs 108 and Rs 124.5 for FY10 and FY11 respectively. Read more
ICICI Bank – Image makeover – Learning from Mistakes
In a recent meeting, the management highlighted its initiatives to change the general perception about the bank. Some of these aspects are very important and quite commendable as well, in our view.
ICICI Bank is trying to build personal relations with its customers and has been increasing its branch banking focus, compared to its earlier strategy of pushing customers towards ATMs and internet, which never allowed any relationship to be built between the customer and the bank. The management is trying to project a very soft image of itself across all customers and different from its earlier “know all” approach. Read more
How Indians Can Settle Credit Cards + Loan EMIs – A Relief Package
Indian Banks in a bid to expand their market share in Housing Loans, Auto Loans and Credit Cards, lent recklessly over 2004 to 2007 to any consumer without even verifying the credentials. Now, they are facing rapid defaults and are causing a misery to the Indian borrower. The RBI aware of this situation, has instructed BCSBI an independent body [it is as good as Government as it was formed by the RBI, so your data is safe with them] that looks into the functioning of Banks and Financial Institutions has started a separate counseling wing to identify genuine cases and negotiate a relief package. Read more
Bank of Baroda – Mints Money in Sept Quarter
Bank of Baroda’s NII growth for the quarter remained strong at 23% YoY led by an improvement in margins. The NIM on domestic operations expanded to 2.89% as against 2.57% in Q1FY10. Growth in non-interest income ex-treasury remained muted at ~3% YoY; however core fee income posted a strong growth of 25%. Treasury profits for the quarter totalled Rs 2bn.
Provisioning expenses came in lower than expected. We believe a reversal of MTM losses on overseas CLN exposure and lower provisions than anticipated contained these expenses. Gross NPAs declined sequentially while in absolute terms net NPAs increased slightly. The delinquency ratio for H1FY10 stood at 1.04% (annualised). This suggests the possibility of higher write-offs during the quarter, which in turn could explain the slight drop in coverage ratio to 79% versus 81.7% in Q1FY10
RBI Doubles NPA provisioning for real estate loans
The RBI Governor has finally woken up to the ground reality of Realty. The RBI announcement highlight was that it has increased the banks NPA provisioning for real estate loans from 0.4% to 1%. The increase in the provisioning norms has led to a sharp fall in the banking and real estate shares as Unitech plunged 6.66% and ICICI Bank slipped 4.57% as token for the melting counters. The biggest loser was the realty sector as the industry may see a roadblock in affordable housing dream.
The central bank has kept all the policy rates unchanged but has hiked SLR from 24% to 25%. The local stock markets could not give overwhelming response to the RBI’s loose money announcement and rather the picture got bleaker
RBI reference rate for the dollar at Rs 48.68 on Monday
The Reserve Bank of India on Monday fixed the reference rate for the dollar at Rs 48.68 against the previous rate of Rs 48.27 on Friday.
The corresponding exchange rate for the euro was Rs 68.77 (Rs 68.89) and that for the UK pound was 79.8133 (Rs 79.9930). The reference rate for the Japanese currency was Rs 51.50 (Rs 50.63) for 100 yen. T
The reference rate is based on 12 noon rates of a few select banks in Mumbai.
RBI sees need to revive private expenditure to boost growth
India’s monetary authority Reserve Bank of India (RBI) said that the main challenge to revert to a high growth path was to revive private consumption and investment expenditure. Governor of the RBI Duvvuri Subbarao said at an industry event that government will have to ensure a pick up in private expenditure as well.
The government is running a fiscal deficit of 6.8% in the current fiscal, highest in the post liberalization era, which according to the finance minister was a deliberate strategy to push growth through increased government expenditure. While the move is sure to help in expansion, the government cannot sustain the deficit at such high levels in the medium run and therefore the road to climb back to high growth levels will only be through stimulating private investment and consumption levels going forward. Read more
Reliance Capital plans to foray into the banking sector again
Reliance Capital, a company led by the Anil Dhirubhai Ambani Group (ADAG), is considering foraying into banking sector again. It has tried before but RBI has declined the license due to them being an industrial house too.
The company has charted out a plan for next three to five years, which includes entering the banking sector once regulatory clearance has been granted and also expand globally.
It is looking to expand its asset management, life insurance and broking operations in emerging markets across Asia, Africa, and the Middle East while increasing customer base to 5 crore from the current level of 1.5 crore, tapping 15,000 additional cities and towns for distribution channels against current 5,000 and also to increase business partners to 10 lakh from 5 lakh, as indicated by Anil Ambani, Chairman Rel Capital.
As per the latest reports, Reliance Capital has sold its entire holding in Reliance Industries (RIL) during the fiscal year 2008-09.
The company has sold over 74 lakh shares of RIL which were valued at Rs 129.88 crore at the end of fiscal 2007-08.
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