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PNB does away with low -yield loans
Punjab National Bank is gradually phasing low-yielding loans. In the first six months of this current year, the bank has phased out Rs35,000 crore of advances. Most of these were Mibor-linked loans, (generally bearing rates of around six per cent).

Despite this, the bank's advance portfolio increased from Rs 60,413 crore as at the end of last year, to Rs63,868 crore as on September 30. Thus, the bank's gross advances increased by about Rs7,000 crore in the first half of the current year.

The bank has been redefining its strategy to concentrate more on yields, rather than volumes, which has worked.

In the first half, the average yield on advances rose to 8.37 per cent from 8.12 per cent as at the end of March last year.

Advances increased in gross terms by about Rs7,000 crore during the first six months.
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Assocham asks RBI to hike credit limit to exporters
New Delhi: The Associated Chambers of Commerce and Industry of India (Assocham) has asked the RBI to hike the bank credit limit to exporters from 12 per cent to 15 per cent of the total bank credit.

The chamber has also asked the apex bank to accord exporters the priority sector lending status. In its mid-term Credit Policy review, the RBI had fixed the bank credit ceiling of 12 per cent for exporters.

In a memorandum submitted to RBI, the chamber said that raising the bank credit limit was necessary must because export performance had been consistently being going up. Credit limit of 15 per cent would further spur the export growth, said the chamber.
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SBI likely to announce a bank acquisition overseas
Mumbai: State Bank of India (SBI) is expected to announce the acquisition of a bank either in Bangladesh or Indonesia on Monday. The Bangladesh bank in question is Rupali Bank, which has 512 branches in Bangladesh and one in Karachi. The other bank being targeted is the Jakarta, Indonesia-based PT Bank Indomonex. Talks for this acquisition, sources said, have reached the last lap.

This will be the third acquisition in recent times by India's largest commercial bank. SBI in February took over over the Mauritius-based Indian Ocean International Bank Ltd for $8 million. It then followed this up with the acquisition of Giro Commercial Bank of Kenya in October for $7 million.

Rupali Bank has been looking for a strategic investor which will have a three- to five-year business and financial plan that will improve its profitability and capital adequacy ratio.

The goal behind the global expansion is to be among the top three banks in Asia by 2008 an ambitious order, considering that Japanese banks and Chinese banks tower over the continental banking business.

SBI is also preparing for 2009, when India will allow acquisitions of local banks by foreign banks. Towards this, SBI has already started a massive brand-building exercise in order to be known more as a bank for the young, and not only for grandfathers.
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Banks hike NRE, FCNR rates
Mumbai: Bank of Baroda (BoB) and Industrial Development Bank of India (IDBI) have announced a 20-30 basis points increase in interest rates on non-resident deposits, to align with the rise in Libor (London inter-bank offered rates). One basis point is one-hundredth of a percentage point.

IDBI has also announced a sharp 52-basis point hike in interest rates offered on non-resident (external) savings deposits to 4.23 per cent.

Libor has seen a rise of 25-30 basis points in the last one month, reflecting hikes in the US Federal Reserve's key funds rate.

The US Fed increased its funds rate by 25 basis points to 4.0 per cent this week, following an identical hike in October.

On NRE deposits, BoB raised interest rate for deposits of one year to less than two years to 5.20 per cent from 5.0 per cent, for two years to less than three years to 5.40 per cent from 5.10 per cent, and for three years to five years to 5.40 per cent from 5.10 per cent.
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LKB Federal merger runs into problems
Mumbai: Federal Bank and Lord Krishna Bank merger plans are in trouble as the two Kerala-based banks have so far failed to reconcile their differences over valuation and the merger proposal is likely to be called off if no headway is made at the meeting.

Federal Bank was ready to pay a maximum of close to Rs 300 crore for acquiring LKB, about two-thirds of what was sought by LKB.

However, LKB is asking for a price that's nearly thrice the book value of its Rs 16.95 per share. Bankers say that there is feeling is that if LKB does not come down from its stance, the merger proposal may not go through as Federal Bank is not willing to pay the price LKB is demanding.

LKB posted a net loss of Rs 21.76 crore in 2004-05. Federal Bank's net profit last year was Rs 90.08 crore. Federal Bank's capital adequacy ratio (CAR) in March 2005 was 11.27 per cent, while LKB's CAR was 11.74 per cent. LKB's net non-performing asset last year was 4.22 and that of Federal Bank was 2.21 per cent.

Federal Bank has a network of 456 branches covering almost all the important cities in the country with a dominant presence in Kerala with 339 branches. Lord Krishna Bank has a branch network of 112 spread across 11 States and the Union territory of Chandigarh.
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