Banking Newsletter - January 2 to 6, 2017

India Infoline News Service | Mumbai | January 06, 2017 17:23 IST

This week, SBI reduced lending rate by 90 basis points, Kotak Mahindra Bank revised MCLR downwards by up to 45 bps. IIFL presents a weekly snapshot of all the major happenings in the Banking industry.

Top Stories
SBI reduces lending rate by 90 basis points
State Bank of India has cut its marginal cost of lending rate, or MCLR, by 90 basis points across all maturities. One basis point is one hundredth of a percent. The six-month MCLR is now 7.95% and the three-year rate stands at 8.15%. The bank has pegged its new lending rates also known as marginal cost of lending rate at 8% for one year against 8.90% earlier. Other public sector lenders, PNB has cut its one-year MCLR rate by 0.7% to 8.45% from 9.15%, effective Sunday. Union Bank of India has reduced its MCLR by 0.65-0.9% to 8.65%. The revised one-year MCLR stands at 8.65%. Read More
What GoI's new housing schemes mean for Housing Loan companies
PM Narendra Modi’s new year speech seems to have brought cheer among the Housing Finance companies, as it is widely expected that a demand revival will be seen in the housing sector, as the interest rates are expected to come down sharply. Indeed several of the banks have already started to announce the reduction in lending rates viz., SBI and Punjab National Bank, and rest of the lot is expected to follow suite. Read More
News Infocus
Lending rates come down on the first day of the New Year: Which sectors will gain?
After PM Narendra Modi urging banks to cut interest rates, SBI becomes the first bank to reduce lending rates by 0.90 per cent followed by Punjab National Bank, which has declared that it will reduce the lending rate by 0.70 per cent. The other nationalised banks have already started announcing a cut in lending rates on the first day of what promises to be a year full of action. Banks that have announced the lending rates so far include Dena Bank, Central Bank of India and State Bank of Mysore. Read More
The Small-Cap stock to watch out for in the financials space
As a norm, the financials and NBFCs tend to do well amidst a softening interest rate environment. The softening interest rates may lead to increased demand for loans from consumers and the stocks in the financial space tend to anticipate increase in volumes, and thus profitability. Even as interest rates are kept unchanged by the government on small savings and the broader trend for the interest rates is showing a downward trend, investing in equity while taking exposure to small and mid-cap stocks could well be a trend continuation from the previous years i.e. 2015 and 2016. The year 2015 and 2016 have been characterised by mid cap and small cap stocks' outperformance as reflected by the gains shown by the mid-cap index. Baid Leasing & Finance Company is one company operating in the financial space, which has shown potential to grow with good momentum. Read More
Domestic Newsmakers
Kotak Mahindra Bank revises MCLR downwards by up to 45 bps
Kotak Mahindra Bank revised the Marginal Cost of Funds based Lending Rate (K-MCLR) downwards by up to 45 basis points (bps) with effect from (w.e.f) January 1, 2017 for various tenors as given below:
Tenor Benchmark Existing Rate
(% p.a.)
Rate w.e.f 01/01/17. (% p.a.)
Overnight K-MCLR 0/N 8,60 8.20
Six Month K-MCLR6M 9.05 8.65
One Year K-MCLR 1Y 9.20 9.00
Two year K-MCLR 2V 9.25 9.00
Three year K-MCLR 3V 9.25 9.00
One Month K-MCLR 1M 8.70 8.25
Three Month K-MCLR 3M 8.85 8.40
The bank will review and publish the K-MCLRs on a monthly basis.
Read More
Banks trade weak even as majority of them reduce lending rates led by SBI
Clearly, SBI cutting the lending rates by almost 0.90% has set the tone for the day, for the markets in general and for banking stocks in particular. Other nationalised banks followed the leader with the likes of Punjab National Bank, Union Bank of India, IDBI and Dena Bank reducing the MCLR rate by upto 90 basis points each. Kotak Mahindra Bank is one amongst the private banks to reduce the MCLR by almost 25 basis points. ICICI Bank on the other hand has announced that it will reduce the MCLR by almost 5 basis points across all the tenures. This initiative is expected to increase the competition amongst the banks on interest rate front and may not be healthy for the NIM i.e net interest margin of the banks. The stock prices thus are trading in red for most of the banks, with Nifty Bank index trading down by more than 1.15% at 17967 levels. Read More
Oriental Bank cuts overnight MCLR to 8.40% from 9.10%
Oriental Bank of Commerce on Monday declared its marginal cost of funds based lending rate (MCLR) for one year at 9.40%. The bank has revised MCLR for different tenors w.e.f January 3, 2017.  Besides the one-year tenor, the bank has declared MCLR for six other tenors — overnight (9.40%), one month (8.45%), three months (8.50%), six months (8.55%), one year (9.60%). Read More
ICRA assigns AAA rating to Kotak Mahindra borrowing program
ICRA has reaffirmed the rating of [ICRA] AAA (pronounced as ICRA triple A) with stable outlook to Rs 100 crore subordinated debt programme of Kotak Mahindra Investments Limited (KMIL). The rating factors in the strong parentage in the form of Kotak Mahindra Bank Limited (rated at [ICRA]AAA(stable)), operational synergies with the group companies and groups’ favorable experience in capital market related activities in addition to the high financial flexibility enjoyed by KMIL by virtue of it being 100% subsidiary of Kotak Bank. KMIL’s adequate capitalization augmented by regular capital support by the parent, comfortable liquidity, improving asset quality and sound risk management systems provide additional comfort. Read More
Rate cut is a positive step in line with govt’s desire to revive the Indian economy: Sobha Limited
Responding to the steep and unprecedented interest rate cuts by nationalized banks led by SBI, JC Sharma, VC & MD of Sobha Limited said, “This reduction of lending rates by the banks is the outcome of huge inflow of deposits made possible due to demonetisation. This is a positive step in line with the government’s desire to revive the Indian economy.” He further commented that the steep cuts announced in the home loans upto 90 basis points will be a shot in the arm of the homebuyers as their borrowing costs will come down significantly and their affordability factor improves simultaneously. It is expected that demand for homes will get significant boost with this welcome step. Read More
Bank stocks gain even as market attempts recovery from lows
Banks stocks are expected to be under pressure in 2017 for several reasons beyond NPAs. The fact that they are over owned is one the reasons the Banking stocks may face some pressure. However the Banking stocks across the board are gaining in Tuesday’s session.

Yes bankAxis BankCanara BankPNBIndusind Bank and ICICI Bank are all up in the first half of the trading session. Banking stocks are the flag  bearers of  the recovery in the markets, which are struggling to inch up in the green and stay there. Read More
GoI seeks more dividends from PSUs; Should investors be a worried lot?
PSU companies have performed well in the recent years, at times outperforming the broader markets as reflected in the BSE PSU Index, which gained almost 11.9 per cent.

The increasing pressure applied by the GoI for dividends from the profitable PSU companies raises alarm bells for the individual investors. For GoI dividends from the public sector companies is the major source of revenue besides tax revenue. Read More
Arundhati Bhattacharya unveils a Digital Platform and Mobile App developed by MaGE
Arundhati Bhattacharya, Chairman, State Bank of India launched a Digital Platform and Mobile App powered by Manipal Global Education Services’ (MaGE) EduNxt Platform.  The State Bank of India’s analytics dashboard app acts as a digital mentor to Probationary Officers and Trainee Officers right through their training lifecycle. Manipal Global’s Digital Platform provides data driven deep insights on the Probationary Officers and Trainee Officers training life cycle for the officials of State Bank of India. The intuitive mobile app provides a learning dashboard for the learner. Read More
Yes Bank implements multi-nodal Blockchain solution in India
Yes Bank has implemented a multi-nodal Blockchain transaction to fully digitize vendor financing for Bajaj Electricals. The implementation has been done on a blockchain-based smart contract written by fintech start-up Cateina Technologies. The bank will also leverage IBM Watson Conversation, a cloud-based cognitive service, to enhance the digital experience of partners, corporate clients and developers collaborating with them on the integrated Blockchain - API Banking platform. Read More
LIC Housing Finance had been downgraded due to MCLR cut
LIC Housing Finance has been downgraded by Morgan Stanley owing to unexpected MCLR cuts. Morgan Stanley has downgraded LIC Housing from overweight to equal weight. The reason behind the downgrade has been weak and uncertain revenue outlook, driven by unexpected lending rate cuts by the banks as explained by Morgan Stanley. Morgan Stanley has slashed the target to Rs 560 from Rs 700 after it realised that the net interest margin will be hit by almost 35 basis points. Read More
Corporation Bank sets overnight MCLR to 8.35%
Corporation Bank on Tuesday declared its marginal cost of funds based lending rate (MCLR) for one year at 8.35%. Besides the one-year tenor, the bank has declared MCLR for six other tenors - overnight (8.35%), one month (8.35%), three months (8.40%), six months (8.65%), one year (8.75%). Read More
Punjab and Sind Bank lowers its MCLR
Following the MCLR rate cut by several leading public-sector banks, Punjab and Sind bank also have decreased MCLR across different tenors and the same will be effective from January 4, 2017.
It is only a matter of time other banks follow suit. 

SBI was the first nationalized to announce lending rate cut which it announced on January 02.

Other nationalised banks followed suite by cutting rates inlcuding private banks like Kotak Mahindra Bank and ICICI Bank. 
Read More
Indiabulls Housing Finance reduces its home loan rates by 45 basis points to 8.65%
Indiabulls Housing Finance Limited (IBHFL), India's 2nd largest housing finance company announced its revised home loan rate of 8.65%, a reduction of 45 basis points for its customers, effective January 03, 2017. Read More
SBI blocks transfer of funds in e-wallets
SBI has blocked its customers from using net banking services for transfer of funds to major e-wallet players; and consequently the company's stock has been punished by the investors. The stock of SBI as at 1.17 pm is trading at Rs 243.85, down by 0.41%. SBI on the other hand has cited reasons like online protection of its customers, for this unwelcome move. E-wallets have become extremely popular post the demonetisation move and hence a fair amount of transactions were carried out using this mode. SBI in the last one year has surged by 10.69%; and maintains a stock P/E of 52.81. Read More
Droom ties up with Axis bank to provide quick loans on new and used cars
India’s pioneering online automobile transactional marketplace, has firmly entrenched its foothold as a complete eco-system for buyers to have an impeccable automobile owning experience. In its latest effort to sustain such a status, Droom has tied up with Axis Bank, India’s third largest private sector bank, toprovide quick sanction  of loans on both new as well as used cars. Loans are an integral element in almost all new and used car purchases and Droom’s recent collaboration with Axis bank is evidence of its continued efforts to cover the 360 degree eco-system of online automobile transactions. Loans will be provided for up to 85% of the value of the car with a tenure of 1-5 years. Furthermore, loans on Used Cars can be availed on vehicles upto the age of 10 years at the end of the loan tenure. Read More
Muthoot Finance and ECL Finance to raise funds via NCDs
ECL Finance and Muthoot Finance are collectively eyeing at raising funds of Rs 3400 crore through retail issuance of non-convertible debentures. Through the issue of NCDs, ECL Finance, the non-banking financial services arm of Edelweiss group, plans to raise upto Rs 2,000 crore. These NCDs will be issued in one or more tranches. The funds mobilised through the issues will be used for lending activities and for general corporate purposes. Read More
Canara Bank in sync with herd: cuts MCLR
The Indian banks which are on the mission to cut the lending rates for increasing their credit growth, have an addition in foray. Canara Bank has cuts its Marginal Cost of Funding Rate by 70 bps to 8.45%. All the major banks have cut their rates in the range of 40 to 90 bps. Canara Bank is the latest bank which has joined the race of rate cuts. In the last one year, the stock of the company has surged by 13.09%. Read More
Banks make hay even as Nifty trades above 8200
Amidst a struggle between the FIIs and DIIs, where FIIs continue to be net sellers and DIIs continue to be net buyers, the Indian markets are all gearing up for the forthcoming budget session, and are being propelled by domestic cues like GST and UP electoral developments along with the demonetisation impact on various sectors including banks. Banks are gaining on an intraday basis on January 5, with several of the banks like Laxmi Vilas Bank, Corporation Bank, Indian Bank, DCB Bank, Vijaya Bank and Dena Bank all trading firmly up, even as the broader markets trade in green with Sensex gaining 150 points and trading at 26782 levels. Read More
DHFL reduces home loan lending rates by 50 bps to 8.60%
DHFL, one of India’s leading housing finance company, announced that it has reduced its home loan lending rates by 50 basis points from 9.10% to 8.60 %, effective January 04, 2017. Harshil Mehta CEO DHFL said, “Over the past three decades across semi-urban and tier 2 and 3 locations, DHFL has committed itself to transforming the quality of lives of people in the low and middle income segment by enabling access to home ownership. The Government’s recent decision to provide interest rate relief to home buyers and to those who wish to plan a home in 2017, as well as several past initiatives have created a growth-enabling and conducive environment for the housing finance sector. We will continue to be prompt and responsive to any initiative in the external environment, as we also continue to undertake several internal measures to benefit our customers as part of our commitment to enable access to home ownership for the LMI segment.” Read More
United Bank of India revises MCLR
United Bank of India has revised downwards the Marginal Cost of Funds Based lending Rate (MCLR) with effect from January 6, 2017. In the regard, the MCLR for a one year period has been revised to 8.8% from the existing 9.4%; for a six-month period, it has been revised to 8.65% from the existing 9.35%; for a three month period, the bank revised the MCLR to 8.45% from the existing 9.3%, for a one month period, while it has been revised to 8.35% from 9.25%. Read More
Bankex: Bank of Baroda holds the largest share of the pie
Bank of Baroda is the stock of the day in the Bankex index. Since demonetisation, BoB has seen an increase in its deposits according to the latest data related to saving account growth of the bank, and it stands at Rs 38000 crore. On the other hand, the bank intends to bring down its NPA to Rs 11000 -12000 crore from 19000 crore, early this financial year. In the last one year, the stock has given a return of 1.25%. In the last three years, the stock has given a return of 4.42%, and during the same time the Sensex has given a return of 8.48%; whereas the Bankex has surged by 16.94%. Read More
Bank of Baroda reduces MCLR
The MCLR for a one month period has been fixed at 8.15%, down from the existing 8.85%, while an MCLR of 8.20% has ben fixed fo a three month period, 8.3% for a six month period, 8.35% for a one year period, 8.5% for a three year period, and 8.65% for a five year period. Bank of Baroda has revised the Marginal Cost of Funds Based Lending Rate (MCLR) with effect from January 7, 2017. Read More
ICICI Bank and YES Bank together contribute 50% to BSE Bankex gains
BSE bankex is gaining on Thursday with the index gaining by almost 1.19% on intraday basis. The index trading at 20692 is up by almost 246 points. ICICI Bank is the biggest gainer in the index followed by Yes Bank. With contribution of almost 94 points to the Index, ICICI Bank is the biggest contributor to the index. Yes bank has contributed almost 35 points to the index. Put together the contribution by both the banks stands at 129 points which is roughly 50% of the index gains. The other banks viz., IndusInd Bank, SBI, Kotak Mahindra Bank are all trading in green contributing to the index gain. Out of the 10 scrips in the index none is trading in red signalling the strength in the banking sector on Thursday despite concerns on impact on profitability due to aggressive lending rate cuts. Read More
Yes Bank partners with Gupshup, launches Yes mPower for instant loans
Yes Bank has partnered with Gupshup, a leading bot platform, to launch ‘Yes mPower’ - a banking chat bot for its loan products. Currently active on Facebook Messenger, Yes mPower helps customers get information about loan products offered by Yes Bank and instantly gives a loan eligibility, enabling customers to get the information they need quickly and easily. On Yes mPower, a customer can get information on loan products like personal loans, auto loans, gold loans, loan against securities and products like used car loans, loan against properties, home loans will be added shortly. Read More
Bank of Maharashtra reduces MCLR rates by upto 70 bps across tenors
Bank of Maharashtra today has announced the revised Marginal Cost of Funds based Lending Rates (MCLR), which will come into effect from January 7, 2017. The revised MCLR for overnight is 8.75%, one month is 8.80%, three months 8.85%, for six months 8.90% and for a period of one year it has been revised to 8.95%. Bank of Maharashtra has substantially reduced its MCLR rates by 35-70 bps. Read More
Lakshmi Vilas Bank raises a whopping Rs 168 crore through QIP
Lakshmi Vilas Bank has informed BSE that it has raised Rs 168 crore through Qualified Institutional Placement. The bank had opened the issue from December 28- December 31, 2016. This is the first time that the Lakshmi Vilas Bank has issued QIP in its 90 years history. Centrum Capital was the sole book runner and Khaitan and Co., was the legal advisor for the issue. Read More
Dena Bank's capital raising boosts stock price
Dena Bank has recently announced its capital raising plans, and this has boosted the stock price of the bank. The board of directors of the bank are expected to meet on Jan 7 to discuss the capital raising plans that will be executed through equities and bonds.
In the last one year, the stock has fallen by 15.68%.
Read More


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