07 April 2002
Lenders to seize DPC assets
Mumbai: The Indian and foreign lenders to Dabhol Power Company (DPC) are expected to draw a final blueprint by 9 April for seizing the assets of the idle 2,184 MW plant and may conduct their direct sale instead of buying 85 per cent foreign equity in the beleaguered company.
The Industrial Development Bank of India (IDBI)-led consortium of Indian lenders, which has an exposure of over Rs 6,200 crore in the project, will make a call over the company and its asets by taking over its reigns from the hands of M A Patel, the Mumbai high court receiver.
Forex reserves up to $ 54.154 bn
Mumbai: The foreign exchange reserves moved up $837 million to $54.154 billion for the week ended 29 March 2002 when compared with $53.317 billion in the previous week, according to the RBI.
India's foreign exchange reserves continued with their upward trend following further inflows of $ 837 million to cross the $ 54 billion mark.
06 April 2002
LIC eyes overseas expansion
Mumbai: Life Insurance Corporation (LIC) is all set to embark on an ambitious overseas expansion. During the current fiscal, LIC plans to enter into developed markets such as Canada, Australia, New Zealand as well as Egypt and Botswana.
LIC is close to signing deals with its partners to restructure operations in UK as well as for launching its operations in USA by opening branches in New York and California. LIC is also reviving its operation in Sri Lanka, opening an office in the Sultanate of Oman and opening an offshore centre in Mauritius.
RBI mops up Rs 30,000 cr through repo auction
Mumbai: The Reserve Bank of India (RBI) mopped up Rs 30,055 crore from the money market through a one-day repo auction.
The earlier highest mop-up through the repo auction was on 5 September 2000, when the RBI sucked out Rs 19,115 crore.
Meanwhile, the RBI has set the cut-off yield on the Rs 4,000 crore 10-year paper at 6.85 per cent. The cut-off for the Rs 3,000 crore, seven-year paper was set at 6.65 per cent.
GIC seeks $5 billion terror cover
Mumbai: General Insurance Corporation of India has decided to adopt a united approach to combat the rising prices of terrorist cover in the global reinsurance market.
The current cap of Rs 200 crore available to Indian corporates has seen a number of large-sized, high-risk companies approaching the overseas market for additional cover. GIC hopes to supplement terrorist cover up to a level of Rs 500 crore at an extra cost to meet the requirement of the Indian market.
The Tariff Advisory Committee has allowed all general insurance providers to obtain terrorist cover in excess of Rs 200 crore directly from overseas reinsurers.
05 April 2002
ABN Amro looking for acquisitions
|Bangalore: ABN Amro is looking at possible acquisitions among India's private banks in order to grow rapidly in an emerging market.
The Reserve Bank of India (RBI) in February confirmed that it had raised its foreign direct investment limit in private banks to 49 per cent from 20 per cent while retaining the ceiling on foreign investors' voting rights to 10 per cent.
ABN AMRO Bank acquired the retail assets of Bank of America's Indian operations a few years ago.
FIs sack DPC security staff
Mumbai: The Indian lenders to Dabhol Power Company (DPC) has laid off 150 security personnel at the plant site in Guhagar and reappointed former sub-contractor Punj Lloyd for its care and preservation.
Punj Lloyd has been reappointed as the care and preservation agency for the $3 billion plant as it was in charge of the same function before termination of their contracts on 15 September 2001.
A team of 17 persons along with high court receiver M A Patel and FI officials has parked itself in the 2,184 mw plant is taking stock of the numerous physical assets.
PNB IPO oversubscribed four times
New Delhi: Punjab National Bank's Rs 165 crore public offer received overwhelming response with the bank receiving applications worth more than Rs 700 crore.
PNB offerd 5.3 crore equity with a face value of Rs 10 per share at a premium of Rs 21 per share to the public as part of efforts to increase the long term resources and improve the capital adequacy ratio.
Of the 20 per cent IPO, the bank offered 2 per cent to its employees in a bid to boost employees' morale.
PNB's IPO was the first from the public sector banks in the last fiscal and one of the major offers after Bharti Tele.
04 April 2002
Risks involved in securitising life premia
Chennai: Though life insurance premiums are payable in equated instalments (monthly, quarterly, yearly) and spread over several years (like housing loan repayments), insurers and investors are wary about securitising the same (See Equity option). The reason? Uncertainty hangs over its continued payment by policyholders.
Why is it so? Says Standard and Poors director (insurance ratings) Earl Lancaster: "The securitisation of future premiums beyond the contractual term of the insurance policy [like renewal premiums for non-life business or annually reviewable life business] will involve the transfer of: [a] the persistency risk [the risk that there are fewer renewals than anticipated]; and [b] the rate revision risk [the risk that the premium rates per unit of exposure will be lower than expected because of competitive or other considerations]."
Both the risks, he says, are dependent on future market conditions and the future way in which the insurer conducts its business. "The risks are typically not very easy to predict."
Similarly, securitisation of future premiums due up to the end of the contractual term of the policy will still be a persistency risk, though, depending on the contract design, this risk will be partially mitigated (and therefore more predictable) by surrender penalties, market value adjustors and encashment deferral rights - all of which will reduce policyholders propensity to terminate insurance contracts prior to the end of the contractual terms, says Lancaster.
He says the premium consists of contributions towards expenses, mortality and (hopefully) profits. "The securitisation of future premiums will also, therefore, necessitate the establishment of higher actuarial reserves [for life] or un-expired risk reserves [non-life] plus reserves for future administrative expenses."
Therefore much of the capital raised from securitising future premiums should be used to set up higher reserves. Equally, higher actuarial reserves will attract an increased solvency requirement. It is even possible that prudent reserving requirements may utilise all the capital raised. There may also be tax implications as with any securitisation.
For investment-orientated life contracts, it will be imprudent to securitise future premiums, as the policyholders expected return and the operation of the policy may depend on the timing of the payment of the contractual premium, says Lancaster. "It should be remembered that most of the premium assets belong to the policyholder and are therefore unsuitable to be securitised."
A contrary view is also available. Says Birla Sun Life Insurance actuary K S Gopalakrishnan: "In life insurance the product is different. If a policyholder fails to pay future premiums the insurer protects himself by paying only a surrender value, or nothing. Also, a lapsing policy need not result in a loss to the insurer; instead, it could actually improve the profits."
Lapses can, however, result in a loss to the insurer if the policy is of a smaller size and the lapse happens at early durations, say within the first three years, despite a nil surrender value. Gopalakrishnan says even if a life insurer wants to securitise, it need not securitise future premiums totally, or all the future premium payments, under the policy. "Financially, the insurer only has to securitise that part of the premium in such a way that the targeted profits are made even under a lapsed policy."
But determining this can be a messy exercise. Thus, instead of securitisation, life insurers are managing this risk through product design. Unit-linked products are a good example. Actuaries are thus developing products that are lapse-supported on the whole, even though there is a certain amount of cross subsidy between smaller and bigger policies.
UTI Banks CD rating reaffirmed
New Delhi: The Investment Information and Credit Rating Agency (ICRA) has reaffirmed the A1+ rating to the certificate of deposits (CD) programme of UTI Bank Ltd. The rating indicates highest safety in the short term.
According to an ICRA statement issued here, the short-term rating takes into account the steady improvement in asset quality and the consistent high growth in deposits.
The rating also factors in the strategic investment of 26 per cent by CDC Capital Partners in UTI Bank during December 2001 and the proposed preferential placement of shares to domestic insurance companies and AIG Sector Equity Fund.
IOB plans to double operating profits
Chennai: Indian Overseas Bank (IOB) expects to double its operating profits for the fiscal ended 2001-02. It is likely to post operating profits of around Rs 600 crore.
IOBs performance has been aided by a reduction of nearly Rs 275 crore in non-performing assets. Of this, cash recoveries are likely to be of the order of Rs 190 crore, while the upgradation of accounts will contribute Rs 12 crore.
Bank sources said business volumes (deposits plus advances) will be in the order of Rs 48,000 crore. Incremental loans in the last fiscal were in the order of nearly Rs 2,000 crore, of which nearly Rs 370 crore have been given to the housing sector alone.
IOB is not complaining about the slow credit off-take. The capital adequacy of the bank was maintained at 10.24 per cent in end March.
SBI earmarks 30% for term loans
Mumbai: State Bank of India (SBI) has allocated around 30 per cent of its total loan portfolio towards term loans, which works out to be around Rs 35,000-40,000 crore, SBI chairman Janki Ballabh has said.
Ballabh was responding to questions at the Banking Summit, organsied by the Confederation of Indian Industry, as to who will provide term loans to the industry with the definition of banks and development financial institutions getting increasingly blurred.
Our board has recently decided to earmark 30 per cent for term loans, while the balance 70 per cent will continue to be assigned for the working capital, he said. Currently most banks are granting term loans, subject to each banks risk management policies. Banks need to have all the credit appraisal systems in place before granting such loans and even a seven-to-10-year-term is not a problem.
Ballabh said earlier the bank credit was divided into credit towards large corporates and credit towards the priority sector. Though we are trying to improve the quality of our lending towards the priority sector, we have come to realise that over-dependence on corporates can cause serious problems in our asset-liability management.
Ballabh said every branch of SBI is now being used not only for deposit mobilisation but also as an active delivery point of other products and services. Increasingly, banks will only be able to survive through value-added services, and not through interest margins. We have to improve the quality of our products and the delivery of these products. With margins shrinking, increased volumes have become important.
A taste of new-age banking at ABN-Amro
ABM-Amro Bank, in alliance with Barista Coffee Co, has launched the `cafe in a bank' concept through `Bancafes' at its branches.
"This will let customers relax while they explore their finances without being rushed," according to Mr Romesh Sobti, Executive Vice-President and Country Representative, ABM-Amro Bank India. During evening banking hours (7.30 p.m. to 11 p.m.), the bank's customers can relax over a cup of gourmet Barista coffee as they "browse through investment options, conduct banking transactions through the Internet or view information on the bank's products and services over a specially-designed user-friendly technology interface," Mr Sobti said, launching the first Bancafe here on Thursday.
ABN-Amro branches all over the country will soon offer the Bancafe experience. The bank has a network of 48 ATMs and 11 branches in eight cities: Mumbai, New Delhi, Chennai, Kolkata, Pune, Baroda, Hyderabad and Bangalore.
Bancafe offers not only the coffee experience but will also serve as a platform for promotions and informational seminars to be organised during evening banking hours, according to the bank.
ABN-Amro, with a strong consumer and commercial focus offers a range of loans, savings and term deposit accounts and investment products to its customers. Barista Coffee Co operates through a chain of 70 Barista Espresso bars across the metros and large cities in India.
Corporation Bank wins IDBRT award
Mangalore: Corporation Bank has won the Best Bank award for excellence in banking technology from IDBRT, Hyderabad, for the year 2000-2001.
As part of its information technology initiatives, the bank has just put in place a web of 101 inter-connected Corp Bank ATMs from Amritsar to Thiruvananthapuram. According to a press release issued here, the bank has launched CorpSmart (a combi-card combining an electronic purse and ATM card) and inaugurated CorpNet (an Internet-banking facility for individual customers).
Apart from enabling customers of Corporation Bank to transact business through the inter-connected ATM network in any part of the country, the facility also allows customers of other banks that are connected to the SPNS network to withdraw cash from Corporation Bank ATMs.
Among the other tech-savvy initiatives are CorpFast and CorpClassic. CorpDial is a telebanking facility, while CorpReach provides access to accounts from a computer terminal.
PNBs IPO garners Rs 690 crore
New Delhi: The recently concluded initial public offering (IPO) of Punjab National Bank (PNB) has garnered an over-subscription of over 300 per cent, with the total subscription touching about Rs 690 crore against the issue size of Rs 164.49 crore.
PNB chairman and managing director S S Kohli says the issues success was due to an aggressive pricing, backed by a very strong marketing effort. The large over-subscription also shows that investors have confidence in PNBs fundamental strength.
The IPO has received 1,50,000 applications from investors. But Kohli says the details of the subscription are not fully available, as it is still under compilation.
The PNB issue, which will result in the government holding in the bank coming down to 80 per cent from the earlier 100 per cent, was open for subscription from 21-28 March 2002. PNB had come up with a issue of 5.30-crore shares of Rs 10 each for cash at a premium of Rs 21 per share aggregating Rs 164.49 crore.
ICICI Pru Life issues 1 lakh policies
Mumbai: ICICI Prudential Life Insurance Company Ltd, the joint venture between ICICI Ltd and Prudential plc of UK, has issued 1 lakh policies as on 31 March 2002. The company has underwritten policies amounting to over Rs 1,500 crore and has a premium income of around Rs 120 crore.
The company has augmented its equity-base by Rs 40 crore, taking its paid-up capital to Rs 190 crore. This capital infusion is the first of the two planned rounds of equity expansion, the second of which is scheduled later this year, a press release said.
Says ICICI Pru Life managing director Shikha Sharma: The company is focused on developing flexible, need-based products, backed with need-based selling advice and technology-enabled risk.
Over 40 per cent of the policies issued were of products such as market-linked policies, retirement solutions and Smart Kid, a policy designed specifically to meet the educational needs of children.
FI-promoted banks to do govt business
New Delhi: The Reserve Bank of India (RBI) is considering a proposal to allow private banks promoted by all-India financial institutions to conduct the government business, a prerogative of public sector banks till now.
Disclosing this, RBI deputy governor Dr Y V Reddy said: Besides generating competition for the government business, the induction of more players will help state governments get faster and more efficient services.
Reddy mentioned this in a speech on Economic Reforms and the Evolving Role of the RBI as Banker to the Governments, circulated during the function organised on the occasion of the silver jubilee celebrations of the Indian Civil Accounts Organisation, in his absence.
The RBI might in future consider shedding the retail banking business in relation to the government in favour of agency banks. This is in view to ensure that in the long run, the RBI will maintain only the principal accounts of the government, leaving the day-to-day banking business to the commercial banks functioning as its agents, he said.
Karnataka Bank turnover at Rs 10,000 cr
Mangalore: The Mangalore-based Karnataka Bank has crossed a turnover of Rs 10,000 crore as on 31 March 2002. In his annual address to the banks executives here recently, Karnataka Bank chairman M Ananthakrishna is said to have unveiled the banks corporate goals for 2002-03, while emphasising the need to pay increased attention to the micro-realities of the changing banking environment.
According to a press release, Karnataka Bank plans to target an aggregate deposit level of Rs 8,500 crore, with a growth rate of approximately 25 per cent. Advances are expected to increase at 22 per cent to Rs 4,250 crore with gross investments growing at 18 per cent, also to Rs 4,250 crore. The net profit has been projected at Rs 100 crore and owned funds at Rs 525 crore.
The bank also plans to open eight more branches during the year, thereby taking its branch strength to 365. On the technological front, 125 branches will be networked by December 2002 and efforts will be made to optimise technology utilisation to increase operational efficiency and income.
The bank has made arrangements with MedLife (India) Insurance Company to distribute life insurance products. It has also requisitioned the services of the National Institute of Bank Management (NIBM) on a consultancy assignment for organisational restructuring and business profile reengineering.
Going over the banks main achievements during 2001-02, Ananthakrishna said the banks shares crossed the issue price for the first time since the public issue in 1995. The operating surplus also increased significantly over the previous years levels and, for the first time, a group insurance scheme covering all the staff members of the bank was introduced.
As for its priorities for 2002-03, the bank hopes to consolidate its position, diversify into newer areas of business, build quality assets and improve profits by making profitability a thrust area.
SBI plans to invest in Maharashtra, Goa
Mumbai: State Bank of India (SBI) proposes to invest Rs 3,000 crore in the states of Maharashtra and Goa in the fiscal year 2002-03.
Addressing a press meet to discuss SBIs performance and projections for the new financial year for its Mumbai circle, SBI CGM (Mumbai circle) B Behera said of this amount, around Rs 1,250 crore will be deployed towards personal advances and Rs 500-600 crore towards small-scale industries and agriculture financing. The remaining will be deployed in other areas wherever deemed essential.
In the new fiscal year, SBI plans for the Mumbai circle include the devising of new schemes specifically aimed at small and marginal farmers to assist in the purchase of land. SBI will also shortly launch a co-branded debit card along with Indian Oil Corporation on a pilot basis in Mumbai. Towards this end the bank has tied up with over 400 merchant outlets.
Insurance and investment-based products will be made freely available at branches under the Mumbai circle, with particular focus on products of the banks own subsidiaries - like cards, insurance and mutual funds. The anytime-anywhere banking facility will be extended further with the networking of 45 of the banks branches in the circle to 450 branches all over the country.
SBT, Global Money Exchange tie up
Thiruvananthapuram: The Global Money Exchange Company, Sultanate of Oman, under the direct management of the State Bank of Travancore (SBT), will commence operations on 5 April 2002. Announcing this, an SBT spokesman here said the exchange is promoted by the Khalili group of Oman. This is the banks maiden venture in the Sultanate of Oman.
The bank already manages City Exchange LLC, an exchange company in the United Arab Emirates. Under the rupee-drawing arrangement with Global Money, expatriates in the sultanate can send remittances to SBTs 300 major branches, which can be encashed immediately without incurring any charges.
The bank also intends to introduce fast-remittance arrangements shortly. SBT at present has remittance arrangements with 13 exchange companies in West Asia. The annual volume of remittances channelised through these exceeds Rs 3,300 crore.
Saudi banks are the best in Gulf region
Chennai: Saudi Arabian banks rank among the best capitalised financial institutions in the Gulf region. The Saudi banking system is also the largest and the most profitable ones in the region, states a Standard and Poors (S&P) study titled Bank Industry Risk Analysis: Saudi Arabia.
According to the report, due to a combination of factors like wide margins, good efficiency, low costs and cheap deposits as on 30 September 2001, the Saudi banks average annualised ROA and ROE stood at 2.2 per cent and 19.7 per cent, respectively. In this respect, liquidity remains abundant in the kingdoms banking system. Saudi banks aggregate loans-to-deposits (credit deposit ratio) ratio stood at a low of 66 per cent on 30 September 2001.
The study also points out some constraints in the Saudi economy, like: economic reforms pertaining to liberalisation and privatisation are still awaited; the government deficit and debt are currently increasing; and Saudi banks could face a shrinkage in domestic as well as regional business opportunities, while asset quality could suffer from a decline in oil prices.
On the positive side, says S&P analyst Anouar Hassoune of the Financial Institutions Group in Paris and one of the authors of the report, the average quality of financial disclosure in the kingdom has improved over the past decade. Financial disclosure, nevertheless, remains mixed. Although many Saudi banks have attained reasonably high levels of financial transparency, a few have failed to produce interim or even annual financial reports.
The banking environment in Saudi Arabia is relatively protected and strictly regulated by the Saudi Arabian Monetary Agency, which has sensibly been sparing in issuing banking licenses in the past decade, particularly to foreign applicants. Nonetheless, there is a reasonable amount of competition in the domestic banking system, which enjoys minority but active foreign shareholding. However, in the medium to long term, foreign competition could more directly step in, as Saudi Arabia is about to join the World Trade Organisation.
The report also notes that the positive factors driving S&Ps assessment of the largest banking system in the Gulf region and the Arab world are offset by several recurring weaknesses. In spite of major structural reforms either in draft or currently being implemented, aimed at diversifying and liberalising the kingdoms economy, domestic revenues remain dependent on oil-price gyrations.
Says Emmanuel Volland, co-author of the report and a director in the Financial Institutions Group in S&P, Paris office: A decline in oil prices would have negative implications for the economy, and would
ultimately weigh on banks loan books. For example, when the economy slumped in the mid-1980s, the banking system suffered from a huge rise in problem loans.
In such a context, government spending is an important cushion, as well as a major source of the banks activity. But current large budget deficits weigh on the governments already-high indebtedness, which puts additional pressure on banks to seek business in the relatively narrow private sector.
Housing loans become cheaper
New Delhi: A number of banks, including SBI, Corporation Bank and Indian Overseas Bank, have cut the interest rate on housing loan by half a percentage point to 11 per cent from 1 April 2002.
Other leading institutions like ICICI and HDFC, Punjab National Bank and Oriental Bank of Commerce are planning to follow suit.
ICICIs review committee would meet next week to take a final view on the issue. At present, ICICI is charging a floating interest rate of 11.5 per cent on housing loan, repayable in 15 years on a monthly reducing balance.
RBI moots advisory board
New Delhi: Reserve Bank of India has asked the government to explore possibilities of setting up an adivsory board for evolving best practices in the discharge of its duties as banker to both central and state governments.
The RBI may also have to consider shedding retail banking business to maintain only government's accounts, RBI deputy governor Y B Reddy said at a seminar here.
03 April 2002
PNB public offer gets Rs 690 cr
New Delhi: The recently concluded initial public offering (IPO) of Punjab National Bank (PNB) has garnered an oversubscription of over 300 per cent with total subscription touching about Rs 690 crore against the issue size of Rs 164.49 crore.
The PNB Chairman and Managing Director, Mr S.S. Kohli, told Business Line that the issues success was based on the aggressive pricing backed by a very strong marketing effort. "The large oversubscription also shows that investors have confidence in fundamental strength of the bank,' Mr Kohli said.
The IPO has received 1,50,000 applications from investors. However, Mr Kohli said that the details of the subscription were not fully available as it was still being compiled.
The PNB issue, which would result in the Government holding in the bank coming down to 80 per cent from the earlier 100 per cent, was open for subscription from March 21-28.The bank had come up with a issue of 5.30 crore shares of Rs 10 each for cash at a premium of Rs 21 per share aggregating Rs 164.49 crore.
UTI Bank issue reaffirmed A1+
New Delhi: Credit rating agency, ICRA, has reaffirmed the A1+ rating to the certificate of deposits programme of UTI Bank Ltd. The rating indicates highest safety in the short-term.
According to a statement issued by ICRA, the short-term rating takes into account the steady improvement in asset quality and the consistent high growth in deposits.
The rating also factors in the strategic investment of 26 per cent by CDC Capital Partners in UTI Bank during December 2001 and the proposed preferential placement of shares to domestic insurance companies and AIG Sector Equity Fund
PNB public offer gets Rs 690 cr
New Delhi: The recently concluded initial public offering (IPO) of Punjab National Bank (PNB) has garnered an oversubscription of over 300 per cent with total subscription touching about Rs 690 crore against the issue size of Rs 164.49 crore.
The IPO has received 1,50,000 applications from investors.
The PNB issue, which would result in the government holding in the bank coming down to 80 per cent from the earlier 100 per cent, was open for subscription from 21 March to 28.
02 April 2002
Corporation Bank officers stir continues
Mangalore: Officers of the Corporation Bank Officers Organisation (CBOO) have decided to continue their agitation demanding the introduction of a voluntary retirement scheme.
In a press release issued here, CBOO general secretary D N Prakash said the executive committee of the organisation will meet shortly to review the situation and chalk out its future course of action.
Corporation Bank officers went on a token strike throughout the country on 30 February 2002. The officers have been agitating since December 2001 demanding the introduction of a voluntary retirement package.
ARC is for handling distressed debt: FM
Mumbai: The proposed Asset Reconstruction Company (ARC) for taking over bad debts is not a "disguised mechanism to put public money into the balance-sheet of banks, but one that was designed to play a vibrant and energetic role in handling distressed debt," Finance Minister Yashwant Sinha has said.
Explaining the concept of ARC, Sinha said: "We are not engaged in window-dressing. The ARC will strike at the root of the structural problem by consolidating debt that is scattered, engaging in innovative corporate finance (such as mergers or sale of brands or plants), injecting new capital, converting a distressed company into a profitable one and even taking it for an IPO."
Addressing a gathering of bankers at the Banking Summit 2002, organised by the Confederation of Indian Industry here, Sinha said ARC is partly a question of specialisation, and certain entities, banks and non-banks, can build a specialised competence in processing distressed debt that other creditors can choose to outsource the handling of distressed debt by selling of loans or bonds to these specialists.
Referring to priority-sector lending, the finance minister said the continuing social responsibility of a bank to lend 40 per cent towards the priority sector will continue. "I believe that it will be undesirable for banks to veer away from this social obligation. It is not entirely a bad business proposition as the self-help group experience has shown us."
RBI team goes through Global Trust books
Hyderabad: A high-level team of Reserve Bank of India officials arrived at Hyderabad on 1 Aprili to go through the books of Global Trust Bank (GTB) following the sacking announced by the bank of seven of its top officials, including executive director and promoter of the bank Sridhar Subasri.
The bank on 30 February 2002 announced that the board has decided to fix the responsibility after examining the reasons for some of the banks accounts becoming irregular. It said the findings revealed certain deviations and serious irregularities.
The accountability committee of GTB, headed by one of its directors and former Madras High Court chief justice K A Swami, examined the problem accounts and recommended action against the top officials who were held responsible for the serious deviations and irregularities.
Status-holders to get 100% EEFC credit
Mumbai: The Reserve Bank of India (RBI) has said status-holder exporters will be eligible to credit up to 100 per cent of their Exchange Earners Foreign Currency (EEFC) accounts, as against the existing limits of 50 per cent, with effect from 1 April 2002.
This follows the announcement in the Exim Policy to extend special facilities to exporters with a proven track record and who are certified as status-holders. Such exporters will also have an extended period of one year from the date of shipment to realise export proceeds.
Under the existing regulations, a period of six months was available for the realisation of export proceeds, an RBI press release said. "The facilities for status-holder exporters are with a view to simplify procedures and reduce transaction costs."
Exporters will also have the freedom to directly dispatch the shipping documents to their importer clients outside India without prior permission from the RBI.
RBI likely to redefine wilful defaulters
Mumbai: The Reserve Bank of India (RBI) is working out a proper definition for wilful defaulters, so that credit denial to this group can be made effective and criminal prosecution made demonstrative against this class of defaulters, according to RBI deputy governor G P Muniappan.
In a speech circulated in-absentia at the Banking Summit 2002, organised by the Confederation of Indian Industry here, Muniappan said the central bank is examining the recommendations of the Kohli group on wilful defaulters.
"The RBI is concerned that some new private banks that started off with a clean slate have acquired a large level of non-performing assets (NPAs) in a short period," he said. The total gross NPAs of new private sector banks at the end of 31 March 2001 stood at 5.1 per cent.
To force higher provisioning, the RBI has decided that it will not allow banks to increase dividend levels unless they reach a provisioning level of 50 per cent of gross NPAs.
As on 31 March 2001, only five banks had a provisioning level to gross NPAs of more than 50 per cent. Provisions held by public sector banks as a whole was at 42.83 per cent and that by private sector banks was 35 per cent of gross NPAs.
Muniappan said the interest-bearing assets of Indian banks have so far "derived comfort from a large proportion of them being held in the form of sovereign debt paper or sovereign-guaranteed advances."
NPAs of banks (both advances and investments taken together) form just about 5 per cent of the total assets at the end of March 2001. "But this facet will undergo a rapid change at any time if the defaults under the guaranteed advances to undertakings of some of the state governments escalate any further," he said.
Canara Bank starts Laghu Udhyami card
Bangalore: Canara Bank has launched the Laghu Udhyami credit card scheme for small borrowers in segments like retail trade, small businesses, village industries and for artisans and the self-employed.
Borrowers with three years good track record are eligible for the scheme.
PNB cuts domestic term deposit rates
New Delhi: Punjab National Bank (PNB) has reduced the interest rates on domestic term deposits. The new rates are effective from 1 April 2002.
The new rates for term deposits of less than Rs 15 lakh are (in percentage) 91 to 179 days: 6.50; 180 days to less than one year: 6.50; one year to less than two years: 7.25; two years to less than three years: 7.50; three years and above: 8.00. There is no change in the rate for deposits accepted for up to 90 days.
For a single deposit of Rs 15 lakh to less than Rs 1 crore accepted for a period of less than one year, a 0.25-per cent higher rate will be permitted. For a single deposit of Rs 1 crore to less than Rs 5 crore, a 0.5-per cent higher rate will be permitted for maturities up to179 days and a 0.25-per cent higher rate for maturities of 180 days to less than one year.
The rates on a single deposit of Rs 5 crore and above are decided by the bank from time to time. Senior citizens will get an additional interest of 0.5 per cent for maturities of less than one year and 0.75 per annum for maturities of one year and above.
The bank has also revised the rates for NRE deposits. The new rates will be: 6.5 per cent for deposits of six months to less than one year; 7.25 per cent for one year to less than two years; 7.5 per cent for two years to less than three years; and 8 per cent for three years and above.
IFCI sells shares of Indo Rama
Mumbai: IFCI Ltd has executed a negotiated deal with Yield Securities & Credits Pvt Ltd for sale of 16,46,579 equity shares of Indo Rama Synthetics India Ltd (IRSL) and with Virgin Securities & Credits Pvt Ltd for the sale of 16,46,580 equity shares of Indo Rama Synthetics India Ltd.
The company has informed that the deal is in terms of the share purchase agreement dated 26 March 2001 between IFCI and O.P. Lohia, promoter of IRSL.
RBI revises WMA limits by Rs 752 crore
Mumbai: Reserve Bank of India has revised the normal Ways and Means Advances (WMA) limits (loans to State governments) by Rs 752 crore to Rs 6,035 crore.
The present scheme for special WMA and minimum balance would continue, the RBI said here in a statement adding that it would continue to be linked to investments made by state governments in GOI securities.
On overdraft regulation scheme, the apex bank said states would be allowed to run an overdraft for 12 consecutive working days as at present.
In case the overdraft appeared in the state's account and remained beyond 12 consecutive working days, the RBI and its agencies would stop payments on behalf of the concerned state governments, it added.
01 April 2002
ICICI Bank to diversify portfolio
Mumbai: The strategy of ICICI Bank after the merger with ICICI Ltd will be that of building a diversified portfolio to de-risk the company.
While the merged entity will continue to be into project finance, the focus will be to tap the potential in-retail financing.
The merged entity will start with a retail portfolio of 10 per cent.
After the merger, the branch network is expected to increase by 25-50 per cent in the next year, the thrust will be to beef up virtual channels such as Internet and call centres.
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