PSU banks decide not to hike rates

Jaipur/ New Delhi/ Mumbai, July 16: You need not worry about an increase in your equated monthly instalments after RBI’s late night action on Monday. The finance ministry has leaned on public sector banks that control around 70% of the business against raising rates to keep a large constituency of middle class and corporate borrowers pacified ahead of key elections. After all, for over a year now, the finance ministry has been prodding RBI to cut rates, while the central bank has refused to toe the government line. Instead, on Monday it signalled a reversal in policy to offset the impact of the weakening rupee by announcing several measures that will push up the cost of funds for banks.

While there were expectations of banks responding with hikes in the coming days, the finance ministry swung into action and impressed upon banks to maintain status quo.

By evening the impact was visible as banks started issuing statements, saying rates will not go up. “The measures taken by RBI are designed to curb speculation in the market and are not seen by SBI as indicative of any systemic problem or deeper malaise. It is, therefore, expected that the position in the market will stabilize shortly. Hence neither the management nor the board of SBI that met on Tuesday in Mumbai felt that this requires any adjustment of lending,” State Bank of India said in a statement. Taking a cue from the largest lender, others including Punjab National Bank, Bank of Baroda and IDBI Bank followed suit.

Earlier on Tuesday, finance minister P Chidambaram seemed to lay down the ground rule. While kicking off a pre-election campaign on government schemes, Chidambaram said he did not expect banks to raise interest rates. “These measures are intended to quell excessive speculation in the forex market, reduce volatility and stabilize rupee. They should not be read as a prelude to any policy rate changes,” he said. Admitting that the high current account deficit has made the rupee weaker, the finance minister said, “Given the current account deficit and the inflation, some depreciation of the rupee is expected. But sometimes there is excessive speculation in the foreign exchange market and the role of RBI is to ensure that volatility is cut.

The tight liquidity situation due to the recent measures raised concerns of growth being impacted. But the finance minister allayed such fears. “These measures will in no way affect our commitment to growth. We must increase credit delivery and stimulate growth.” He reeled off a number of reforms and initiatives taken by the government in the last four months to revive growth and reverse the policy paralysis that has stalled projects approvals.

SBI tops ATM expansion in non-metros: Assocham

Mumbai, September 19: Country's largest lender State Bank of India (SBI) is more aggressive in expanding its ATM (automated teller machine) network in the non-metro and semi-urban centres as compared to its peers, according to a study by Assocham. "Unlike other banks, the State Bank of India (SBI) is expanding its ATM network in non-metro and semi-urban centres, faster than expansion in the metros," the study based on the recent Reserve Bank data said. As compared to the 5,783 ATMs in metro cities, SBI has 7,511 and 6,419 ATMs in non-metro urban areas and semi-urban areas, respectively, the Assocham statement said.
SBI's peer in the state-run banks space, Punjab National Bank is the only other bank which has more ATMs in non-metro cities than the metros, it said. The objective of financial inclusion can be better achieved by the usage of technological interventions, including ATMs, and public sector banks have an important role to play in the objective, Assocham Secretary General D S Rawat was quoted as saying.
Overall, the private sector banks, led by Axis Bank have gone about expanding their network through ATMs in a much more aggressive way than their public sector peers.  Be it, ICICI Bank, Axis Bank or HDFC their bias and preference for ATMs is for the metro cities, followed by tier two cities.Among the private sector banks, Axis Bank has the largest (10337) ATM network, followed by HDFC Bank with 9709 such machines and ICICI Bank - 9366 ATMs.
Excepting the SBI, the other banks have to go a long way before achieving the financial inclusion in the semi-urban and rural areas.
“The Finance Ministry is rightly very keen of achieving the financial inclusion of a large number of people in rural areas.  This can best be achieved by leveraging of technology and use mobile telephony and ATMs. Somehow, the public sector banks will have to take a lead in these areas. Even their brick and mortar branch network is wider in the rural and semi-urban areas than the private sector banks,” ASSOCHAM Secretary General D S Rawat said.
He said while a good beginning has been made, pooling of technology resources like the ATMs should be encouraged so that optimum use can be made to the advantage of the people. The ASSOCHAM quoted honourable Finance Minister Mr P Chidamabaram who recently noted how even the trade has not been fully brought into the banking network.
“As was pointed out by the Finance Minister, today traders are not able to deposit their cash of sales proceeds at night in any bank. In the process, they have to keep it either in the shop premises or at home taking the risks of theft and other insecurity issues. We must have technology-driven day and night banking so that a wider section of the informal economy is brought into the banking network,” Mr Rawat said. While the RBI has been expressing concerns over regulatory issues over the mobile banking, sooner or later different technology platforms have to converge and the regulators need to equip themselves to deal with new challenges and opportunities.
The ASSOCHAM said a large number of Indians still remain outside the banking network.  It is because of lack of the organized banking that the gullible people in semi urban and rural areas fall prey to unscrupulous money-lenders. “The institutions of micro-finance did make a good beginning. However, because of certain corporate governance issues, the entire experiment has become rather overshadowed by controversies. The use of technology to reach out to the bottom of the pyramid promises a lot of scope,” the ASSOCHAM Secretary General said.

LIC's 11% SBI stake makes RBI see red

The banking regulator is unhappy with the Life Insurance Corporation (LIC) of India holding more than 10 per cent stake in State Bank of India, the country’s largest lender. LIC stake in SBI was 11.05 per cent, as on June 30.
The Reserve Bank of India (RBI) has conveyed its discomfort to the bank’s management, according to a top SBI official. “These are two big institutions. RBI is not comfortable with two large institutions having a cosy relationship,” the official said.
A top RBI official also confirmed the development. “Any institution that wants to have more than five per cent stake in a bank needs to have our prior approval, even if the stake is acquired from the secondary market,” the RBI official said. “We don’t want the banking sector to have too much capital from volatile sources,” he added.
The move comes at a time when LIC has increased stake in public sector banks by purchasing shares both from the secondary market and through direct equity infusion via preferential allotment. The cash-strapped government had asked LIC to infuse equity into public sector banks so that these lenders could have eight per cent tier-I capital. LIC had infused close to Rs 8,000 crore in several public sector banks such as Punjab National Bank, Bank of Baroda, Union Bank of India, Dena Bank, and Central Bank of India, among others, in the last financial year. LIC’s stake in SBI, however, has been acquired from the secondary market.
Interestingly, the insurance regulator is also unhappy with LIC for its more than 10 per cent stake in several public sector banks, as such a move breaches the single company cap norm. Concerned over the concentration risk, the Insurance Regulatory and Development Authority (Irda) has sought details of LIC’s investment in banks. Nearly 26 per cent of LIC’s equity investment is in banks, while nearly 39 per cent of its equity exposure is in stocks of public sector units.
According to the Insurance Act, equity exposure in a single entity is capped at 10 per cent. Thus, LIC can invest up to 10 per cent of the capital employed by the investee company, or 10 per cent of the fund size in a corporate entity, whichever is lower. The capital employed includes share capital, free reserves and debentures or bonds.
As on March 31, 2011, LIC’s investment corpus stood at nearly Rs 11 lakh crore, of which 20 per cent, or Rs 2.2 lakh crore, was equity. Of that, investments in state-run stocks stood at Rs 85,031 crore, while exposure in banks stood at nearly Rs 59,586 crore.

Public Sector Banks, including SBI set out on a talent drive

 "Public sector banks in the country face a tremendous 
challenge with respect to talent and leadership skill availability.
Estimates put the manpower shortfall at four to five lakh."

 

Bangalore & Kolkata, August 30: Public sector banks (PSBs) including Punjab National Bank, IDBI, State Bank of India and Bank of India are altering their talent strategies to focus on performance and employee engagement. The banks are also lining up incentives such as paid holidays abroad, leadership and training programmes at top b-schools.

 

"Public sector banks in the country face a tremendous challenge with respect to talent and leadership skill availability. Estimates put the manpower shortfall at four to five lakh," said Padmaja Alaganandan, executive director - consulting at PwC Consulting. Bridging the shortfall requires focus on fast-tracking high potential talent, she added.

 

The increased focus on performance has resulted in top business schools like IIMs witnessing an increase in executive management programmes taken up by banks to understand leadership, strategy, customer orientation and employee engagement. "Although the numbers of PSBs (around 2 per cent) are small when compared to other sectors, we have seen a more active interest in open programme participation this year," says Alex Manappurathu, chief programme officer (executive education), IIM-Bangalore.

 

At IIM-Bangalore, SBI, Bank of India, State Bank of Travancore, Canara Bank, Andhra Bank, Syndicate Bank, Karnataka Bank are among the public sector banks that have participated in open/custom programmes in the last three years, catering to the GMs and DGMs.

 

SBI has effected a complete overhaul of its talent assessment and engagement programmes. There is a new appraisal system. Senior managers will now have a performance review twice a year. The bank has tied up with Harvard Business School for online training programmes for its senior management. "We are now recruiting aggressively. These engagement methods will help us retain our employees and get more to join us," said a senior SBI HR executive who did not wish to be named.

 

Another bank that plans to provide global exposure to its employees is Punjab National Bank that has tied up with a business School in Singapore to train their middle and senior management on leadership skills. Last year, the bank started a grievance portal for employees called "Samadhaan" through which an employee can mail problems related to promotions, or managerial hiccups to the chairman directly.

 

"For junior and middle management, our salaries match the private banks and our attrition is not high," said Sushma Bali, GM-HR for PNB. Nonetheless, the bank is overhauling its employee engagement and performance management processes.

Chakrabarty had same views on CRR as a banker: SBI chief

Mumbai, August 28: State Bank of India Chairman Pratip Chaudhuri on Tuesday took a gentle dig at the Reserve Bank of India Deputy Governor K C Chakrabarty, who had advised him yesterday to “find out some other place” if he didn’t agree with the current regulatory environment insofar as cash reserve ratio was concerned.
Speaking on the sidelines of an investor conference on Tuesday, Chaudhuri said he hadn’t read the complete media reports, but what he remembered was that Chakrabarty had the same views when he was a banker.
“What I want to say is that it’s just a view. When he (Chakrabarty) was a bank chairman, he was also of the same view (reducing the CRR),” Chaudhuri said. He made the remarks with a big smile, but the message was loud and clear.
Before joining the central bank, Chakrabarty was the chairman and managing director of Punjab National Bank and before that, of Indian Bank.
However, while speaking to NewsWire 18, Chaudhuri clarified his intention was not a complete abolition of cash reserve ratio (CRR) overnight, but to ignite a public debate on the merits of CRR. “My comments are in sync with the views of most of the bankers today,” he said.
Chaudhuri had earlier suggested that CRR should be phased out in a time bound manner or at least RBI should consider a paying an interest on it equivalent to the savings bank account rate if not the repo or the reverse repo rate.
CRR is the proportion of deposits that banks need to park with the regulator. While RBI used to pay interest on CRR funds, but that system was withdrawn a few years back. As a result, banks do not earn anything for keeping CRR with RBI but the negative carry for CRR and also SLR (statutory liquidity ratio) is considered while calculating the benchmark lending rate — the Base rate.
At present, CRR is 4.75 per cent. The central bank had reduced CRR by 125 bps to improve liquidity situation during January-February. CRR is not only used a liquidity tool but also indicates the monetary policy stance of the central bank.

Capital infusion
Regarding fund raising, Chaudhuri said SBI was in talks with the government for capital infusion and he expected the government to infuse about Rs 4,000 crore this financial year in the bank.
The government is committed to infuse capital in the PSBs and retain its stake, financial services secretary D K Mittal had told reporters on a sidelines of an event last year in Mumbai. However the Rs 8,000 crore capital infusion for SBI came only at the end of the last financial year after from the government after dilly-dallying on the issue for the whole year.
Capital adequacy ratio for the SBI at the end of the first quarter stood at 13.17 per cent.
On associate banks’ merger, Chaudhuri said that it was currently not on the priority list of the bank and he could not say if any associate bank would be merged this financial year. The SBI board has already cleared the merger of one associate bank this year.

Specialist Officers Recruitment in Punjab National Bank

Human Resources Development Division Head Office, 7, Bhikaiji Cama Place, New Delhi -110607

Punjab National Bank invites online applications from indian citizens for the following posts
1. Senior Manager (Law) : 01 Post
2. Manager (Credit) : 600 Posts
3. Manager (Security) : 18 Posts
4. Officer (Librarian) : 01 Post
5. Fire Officers : 11 Posts
6. Officer(Printing Technologist) : 01 Post
7. Officer (Data Analyst) : 02 Posts
8. Officer (IT) : 35 Posts
9. Officer (HRD) :20 Posts
10. Hindi Officers : 51 Posts

Last Date for Online Apply 17.08.2012
Opening Date for Online Registration : 01/08/2012
Tentative Date of Written Examination 14.10.2012

Application Fee :
For post codes 01- 07 For SC/ST/PC category candidates : Rs 50/- per candidate (only intimation charges) For General/OBC/EXSM category candidates : Rs 400/- per candidate
For post codes 08 - 10 For SC/ST/PC category candidates : Rs 20/- per candidate (only intimation charges) For General/OBC/EXSM category candidates : Rs 100/- per candidate

For more details : click here

SBI wants benchmark prime lending rate scrapped

Mumbai, August 7: Led by State Bank of India — the country’s largest lender — banks have asked the Reserve Bank of India to invoke the sunset clause on benchmark prime lending rate (BPLR), and has argued such a move will reduce interest rates for customers by 50-75 basis points as they will shift to base rate.

BPLR is the erstwhile benchmark rate for all loans, and was replaced by base rate in July 2010. While all new loans were disbursed using base rate as the reference, it was not made mandatory for old customers — who were given loans in the BPLR regime — to shift to base rate. When the base rate was introduced in 2010, even then bankers had demanded the end of the BPLR regime by invoking the sunset clause.

The demand for the sunset clause is being made again by banks at a time when the central bank is reviewing the loan pricing mechanism. A committee under RBI Deputy Governor Anand Sinha is looking into the issue of transparency in loan pricing and also studying the efficacy of base rate with respect to transmission of monetary policy.

Banks had aggressively hiked BPLR in the last two years, following 13 interest rate increases by RBI between March 2010 and October 2011. The move was also aimed at encouraging borrowers to shift to the base rate regime.

Rate Card

Bank                                  Base rate        BPLR (%)
State Bank of India             10.00            14.75
ICICI Bank                         9.75             17.50
HDFC Bank                        9.80             18.30
Punjab National Bank        10.50             14.00
Bank of Baroda                 10.50             14.00
Union Bank of India           10.50             15.00
Canara Bank                     10.50             14.75

Bankers said borrowers were given loans at sub-BPLR rates while in the base rate regime. But a spread was added to the base rate. Yet, effective lending rate under base rate is still 50-75 bps lower than that of the BPLR regime. They said only about 30 per cent of the borrowers are yet to shift to the base rate despite continuing to pay higher interest.

“There is an administrative cost in running the BPLR system,” said a banker who is involved with the discussion on this matter with the regulator. “SBI has written to the central bank to invoke the sunset clause for all banks, which will not only benefit the banks but also reduce the interest rate burden of the customers.”

SBI’s base rate is 10 per cent while its BPLR is at 14.75 per cent.

In 2010, banks had requested RBI to invoke the sunset clause. The regulator refused, citing legal complications as the banks had entered into a contract, which needs to be honoured, while giving a loan, and the customer cannot be forced to shift to base rate.

Banks have also asked RBI to allow them to review the base rate formula at least once in three years. When the base rate mechanism was introduced, RBI allowed banks to tweak the formula for one year. But the formula cannot be changed after one year.

During interactions with bankers, it was also noticed by the regulator that banks were using various indicator to capture its cost of funds. The committee reviewing the loan pricing suggested that marginal cost of funds could be a better indicator for cost of funds. However, the proposal has not found favour with banks having higher current account and savings account deposit (as a portion of total deposits), as increase in marginal cost will not reflect the overall cost increase of the bank.

Should you switch your home loan to SBI?

Though State Bank of India (SBI) has cut rates on home loans by 25 to 85 basis points (bps) across tenures (bank’s present discount to its card rates is about 25 bps), it’s a bit early for home loan borrowers to switch their lender. Wait for 10-15 days, as other lenders are likely to follow suit. Borrowers can also use SBI’s example to bargain with their respective lender for better rates. It is most likely that their lenders would agree, as it is in their interest to retain a borrower with a good repaying record, say experts.

For home loans up to Rs 30 lakh, SBI has reduced the interest rate from 10.75 per cent to 10.25 per cent and to 10.4 per cent for loans above Rs 30 lakh. Earlier, for loans between Rs 30 lakh and Rs 75 lakh the interest rate was 11 per cent and for loans above Rs 75 lakh, it was 11.25 per cent. The revised equated monthly instalment (EMI) per Rs 100,000 at the rate of 10.25 per cent for a loan tenure of 30 years would be Rs 897, against the prevailing EMI of Rs 934, said an SBI statement. The waiver of the prepayment penalty for floating rate home loans has made switching lenders to take advantage of lower rates an attractive proposition for borrowers. But that should not be the only criteria for switching your lender. The difference between old and new rates should be at least 75-100 bps for the switch to make commercial sense, as the procedure is cumbersome.

Harsh Roongta, CEO, Apnapaisa.com, says other lenders might also cut rates and it is best to wait for 10-15 days. The biggest advantage is that there is no prepayment penalty on floating rate loans. However, there will be a nominal processing fee and a small fee on creation of security. Home Loan Rates

 SBI #  10.25
Other Bank # Minimum 10.5% floating

* ICICI Bank and HDFC Ltd also have floating interest rate scheme where the interest rates are fixed for the initial few years and thereafter the then prevailing floating rates are applicable.

# SBI rates are effective from August 7, 2012.
 The home loan rates are indicative rates, which may change according to the credit profile of the customer. Source: Apnapaisa Research Bureau

Even if borrowers are getting the new loan at 50 bps less and if only two years are left for repayment, switching to a new lender will help, as the rates offered by SBI are very competitive, Roongta says.

Assume, for instance, a borrower took a floating rate loan of Rs 80 lakh, at an interest rate of 12 per cent and tenure of 30 years. The loan has been repaid for five years. The old EMI is Rs 82,289 and the amount due is Rs 78,13,057. If the loan is reset at 10.5 per cent, the new EMI is Rs 76,000. The difference works out to Rs 6,000. Car Loan Rates

State Bank of India # 10.75
Other Bank # 11.25

Car Loan – Interest rates as on August 02, 2012
* SBI rates effective from August 07, 2012 Source: Apnapaisa Research Bureau

Vipul Patel of Home Loan Advisors, an independent mortgage advisory firm, is advising his customers to use SBI’s rates to bargain for a better deal with their respective lender. If the lender does not agree to lower the rates, then the borrower must switch to a new one. “Even if your bank does not bring down rates to 10.25 (SBI’s charge), they might at least reduce it to 10.5 or 10.75 per cent. If your current rates are 11 per cent or above, even this much of a reduction will help,” he says.

While switching the loan, borrowers should try to keep the monthly repayment constant or increase it, so that the period of the loan does not increase. However, unlike home loans, it does not make sense to switch your car loan. The prepayment charges are huge and the loan tenure is short in most cases (three to seven years).

State Bank of India's asset quality improving: Chairman

Mumbai, July 27 (Reuters) - State Bank of India's asset quality is improving compared to last year, Chairman Pratip Chaudhuri said on the sidelines of a news conference after announcing its $1.25 billion bond issue. He did not give any further details citing a silent period ahead of the earnings. India's biggest lender will post April-June quarterly results on Aug. 8, Chaudhuri added.

The comments came after SBI shares slumped as much as 3.8 percent on Friday as a rise in non-performing assets at Punjab National Bank and Union Bank sparked concerns about asset quality in the government-run banking sector.