A new bank for women, by women

http://www.thehindubusinessline.com/industry-and-economy/banking/a-new-bank-for-women-by-women/article4462787.ece

In a first in the country’s history, Finance Minister P. Chidambaram said India would have its first public sector Women’s Bank by this year-end.

Committing an initial capital of Rs 1,000 crore for this bank, Chidambaram even invited all Members of Parliament to its inauguration, once it gets necessary approvals and licence from the Reserve Bank, by October 2013.

“Women are at the head of many banks today, including two public sector banks, but there is no bank that exclusively serves women,” he said.

He said the proposed bank would lend mostly to women and women-run businesses, support self-help groups and women’s livelihood and predominantly employ women.

At present, there are all-women banks in the co-operative sector. For instance, the Self-Employed Women’s Association (SEWA) set up a women-only bank in 1974. The bank is owned by self-employed women as shareholders, and policies are formulated by their own elected board of women workers.

Then, there is Konoklota Mahila Urban Co-operative Bank Ltd in Jorhat, Assam, which has been operating under a licence obtained from the RBI since 2000.

LEVEL-PLAYING FIELD

According to Anand Sinha, Deputy Governor, RBI, the women’s bank would be set up as a PSB and would not require separate guidelines. “It creates a level-playing field,” he said.

Such an institution would go a long way in empowering women, not just financially, but socially too, said Usha Ananthasubramanian, Executive Director of Punjab National Bank.

“Though there is some mention of such a bank (all women) in Pakistan, it has not made a mark. We should ensure that this bank for women emerges as niche, focused entity, and not just a cosmetic body,” Usha said.

Shinjini Kumar, Director, Tax & Regulatory Services, Banking Regulations at PwC, said the financial empowerment of women had a multiplier effect on the well-being of families and the economy.

Rajashree Nambiar, General Manager - Retail Banking Products & Segments, India & South Asia, observed that an all women management structure would promote a superior culture of ethics and integrity.

Syndicate Bank took the lead in starting all-women branches way back in the 1970s in Chennai, Bangalore and Thiruvananthapuram, said N. K. Thingalaya, former CMD. Those branches ranked very well in taking decisions and mobilising business.

RURAL PUSH

Ajai Kumar, Chairman and Managing Director, Corporation Bank, said that such a bank would be more popular in the rural areas.

“Just like how self-help groups have been able to help the community for increasing their income levels as well as their occasional requirements, women’s bank will be beneficial in semi-urban and rural areas to relate better with rural people,” he said.

Tax saving deposits must be made more attractive, say banks

http://www.thehindubusinessline.com/industry-and-economy/economy/tax-saving-deposits-must-be-made-more-attractive-say-banks/article4452596.ece

Banks have moved the Finance Ministry to reduce the tenure of tax saving deposits from five to three years to turn them attractive for depositors. Their plea comes in the backdrop of deposit growth trailing credit growth in the current financial year so far.

If the ministry agrees to the banks request then tax savings deposits will be at par with investments in equity linked savings scheme insofar as tenure of the investment goes.

Further, banks also want the ministry to allow them to grant loans against the tax savings deposits.

DEPOSIT GROWTH LAGS CREDIT GROWTH

As per the latest Reserve Bank of India data, the banking system has seen a slower year-on-year growth in deposits at 13.2 per cent (15 per cent in 2012), while credit growth was at 16.4 per cent (15.7 per cent).

The deceleration in the term deposits, which constitutes the major component of aggregate deposits in the banking system, could be largely attributed to the low and declining real interest rates on time deposits, according to the central bank’s macroeconomic and monetary policy document.

In 2012-13, lack of commensurate growth in aggregate deposit to fund credit growth has lead to an increase in credit-deposit ratio (C-D).

The C-D ratio for the banking system is currently running at 94 per cent (78 per cent last year) that is, for every Rs 100 deposit they are mobilising, they are lending Rs 94. However, central bank regulations stipulate that for every Rs 100 mobilised by banks by way of deposits, they have to invest Rs 23 in government securities and park Rs 4 with the RBI, leaving them with Rs 73 for making loans.

The divergence between the C-D ratio and the central bank norms for raising deposits and making loans implies that there is pressure (liquidity) to find resources (balance Rs 21: Rs 94-Rs 73) from other avenues.

TDS ON DEPOSITS

Bankers say there will be no loss of revenue for the Government if the proposal to bring down the tenure of tax saving deposits from five to three years finds a place in the Budget.

Banks want tax deducted at source (TDS) to kick-in only if the interest earned on a deposit in a year is over Rs 50,000 against Rs 10,000 now.

Given the price rise and many retired people depending on income from deposits, bankers feel their proposal to the ministry in this regard is justified.

Under the current TDS regime, a bank deducts tax from the interest payable (if it exceeds Rs 10,000 in a year) on a deposit.

The deducted amount gets remitted to the Government.

If a depositor furnishes Permanent Account Number (PAN), then the TDS is at 10 per cent on the interest earned on fixed deposits.

In the absence of PAN, declarations for non-deduction of tax at source in Form 15G or in Form 15H cannot be acted upon and interest earned by the economically weaker sections, the aged and the infirm becomes subject to tax deduction at the higher rate of 20 per cent.

Form 15G is a self-declaration form submitted by individuals below 60 years to banks stating that their income is below the taxable limit. Form 15H is submitted by those above 60.

Currently, depositors circumvent TDS by ensuring that none of their deposits earn interest of more than Rs 10,000. They do this by splitting deposits and parking them with different banks.

By upping the cut-off limit for deduction of TDS on interest from Rs 10,000 to Rs 50,000, banks can easily mobilise deposits, make more loans and spur the economy, said a banker.

Moody’s lowers SBI’s rating as bad loans mount

http://www.thehindubusinessline.com/industry-and-economy/banking/moodys-lowers-sbis-rating-as-bad-loans-mount/article4452637.ece

State Bank of India’s baseline credit assessment has been lowered a notch by credit rating agency Moody’s Investors Service, reflecting its relatively high level of bad loans.

Moody’s has adjusted SBI’s mapping to a baseline credit assessment (BCA) of ‘ba1’ (speculative grade rating) from ‘baa3’ (investment grade rating) previously on the long-term scale.

BCAs are opinions of the intrinsic — or standalone — financial strength of issuers subject to extraordinary government support, which can include banks, sub-sovereigns and government-related corporate issuers.

The lowering of SBI's BCA reflects its relatively high level of bad loans, which are unlikely to be managed down quickly, said the agency.

The new BCA also reflects the bank’s relatively weaker ability to sustain any further deterioration in the economic environment relative to its similarly-rated peers globally.

DEPOSIT RATING UNCHANGED

Due to SBI’s systemic importance, Moody's has left unchanged the global local currency deposit rating and senior unsecured debt rating at ‘Baa2’ (investment grade rating), said the agency in a statement. The outlook on all SBI’s ratings is stable.

The deterioration in asset quality witnessed over the last 18 months increases the bank’s risk profile, cautioned Moody’s.

The agency pointed to a rise in impaired loans, including re-structured loans, and a smaller cushion to absorb losses due to low-provision coverage and lower Tier-1 capital relative to other large banks in emerging markets.

LOAN-LOSS RESERVES

Furthermore, SBI's shock-absorbing buffers are also not as robust as those of its peers. Its loan-loss reserves of 61 per cent of gross non-performing loans or less than 45 per cent of impaired loans are modest when compared globally.

Do we need more banks or bigger banks?

http://www.moneycontrol.com/news/business/do-we-need-more-banks-or-bigger-banks_829673.html

The Reserve Bank of India on Friday fueled enough optimism for India Inc, mostly bruised with economic blues. They can now apply for a new banking licence. The central bank released guidelines for the same. Corporate CEOs were vying each other in airing their voices to stake claim as potential candidates. According to reports, RBI may issue 4-5 such licences.

Is it the need of the hour?

India, the second largest populated country, has total 77 banks including 27 public sector banks, 20 private banks and 30 foreign banks. However, this huge universe has not clinched any significant global footprint.

Country's largest lender - the State Bank of India (SBI) ranks 60th globally in 2012 in terms of tier I capital (equity + reserves). The second largest bank (in terms of loan book) ICICI Bank 's position is way below at 110. Among top 200, four more banks including HDFC Bank , Bank of Baroda ,Canara Bank and Punjab National Bank managed to find their ranks.

Financial inclusion or basic banking service for every Indian seems to be the motivating factor for expanding banking reach. According to experts, consolidation should be the ideal solution to it, not new banks.

"There is no substitute for consolidation in PSU banks," Ramnath Pradeep, former chairman of Corporation Bank and currently chief advisor at PDS & Associates, a Mumbai based law firm; toldmoneycontrol.com.

"Indian companies are spreading their tentacles by acquiring companies abroad. For funding cross-country acquisitions Indian banks should acquire size and sophistication. State Bank of India is considered to be small fry in the global banking arena. Despite cornering about 25 per cent of the banking business in the country, SBI does not rank in the top 20 global banks. Ideally, India should have 4 or 5 global-scale banks," he said.

SBI & associate banks

SBI has five associate banks including State Bank of Hyderabad (SBH), State Bank of Patiala,State Bank of Mysore (SBM), State Bank of Travancore (SBT) and State Bank of Bikaner and Jaipur (SBBJ). Earlier, SBI had merged the State Bank of Saurashtra with itself in 2008 while the State Bank of Indore was merged in 2010. 

Since then, no further merger has taken place. Once all its subsidiaries are merged with it, it would be among the top 10 banks in the world in terms of various parameters.

Smaller PSU banks of no use? 

Even today, some small public sector banks (viz. Dena Bank, Andhra Bank, United Bank of India and others) have not been able to show a healthy performance. They are even hesitant  to act as a lead bank and are content with being a consortium member . The need of the hour is merger of small banks to emerge into large entity (ies).

Some market considerations for possible mergers

Allahabad Bank, Central Bank, Corporation Bank and P&S Bank - projected to be the fourth largest

Canara Bank, Indian Bank, BoM, IOB and United Bank of India - projected be the second largest bank

SBI, BoI and BoB - projected to be among the largest banks in the world

PNB, Vijaya Bank, Andhra Bank and IDBI - projected to be the third largest

OBC, Syndicate Bank, UCO Bank and Dena Bank - projected to be the fifth largest

'Unclaimed deposits of over Rs 2,481 crore in banks till Dec 2011'

http://www.financialexpress.com/news/unclaimed-deposits-of-over-rs-2481-crore-in-banks-till-dec-2011/1078163/0

About Rs 2,481.40 crore was lying as unclaimed deposits in over 1.12 crore bank accounts till December, 2011 as per information provided by the Reserve Bank, Parliament was informed today.

"The Reserve Bank of India (RBI) has informed that as on December 31, 2011, a total amount of Rs 2,481.40 crore in 1,12,49,844 accounts is lying as unclaimed deposits with the commercial banks," Minister of State for Finance Namo Narain Meena told Lok Sabha in a written reply.

He said in the Banking Laws (Amendment) Act, 2012, a new section has been inserted in the Banking Regulation Act empowering the RBI to establish the 'Depositor Education and Awareness Fund' for the unclaimed deposits lying with any bank for more than 10 years.

"This fund will be utilised for promotion of depositors' interest and for such other purposes which may be necessary for the promotion of depositors' interest as may be specified by the RBI from time to time," the Minister said.

He further said the RBI shall specify an authority or committee to administer the fund.

Meena said, to deal with inoperative and unclaimed deposits accounts, RBI has given detailed instructions to banks such as annual review of inoperative accounts, making these accounts operative after due diligence, non-levy of charges for activation of inoperative accounts, etc.

They have been advised to find the whereabouts of the customers and their legal heirs, he said.

Also, RBI has instructed banks to play a more proactive role in finding the whereabouts of the account holders of unclaimed deposits/inoperative accounts and also to display the list of unclaimed deposits of inoperative accounts which are not in operation for 10 years or more, on their websites.

Rs 71,000-cr worth life insurance policies surrendered in last fiscal

http://www.thehindubusinessline.com/industry-and-economy/banking/rs-71000cr-worth-life-insurance-policies-surrendered-in-last-fiscal/article4439570.ece

Large-scale surrender of insurance policies, particularly unit-linked insurance plans, has forced the regulator to examine the issue. Renewal of insurance policies is measured by a parameter called persistency.

According to IRDA (Insurance Regulatory and Development Authority) data, in fiscal 2012 life insurers had to pay Rs 71,208 crore on account of surrenders (withdrawals), of which, LIC paid Rs 41,531 crore and private sector insurers, the balance.

In fiscal 2012, ULIPs accounted for 68 per cent of the total surrender for LIC, and 97 per cent of the total for private insurers. 

Persistency measures the number of policies retained in the books of an insurer. If a lot of policies lapse (non-renewal), then it could be taken as a sign of mis-selling by insurers. Currently, life insurers are required to provide persistency ratio numbers (percentage of policies on which premiums are still being paid after their sale) to the regulator on an annual basis.

RBI opens doors to broking, real estate firms to set up banks

http://www.thehindubusinessline.com/industry-and-economy/banking/rbi-opens-doors-to-broking-real-estate-firms-to--up-banks/article4443075.ece

The Reserve Bank of India on Friday set the stage for entry of new banks in the private sector by unveiling the much-awaited final guidelines.

The central bank appears to have accommodated the Government’s viewpoint and reversed the stand it had taken in the draft guidelines of not allowing broking and real-estate companies in the banking space.

The RBI said entities in the private sector, public sector and non-banking finance companies (NBFCs) will be eligible to set up a bank. Eligible NBFCs could be permitted to promote a new bank or convert themselves into banks.

Eligible promoters will have to make an application to the RBI by July 1, 2013.

The riders

The RBI, however, has given itself some wiggle room to reject applications. It said the promoter’s business model and business culture should not be misaligned with the banking model.

Further, the promoter’s business should not put the bank and the banking system at risk on account of activities such as those which are speculative in nature or subject to high asset price volatility.

The RBI will also check the promoter’s past track record of sound credentials and integrity; financial soundness and successful track record of running their business for at least 10 years; and seek feedback from other regulators, enforcement and investigative agencies.

Among others, the players which are expected throw their hat in the ring to get banking licences are: L&T Finance Holdings, Tata Capital, Aditya Birla Financial Services, Reliance Capital, LIC Housing Finance, Mahindra & Mahindra Financial Services, Religare Enterprises, and Indiabulls.

According to Shinjini Kumar, Director, PwC, the RBI has thrown open the field wider by relaxing the entry barrier.

The guidelines come three years after the then Finance Minister Pranab Mukherjee announced that the RBI is considering giving some additional banking licences to private sector players.

The last time that the central bank gave banking licences was a decade ago when Kotak Mahindra Finance Ltd got converted into a commercial bank and YES Bank was floated.

Entities/groups which intend to float a bank will have to set it up through a wholly-owned non-operative financial holding company (NOFHC), which will be registered as a non-banking finance company.

The NOFHC and the bank cannot have any loan exposure to the promoter group.

Further, the bank cannot invest in the equity/debt capital instruments of any financial entities held by the NOFHC.

The initial minimum paid-up voting equity capital of the new bank, whose board should have a majority of independent director, has been set at Rs 500 crore (it was Rs 200 crore when Kotak Bank and YES Bank were set up).

The Holding Company will initially hold a minimum 40 per cent of the paid-up voting equity capital of the bank, which will be locked in for a period of five years and brought down to 15 per cent within 12 years.

The RBI said the aggregate foreign shareholding in the new bank cannot exceed 49 per cent for the first five years.

‘Pay and recover’ is the norm in case of third-party liability on insurer

http://www.thehindubusinessline.com/industry-and-economy/banking/pay-and-recover-is-the-norm-in-case-of-thirdparty-liability-on-insurer/article4386551.ece

It is an established principle of third-party insurance that the insurance company will have to honour the claim of the road accident victim even if the insured was remiss in not honouring the terms of the insurance contract.

Thereafter, it can proceed against the insured for violating the terms of the contract and seek reimbursement of what it had paid to the victim.

In National Insurance Company Ltd vs. Dhas and Others, the Madurai Bench of the Madras High Court reiterated the principle of ‘pay and recover’ while directing the appellant to pay up the Rs 2,12,000 ordered to be paid by the Motor Vehicles Tribunal to the family of a road accident victim.

The insured had licence for light motor vehicle but drove a two-wheeler for which he did not have a licence, and killed the victim involuntarily.

The court pointed out that the right of the victim and his family (third party) is statutory, whereas the rights of the parties — the insurer and insured — are contractual.

They are free to enforce their contractual rights but before that the insurer must honour the third parties’ statutory rights.

The third party’s agony should not be compounded by embroiling him in the contractual matters between the two.

RBI for change in laws to deal with fake currency menace

http://www.thehindubusinessline.com/industry-and-economy/banking/rbi-for-change-in-laws-to-deal-with-fake-currency-menace/article4390261.ece

The Reserve Bank said it is in talks with the Government to amend the relevant laws to ensure that persons generating fake currency are punished and not those who possess such notes innocently.

“We are in negotiations with the Government of India on how this law can be reviewed and changed so that the responsibility for the fake currency is actually on the people who are responsible for generating the fake currency,” RBI Governor D Subbarao told newspersons after the board meeting here.

“But at the moment, regrettably, the holder of fake currency is responsible for that and if a branch manager says that he (the person with the notes) is accountable for it then he is right,” he said.

Cops crack Rs 1crore bank fraud

http://timesofindia.indiatimes.com/city/mumbai/Cops-crack-Rs-1crore-bank-fraud/articleshow/18313968.cms

The Mulund police claimed to have detected a Rs 1 crore banking fraud within 18 hours with the arrest of a 32-year-old man from Vasai late on Friday. 

Initial investigation carried out by the authorities has revealed that the bank and its officials were not at fault. Probe showed that the fund was fraudulently transferred after the hacker (kingpin still absconding) cracked the username and password of the current account of a cosmetics company at the bank's Mulund branch on Thursday, between 9.15am and 10am. The amount was transferred to 12 different accounts in nationalized and private banks in and outside the city after the hacker impersonated as company director Ankur Korane (29) to gain access into the current account and transfer money through real time gross settlement (RTGS) in 45 minutes. 

At 6pm on Friday, the Mulund police rushed to a nationalized bank at Manickpur on receiving a call that the bank had made a person—identified as Shroy Ral Pereira (32) —wait . Pereira had visited the bank to withdraw Rs 10 lakh out of the Rs 30 lakh credited into his account. "All the banks to which the 12 transactions were made were intimated about the fraud. The accounts were frozen, which helped in the recovery of Rs 54 lakh. We are trying to trace the channels to which the balance Rs 46 lakh was credited and from which locations it was removed," said aMulund police officer. 

On Saturday, Pereira was produced before the Mulund metropolitan magistrate court . Additional commissioner of police (East) Quaiser Khalid confirmed to TOI on Saturday the arrest of one person from the nationalized bank's Manickpur branch on Friday. The kingpin had used the accused's account to transfer Rs 30 lakh on 2-3 instalments. "The team showed prompt response in nabbing an accused which helped us in freezing the accounts and saving money from being siphoned off. His arrest will help us in getting hold of the main culprit," said Khalid. 

Korane had approached the Mulund police on Thursday at 9pm, 12 hours after the money was transferred from his company's current account. In the complaint, Korane said, "I learnt about the transaction after I received an SMS from the bank. I spent the day making calls to the bank, placing requests to send a message to the banks to freeze the 12 accounts where the money was transferred . On the bank's instructions that I approached the police to lodge an FIR so that they stop transactions from the company's account." 

Around 10pm on Friday, Pereira was brought to Mulund police station. "Periera initially said it was his own money. But his lie was caught when cops went through his account and found only Rs 600 deposited in the last six months. He revealed that a friend had sought his bank account number, informing him that he wanted to transfer a huge sum and promised to pay him a commission. The hacker may have promised commission to other account holders too," said investigators , adding, they suspect an insider hand behind the fraud. 

The accused have been booked under IPC sections 34 (common intention), 419 (impersonation ) and 420 (cheating). They have also been booked under IT Act 66 (C) (identity theft) and 66 (D) (impersonation by using computer resource).

Rs 1 crore stolen from executive's bank account

http://timesofindia.indiatimes.com/city/mumbai/Rs-1-crore-stolen-from-executives-bank-account/articleshow/18298758.cms

AnkurKorane was at his office inMulund on Thursday morning when his mobile began buzzing with texts. The first message at 9.15am declared that Rs 12 lakh had been transferred out electronically from his bank account—a transaction he knew nothing of. The next text informed of a transfer of Rs 5 lakh, the third of a debit of Rs 15 lakh. By 10am, Koranehad received 12 such texts. Within mere 45 minutes, Rs 1 crore was stolen from his account.

A director in a cosmetic company, 29-year-old Korane has filed a complaint with Mulund police about the fraudulent transactions. A first information report has been registered for cheating and impersonation under sections of the Information Technology Act and the Indian Penal Code.

"The money was transferred in 12 transactions from the victim's Yes Bank account, Mulund branch, using Real Time Gross Settlement system," said additional commissioner of police (east region) Quaiser Khalid. In each transaction, the money was sent to a different account in the country.

The Mulund police admitted that they are so far in the dark on how the crime was perpetrated, though they suspect that Korane's e-banking details such as username and password were stolen and used for the fraud. The case, they said, will be transferred to the cyber crime cell and the economic offences wing of the Mumbai police.

In his complaint, Korane alleged that when he "contacted the bank to freeze further transactions from my account, it asked that he first submit a police FIR". Still shaken on Friday, Korane refused to discuss the crime's details, only saying that he is "running around the police station, helping cops in their probe".

The police have directed the bank to provide the details of the 12 accounts where Rs 1 crore was directed. "We have also ordered a halt on transactions from Korane's account to protect the Rs 60 lakh that remains there and was not siphoned off during the fraudulent transactions," said senior inspector Jivajirao Jadhav.

A Yes Bank spokesperson told TOI: "Investigations are currently being conducted by the concerned authorities. The bank is extending all necessary cooperation."

When informed about the crime, cyber expert Vijay Mukhi explained that a bank account can be hacked in various ways. A user's online banking username and password can fall "into wrong hands if stored on a computer, a cellphone or scribbled on a piece of paper". "Hackers send out viruses to steal passwords from computers. They also dispatch spam emails, which ask for banking passwords," Mukhi said.