NEFTs get faster because banks will process them every 30 minutes now

RBI has reduced the settlement time for

clearance of NEFT from 1 hour to 30 minutes

Mumbai, April 10: On 6 April, the Reserve Bank of India in its monetary policy announcement said that it has decided to reduce the settlement time for clearance of National Electronic Funds Transfer (NEFT), from 1 hour to 30 minutes. Here is what it means for you:

NEFT is one of the electronic payment systems in the country. It allows you to send money from one bank to another. You can send the money only during a certain hours. The fund transfer happens in batches. So far, NEFT payment settlement happened in hourly batches. Now this has been changed to every half an hour. Hence, in a weekday (Monday to Friday) the batch between 8 am to 7 pm will have 23 batches. So far there were only 12 batches.

On Saturdays, NEFT settlements happen between 8 am and 1 pm. Now, instead of six batches, it will be settled in 11. There is no NEFT on Sundays.

The cost of sending money using NEFT depends on the bank that you are transacting with. However, the RBI has issued guidelines on the costs too. For receiving money over NEFT, you don’t have to pay any charges. For sending, you will be charged a fee.

For an amount up to Rs10,000, the banks can’t charge you more than Rs2.50, excluding service tax. If you send between Rs10,001 and Rs1 lakh, you will be charged Rs 5 plus service tax, and for transactions between Rs1 lakh and Rs2 lakh, charges would be Rs15 plus service tax. For transactions above Rs2 lakh, the charge would be Rs25 plus service tax.

Banks are also supposed to pay 25 paise per transaction to the clearing house as well as destination bank, as service charge. However, it cannot be passed on to the customers.

To send money using NEFT, you need to have an account with a bank that allows you to do fund transfer using NEFT. You need to have your beneficiary’s bank account details such as account number, name of the receiver, and IFSC code. Once you add the beneficiary, you will have to wait for half an hour for the beneficiary to get registered. Once registered, you can start sending the money.

According to RBI, In case of non-credit or delay in credit to the beneficiary account, you can contact the NEFT customer facilitation centre of your bank; details of which is available on bank websites.

Shut down SBI branches till the supply of cash gets normalised: Union

Chennai, January 14 (IANS): State Bank of India (SBI) can shut down its branches till the supply of cash gets normalised and staff are not put to risk to face the ire of banking public, a top union leader said.

“We have suggested to the SBI management to down the branch shutters till the supply of cash gets normalised. It is better to close down the branches for some time than the staff face the ire of the public for no fault of theirs,” D. Thomas Franco Rajendra Dev, Senior Vice President of the All India Bank Officers Confederation (AIBOC), told IANS.

Dev wondered how his comrades in Maharashtra, Madhya Pradesh and Chhattisgarh are saying that cash supplies there are better but such views are not heard from his comrades in other states.

“It is strange that Reserve Bank of India (RBI) is not divulging as to the amount of cash supplied state­wise and bank­wise. What is the big secrecy to be safeguarded after the cash has been distributed to states and banks?”

According to Dev, in many SBI branches cash is being rationed amongst the account holders. The RBI has been issuing empty statements about currency supplies being comfortable and currency being sent to rural areas whereas in reality it is not so, Dev charged.

He said people in Tamil Nadu will not be able to celebrate Pongal festival properly due to cash crunch.

- IANS

Cash Costly, allow Banks to Charge for Cash Transactions

Mumbai, December 26: The country’s largest bank, State Bank of India, wants the government to allow banks to charge customers for cash transactions, said a senior executive. “We must be allowed to charge bank account holders to charge for cash transactions. Handling cash is a huge cost to banks,” said Manju Agarwal, deputy managing director at SBI. “Given that this is an opportune time, there needs to be incentives to use cards or internet to make electronic payments and discourage cash.”

The Reserve Bank of India and commercial banks face a total of Rs.21,000 crore ($3.5 billion) in currency operations costs annually. Speaking about the digital push after demonetisation, Agarwal said they have seen multifold rise in debit card and mobile banking usage to make payments. Banks, including SBI, have been promoting cashless transactions through cards and their mobile applications. SBI is aggressively promoting its SBI Buddy. Moreover, in collaboration with telecom firm BSNL, it has launched its new app – ‘mobicash’ which features three-way access to transfer fund from the mobile phone.

Agarwal said there were easy and secure ways to make cashless transactions even on basic phones which facilitate transactions through SMS or USSD code. Last week, SBI chairman also spoke about finding ways to disincentivise cash transactions, such as imposing a charge or levy above a specified limit or threshold, after normalcy is restored in banking operations.

With about 90% of our transactions done in cash, India has a cash-to-GDP ratio of about 12.2%, believed to be relatively high compared to many of its peer countries like Brazil, Russia and Mexico. Though the withdrawal of high-value currency notes has taken the number to 7.3% of the GDP, which is lower than US at 7.8% (as per RBI data), it is estimated to settle at 10% after the entire demonetised value is back in the system.

Bhattacharya said if India wanted to de-emphasise cash, not only should there be an incentive for people to move towards a cashless economy, but also a disincentive for transacting excessively in cash, leaving out small-ticket transactions. “Cash imposes a huge burden. We don’t understand it as it is not immediately visible. It is a huge burden on society,” she added.

SBI initiates three-pronged strategy to boost its home loan business

Mumbai, December 29: The State Bank of India has initiated a three-pronged strategy to push its home loan business. The country's largest lender will sell its home loan products through the entire group network instead of limiting it to the bank, develop a mechanism to identify right customers for home loans, and implement a uniform delivery system across its branches, a top official said.

"We are looking to grow home loans at 15%-17% in FY16 and how to leverage our group resources," said B Sriram, managing director and group executive (national banking) at SBI.

The state-run bank, which owns more than one fourth of the housing loan market in the country, grew its home loan business 14% year-on-year for the quarter ended September at around Rs 1.49 lakh crore.

With the Reserve Bank of India issuing guidelines for licensing small banks and entry of players such as Bandhan and IDFC, the home loan market is expected to get more competitive in the coming years.

Sriram said SBI plans to connect about 40,000-50,000 counsellors working for its non-bank group subsidiaries such as SBI Mutual Fund and SBI Life Insurance to source home loans, to boost its customer reach. For example, an outsourced counsellor working for SBI Mutual Fund would also approach his clientele for SBI home loans, for which she would earn commissions.

"Alternative channels could be the main channel next 10 years in the banking industry as they attract young customers," Sriram told ET in an interaction. SBI is also working on a mechanism to identify the right customer to offer home loans or any other cross-selling product like mutual fund or insurance. For example, if a customer enters a SBI branch and does a transaction, immediately a screen will prop up on the branch official's computer showing the customer's profile and product suitability.

RBI should roll back steps after rupee stabilises: SBI

New Delhi, July 16: Bankers today said that the liquidity tightening measures announced by RBI are temporary and hoped that they will be rolled back once the rupee stabilises. “These measures are temporary, to calm down volatility. We are not taking that these measures will be long-term. I think once the rupee stabilises, these steps should be largely rolled back,” SBI Chairman Pratip Chaudhuri said.

The Reserve Bank of India had last night announced a slew of measures like raising the cost of borrowing by banks by 2 per cent to 10.25 per cent and announcing sale of bonds worth Rs 12,000 crore through open market operations to suck liquidity to check the rupee slide. The rupee had earlier this month touched a life-time low of 61.21 to a dollar. On the impact of RBI measures on interest rates, Chaudhuri said: “Impact on loan growth depends on how long these measures stay. Deposit rates do not have such a close correlation with the money market.’’ RBI’s measures strengthened the rupee to 59.20 against the dollar in noon trade against the previous close of 59.89.

“RBI action is towards the forex side of market and to contain volatility in rupee,” Bank of Baroda Chairman S.S. Mundra said, adding that it would be too early for RBI to change the policy stance. RBI is scheduled to announce its first quarter monetary policy review on July 30. UCO Bank Chairman Arun Kaul said RBI’s step is a temporary measure and the bank has to wait for some more time to decide on the impact of this move. “The objective of RBI action is to compress liquidity. The implications are same as repo rate hike. RBI has opted for that time which is slack in terms of credit demand,” Kaul said.

One-third of new ATMs should be visually-challenged friendly

Chandigarh, September 7: The Reserve Bank of India has asked all banks to make efforts to provide banking services available to all. In a circular issued to all state-run commercial banks, the central bank has advised them to ensure all banking facilities such as chequebooks, ATMs, internet banking, lockers, retail loans, credit cards, etc, are invariably offered to visually challenged persons, without any discrimination as they are legally competent to contract.
The RBI has also directed the banks to take necessary steps to provide all existing or proposed ATMs with ramps and to provide at least a third of new ones installed, with as talking features and Braille keypads.
The move follows a complaint filed by the office of the chief commissioner for persons with disabilities, alleging visually challenged persons face problems in using banking facilities. "Banks are therefore advised to strictly extend all banking facilities to persons with visual impairment and other disabilities, reads the circular.
Most banks allow the visually impaired to open joint bank accounts only. Since ATMs are not voice enabled they cannot be accessed.

SBI to cut processing and conversion fees on home loans

With the advent of festival season India’s largest lender – SBI has embarked upon a special campaign to ramp up its home loan book. It is going to reduce the processing fee for home loans to Rs.1,000 per loan irrespective of the size. The offer would be made available from September 1 onwards, a senior bank official told.
With the advent of festival season India's largest lender - the State Bank of India (SBI) has embarked upon a special campaign to ramp up its home loan book. It is going to reduce the processing fee for home loans to Rs.1000 per loan irrespective of the size. The offer would be made available from September 01 onwards, a senior bank official told.
Currently, loan processing is at 0.25% of the loan amount subject to a cap of Rs 6,500 for loans upto Rs.75 lakhs. For any higher loan amount, the maximum fee ceiling is Rs.10,000.  For example, if you apply for a loan of Rs. 20 lakhs, you need to pay a processing charge of Rs.1000/- With the new offer, it will be uniform at Rs.1,000 for a home loan. However, the offer would end on 30th November, 2012.
At the same time, the banking behemoth is actively mulling reduction in conversion fee which is presently at 1%. For all banks, conversion fees are in the range of 0.50-2%. This move, if implemented, will help the existing (SBI) home loan customers, who are not entitled to get the benefit of reduced interest rates to avail of the lowered interest rates. Let’s assume the loan size is Rs.30 lakhs and a customer has already repaid Rs.10 lakhs. Therefore, he has to pay Rs.20,000/-(i.e. 1% of 30-10 lakhs) one-time upfront for the conversion.
Earlier, SBI cut the interest rates on home and auto loans by over 50 basis points, effective from August 07. However, it did not change the base rate (remains at 10% p.a), the benchmark rate below which the Reserve Bank of India does not allow any bank to lend. Now, a home loan borrower can avail of a home loan with interest at 10.25% as against 10.75% prior to the rate cut, for a ticket size of Rs 30 lakhs. The interest rate will be 10.40% for loans above Rs. 30 lakhs. The EMI on Home Loan tenor of 30 years is Rs.897 per lakh which is the lowest in the market.
However, the new rates are available only to the new customers. So, a customer who had taken a loan at a higher floating rate viz. 11.25% will be keen to avail the benefit of the current lower rate. So, he can convert his loan to the new rate by paying the conversion fee. "Those proposed moves by RBI will certainly benefit customers, who should tap opportunities right in time. However, the bank cannot just keep on doing this beyond a point as it may hurt their margins," said Anil Rego, CEO and founder, Rights Horizons, a Bangalore based advisory firm.
With 26% market share, SBI continues to be the leader in home loan market followed by the privately held housing finance company- HDFC.  "We have got some surplus funds after RBI cut statutory liquidity ratio by 1% to 23%. We have decided to utilize it in expanding our retail business. The Bank is aiming at 20-25% growth in its home loan portfolio. As the country's largest bank, we have a vital role to play in supporting the economy", said the official.
As of July, SBI's home loan portfolio stood at around Rs 1.06 lakh plus crores. Total retail loans stood at Rs 1.86 lakh crores in the April-June quarter. To facilitate home loan borrowers, it is planning to upload the list of housing projects, approved by the bank shortly.  The bank has tied up with 1,046 such projects across India till July in 2012-13. In order to enlist its projects, a builder has to meet certain norms prescribed by SBI. For listed projects, the bank sanctions home loans in 4-5 days while it takes around 14 days to approve a home loan for other housing constructions. The lender offers a loan to value (LTV) of 90% for home loans upto Rs 20 lakhs and upto 80% for loans above Rs 20 lakhs.

SBI chief gets taste of RBI's tongue-lashing

Chennai, Aug 27: His predecessor, O P Bhatt, had spent the better part of his five-year tenure in a bitter war of words with the Reserve Bank of India over teaser home loans and sundry other things. State Bank of India Chairman Pratip Chaudhuri obviously didn’t want that to continue — so his first public statement after taking over in April last year focused on why SBI should not get into a state of perpetual conflict with the regulator.
Chaudhuri’s best efforts apparently have not been enough to soothe the RBI’s nerves and to stop it from seeing SBI as a problem child. A week after he suggested the abolition of the cash reserve ratio (CRR) — the proportion of deposits banks need to park with the regulator — RBI Deputy Governor K C Chakrabarty bluntly said on Monday — Chaudhuri “has to find some other place” if he could not work as per the central bank’s regulatory environment.
Chakrabarty was responding to a question from the audience at a conference on systemic risk here. The tongue-lashing took many by surprise, as it was probably the first time that a top RBI official resorted to such a public reprimand for the chairman of the country’s largest bank. Chaudhuri had said keeping the CRR balance with the RBI was costing the banking system Rs 21,000 crore. He had questioned why the CRR was not applied to insurance companies, non-banking financial companies and mutual funds, which were also mobilising public deposits. “CRR doesn't help anybody and it is unfairly put on the banks,” Chaudhuri had said.
While the RBI used to pay interest on CRR funds, that was withdrawn a few years back. Interestingly, SBI has reduced the lending rate on some segments such as retail and small and medium enterprises and said the reduction was due to a cut in the CRR and not due to a policy rate or repo rate cut. The RBI had reduced the repo rate in April by 50 bps to eight per cent.
Meanwhile, to another query as to “which banking tree needed to be protected”, Chakrabarty, drawing a forest fire analogy, said: “Obviously, it is SBI. It is too big a tree. If you fail to protect the SBI tree, it (the fire) may spread to other banks and it will turn out to be a systemic failure.”

SBI, BoI allowed to operate in Pak

India and Pakistan have agreed to allow two banks each from both the countries to set up branches across the border, Governor of the State Bank of Pakistan, Yaseen Anwar said on Wednesday.
“We have held discussions with the Reserve Bank of India and both sides have agreed to issue a full banking licence to two banks of each country,” Anwar told PTI on the sidelines of a conference organised by Institute of South Asian Studies.
The two Indian banks that will be allowed to operate in Pakistan are State Bank of India (SBI) and Bank of India (BoI). On the other hand, quasi-state owned National Bank of Pakistan and privately-owned United Bank Ltd will be running full-banking operations across the border, once licensed by India. “It will take few months to approve Indian banks’ licences on receiving them,” he said. “We are ready to go tomorrow to India” to set up banking operations, Anwar said.
Discussions have been held with RBI Governor D Subbarao to issue banking licences, he said, adding that the process will help normalise trade relations between India and Pakistan. Officials from the Bank of India in Singapore recently visited Karachi for setting up an office in Pakistan, said Syed Hasan Javed, Pakistan High Commissioner to Singapore.

Banks offer festive bonanza to customers

Mumbai, August 18: With an eye on getting business in the festive season, banks have started offering discounts on interest rates and waiving processing fees to attract retail customers. Mumbai-based Union Bank of India on Saturday announced it has waived processing fees on home and auto loans from August 15 to January 26.

State Bank of Bikaner and Jaipur, an associate of the State Bank of India, has found an innovative way to attract customers. While the bank is giving a discount of 25 basis points on retail loans across the board, customers who are applying for a car loan above Rs 10 lakh on line will get an additional rebate of 25 basis points, thus making the effective interest rate at 10.5 per cent which is the base rate of the bank, said Shiva Kumar, managing director, SBBJ. He added, the bank was offering 10.75 per cent for home loan customers, and those who apply on line will get a rebate of 10 basis points.

With credit growth slowing down in the current financial year amid high interest rate, banks are seeing the festive season as an opportunity to boost their credit portfolio. State Bank of India, for example, had said that it expected growth in retail credit to offset the impact of slowdown in corporate credit. The country's largest lender had earlier announced the cut in the interest rates for home and auto loans, immediately after Reserve Bank of India announced a one per cent SLR cut in July. SBI's home loan rates stand at 10.25 per cent for home loans up to Rs 30 lakh and 10.4 per cent for the loans above Rs 30 lakh. It also slashed its interest rate on car loans by 50 basis points to 10.75 per cent across the tenors.

Another public sector lender Andhra Bank is expected to take the decision about cutting interest rates on retail products. “We will be taking a decision soon” said, K K Misra, executive director of Andhra Bank.

Central Bank of India has already launched some products and is in the process of launching few more schemes both on asset and liability side. It has launched a special 555 days fixed deposit product in which the interest rate is higher by 50 basis points that the normal deposits of that tenor. It has also launched a recurring deposit account where the customer has the flexibility of putting the money according to his/her adjustment. Normally in the recurring accounts one has to put a fixed sum every month. “We will be waiving the processing fees on the retail loans, and where there is scope of reduction of interest rates we will cut the rates” said Ram Sangapure, general manager (retail), Central Bank of India.

Lok Sabha to decide on Banking Act changes

New Delhi, August 19: The almost seven-year wait for amending the Banking Regulation Act is likely to end on Wednesday, when the Lok Sabha will take up amendments in the Banking Regulation Act for consideration and passage. This is one of three financial sector Bills aimed at ushering in a new phase of reforms.
The Lok Sabha’s list of business for August 22 states that Finance Minister P Chidambaram will move the Banking Laws (Amendment) Bill 2011 to amend the Banking Regulation Act, 1949, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.
India Inc is keenly awaiting passage of this Bill as this will push the Reserve Bank of India to issue new banking licences.
Enactment of this Bill will provide new powers to the central bank. It proposes to confer upon the Reserve Bank the power to call for information and returns from the associate enterprises of banking companies, and also to inspect the same, if necessary. The Bill also proposes to empower the Reserve Bank to supersede the board of directors of a banking company for a total period not exceeding 12 months, and appoint an administrator to manage the banking company during the said period. The RBI feels that such power will help it in regulating new as well as existing entities in a better manner.
Another key feature of the Bill is increasing the voting rights. The Bill had originally proposed raising the ceiling on voting rights of shareholders of nationalised banks to 10 per cent from 1 per cent.
For private sector banks, the Bill talked about removing the existing restriction on voting rights limited to 10 per cent of the total voting rights of all the shareholders. However, it is believed that the Government has accepted the Standing Committee’s recommendation of increasing the limit of voting rights to 26 per cent from the existing 10 per cent.
It is expected that higher voting rights will give investors more leeway. The present Bill contains some provisions of the previous Bill. The previous Bill for amendment in Banking Regulation was introduced in the Lok Sabha on May 13, 2005. Even after the Standing Committee’s recommendation, strong opposition from its then allies the Left Parties forced the Government to allow the Bill lapse in 2009 when the term of the 14th Lok Sabha ended.

Finance ministry wants RBI to pay 7% interest on CRR deposits

New Delhi, August 12: The finance ministry has suggested that the Reserve Bank of India pay 7% interest on the mandatory deposits parked with it by banks, one among several measures proposed to lower rates even if the central bank does not ease the monetary policy. Finance minister P Chidambaram will take a call on the proposal, which would eventually go to the RBI.

“This is one among the many measures we have suggested to bring interest costs down,” a senior finance ministry official told ET on condition of anonymity. Chidambaram had last week indicated that the government was aware of the high interest rates and said “carefully calibrated risks” could be taken to stimulate investment, suggesting some innovation from the government to lower rates.

Banks have to mandatorily park a percentage of their deposits, called the cash reserve ratio, or CRR, with the RBI. The central bank had stopped paying interest to banks on CRR in 2007. Finance ministry officials are of the view that if the RBI were to pay interest at the reverse repo rate, or the rate at which banks park their surpluses with it, then banks will be able to lower their deposit rates, and eventually, lending rates will fall. At present, the CRR rate is 4.75%.

If the RBI were to agree to the proposal, banks will earn 7%, the reverse repo rate, on this portion of funds, helping them lower the cost of funds that can be passed on to borrowers. The RBI had not cut rates in its June 18 policy review because of the high inflation and lack of fiscal consolidation from the government. An RBI official said the move may not bring down interest rates, as effective cuts in policy rates have not yet been transmitted by banks to borrowers.

“We have not seen any real transmission in spite of a 100 basis points SLR (statutory liquidity ratio) cut in July, 75bps CRR cut in March and 50 bps rate cut in April,” the official said. “So how will this (paying interest on CRR) help is still a mystery to us.”

PM plays down Moody's forecast

Prime Minister Manmohan Singh, talking to reporters at Rashtrapati Bhavan, where he was attending the swearing-in ceremony of Vice-President Hamid Ansari, today played down the Moody’s forecast of 5.5 per cent gross domestic product (GDP) growth in the current financial year. He expressed hope that it would be better than the 6.5 per cent recorded in 2011-12.

Earlier this week, Moody’s Analytics, the research unit of ratings agency Moody’s Investors Service, had cut India’s growth forecast to 5.5 per cent, citing a lack action from the government or the Reserve Bank, despite a broad-based slowdown and a poor monsoon.

The government is already under pressure of a looming ratings downgrade to junk, following the Standard & Poor’s April 25 revision of the long-term rating outlook of the country to negative from stable.

Asked to comment on Moody’s analysis of the Indian economy, Singh said: “It is a cause of concern, but one should not draw unwarranted conclusions.”

“The fundamentals of the Indian economy are strong. Investments and savings are among the highest in the world. I am hopeful we will do even better than the 6.5 per cent growth performance of last year,” he added.

Moody’s Analytics Senior Economist Glenn Levine had said: “There has been little policy response from either the Reserve Bank of India or the government and, with global uncertainty dragging on, we see nothing on the horizon to lift the economy from its funk.”

While releasing its outlook on India’s investment scenario, S&P Credit Analyst Takahira Ogawa had said in April: “The outlook revision reflects our view of at least one-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political set-up.”

The government, on its part, has been trying to improve its record on the reform front since then, but it is yet to make a headway.

Keen to prevent a downgrade of India’s sovereign rating by S&P, which could trigger an exodus of foreign investors, Singh had told the Congress party last month that there was no option but to raise diesel prices by at least Rs 5 a litre after the Presidential election.

Prime Minister’s Economic Advisory Council Chairman C Rangarajan had also said yesterday that the overall growth rate for the current year could be slightly better than last year’s 6.5 per cent. He said industrial production should pick up in the second half of the year and agriculture activities’ contribution to GDP should also be higher.

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.

Recruitment for the post of managers in RBI

Applications are invited for the posts mentioned below in Reserve Bank of India (RBI/Bank) from Indian citizens, citizens of Nepal and subjects of Bhutan, Tibetan refugees (who came over to India before 1st January 1962) and persons of Indian origin who have migrated from Myanmar and Sri Lanka with the intention of permanently settling in India and in whose favour Eligibility Certificates have been issued by Government of India.


 Manager (Technical – Civil): NO. OF POST: 02
 Manager (Technical – Electrical): NO. OF POST: 01

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Knowledge helpline for SBI staff launched

Reserve Bank Governor D. Subbarao launched a ‘knowledge helpline’ for the staff of State Bank of India. The Web-based service, will be useful to the employees to get their doubts clarified about banking and in turn be more helpful to the customer in their service. The RBI Governor, who also inaugurated the “Swarn Udyan” and the renovated hostel blocks was the chief guest at the golden jubilee celebrations of the State Bank Staff College here on Friday. Speaking on the occasion, he said banks have to regain the trust and confidence of people. Banking sector is going to be involved and engaged in financial inclusion. It is required to understand the psychology and economy of poor people to enhance financial inclusion. There is a need for innovative infrastructure financing in India as we are supply constraint economy. SBI Chairman Pratip Chauduri and other dignitaries from the SBI, the RBI, other banks and educational institutions took part in the event. The State Bank Staff College set up in 1961 has emerged as a premier training institute for the banking industry. The college trains more than 6,000 officers every year, mostly middle- and senior-level executives, in credit management, international banking, leadership development, marketing skills, negotiation skills and communication skills etc. Several public and private sector banks in India as well as banks from developing countries like Sri Lanka, Ethiopia, Ghana, Maldives, etc., also send their officers for training. Several Govt. officials of revenue intelligence, enforcement directorate, CBI, income tax, central vigilance commission etc., are also trained in banking related areas at the College.

Trying to increase coverage in retail space: Pratip Chaudhuri

Mumbai, August 2: In an interview with ET Now, Pratip Chaudhuri, Chairman of State Bank of India, gives his views on the RBI monetary policy and rate cuts. Excerpts:

 

ET Now: Firstly, how much of a benefit will SBI get from the cut in SLR announced by the RBI in this policy?

 

Pratip Chaudhuri: We thank the RBI. The policy had become two-dimensional. People used to only talk about the repo rate and a possible CRR cut. But the RBI added a third dimension of injecting liquidity beyond these two instruments, i.e. repo rate and CRR cut. Last time they increased the refinance component on export credit from 15% to 50%. This has given us an additional Rs 5000 crore.

 

The SLR cut has released about Rs 10000 crore for SBI. So what it means to my mind is that Rs 10000 crore which was locked up in low-yield SLR security, we would have greater urgency to deploy that in productive sectors.

 

ET Now: How much is your present SLR holding and would you look at taking benefit of the SLR reduction limit which was announced by the Reserve Bank of India on Tuesday?

 

Pratip Chaudhuri: Our SLR holding is currently about 28%. With this 1% reduction, it would become about 4% surplus. So you can either sell, depending on where that particular scrip is trading. Even if you don't sell, you can always put it into LAF and get liquidity. So roughly we have Rs 40000 crore of extra liquidity.

 

ET Now: Is the cut in your base rates as well in the pipeline then?

 

Pratip Chaudhuri: Not a broad-base rate cut. Only car loan and home loans are being targeted because we think that the instrument of interest rate should be used for increasing the credit flow.

 

So we think that the impact of cutting interest rates would be highest in these 2 segments -- home and car loans. No matter what is the interest rate for the corporate sector, there is hardly any demand for term loans. Working capital loans are also not in high demand because currently the commercial papers are going at about 9.3 to 9.7, which is below the base rates of all banks. So we are trying to increase our coverage in the retail space.

SBI reduces interest rate for deposits over 5 years from Aug 7

Mumbai, August 2: State Bank of India (SBI) on Thursday reduced interest rates for deposits with a term of more than five years to 8.5%, effective August 7. The bank currently offers 8.75% for deposits of up to Rs. 1 crore and 9% for deposits above Rs. 1 crore in this basket. “This is purely an asset-liability mismatch decision,” said SBI Deputy Managing Director and Chief Credit Risk Officer Atanu Sen. “Honestly speaking, we found that the portion of depositors in this basket is quite small. We have not touched other maturity baskets.”

 

SBI’s selective deposit rate cut comes a day after the country’s largest lender reduced its home and auto loan rates, citing extra liquidity support through the Reserve Bank of India’s decision to pare banks’ mandatory bond holding limit to 23% of total deposits from 24% earlier. The bond holding limit is called the Statutory Liquidity Ratio (SLR). SBI said the SLR cut gives it additional liquidity of about Rs. 10,000 crore and the management had decided to pass this on to customers and expand the balance sheet.

 

SBI reduced home loan rates from 10.75% to 10.25% for loans up to Rs. 30 lakh while loans above that will be offered at 10.40%. Auto loan rates were reduced from 11.25% to 10.75%.

 

While the reduced rates are for new customers, existing borrowers can switch to them by paying 1% of the outstanding loan amount to the bank as fees. It said this was not an early payment penalty. “Cost is a factor of time,” said P. Pradeep Kumar, deputy managing director and group executive for global markets at the bank. “We are offering the new rates now based on the existing cost. Even then, our rates are the most competitive in the industry.”

 

PTI reports: The bank said that sluggish growth in the property market prompted it to cut its annual home loan growth target. The bank, which cut its home loan rates on Wednesday, was earlier targeting a 25 per cent growth in its home loan book. Such loans are expected to grow by only 15-20 per cent, the bank said. “There has been a drop in home registrations and we want to be realistic and now expect that the home loan segment will grow by only 15-20 per cent,” Mr. Atanu Sen, Deputy Managing Director said, while addressing a press conference.

SBI cuts interest rates on Home & Car loans from August 7

Mumbai, August 1: The country's largest lender State Bank of India will cut rates on its home and auto loans. The move comes close on the heels of the Reserve Bank of India cutting the statutory liquidity ratio for banks in its policy statement on Tuesday.

 

SBI will cut rates on home loans by 25 bps and on auto loans by 50 bps, the bank's chairman Pratip Chaudhuri told ET NOW in an exclusive interview. The new rates will be effective from August 7. The bank, however, is not in a position to cut its base rate at present.

 

"We need to use interest rates as an instrument to increase credit flow. We are targeting home and auto loans because the pass through in both these segments will be the fastest," Mr Chaudhuri said. SBI's asset liability committee met on Wednesday evening to take a call on interest rates following the RBI's policy.

 

According to Mr Chaudhuri, "there is very weak corporate demand and it won't make business sense to cut rates for corporates at this juncture." However, he added that a pick-up in demand from corporates may lead to the bank looking at reducing rates for corporates.

 

SBI has in the recent past cut rates on its SME and auto loan portfolios but this is the first home loan rate cut by the bank in a few quarters.

 

Though the bank hasn't taken any call on deposit rates yet, Mr Chaudhuri mentioned that SBI is seeing a surfeit of deposits at a time when the rest of the banking industry is starved of deposits. The bank will declare its Q1 earnings on August 10.

 

PTI Reports:  New Delhi, August 1: State Bank of India today slashed lending rates on car and home loans by up to 0.5 per cent, a day after one per cent cut in SLR by the Reserve Bank. SBI has reduced interest rate on home loans of up to Rs 30 lakh to 10.25 per cent from existing 10.50 per cent (after 0.25 per cent concession over the card rate), a senior bank official said.

 

On the home loans of beyond Rs 30 lakh but less than Rs 75 lakh, the new rate will be 10.40 per cent against the existing 10.75 per cent, down 0.35 per cent.

 

The new rates will be effective from August 7, the official added. The base rate or minimum lending rate of SBI stands at 10 per cent. Base rate is the benchmark rate below which a bank cannot lend.

 

With regard to the car loan, the reduction is to the extent of 0.5 per cent. The new car loan would be 10.75 per cent against the existing rate of 11.25 per cent for a seven-year loan. Now for every Rs 1 lakh, a customer has to pay Rs 1,699 EMI against Rs 1,725 per month earlier. SBI claimed this as the lowest EMI. With the reduction, a borrower would end up saving Rs 312 per year on every one lakh.

 

Yesterday, RBI in its quarterly monetary policy review reduced Statutory Liquidity Ratio (SLR), the amount of deposits that have to be invested in government bonds and other liquid assets, by 1 per cent. RBI Governor D Subbarao cut the SLR to 23 per cent, thereby releasing around Rs 68,000 crore of additional liquidity into the system, even as he left all the key interest rates unchanged in the anti-inflationary stance.

SBI expects 50 bps cut in CRR, no change in lending rate

India's largest lender State Bank today said it expects Reserve Bank to lower the mandatory cash reserve requirement of banks or CRR by 50 basis points on July 31 but sees no reduction in the key short-term lending rate.

 "We expect a 0.5 percentage point reduction in CRR (the percentage of deposits that banks park with the RBI) to ease money supply. Also, this will have better effect on monetary transmission than a reduction in the short-term lending rate," SBI Chairman Pratip Chaudhuri told reporters after announcing the successful conclusion of a USD 1.25 billion overseas bond sale.

 RBI will announce its first quarter monetary policy review on Tuesday in the backdrop of slowing growth, poor investment sentiment and persistently high inflation.

Yesterday, SBI had closed a mid-term note or bond issue at a coupon of 4.12%, making it the largest and cheapest bond sale by a domestic lender till date. Chaudhuri said the asset quality of the Government-run
bank has improving compared to last year. He did not give any further details citing a silent period ahead of the earnings.

 The bank will announce its April-June quarterly earnings on August 8. The comments came after SBI shares slumped as much as 3.8% today as a rise in non-performing assets at Punjab National Bank and Union Bank of India sparked concerns about asset quality in the Government-run lenders.

 Explaining the rationale behind why a CRR cut is better at this juncture, Chaudhuri said this will help bank's liquidity, which in turn, will help them lower the lending rates, thus helping the monetary transmission better.

On the contrary, he said a marginal reduction in the repo will not help banks to cut lending rates.The senior unsecured dollar bond issue, due in August 2017, was carried through the London branch of SBI. The issue was rated Baa2 by Moody's and BBB- by S&P.