Bank derivative deals under lens
Mumbai: Acting on a complaint by the Food Corporation of India, the Reserve Bank of India (RBI) has asked select foreign banks which are active in the derivatives market to provide information on derivative structures sold by them.

A number of companies are said to have suffered losses in derivative contracts entered into with some foreign banks and have expressed reservations about the pricing of the derivative products sold to them.

The Food Corporation of India (FCI) is said to have registered a complaint with the RBI after it suffered losses in an interest rate swap deal struck with Barclays Bank.

FCI said it was not given a "fair" quote by Barclays Bank while structuring the deal, sources said.

FCI had bought the interest rate swap for its underlying fixed rate interest liability on a Rs700-crore bond issue in October 2005.

Sources pointed out that FCI was to receive a fixed rate of interest from Barclays Bank and was to pay a floating rate of interest, linked to one-year government securities.

Since October 2005, the interest rate scenario has changed following two rounds of reverse repo rate hikes. The yield on the one-year paper has gone up from 5.35-5.40 per cent in October 2005 to a high of 6.85 per cent in July 2006.

It is currently hovering around 6.65 per cent. The 10-year yield, which was between 7.10 and 7.24 per cent in October 2005, peaked to 8.50 in July 2006. Subsequently, it has come down to 7.60 per cent.

The RBI is now making it mandatory for banks to disclose their derivative deals as balance sheet items from next year and has also pursued the matter with the Ministry of Company Affairs.
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ICICI Bank plans products in remittance space
Mumbai: ICICI Bank is planning new products in the remittances space which has been performing very well. The bank also plans to scale up its presence in the Gulf besides exploring alliance possibilities with overseas banks to boost this business, especially in the emerging markets.

The new products slated for launch before March 2007. Company sources said the products will be market-specific and possess a plethora of innovative features which will make the modes of disbursing and accepting funds very easy.

ICICI Bank currently enjoys an over 20 per cent marketshare in the $24 billion Indian remittances market.

ICICI Bank is also in talks with a few foreign banks for alliances in this space and already has six such tie-ups in place.

The remittances market has expanded robustly at a CAGR (compounded annual growth rate) of 15-to-20 per cent in the last three years and industry analysts expect the momentum to continue over the next three years as well.
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BoM to market Hero Honda bikes in rural areas
Pune: Bank of Maharashtra (BoM) has tied up with Hero Honda to market the company's motorbikes to farmers in Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh and Goa. BoM has signed a memorandum of understanding (MoU) with Hero Honda for this.

Initially, the scheme would be launched in the five states through its 1,092 branches. The bank has decided to cover 15,000 customers in the first phase with a financial outlay of Rs75 crore up to March 2007.
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