News - Banking

• 4 bidders have carried out due diligence: IFCI Board (CNBC TV18 3rg Dec 2007) The IFCI board which met on Saturday, has announced that of the eight bidders short listed for a 26% stake in the company, four have carried out their due diligence. These include the consortium of Sterlite Ind and Morgan Stanley, the consortium of WL Ross, GS Capital Partners, Standard Chartered Bank and HDFC, the consortium of Cargill Financial Services and Texas Pacific Group, and the consortium of Shensie Bank, PNB and JC Flowers.
  The other four bidders have dropped out of the race.
• Financial sector reforms lagging behind: FM (The Financial Express 3rd Dec 2007) Finance Minister P Chidambaram expressed concern over the slow progress of financial sector reforms in banking, insurance, pension and capital Markets and hoped that some breakthrough might take place in the remaining tenure of the UPA Government.
  "Financial sector reforms are lagging behind. We need to push through financial sector reforms in banking, insurance and pension and unfinished agenda in the capital Markets.
  But I still think that we have 16 months and we might be able to make some progress," Chidambaram said at the India Economic Summit here.
• Bank of Rajasthan to issue shares worth Rs166.75 cr (Live mint.com 3rd Dec 2007) Bank of Rajasthan (BoR) on Monday informed that it will raise Rs166.75 crore through preferential issue of equity shares to US-based Indus Capital Partners and New Delhi-based Max India Ltd.
  The bank would issue one crore shares at a price of Rs166.75 per share calculated on preferential basis to the two entities, Bank of Rajasthan said in a communique to the Bombay Stock Exchange.
  BoR would issues 65 lakh shares to Indus Capital Partners constituting 4.5% and 35 lakh shares to Max India Ltd constituting 2.42% of its total post-issue paid up share capital, the bank informed.
• Cabinet approves SBI rights issue (Live mint.com 30th Nov 2007) The Cabinet has approved enhancing the capital of State Bank of India by subscribing to a rights issue of equity shares worth Rs10,000 crore.
  Information and broadcasting minister Priyaranjan Dasmunshi told reporters after the Cabinet meet that the share issue would be completed within the current financial year.
• BoI life JV to get Rs 500 cr capital (Business Standard 30th Nov 2007)
  Bank of India (BoI), along with its partners Union Bank of India and Dai-Ichi Insurance, is likely to infuse around Rs 500 crore in the next 6-7 years in a proposed life insurance joint venture.
  Bank of India has 51 per cent stake in the life insurance JV, while Union Bank of India has 23 per cent and Dai-Ichi Insurance 26 per cent. Dai-Ichi is a Japan-based insurance company.
  The joint venture agreement will be signed on December 6, said a senior official close to the development. “The company will most likely be operational in April,” the official said.
  BoB puts corporate NPAs worth Rs 460 cr on block (Business Standard 30th Nov 2007)
  Bank of Baorda (BoB) has put on block non-performing corporate loans worth Rs 460 crore to further clean up its books. The public sector bank’s net NPAs are already close to 0.5 per cent.
  The bank has already opened data room for prospective buyers and seven investors are examining a portfolio of 109 accounts with principal outstanding of Rs 460 crore. These NPAs accounts are from Mumbai and Maharashtra region, a senior BoB executive said.
  “We have made full provisions for these accounts and decided to sell them only after exhausting the options of direct recovery. In case of some accounts, the recovery of outstanding may still be possible through direct negotiations but may not be worth the time required for such exercise”, the executive added.
• PSBs taking guard against falling dollar (The Hindu Business Line 30th Nov 2007) Faced with a deteriorating US dollar, public sector banks (PSB) are beginning to reduce their cash and cash equivalent balances with the American banks and shifting to the Euro.
  Top PSU bankers, who declined to be named, said that the steps were taken to cut losses due to exchange rate depreciation. At one point of time the US dollar was the favoured currencyof the Indian bankers for maintaining their correspondent account or nostro balances. But dollar balances are now on the descent. This is evident from sharp drop in custody liabilities of US banks that included nostro balances. During the first nine months (January to September) of the current calendar year, the balances dipped by over $4.8 billion, according to the US Treasury Data. Between April and September this year, the drop was over $9.5 billion.
• Regulator may not allow SBI, ICICI to float holding firms (Live mint.com 29th Nov 2007)Plans of the country’s biggest commercial bank State Bank of India (SBI) and largest private sector lender ICICI Bank Ltd to float intermediate holding companies for their insurance and asset management businesses are set to face a regulatory dead end when the Reserve Bank of India (RBI) releases its policy paper on 30 November, people familiar with the development said.
  The apex bank had released a discussion paper on holding companies on 27 August. Under Indian law, banks cannot invest more than 20% of their net worth in their non-banking subsidiaries, including venture funds. Since the insurance business is heavily capital-intensive, the two banks planned to float holding companies for their insurance, as well as asset management businesses.
• Public sector banks lose market share (Live mint.com 28th Nov 2007)Indian banking assets are growing faster than the real economy.Banking assets as a percentage of India’s gross domestic product (GDP) have grown from 85.7% in fiscal 2006, to 92.5% in the last fiscal year, says Reserve Bank of India’s annual publication on the industry, Report on Trend and Progress of Banking in India 2006-07, released on Tuesday.
  For the third consecutive year, advances grew more than 30% last year but banks’ deposit liabilities could not cope with it and grew by 24.6%.
  The most significant trend of the industry last fiscal, was the growing clout of new private and foreign banks. Their combined market share rose from 22.3% to 24.9%, while public sector banks’ market share shrank from 72.3% to 70.5%. Old Indian private banks too lost market share—from 5.4% to 4.6%.
• Defaults in home loans may rise (Business Standard 28th Nov 2007)RBI sees sub-prime woes raising interest rates
  The Reserve Bank of India (RBI) has said that any disorderly adjustments in the global financial markets may result in a sharp rise in interest rates.
  This, in turn, will result in an increase in defaults in home loan portfolios and mark-to-market losses on investments by banks in India.
• Foreign banks see little leeway after 2009(Business Standard 28th Nov 2007)
  Bankers have read the Reserve Bank of India’s (RBI) comments on foreign banks’ market share in India as an indication that the promised review of policies on the presence of overseas banks in 2009 is unlikely to yield any greater leeway within which they can operate.
  RBI Deputy Governor V Leeladhar yesterday said the share of foreign banks in the assets of India’s banking system at 49 per cent at the end of January 2007 was far in excess of the commitment of 15 per cent at the World Trade Organisation (WTO).
• Sub-prime not to impact banks: RBI (Business Standard 28th Nov 2007)
  Indian banks' exposure to US sub-prime mortgage insignificant, says central bank
  Banking regulator Reserve Bank of India today said Indian banks with overseas presence have insignificant exposure to the US sub-prime mortgage, indicating negligible impact on the books of banking entities.
  Plus pre-emptive monetary policy actions and prudential steps, which are already in place, will ensure that problems akin to the sub-prime in the country will not hit the financial system.
• No plan to raise Govt stake in PSBs (The Hindu Business Line 28th Nov 2007) No move to go below 51% either: Chidambaram. The Government has no plans to raise its stake in public sector banks (PSBs) to 74 per cent across the board as it would require large infusion of funds, the Rajya Sabha was informed here today
• Bank chiefs want flexibility in fixing wages (The Hindu Business Line 28th Nov 2007) Public sector banks need to move away from industry-level wage negotiation, said Dr A.K. Khandelwal, Chairman and Managing Director, Bank of Baroda.
  “We need to dismantle the existing structure. There is no law that restricts us to determine compensation packages at the bank level but we need to persuade the government to permit it,” he said.