07/01/09 Read to lead
One country, one bank account’ may turn a reality
Our Bureau
Mumbai, Jan. 6 If you are banking with several banks, keeping track of all the accounts can prove to be cumbersome. Life would be easy if a single account number gives you access to all banks.
Well, the Indian Banks’ Association, at the behest of the Government, is examining the feasibility of a ‘One Country, One Bank Account’ proposal whereby a single bank account is all that an individual would need to transact business at any bank in the country.
If the ‘One Country, One Bank Account’ proposal, currently on the drawing board stage, becomes a reality, it could revolutionise the way banking transactions are carried out in India. From ‘Any Branch Banking’ services being currently offered by individual banks, the Indian banking system would be graduating to ‘Any Bank Branch Banking’.
With ATM-cum-debit cards now being enabled for conducting transactions across the ATM networks of banks in the country, the ‘Any Bank Branch Banking’ could as well see the light of day in a few years.
“The Government has asked us to examine the feasibility of the ‘one country, one account’ concept. It is a challenging concept whereby an individual with a unique account number can go to any bank for transacting business. Technology holds the key to its implementation,” said Mr Sanjay Sharma, member, IBA’s Information Technology Committee, and Managing Director & CEO, IDBI Intech.
Mr Sharma said IndiaPay, the retail payments hub being set up under the aegis of the National Payments Corporation of India (NPCI), would help link up all banks, ATMs, Point of Sale (POS) terminals, mobile service providers, etc., as an aggregator for enabling seamless payment and settlement.
Once IndiaPay becomes operational, all ATM and POS transactions would be settled in India. Currently, these transactions are routed through international payment gateways of MasterCard and Visa.
According to Mr K. Unnikrishnan, Deputy Chief Executive, IBA, the NPCI, which has an authorised capital of Rs 300 crore and paid-up capital of Rs 100 crore, has engaged the services of a global HR search firm to zero in on a CEO and key operations personnel.
Banks reluctant to lend to realty’
Developers’ memo to RBI.
Our Bureau
Mumbai, Jan. 6 The Confederation of Real Estate Developers’ Association of India has represented to the Reserve Bank of India Governor, Dr D. Subbarao, that despite the recent steep cuts in signal rates, commercial banks were still reluctant to extend home loans as also finance to developers.
Leading a delegation, Mr R.S. Ajmera, President, CREDAI, submitted a memorandum to the Governor asking that real estate to be treated on a par with infrastructure.
Other demands include slotting affordable home price at a maximum of Rs 35 lakh, for which home loan rates should be seven per cent, while charging home loans above Rs 35 lakh at nine per cent.
The members wanted the RBI to relax norms for FDI flow for complete or part purchase of IT parks and malls, besides making five acre or 10,000 sq metre townships also eligible for the investment.
They sought the RBI’s intervention to prompt banks to reduce margins on home loans besides ensuring adequate credit flow to the housing segment.
SASF targeting ‘tough’ IDBI loan cases
At stake NPAs worth Rs 3,770 cr.
Our Bureau
Mumbai, Jan.6 With 456 non-performing loan cases aggregating Rs 5,230 crore being successfully resolved in the last four years, the Stressed Assets Stabilisation Fund (SASF), the special purpose vehicle (SPV) formed in September 2004 by the Government for acquiring non-performing loans of the erstwhile IDBI, is aggressively seeking to resolve the remaining 175 ‘difficult’ cases aggregating Rs 3,770 crore.
The urgency to resolve as many non-performing loans (NPL) cases as possible stems from the fact that with the passage of time the value of ‘assets’ in the Fund’s portfolio would get depreciated.
Of the 456 cases aggregating Rs 5,230 crore settled so far, the Fund has made cash recovery totalling Rs 2,384 crore.
Bond issue
In 2004, the Government had issued non-interest bearing 20-year bonds to the Fund.
The Fund, in turn, transferred them to IDBI as a consideration for ‘buying’ NPAs aggregating Rs 9,000 crore.
Proceeds from the recovery made by the Fund are utilised by IDBI to redeem the bonds. So far, bonds worth Rs 2,384 crore have been redeemed.
“We have settled almost all the ‘low hanging fruit’ cases from our NPA portfolio. We are now aggressively tackling the more difficult cases. We are taking recourse to debt restructuring in respect of units that are potentially viable under and outside corporate debt restructuring mechanism, going in for compromise settlement, filing recovery suit against promoters in debt recovery tribunal and taking over the units under the provisions of SARFAESI Act,” said Mr B Ravindranath, Executive Trustee, SASF.
FI status
SASF, according to Mr Ravindranath, has been accorded the status of Financial Institution to take advantage of the provisions of the Recovery of Debts due to Banks and Financial Institutions, 1993, by approaching the Debt Recovery Tribunal as well as Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002, Corporate Debt Restructuring mechanism for resolution of the assets acquired.
Among others, industrial units in the SASF portfolio belong to the textiles, food products, metal products, textiles, chemicals, pharmaceuticals, plastic, electrical/electronic, engineering, auto & auto ancillary, cement, power, and hotel sectors.
Mr Ravindranath said the Fund is also taking recourse to auction of units, sale of movable/ immovable properties, and issuing possession notices under SARFAESI.
Credit Suisse funds NBFC arm
Our Bureau
Mumbai, Jan. 6 Swiss investment bank Credit Suisse has brought in Rs 794 crore to India to fund its non-banking financial service business.
With this, Credit Suisse Finance (India) Private Ltd, the NBFC arm, has a total capital of Rs 827 crore, the bank said in press release on Tuesday.
Credit Suisse had acquired a Chennai based non-deposit taking NBFC, Bokdia Marketing and Finance, last year. The company has now changed the name to Credit Suisse Finance (India) Pvt Ltd.
The new NBFC arm of Credit Suisse will provide asset-backed financing, securities-backed financing, IPO lending and pre-IPO funding facilities to corporate and individual clients, said Mr Mihir Doshi, Managing Director and Country Head of Credit Suisse in India.
In 2007, Credit Suisse launched its India brokerage operation and obtained a merchant banker licence. It was granted a portfolio manager licence in 2008.
Credit Suisse entered the NBFC sector when many players have exited or trimmed operations. The move to enter at this time could be good if the company has a long-term plan. At present, valuations are attractive and the company would get the option of picking and choosing its clients. It would also depend on the company’s India-specific plans and its risk appetite, said Mr Arshad Khan, Associate Director, Financial Institutions, Fitch Ratings.
Though it might not be a right time to go ahead with expansion plans, it is a good time to roll out operations, he added
Truck sales hit the bump, decline 73% in Dec
Excess capacity build-up and fall in cargo movement, says study.
Suresh P. Iyengar
Mumbai, Jan. 6 In line with the sharp drop in cargo movement, truck sales plunged 73.5 per cent to 6,221 units in December 2008 against 24,222 units logged in the same month the previous year, according to the Indian Foundation of Transport Research and Training (IFTRT).
Apart from excess capacity build-up, the 25-30 per cent fall in cargo movement due to the general economic slowdown has hit truck sales, said Mr S.P. Singh, Senior Fellow and Coordinator, IFTRT, an independent body doing research in the field of transport.
Tractor-trailers of 30-49 tonne range witnessed a maximum drop of 94.7 per cent in December sales at 114 units (2,143 units).
They are mostly used to transport high-density cargoes such as cement, fertiliser, timber, ores and steel predominantly to railways for further transportation.
Sales of multi-axle vehicles of 25.2-31 tonne sunk 79 per cent to 2,033 units ( 9,587 units).
Hit by the crumbling infrastructure projects, sales of tipper trucks used mainly in construction dipped 73 per cent to 1,462 units (5,358 units).
Tipper truck sales dipped virtually due to stoppage of construction and infrastructure projects in many parts of the country in the last three months in the wake of financial crunch, said a dealer.
Medium commercial vehicles of 15 tonne to 16.2 tonne witnessed a drop of 72 per cent to 1,635 units (4,159 units).
Sales of these vehicles, used mostly in hilly terrains and narrow highways to carry parcel cargo, have been sinking for quite some time. Sales of intermediate commercial vehicles (8-12 tonne), used by logistic firms, retail stores and for captive purposes in factory and hospitals, plunged 69 per cent to 1,053 units (3,414 units).
The 5-7.5 tonne category light commercial vehicles (LCVs) saw sales dipping 52 per cent to 1,586 units (3,294 units).
LCVs mostly operate on intra-state short haul and intra-district cargo operations and their market share has been cannibalised by new LCVs of sub-one tonne load capacity such as Tata Ace.
In comparison to the huge slump of 1984 and 1988, the drop in sales of commercial vehicles in the last quarter and particularly in December 2008 is most alarming and gives multiple negative signals about the health of the country’s economy, said the IFTRT study.
Commercial vehicle cos expect 6-month lag for sales to pick up
‘Second fiscal package would take time to translate into sales’.
While demand has been moderate in rural and semi-rural areas due to transportation of agriculture commodities, in the urban areas, lack of industrial activity has adversely impacted the demand for new trucks.
Priyanka Vyas
New Delhi, Jan. 6 Commercial vehicle companies and component suppliers expect it would take about six months before they can see any major revival in business.
The Government’s second fiscal package aimed at infrastructure spending is expected to increase the demand for trucks.
But with record low sales, industry players say that it would take a few months before the benefit of the Government’s measures translates into sales.
“The depreciation benefit will have a quicker impact on sales. But by the time demand starts generating through infrastructure spending, it could be around six months,” Mr Prakash Telang, Executive Director, Tata Motors, the country’s largest commercial vehicle producer, told Business Line.
Similarly, in a statement this week, the Managing Director of Ashok Leyland, Mr R. Seshasayee, said that while he expected the package to have a positive impact on sales, it would be with a time lag.
Both the companies control over 80 per cent of the domestic commercial vehicle market.
Sales figures
Last month, Tata Motors commercial vehicle sales were down by over 50 per cent. Ashok Leyland’s overall commercial vehicles sales were down 63 per cent in December.
Sales have fallen sharply due to lack of freight movement with a fall in industrial production.
A top executive with Eicher Motors admitted the difficulty in gauging the precise timeframe by when sales could pick up.
“It is difficult to say when the impact of the recent measures would trickle down to sales. We hope sales should pick up with all the positive signals that the Government has sent,” said Mr Vinod Aggarwal, Chief Financial Officer, Eicher Motors.
Shriram Transport Finance, a major player in commercial vehicle finance, has said that while demand has been moderate in rural and semi-rural areas due to transportation of agriculture commodities, in the urban areas, lack of industrial activity has taken a major hit on the demand for new trucks.
“Movement of goods in rural and semi-rural areas has not been so sharply affected. But demand from large fleet operators in the urban areas would not change dramatically in the absence of a revival in industrial production and import-export of goods,” said Mr R. Sridhar, Managing Director, Shriram Transport Finance.
Security fears may deter new outsourcing customers
Six major vendors get terror mails.
Vishwanath KulkarniShamik Paul
Bangalore, Jan. 6 Faced with sluggish business volumes, Indian IT services firms could find it even more difficult to convince new customers to offshore to India in the wake of recent successive terror strikes across the country.
Industry analysts said offshoring by newer customers could get impacted by the recent developments even as the terror threats continue to persist. Last week six major IT firms in Bangalore such as Infosys, Wipro, Accenture and Cranes Software received a terror mail threatening to blow up their campuses in the city.
“Older customers will not be perturbed. However, the new clients will require a lot more assurance before they can offshore work to India,” said Mr Vinu S. Kartha, partner at Tholons Inc, an offshore advisory firm.
Big deterrent
Terrorist threats could make travel more difficult and may disrupt the vendor’s ability to provide services to their clients or could delay, postpone or cancel clients’ decisions to use their services.
“It (terror attack) is a big deterrent for new clients’ proposed off-shoring initiatives,” said Mr S. Sabyasachi, founder of MindPlex Consulting, an offshore advisory firm.
However, IT firms feel that the India would continue to be a dominant offshoring destination considering the scale of resources and the quality of services offered.
High standards
“It is a matter of great concern for the customers, but people including new customers won’t run away. Our security standards are quite high,” said Mr Som Mittal, president of Nasscom, the apex body of software and services companies.
Stating that the customers were fairly mature and knew that terror strikes were not particular or new to India, Mr Mittal said “both physical and data security systems of Indian IT firms are pretty robust.”
The Indian companies do mission critical work for customers and have strong disaster recovery and business continuity plans in place and have set up delivery centres in near shore locations such as Eastern Europe, Mexico and Canada.
IT firms continue to enhance security after the recent terror threats. Companies such as Infosys and Wipro have sought CISF cover. Besides, post 9/11 incident, most large companies have already included terrorism risk in their corporate insurance policies, which also includes loss of profits in the event of an attack.
“Clients are not overtly concerned. However, there is a lot more scrutiny on the security arrangements the Indian vendors have in place,” said Mr Krishnakumar Natarjan, CEO, MindTree Ltd.
More lending rate cuts in Feb
BS Reporter / Mumbai January 7, 2009, 0:14 IST
Bankers expect credit to pick up after Jan 15.
Public sector banks are expected to reduce their lending rates further next month.
“We have not asked banks to lower rates just yet. We are waiting for all of them to complete one round of cuts and we will then take up the issue. But the next round should be in February,” said a senior government official.
At present, the benchmark prime lending rate of public sector banks ranges between 12 and 13.25 per cent. Some banks, like Punjab National Bank, have cut the benchmark rate three times, and others, like State Bank of India, twice — once in November and then earlier this month.
WHO'S CHARGING WHAT
Govt Banks
BPLR* (%)
SBI
12.25
PNB
12.00
Canara Bank
12.5.0
Bank of Baroda
12.50
Bank of India
12.50
PRIVATE BANKS
ICICI Bank
16.75
HDFC Bank
16.00
*Benchmark prime lending rate
There are also lenders such as IDBI Bank that are yet to go for a second round of lending rate cuts, though deposit rates have been pared to lower cost of funds.
“For the smaller banks, the transmission of the lower deposit rates will take some time and that is what is delaying a reduction in lending rates,” the official added.
“The overall direction is towards further cuts but the timing will depend on how much and by when we can lower the cost of deposits,” said a public sector bank chief.
Today, United Bank of India cut its benchmark prime lending rate 50 basis points to 13 per cent with effect from January 12. Deposit rates have also been cut.
Over the next few weeks, banks are expected to lower deposit rates further with SBI, the country’s largest bank, expected to review rates by the middle of the month.
In a report released yesterday, HDFC Bank economists said they expected deposit rates to fall 75 to 125 basis points by March, and lending rates 50 to 75 basis points.
To enhance credit flow and spur economic activity, the Reserve Bank of India has reduced the repo rate, the rate at which it lends to banks, 350 basis points since October. The cash reserve ratio, or the proportion of deposits banks must keep with the RBI, has been lowered 400 basis points in the same time-frame to infuse additional liquidity of Rs 3,00,000 crore and help banks earn some income. The reserve repo, the rate at which RBI absorbs liquidity from the banks, has also been lowered 200 basis points to discourage banks from parking surplus cash with the central bank.
For the moment, the finance ministry is concentrating on monitoring credit flow to various sectors. Yesterday, Finance Secretary Arun Ramanathan asked Mumbai-based public sector bank chiefs to step up lending and ensure that loan proposals were cleared quickly.
Public sector bank chiefs said credit flow is normal for segments like small and medium enterprises and firms. “Credit offtake is expected to pick up around January 15 because the effect of the series of rate cuts sets in and purchases coinciding with Makar Sankranti take place,” said a bank chairman who was present at the meeting.
On the issue of non-banking finance companies, bankers said those who are approaching them with proposals are being granted loans.
Card processing work to shift to India
BS Reporter / Mumbai January 7, 2009, 0:57 IST
Processing of domestic card transactions will shift to India over the next few years with India Pay, a domestic payment system, expected to take over the activity which is so far done overseas.
While the process is expected to take four to five years, India Pay, the new payment system will start next year. Initially, the focus will be on ATM transactions.
Sources said over the next four to five years, processing of credit card transactions, which is so far done abroad will shift to India. Sources at the Indian Banks’ Association, which is on the scheme, said that India Pay will handle all domestic transactions while it will work with payment networks like Visa and MasterCard for international transactions undertaken by Indian cardholders or foreigners on visit to the country.
Once the processing work shifts to India, sources said, the transaction costs will come down. At present, the fees charged by Visa and MasterCard are relatively high, they said. Also, the fees which will go to the Indian company, will result in savings in foreign currency.
Countries such as China have already shifted to local processing after China Union Pay started operations in 2003.
In India, a company, National Payment Corporation of India, has already been registered.
IBA deputy chief executive K Unnikrishnan said the entity will focus on three strands – electronics payments, ATM transactions and processing of card payments. It is in the process of appointing a chief executive officer and a management team.
The company’s initial capital base will be Rs 100 crore, while the authorised capital is pegged at Rs 300 crore. Nine banks, including two foreign players operating in India, have picked up stake in the company. Some of the banks include State Bank of India, Bank of India, Bank of Baroda, Punjab national Bank, ICICI Bank, HDFC Bank, Citi Bank and HSBC.
As the operations progress more banks would be brought on the board as shareholders. Public sector banks would hold 51 per cent stake.
Besides ATM transactions, electronic payment systems such as electronic fund transfer, which are at present managed by the Reserve Bank of India, may also come under wings of this company, another IBA official said.
Basel panel for focus on stress testing
D Ravi Kanth / Geneva January 07, 2009, 0:05 IST
Committee suggests forward-looking risk assessment by banks to avoid financial crisis in future.
The Basel Committee on Banking Supervision today unveiled a new framework of principles on how to implement stress-testing practices, which were neglected by leading global banks that are now caught in the financial implosion, analysts said.
Entrusted with the responsibility of tightening regulation and supervision in global banks that suffered huge losses — now estimated at over $1 trillion — during the last one year, the Basel Committee has embarked on a series of measures to ensure proper regulation within banks.
It has secured a strong mandate from the leaders of G-20 countries, who met in Washington last year to prepare the ground for tightened supervision and regulation of banks.
The committee operates from the Bank for International Settlements, the watchdog for central banks in the world.
“Stress testing is an important risk management tool,” said Nout Wellink, Chairman of the Basel Committee on Banking Supervision and President of the Netherlands Bank. “It plays a critical role in strengthening not only bank corporate governance but also the resilience of individual banks and the financial system,” he said.
“The financial crisis has demonstrated the importance of stress testing as an integral part of any bank’s risk management, liquidity and capital planning process,” the chairman said.
In its latest paper issued today, the Committee proposed a set of principles to address “weaknesses in stress testing exposed by the financial crisis.” The principles include the underestimation of the potential severity and duration of stress events and the insufficient identification and aggregation of risks on a firm-wide basis.
It “sets expectations for the role and responsibilities of supervisors in reviewing firms’ stress testing practices,” the panel said. Further, the new framework of principles emphases that a sound stress-testing programme must include some key benchmarks. First, the stress-testing practices should be “directed by the board and senior management.” Second, banks must provide “forward-looking assessment of risk” and “complement information from models and historical data.” Third, the practices should be “an integral part of capital and liquidity planning” and “guide the setting of a bank’s risk tolerance.” And, “facilitate the development of risk mitigation or contingency plans across a range of stressed conditions.”
In a separate development, the European Central Bank is considering to further reduce its borrowing cost that are well above the rates in the United States and Japan. As overall inflation rate fell down to the lowest level in more than two years in December, the ECB is provided with enough room to consider further interest rate cuts, which have been reduced by 1.75 percentage points since early October.
Latest estimates suggest the consumer-price inflation in the euro area slowed to 1.6 per cent from 2.1 per cent in November, a development that brings below the ECB’s target of 2 per cent. The fall in inflation rate is made possible due to sharply falling oil prices, analysts said.
Last month, the ECB predicted the euro-area economy will shrink about 0.5 per cent this year, which would be the first annual fall in gross domestic product since the euro’s introduction a decade ago.
Bank agents look beyond core services to survive7 Jan 2009, 0133 hrs IST, Ram Narsinghdev Sahgal, ET Bureau
MUMBAI: Two years after the Reserve Bank of India (RBI) permitted banks to outsource banking services to business correspondents (BCs) for getting
underbanked parts of the country in the financial inclusion fold, BCs are having a tough time keeping their heads above water. BCs attribute their losses to the small business volumes in rural and semi-urban areas. For instance, State Bank of India (SBI) offers its 21 BCs Rs 10 for opening a new no-frills, or zero-balance, account and 50 paise on every transaction of Rs 1,000. To generate a minimum revenue of Rs 10,000 a month, a BC would have to open 1,000 new no-frills accounts from its outlets. In addition, the ticket-size of deposits and withdrawals in underbanked areas is very often less than Rs 1,000. In order to sustain themselves, BCs have now started offering rural customers a variety of other financial services such as insurance to compensate for losses in trying to extend banking outreach. Companies such as Zero Mass Foundation and Fino Fintech Foundation that function as BCs for SBI, Union Bank of India (UBI), ICICI Bank and Corporation Bank say it could take three to five years for them to break-even and start making profits from a standalone BC model. And that too will be subject to certain changes on the ground level, it said. While some BCs like Zero Mass consider it imperative to offer other services in underbanked areas for survival, others like Fino Fintech are confident of the feasibility of a standalone BC model over a period of time, when revenues become ‘healthier’ and costs ‘leaner’. Fino Fintech’s CFO Rishi Gupta believes that financial inclusion could be accomplished, if BCs are allowed to offer their services from the common service centres (CSC) being set up under the National e-Governance Plan (NeGP) for providing e-governance countrywide by bringing government services at the doorsteps of people. “If outreach is to be achieved successfully, a BC would need to bring down the cost of setting up infrastructure and increase business volumes,” said Mr Gupta. “This could happen, if BCs are allowed to use the IT kiosks being set up under NeGP to disburse their services. It will lead to cost savings and increased business volumes. The government’s help in making the BC model a success is therefore imperative.” The CSCs have been positioned as 100,000-plus organised distribution outlets for delivery of the government as well as private sector services. If correctly implemented, the scheme would serve to reduce costs, improve efficiencies and significantly broaden the bouquet of services currently available to the country’s rural population. However, Anurag Gupta, president of Zero Mass Foundation, emphasises the need for BCs to offer other financial services to keep the revenues flowing. “Returns from selling products such as life, health and cattle insurance are higher than those from offering third-party banking services,” he said. “Since we have just started offering some of these products, it’s too early to count revenues yet. However, we expect the revenues from non-banking streams to exceed banking revenues.” Both Fino Fintech Foundation and Zero Mass have been set up by Mumbai-based technology providers, Financial Information Network & Operations and A Little World, respectively, that provide smart card and chipless card technologies to banks under the BC model. While Fino runs BC outlets in 200 districts across 20 states for ICICI Bank, UBI, Corporation Bank, Zero Mass runs 80% of the 3,862 outlets for SBI.
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HSBC employee arrested for duping foreign customer6 Jan 2009, 2257 hrs IST, PTI
HYDERABAD: A call centre employee of a private bank was arrested in Vishakapatnam on charges of withdrawing Rs 47 lakh from the account of a
foreigner by fraudulent methods, police said on Tuesday. Rahul Kumar, an employee of HSBC call centre at its resource centre in Siripuram in Visakhapatnam, for the past one-and-a-half-year, was arrested by the Task Force personnel. He attended a call of one Eva Pagony, a Greek national, who called up the customer service in September last year following some technical problem, Task Force sub-inspector K Ananda Reddy told media today. Rahul allegedly asked Pagony about her account details and also the ATM pin number during the conversation, the police official said. Later, he opened an account and illegally started withdrawing money from Pagony's account, he said. "Rahul withdrew Rs 10 lakh two times and Rs 12 lakh twice and also withdrew Rs 3 lakh at Kolkata. With the amount he purchased a vehicle, cleared his credit card debts and even invested the remaining amount," Reddy said. Following a complaint from an official of the Risk and Fraud Control Unit of HSBC, the police arrested Rahul on January 4. He has allegedly confessed to his role in the fraud and also disclosed that he took assistance from four other persons while withdrawing the amount. A case has been registered and handed over to the Central Crime Station in Visakhapatnam. Rahul has been sent to 14-days judicial remand by a court in Visakhapatnam.
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Our Bureau
Mumbai, Jan. 6 If you are banking with several banks, keeping track of all the accounts can prove to be cumbersome. Life would be easy if a single account number gives you access to all banks.
Well, the Indian Banks’ Association, at the behest of the Government, is examining the feasibility of a ‘One Country, One Bank Account’ proposal whereby a single bank account is all that an individual would need to transact business at any bank in the country.
If the ‘One Country, One Bank Account’ proposal, currently on the drawing board stage, becomes a reality, it could revolutionise the way banking transactions are carried out in India. From ‘Any Branch Banking’ services being currently offered by individual banks, the Indian banking system would be graduating to ‘Any Bank Branch Banking’.
With ATM-cum-debit cards now being enabled for conducting transactions across the ATM networks of banks in the country, the ‘Any Bank Branch Banking’ could as well see the light of day in a few years.
“The Government has asked us to examine the feasibility of the ‘one country, one account’ concept. It is a challenging concept whereby an individual with a unique account number can go to any bank for transacting business. Technology holds the key to its implementation,” said Mr Sanjay Sharma, member, IBA’s Information Technology Committee, and Managing Director & CEO, IDBI Intech.
Mr Sharma said IndiaPay, the retail payments hub being set up under the aegis of the National Payments Corporation of India (NPCI), would help link up all banks, ATMs, Point of Sale (POS) terminals, mobile service providers, etc., as an aggregator for enabling seamless payment and settlement.
Once IndiaPay becomes operational, all ATM and POS transactions would be settled in India. Currently, these transactions are routed through international payment gateways of MasterCard and Visa.
According to Mr K. Unnikrishnan, Deputy Chief Executive, IBA, the NPCI, which has an authorised capital of Rs 300 crore and paid-up capital of Rs 100 crore, has engaged the services of a global HR search firm to zero in on a CEO and key operations personnel.
Banks reluctant to lend to realty’
Developers’ memo to RBI.
Our Bureau
Mumbai, Jan. 6 The Confederation of Real Estate Developers’ Association of India has represented to the Reserve Bank of India Governor, Dr D. Subbarao, that despite the recent steep cuts in signal rates, commercial banks were still reluctant to extend home loans as also finance to developers.
Leading a delegation, Mr R.S. Ajmera, President, CREDAI, submitted a memorandum to the Governor asking that real estate to be treated on a par with infrastructure.
Other demands include slotting affordable home price at a maximum of Rs 35 lakh, for which home loan rates should be seven per cent, while charging home loans above Rs 35 lakh at nine per cent.
The members wanted the RBI to relax norms for FDI flow for complete or part purchase of IT parks and malls, besides making five acre or 10,000 sq metre townships also eligible for the investment.
They sought the RBI’s intervention to prompt banks to reduce margins on home loans besides ensuring adequate credit flow to the housing segment.
SASF targeting ‘tough’ IDBI loan cases
At stake NPAs worth Rs 3,770 cr.
Our Bureau
Mumbai, Jan.6 With 456 non-performing loan cases aggregating Rs 5,230 crore being successfully resolved in the last four years, the Stressed Assets Stabilisation Fund (SASF), the special purpose vehicle (SPV) formed in September 2004 by the Government for acquiring non-performing loans of the erstwhile IDBI, is aggressively seeking to resolve the remaining 175 ‘difficult’ cases aggregating Rs 3,770 crore.
The urgency to resolve as many non-performing loans (NPL) cases as possible stems from the fact that with the passage of time the value of ‘assets’ in the Fund’s portfolio would get depreciated.
Of the 456 cases aggregating Rs 5,230 crore settled so far, the Fund has made cash recovery totalling Rs 2,384 crore.
Bond issue
In 2004, the Government had issued non-interest bearing 20-year bonds to the Fund.
The Fund, in turn, transferred them to IDBI as a consideration for ‘buying’ NPAs aggregating Rs 9,000 crore.
Proceeds from the recovery made by the Fund are utilised by IDBI to redeem the bonds. So far, bonds worth Rs 2,384 crore have been redeemed.
“We have settled almost all the ‘low hanging fruit’ cases from our NPA portfolio. We are now aggressively tackling the more difficult cases. We are taking recourse to debt restructuring in respect of units that are potentially viable under and outside corporate debt restructuring mechanism, going in for compromise settlement, filing recovery suit against promoters in debt recovery tribunal and taking over the units under the provisions of SARFAESI Act,” said Mr B Ravindranath, Executive Trustee, SASF.
FI status
SASF, according to Mr Ravindranath, has been accorded the status of Financial Institution to take advantage of the provisions of the Recovery of Debts due to Banks and Financial Institutions, 1993, by approaching the Debt Recovery Tribunal as well as Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002, Corporate Debt Restructuring mechanism for resolution of the assets acquired.
Among others, industrial units in the SASF portfolio belong to the textiles, food products, metal products, textiles, chemicals, pharmaceuticals, plastic, electrical/electronic, engineering, auto & auto ancillary, cement, power, and hotel sectors.
Mr Ravindranath said the Fund is also taking recourse to auction of units, sale of movable/ immovable properties, and issuing possession notices under SARFAESI.
Credit Suisse funds NBFC arm
Our Bureau
Mumbai, Jan. 6 Swiss investment bank Credit Suisse has brought in Rs 794 crore to India to fund its non-banking financial service business.
With this, Credit Suisse Finance (India) Private Ltd, the NBFC arm, has a total capital of Rs 827 crore, the bank said in press release on Tuesday.
Credit Suisse had acquired a Chennai based non-deposit taking NBFC, Bokdia Marketing and Finance, last year. The company has now changed the name to Credit Suisse Finance (India) Pvt Ltd.
The new NBFC arm of Credit Suisse will provide asset-backed financing, securities-backed financing, IPO lending and pre-IPO funding facilities to corporate and individual clients, said Mr Mihir Doshi, Managing Director and Country Head of Credit Suisse in India.
In 2007, Credit Suisse launched its India brokerage operation and obtained a merchant banker licence. It was granted a portfolio manager licence in 2008.
Credit Suisse entered the NBFC sector when many players have exited or trimmed operations. The move to enter at this time could be good if the company has a long-term plan. At present, valuations are attractive and the company would get the option of picking and choosing its clients. It would also depend on the company’s India-specific plans and its risk appetite, said Mr Arshad Khan, Associate Director, Financial Institutions, Fitch Ratings.
Though it might not be a right time to go ahead with expansion plans, it is a good time to roll out operations, he added
Truck sales hit the bump, decline 73% in Dec
Excess capacity build-up and fall in cargo movement, says study.
Suresh P. Iyengar
Mumbai, Jan. 6 In line with the sharp drop in cargo movement, truck sales plunged 73.5 per cent to 6,221 units in December 2008 against 24,222 units logged in the same month the previous year, according to the Indian Foundation of Transport Research and Training (IFTRT).
Apart from excess capacity build-up, the 25-30 per cent fall in cargo movement due to the general economic slowdown has hit truck sales, said Mr S.P. Singh, Senior Fellow and Coordinator, IFTRT, an independent body doing research in the field of transport.
Tractor-trailers of 30-49 tonne range witnessed a maximum drop of 94.7 per cent in December sales at 114 units (2,143 units).
They are mostly used to transport high-density cargoes such as cement, fertiliser, timber, ores and steel predominantly to railways for further transportation.
Sales of multi-axle vehicles of 25.2-31 tonne sunk 79 per cent to 2,033 units ( 9,587 units).
Hit by the crumbling infrastructure projects, sales of tipper trucks used mainly in construction dipped 73 per cent to 1,462 units (5,358 units).
Tipper truck sales dipped virtually due to stoppage of construction and infrastructure projects in many parts of the country in the last three months in the wake of financial crunch, said a dealer.
Medium commercial vehicles of 15 tonne to 16.2 tonne witnessed a drop of 72 per cent to 1,635 units (4,159 units).
Sales of these vehicles, used mostly in hilly terrains and narrow highways to carry parcel cargo, have been sinking for quite some time. Sales of intermediate commercial vehicles (8-12 tonne), used by logistic firms, retail stores and for captive purposes in factory and hospitals, plunged 69 per cent to 1,053 units (3,414 units).
The 5-7.5 tonne category light commercial vehicles (LCVs) saw sales dipping 52 per cent to 1,586 units (3,294 units).
LCVs mostly operate on intra-state short haul and intra-district cargo operations and their market share has been cannibalised by new LCVs of sub-one tonne load capacity such as Tata Ace.
In comparison to the huge slump of 1984 and 1988, the drop in sales of commercial vehicles in the last quarter and particularly in December 2008 is most alarming and gives multiple negative signals about the health of the country’s economy, said the IFTRT study.
Commercial vehicle cos expect 6-month lag for sales to pick up
‘Second fiscal package would take time to translate into sales’.
While demand has been moderate in rural and semi-rural areas due to transportation of agriculture commodities, in the urban areas, lack of industrial activity has adversely impacted the demand for new trucks.
Priyanka Vyas
New Delhi, Jan. 6 Commercial vehicle companies and component suppliers expect it would take about six months before they can see any major revival in business.
The Government’s second fiscal package aimed at infrastructure spending is expected to increase the demand for trucks.
But with record low sales, industry players say that it would take a few months before the benefit of the Government’s measures translates into sales.
“The depreciation benefit will have a quicker impact on sales. But by the time demand starts generating through infrastructure spending, it could be around six months,” Mr Prakash Telang, Executive Director, Tata Motors, the country’s largest commercial vehicle producer, told Business Line.
Similarly, in a statement this week, the Managing Director of Ashok Leyland, Mr R. Seshasayee, said that while he expected the package to have a positive impact on sales, it would be with a time lag.
Both the companies control over 80 per cent of the domestic commercial vehicle market.
Sales figures
Last month, Tata Motors commercial vehicle sales were down by over 50 per cent. Ashok Leyland’s overall commercial vehicles sales were down 63 per cent in December.
Sales have fallen sharply due to lack of freight movement with a fall in industrial production.
A top executive with Eicher Motors admitted the difficulty in gauging the precise timeframe by when sales could pick up.
“It is difficult to say when the impact of the recent measures would trickle down to sales. We hope sales should pick up with all the positive signals that the Government has sent,” said Mr Vinod Aggarwal, Chief Financial Officer, Eicher Motors.
Shriram Transport Finance, a major player in commercial vehicle finance, has said that while demand has been moderate in rural and semi-rural areas due to transportation of agriculture commodities, in the urban areas, lack of industrial activity has taken a major hit on the demand for new trucks.
“Movement of goods in rural and semi-rural areas has not been so sharply affected. But demand from large fleet operators in the urban areas would not change dramatically in the absence of a revival in industrial production and import-export of goods,” said Mr R. Sridhar, Managing Director, Shriram Transport Finance.
Security fears may deter new outsourcing customers
Six major vendors get terror mails.
Vishwanath KulkarniShamik Paul
Bangalore, Jan. 6 Faced with sluggish business volumes, Indian IT services firms could find it even more difficult to convince new customers to offshore to India in the wake of recent successive terror strikes across the country.
Industry analysts said offshoring by newer customers could get impacted by the recent developments even as the terror threats continue to persist. Last week six major IT firms in Bangalore such as Infosys, Wipro, Accenture and Cranes Software received a terror mail threatening to blow up their campuses in the city.
“Older customers will not be perturbed. However, the new clients will require a lot more assurance before they can offshore work to India,” said Mr Vinu S. Kartha, partner at Tholons Inc, an offshore advisory firm.
Big deterrent
Terrorist threats could make travel more difficult and may disrupt the vendor’s ability to provide services to their clients or could delay, postpone or cancel clients’ decisions to use their services.
“It (terror attack) is a big deterrent for new clients’ proposed off-shoring initiatives,” said Mr S. Sabyasachi, founder of MindPlex Consulting, an offshore advisory firm.
However, IT firms feel that the India would continue to be a dominant offshoring destination considering the scale of resources and the quality of services offered.
High standards
“It is a matter of great concern for the customers, but people including new customers won’t run away. Our security standards are quite high,” said Mr Som Mittal, president of Nasscom, the apex body of software and services companies.
Stating that the customers were fairly mature and knew that terror strikes were not particular or new to India, Mr Mittal said “both physical and data security systems of Indian IT firms are pretty robust.”
The Indian companies do mission critical work for customers and have strong disaster recovery and business continuity plans in place and have set up delivery centres in near shore locations such as Eastern Europe, Mexico and Canada.
IT firms continue to enhance security after the recent terror threats. Companies such as Infosys and Wipro have sought CISF cover. Besides, post 9/11 incident, most large companies have already included terrorism risk in their corporate insurance policies, which also includes loss of profits in the event of an attack.
“Clients are not overtly concerned. However, there is a lot more scrutiny on the security arrangements the Indian vendors have in place,” said Mr Krishnakumar Natarjan, CEO, MindTree Ltd.
More lending rate cuts in Feb
BS Reporter / Mumbai January 7, 2009, 0:14 IST
Bankers expect credit to pick up after Jan 15.
Public sector banks are expected to reduce their lending rates further next month.
“We have not asked banks to lower rates just yet. We are waiting for all of them to complete one round of cuts and we will then take up the issue. But the next round should be in February,” said a senior government official.
At present, the benchmark prime lending rate of public sector banks ranges between 12 and 13.25 per cent. Some banks, like Punjab National Bank, have cut the benchmark rate three times, and others, like State Bank of India, twice — once in November and then earlier this month.
WHO'S CHARGING WHAT
Govt Banks
BPLR* (%)
SBI
12.25
PNB
12.00
Canara Bank
12.5.0
Bank of Baroda
12.50
Bank of India
12.50
PRIVATE BANKS
ICICI Bank
16.75
HDFC Bank
16.00
*Benchmark prime lending rate
There are also lenders such as IDBI Bank that are yet to go for a second round of lending rate cuts, though deposit rates have been pared to lower cost of funds.
“For the smaller banks, the transmission of the lower deposit rates will take some time and that is what is delaying a reduction in lending rates,” the official added.
“The overall direction is towards further cuts but the timing will depend on how much and by when we can lower the cost of deposits,” said a public sector bank chief.
Today, United Bank of India cut its benchmark prime lending rate 50 basis points to 13 per cent with effect from January 12. Deposit rates have also been cut.
Over the next few weeks, banks are expected to lower deposit rates further with SBI, the country’s largest bank, expected to review rates by the middle of the month.
In a report released yesterday, HDFC Bank economists said they expected deposit rates to fall 75 to 125 basis points by March, and lending rates 50 to 75 basis points.
To enhance credit flow and spur economic activity, the Reserve Bank of India has reduced the repo rate, the rate at which it lends to banks, 350 basis points since October. The cash reserve ratio, or the proportion of deposits banks must keep with the RBI, has been lowered 400 basis points in the same time-frame to infuse additional liquidity of Rs 3,00,000 crore and help banks earn some income. The reserve repo, the rate at which RBI absorbs liquidity from the banks, has also been lowered 200 basis points to discourage banks from parking surplus cash with the central bank.
For the moment, the finance ministry is concentrating on monitoring credit flow to various sectors. Yesterday, Finance Secretary Arun Ramanathan asked Mumbai-based public sector bank chiefs to step up lending and ensure that loan proposals were cleared quickly.
Public sector bank chiefs said credit flow is normal for segments like small and medium enterprises and firms. “Credit offtake is expected to pick up around January 15 because the effect of the series of rate cuts sets in and purchases coinciding with Makar Sankranti take place,” said a bank chairman who was present at the meeting.
On the issue of non-banking finance companies, bankers said those who are approaching them with proposals are being granted loans.
Card processing work to shift to India
BS Reporter / Mumbai January 7, 2009, 0:57 IST
Processing of domestic card transactions will shift to India over the next few years with India Pay, a domestic payment system, expected to take over the activity which is so far done overseas.
While the process is expected to take four to five years, India Pay, the new payment system will start next year. Initially, the focus will be on ATM transactions.
Sources said over the next four to five years, processing of credit card transactions, which is so far done abroad will shift to India. Sources at the Indian Banks’ Association, which is on the scheme, said that India Pay will handle all domestic transactions while it will work with payment networks like Visa and MasterCard for international transactions undertaken by Indian cardholders or foreigners on visit to the country.
Once the processing work shifts to India, sources said, the transaction costs will come down. At present, the fees charged by Visa and MasterCard are relatively high, they said. Also, the fees which will go to the Indian company, will result in savings in foreign currency.
Countries such as China have already shifted to local processing after China Union Pay started operations in 2003.
In India, a company, National Payment Corporation of India, has already been registered.
IBA deputy chief executive K Unnikrishnan said the entity will focus on three strands – electronics payments, ATM transactions and processing of card payments. It is in the process of appointing a chief executive officer and a management team.
The company’s initial capital base will be Rs 100 crore, while the authorised capital is pegged at Rs 300 crore. Nine banks, including two foreign players operating in India, have picked up stake in the company. Some of the banks include State Bank of India, Bank of India, Bank of Baroda, Punjab national Bank, ICICI Bank, HDFC Bank, Citi Bank and HSBC.
As the operations progress more banks would be brought on the board as shareholders. Public sector banks would hold 51 per cent stake.
Besides ATM transactions, electronic payment systems such as electronic fund transfer, which are at present managed by the Reserve Bank of India, may also come under wings of this company, another IBA official said.
Basel panel for focus on stress testing
D Ravi Kanth / Geneva January 07, 2009, 0:05 IST
Committee suggests forward-looking risk assessment by banks to avoid financial crisis in future.
The Basel Committee on Banking Supervision today unveiled a new framework of principles on how to implement stress-testing practices, which were neglected by leading global banks that are now caught in the financial implosion, analysts said.
Entrusted with the responsibility of tightening regulation and supervision in global banks that suffered huge losses — now estimated at over $1 trillion — during the last one year, the Basel Committee has embarked on a series of measures to ensure proper regulation within banks.
It has secured a strong mandate from the leaders of G-20 countries, who met in Washington last year to prepare the ground for tightened supervision and regulation of banks.
The committee operates from the Bank for International Settlements, the watchdog for central banks in the world.
“Stress testing is an important risk management tool,” said Nout Wellink, Chairman of the Basel Committee on Banking Supervision and President of the Netherlands Bank. “It plays a critical role in strengthening not only bank corporate governance but also the resilience of individual banks and the financial system,” he said.
“The financial crisis has demonstrated the importance of stress testing as an integral part of any bank’s risk management, liquidity and capital planning process,” the chairman said.
In its latest paper issued today, the Committee proposed a set of principles to address “weaknesses in stress testing exposed by the financial crisis.” The principles include the underestimation of the potential severity and duration of stress events and the insufficient identification and aggregation of risks on a firm-wide basis.
It “sets expectations for the role and responsibilities of supervisors in reviewing firms’ stress testing practices,” the panel said. Further, the new framework of principles emphases that a sound stress-testing programme must include some key benchmarks. First, the stress-testing practices should be “directed by the board and senior management.” Second, banks must provide “forward-looking assessment of risk” and “complement information from models and historical data.” Third, the practices should be “an integral part of capital and liquidity planning” and “guide the setting of a bank’s risk tolerance.” And, “facilitate the development of risk mitigation or contingency plans across a range of stressed conditions.”
In a separate development, the European Central Bank is considering to further reduce its borrowing cost that are well above the rates in the United States and Japan. As overall inflation rate fell down to the lowest level in more than two years in December, the ECB is provided with enough room to consider further interest rate cuts, which have been reduced by 1.75 percentage points since early October.
Latest estimates suggest the consumer-price inflation in the euro area slowed to 1.6 per cent from 2.1 per cent in November, a development that brings below the ECB’s target of 2 per cent. The fall in inflation rate is made possible due to sharply falling oil prices, analysts said.
Last month, the ECB predicted the euro-area economy will shrink about 0.5 per cent this year, which would be the first annual fall in gross domestic product since the euro’s introduction a decade ago.
Bank agents look beyond core services to survive7 Jan 2009, 0133 hrs IST, Ram Narsinghdev Sahgal, ET Bureau
MUMBAI: Two years after the Reserve Bank of India (RBI) permitted banks to outsource banking services to business correspondents (BCs) for getting
underbanked parts of the country in the financial inclusion fold, BCs are having a tough time keeping their heads above water. BCs attribute their losses to the small business volumes in rural and semi-urban areas. For instance, State Bank of India (SBI) offers its 21 BCs Rs 10 for opening a new no-frills, or zero-balance, account and 50 paise on every transaction of Rs 1,000. To generate a minimum revenue of Rs 10,000 a month, a BC would have to open 1,000 new no-frills accounts from its outlets. In addition, the ticket-size of deposits and withdrawals in underbanked areas is very often less than Rs 1,000. In order to sustain themselves, BCs have now started offering rural customers a variety of other financial services such as insurance to compensate for losses in trying to extend banking outreach. Companies such as Zero Mass Foundation and Fino Fintech Foundation that function as BCs for SBI, Union Bank of India (UBI), ICICI Bank and Corporation Bank say it could take three to five years for them to break-even and start making profits from a standalone BC model. And that too will be subject to certain changes on the ground level, it said. While some BCs like Zero Mass consider it imperative to offer other services in underbanked areas for survival, others like Fino Fintech are confident of the feasibility of a standalone BC model over a period of time, when revenues become ‘healthier’ and costs ‘leaner’. Fino Fintech’s CFO Rishi Gupta believes that financial inclusion could be accomplished, if BCs are allowed to offer their services from the common service centres (CSC) being set up under the National e-Governance Plan (NeGP) for providing e-governance countrywide by bringing government services at the doorsteps of people. “If outreach is to be achieved successfully, a BC would need to bring down the cost of setting up infrastructure and increase business volumes,” said Mr Gupta. “This could happen, if BCs are allowed to use the IT kiosks being set up under NeGP to disburse their services. It will lead to cost savings and increased business volumes. The government’s help in making the BC model a success is therefore imperative.” The CSCs have been positioned as 100,000-plus organised distribution outlets for delivery of the government as well as private sector services. If correctly implemented, the scheme would serve to reduce costs, improve efficiencies and significantly broaden the bouquet of services currently available to the country’s rural population. However, Anurag Gupta, president of Zero Mass Foundation, emphasises the need for BCs to offer other financial services to keep the revenues flowing. “Returns from selling products such as life, health and cattle insurance are higher than those from offering third-party banking services,” he said. “Since we have just started offering some of these products, it’s too early to count revenues yet. However, we expect the revenues from non-banking streams to exceed banking revenues.” Both Fino Fintech Foundation and Zero Mass have been set up by Mumbai-based technology providers, Financial Information Network & Operations and A Little World, respectively, that provide smart card and chipless card technologies to banks under the BC model. While Fino runs BC outlets in 200 districts across 20 states for ICICI Bank, UBI, Corporation Bank, Zero Mass runs 80% of the 3,862 outlets for SBI.
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HSBC employee arrested for duping foreign customer6 Jan 2009, 2257 hrs IST, PTI
HYDERABAD: A call centre employee of a private bank was arrested in Vishakapatnam on charges of withdrawing Rs 47 lakh from the account of a
foreigner by fraudulent methods, police said on Tuesday. Rahul Kumar, an employee of HSBC call centre at its resource centre in Siripuram in Visakhapatnam, for the past one-and-a-half-year, was arrested by the Task Force personnel. He attended a call of one Eva Pagony, a Greek national, who called up the customer service in September last year following some technical problem, Task Force sub-inspector K Ananda Reddy told media today. Rahul allegedly asked Pagony about her account details and also the ATM pin number during the conversation, the police official said. Later, he opened an account and illegally started withdrawing money from Pagony's account, he said. "Rahul withdrew Rs 10 lakh two times and Rs 12 lakh twice and also withdrew Rs 3 lakh at Kolkata. With the amount he purchased a vehicle, cleared his credit card debts and even invested the remaining amount," Reddy said. Following a complaint from an official of the Risk and Fraud Control Unit of HSBC, the police arrested Rahul on January 4. He has allegedly confessed to his role in the fraud and also disclosed that he took assistance from four other persons while withdrawing the amount. A case has been registered and handed over to the Central Crime Station in Visakhapatnam. Rahul has been sent to 14-days judicial remand by a court in Visakhapatnam.
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