Banking Newsletter - December 08 to 12, 2014

The Euro area is veering close to recession, Japan has already experienced two quarters of negative growth after a tax hike, and many emerging markets are rethinking their export-led growth models as the industrial world stagnates.

Dec 12, 2014 11:12 IST India Infoline News Service

Top Story
RBI Governor: Global economy weak despite stronger recovery in US
RBI Governor Raghuram Rajan said that the global economy is still weak, despite a strengthening recovery in the United States. The Euro area is veering close to recession, Japan has already experienced two quarters of negative growth after a tax hike, and many emerging markets are rethinking their export-led growth models as the industrial world stagnates.
In the last couple of years, the IMF has repeatedly reduced its growth forecasts. After 6 years of a tepid post-crisis recovery, the IMF titled its most recent World Economic Outlook “Legacies, Clouds, Uncertainties”.
The conventional diagnosis and remedy
Why is the world finding it so hard to resume pre-Great Recession growth rates, let alone restore the levels of GDP that would have been attained if the Great Recession had not happened? The obvious answer is that the legacy of the financial boom that preceded the Great Recession is debt, and the overhang of debt, whether on governments, households, or banks, is holding back growth. In the colourful words of the IMF’s Managing Director, we are experiencing “the New Mediocre”. The implication is that growth is unacceptably low relative to potential, and more can be done to lift it, especially given that a number of economies are flirting with deflation. Hence the conventional policy advice urges yet more innovative monetary interventions with an ever expanding set of acronyms, even while governments are urged to spend on “obvious” needs such as infrastructure. While the need for structural reforms is acknowledged, they are typically deemed painful, and possibly growth-reducing in the short run. Hence the accent is on monetary and fiscal stimulus, and as much of it as possible given the deadening effects of debt overhang.
Govt agrees to cut stakes in state banks
The cabinet approved plans to raise about Rs1.6 trn by selling some of its stakes in state-run banks by 2019, a government reportedly said.

The government holds stakes ranging from 56% to 84% in 27 state-run banks, says report.
Report said that the banks would be advised to preserve the Government holding at minimum 52 percent
RBI permits Indian AIFs to invest overseas
On a review, RBI has decided to permit an Indian Alternative Investment Fund (AIF), registered with Securities and Exchange Board of India (SEBI), to invest overseas in terms of the provisions issued under the A.P. (DIR Series) Circulars No. 49 and 50 dated April 30, 2007 and May 04, 2007 respectively.
Necessary amendments to the Notification ibid has been issued vide Notification No. FEMA.326/RB-2014 dated November 12, 2014 (copy enclosed) and effective from the date of publication in the Gazette i.e. November 21, 2014...... Read More

RBI issues monthly Bulletin for December 2014
The Reserve Bank of India today released the December 2014 issue of its monthly Bulletin. The Bulletin includes the Fifth Bi-Monthly Monetary Policy Statement for 2014-15 and regular features like speeches of the Top Management and Current Statistics. Four special articles are also included in the Bulletin: (1) Flow of Funds Accounts of the Indian Economy: 2012-13; (2) Survey of Professional Forecasters: 2014-15; (3) Developments in India's Balance of Payments during the First Quarter (April-June) of 2014-15; and (4) India’s External Debt at end of June 2014.... Read More

Current account deficit comfortable despite widening: Rajan
The Reserve Bank of India (RBI) is comfortable with the current account deficit even after it widened in the July-September quarter, Governor Raghuram Rajan said. Rajan said risks remain to the current account deficit even though he was not apprehensive about it. India's current account deficit widened to 2.1 percent of gross domestic product in the July-September quarter.
RBI allows White Label ATMs to accept international cards
Based on the review of the operations of White Label ATM (WLA) as well as representations received from the stakeholders, RBI has decided to - allow WLAs to accept international credit/debit/prepaid cards. The cards issued under card payment network schemes (authorized under the PSS Act 2007) will be allowed for the purpose. The WLA operators (WLAO) have to ensure that they have established technical connectivity with the respective card network operators either directly or through their sponsor banks...Read More

RBI issues guidelines for Mobile banking
Reserve Bank of India has issued guidelines related to mobile banking.It may be recalled that the RBI had set up a "Technical Committee on Mobile Banking" (Chairman Shri B.Sambamurthy) to study the challenges faced by the banks in providing mobile banking to customers in general (customer enrolment and technical issues) and also to examine the options/alternatives for expanding the reach of mobile banking in the country...Read More

Domestic News
RBI emphasizes on making mobile banking mandatory for customers
The Reserve Bank of India has ordered Indian banks to make mobile banking as a mandate for all the customers. With reference to the density of mobile usage which currently exists in the country, the usage of mobile banking services is relatively less. The customers of various banks across the country, should consider activating their mobile banking services, on high priority. This is to ensure augmentation of mobile banking in India...Read More

RBI plans to come out with guidelines on refinance: Report
The Reserve Bank of India (RBI) is planning come out with guidelines on refinance of existing projects as demanded by the industry, deputy governor S S Mundra reportedly said. "There is a demand from the industry for refinance of existing projects.," Mundra said at a CII interaction. Mundra reported that the new projects would get the scope for refinance every five years till the economic life of the projects as already declared.
RBI to restructure classification of shortfall and interest payable to banks
RBI has decided to restructure the classification of shortfall and interest payable to banks falling in these categories on deposits placed by them in the above funds, prospectively with immediate effect, as under:
Deposit Rates
S. No. Shortfall in overall priority sector lending target Revised Rates
1 Less than 5 percentage points Bank Rate minus 2 percentage points
2 5 and above, but less than 10 percentage points Bank Rate minus 3 percentage points
3 10 percentage points and above Bank Rate minus 4 percentage points
RBI Central Board meets at Kolkata
The Central Board of Directors of the Reserve Bank of India met today at Kolkata. Dr. Raghuram Rajan, Governor, Reserve Bank of India chaired the meeting. Directors, Dr. Anil Kakodkar, Kiran Karnik, Dr. Nachiket Mor, Shri Y.H. Malegam, Prof. Dipankar Gupta, Shri G. M. Rao, Ms. Ela Bhatt, Dr. Indira Rajaraman, Y.C. Deveshwar, and Prof. Damodar Acharya attended the meeting. The meeting was also attended by the Government nominee director on the Central Board, Shri Rajiv Mehrishi, Secretary, Department of Economic Affairs. Deputy Governors Shri Harun R. Khan, Dr.Urjit Patel, Shri R. Gandhi and Shri S.S. Mundra were present...Read More

FSDC Sub-Committee reviews potential risks facing the financial system
A meeting of the Sub-Committee of the Financial Stability and Development Council (FSDC) was held today in Kolkata. Dr. Raghuram G. Rajan, Governor, Reserve Bank of India, chaired the meeting. The meeting was attended by  U. K. Sinha, Chairman, Securities and Exchange Board of India (SEBI); Shri T. S. Vijayan, Chairman, Insurance Regulatory and Development Authority (IRDA); Shri Hemant G. Contractor, Chairman, Pension Fund Regulatory and Development Authority (PFRDA), Shri Ramesh Abhishek, Chairman, Forward Markets Commission (FMC); Shri Ajay Tyagi, Additional Secretary, Department of Economic Affairs (DEA), Ministry of Finance; Deputy Governors of Reserve Bank of India, Shri H. R. Khan...... Read More

India signs agreement with the World Bank
A Guarantee Agreement for World Bank (IBRD) lending of US $ 1100 million to the Dedicated Freight Corridor Corporation India Ltd (DFCCIL) for Eastern Dedicated Freight Corridor-II Project (EDFC-II) has been signed between the Government of India and the World Bank .
Tarun Bajaj, Joint Secretary (MI), Department of Economic Affairs, Ministry of Finance signed the Agreement on behalf of Government of India and Mr. Onno Ruhl, Country Director, World Bank, signed the same on behalf of the World Bank..... Read More

ICICI Bank to increase ATM charges from January 1
ICICI Bankhas announced a hike in ATM charges for saving account holders from January 1 next year, says report.
Report stated that the number of free transactions in a month is fixed at five using own ATMs, while it has been capped at three for other banks' machines.
The number of free financial and non-financial transactions have been reduced to three per month at six metros of Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad for transactions at non-ICICI Bank ATMs.
CRISIL Research assigns fundamental grade 2/5 to SRS Ltd.
CRISIL Research has assigned a CRISIL IER fundamental grade of 2/5 (pronounced 'two on five') to SRS Ltd.

The grade indicates that the company's fundamentals are `moderate' relative to other listed equity securities in India. Our fair value of the stock is INR34 per share. At the current market price of INR26 per share, our valuation grade is 5/5 indicating that the market price has strong upside from the current levels...... Read More

ICICI Bank to sell holding in banking unit in Russia
ICICI Bank Ltd has announced that the Board of Directors of the Bank at its meeting held on December 05, 2014, approved a proposal for the sale of ICICI Bank's shareholding in ICICI Bank Eurasia Limited Liability Company (IBEL), a non-material wholly-owned banking subsidiary in Russia, to Sovcombank, an unrelated third party Russian bank...Read More

YES BANK bags multiple accolades for Innovation and Digital Payments Excellence
YES BANK, India's fourth largest private sector Bank received multiple honours for Innovation and Payments Excellence at the National Payments Excellence Awards 2014. YES BANK was bestowed with a "Special Award for Innovation" for its industry transforming innovations on IMPS (Interbank Mobile Payment Service) platform by the National Payments Corporation of India. The award was presented to YES BANK at the National Payments Excellence Awards 2014 by H.R. Khan, Deputy Governor, Reserve Bank of India...Read More

IDBI Bank strengthens its network and banking services in Chhattisgarh
Taking forward its endeavor to deploy cutting edge technology to offer a wide array of advanced financial services and products to its customers, IDBI Bank launched its first 'e-lounge' branch in Raipur. The e-lounge, which is self service lounge and located at Fafadih branch in Raipur, Chhattisgarh was inaugurated by Shri M. S. Raghavan, Chairman & Managing Director, IDBI Bank...Read More

SBICAP Trustee Company launches 'MyWill Services Online'
SBICAP Trustee Company Limited (SBICTCL), a wholly owned subsidiary of SBI Capital Markets Limited (SBICAP) - the Investment Banking subsidiary of India's largest public sector bank, State Bank of India (SBI), has launched an online Will creation service for individuals. The service, called 'MyWill Services Online' enables interested individuals to create a Will online in an easy, transparent, hassle free and confidential manner. 'MyWill Services Online' offers the twin advantages of being the only completely online Will-creation portal in the country, maintaining strict confidentiality of information submitted by the individuals' at the most competitive rate in the country...Read More

ICICI Bank organises a customer awareness programme with CIBIL and CRISIL in Pune
ICICI Bank, the country's largest private sector bank, organised a customer awareness programme, 'Jagrukta', in association with Credit Information Bureau Limited (CIBIL) and CRISIL. The programme aims to inform the owners of commercial vehicles about the importance of maintaining a healthy credit record. Around 100 owners of commercial vehicles attended the programme held in the city...Read More

Muthoot Finance partners with FIS to expand financial inclusion efforts
FIS, the world's largest provider of banking and payments technology solutions and a global leader in consulting and outsourcing solutions, today announced that it has partnered with Muthoot Finance Ltd to expand the institution's financial inclusion efforts in India. FIS will provide payment solutions, including a fully managed ATM services and switching solution to support Muthoot Finance in establishing its branded ATMs across the country...Read More

Will take final decision on loan agreement with Adani in 2-3 months: Arundhati Bhattacharya
State Bank of India has reportedly said that the final decision on the US$1 bn (Rs 6,200 crore) loan agreement with Adani Group for Australian mining project would be taken by the executive committee of the bank in 2-3 months. Earlier SBI signed the pact with Adani Group on the sidelines of Prime Minister Narendra Modi's visit to Australia. "The executive committee after due deliberations will decide about the disbursement to Adani," State Bank of India (SBI) Chairperson Arundhati Bhattacharya said.
Kotak Mahindra Bank unveils 'Grand' - Savings Bank Account for 55+
Kotak Mahindra Bank (KMB) announced the launch of Grand, a unique savings bank account tailored exclusively for customers 55 years and above. Grand has been designed keeping in mind their need for hassle-free banking, financial independence and personal attention. Grand offers priority service and first aid card which provides essential customer information and emergency contacts details. It also offers queue privileges at the branch...Read More

Federal Bank receives HR Excellence Awards from CII and Banking Frontiers Magazine
Federal Bank is bestowed upon twin recognitions for HR Excellence on December 5th.  The Bank was  honoured for its “Strong Commitment to HR Excellence” at the 5th CII National HR Excellence Confluence held  at  Hotel Lalit, New Delhi.  Smriti Irani, Minister of HRD, Government of India was the Chief Guest of the function. 
On the same day, in an inspiring function held at Mumbai, the HR Head of Federal Bank was conferred upon the “Best HR Practices & Star Practitioner Award” by Banking Frontiers Magazine...Read More

S&P: ICICI Bank's senior unsecured notes unaffected by issue upsizing
Standard & Poor's Ratings Services said today that its 'BBB-' long-term issue rating on the U.S. dollar-denominated senior unsecured notes by ICICI Bank Ltd. (foreign currency BBB-/Stable/A-3) is not affected by the bank's proposal to upsize the issue.

The notes will be consolidated with the bank's existing US$500 million 3.50% notes due 2020, which the bank issued on Sept. 18, 2014, such that they form a single series. The rating on the notes reflects the long-term counterparty credit rating on the bank...... Read More

Your ATM usage pattern need not hurt your pocket
If you are a compulsive ATM hopper, banking with the largest commercial bank of the country the State Bank of India, you may already be fretting and  perhaps even complaining about the fact that free ATM transactions have been restricted to five in a month and you are expected to cough up anything between Rs 5-20 for your ATM transactions, the  moment you cross the limit of your five free transactions. This includes non financial transactions such as checking your balance and changing your PIN as well...Read More

SBI Launches“SBI Composite Index” for tracking manufacturing activity in Indian Economy
The very first step in the leading indicator approach is to choose a proxy for the manufacturing activity. Gross Domestic Product (GDP) and Index of Industrial Production (IIP) are generally used as measures for economic activity. The GDP is available at quarterly frequency and it is published with a lag of more than a quarter. The number of points available for the recent time period will be less as the reporting cycle is large. This leads us going back a long duration in the past. To gain a decent sample size to construct leading indicator models we need to go very long in the history...Read More

HSBC named Debt House of the Year for 2014
HSBC has been named Debt House of the Year for India in the Asset Triple A Country Awards 2014 The award recognises HSBC’s ability to provide capital market solutions to clients across Asia Pacific. “HSBC wins the best debt house in India, with its wide range of debt funding options for the clients, across G3 and local currency bonds as well as syndicated loans. Its strong onshore and offshore execution and distribution capabilities led to number of benchmark and oversubscribed bond issues and widely distributed syndicated loan transactions during the review period.” said Asset Triple A in its coverage of the various marquee awards they announced...Read More

Axis bank launches fixed home loan product
Axis bank launches fixed home loan product for the tenure of 20 years, at 10.40% for loans upto rs. 50 lakh. Under this product, Axis Bank will offer home loans to both salaried as well as self-employed individuals. For salaried customers, the fixed rate of 10.40% is available on all Vanilla Home Loan offerings including Balance Transfer schemes and for the Self-Employed, the loan is available at interest rates starting from 10.65% for similar variants...... Read More

Cabinet approves for continuation of interest subsidy for crop loans
The Union Cabinet chaired by the Prime Minister, Narendra Modi gave its approval to the following

To continue interest subvention to Public Sector Banks (PSBs), Private Sector Banks, Regional Rural Banks (RRBs), Cooperatives Banks and National Bank for Agriculture and Rural Development (NABARD) to enable them to provide short-term crop loans up to Rs.3 lakh to farmers at 7 per annum during the year 2014-15....... Read More

Asian banks' credit quality broadly stable despite rising credit headwinds: Moody's
Moody's Investors Service expects that Asian banks' credit quality will be mostly stable in 2015, even as credit costs increase and asset quality weakens. Most banking systems in the region remain well capitalized and profitable, with some exceptions.

The stable footing will allow banks to withstand increasing credit costs. Moody's anticipates a gradual strengthening in the region's growth momentum as external demand, particularly from a recovering US economy, improves..... Read More

SWIFT’s KYC Registry goes live for correspondent banks worldwide
SWIFT announces that The KYC Registry is now available to banks seeking to increase efficiency and reduce risk related to their correspondent banking Know Your Customer (KYC) compliance activities. More than 20 global and regional banks have joined The KYC Registry, demonstrating clear momentum and support for this community-driven financial crime compliance initiative....... Read More

SBI bags the coveted Niryat Bandhu Award
State Bank of India bagged the coveted `Niryat Bandhu’ award in ‘Gold Category’ which is awarded to banks / export promotion councils and commodity boards for excellent support services rendered for the promotion of exports.

The award was presented by the Honorable President of India, Pranab Mukherjee on 01st December, 2014 at a function organized at Vigyan Bhawan, New Delhi.

On behalf of our Bank Ms. Anshula Kant, DMD (Operations) received the award from the President. She was  accompanied by Shri Pallav Mohapatra, Chief General Manager and Delhi Circle, Shri  S.P. Singh, General Manager (NW-I) of  Delhi Circle.
Reviving Manufacturing Sector Key to Sustainable Growth: YES Bank
YES Bank Chief Rana Kapoor, while speaking at the Delhi Economics Conclave on Wednesday said that India has great growth potential and robust domestic demand in the manufacturing sector, and only reviving the manufacturing sector and carrying forward necessary reforms are imperative to bring India back to the high GDP Growth Path..... Read More

Special Stories
Will deposit and lending rates come down?
Of late banks having slashing deposit rates and bankers are hinting at a fall in lending rates. Leading banks like State Bank of India, Bank of Baroda, Andhra Bank, Central Bank of India and ICICI Bank Ltd, have slashed deposit rates in the past two months. The Reserve Bank of India (RBI), in its monetary policy, last week, stated that liquidity conditions have eased considerably in the third quarter of 2014-15 and deposit mobilization has outpaced credit growth..... Read More

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