Dept of Post applies for banking licence

http://www.thehindubusinessline.com/industry-and-economy/banking/dept-of-post-applies-for-banking-licence/article4856824.ece

The Department of Post today submitted application before the Reserve Bank for a licence to offer full-fledged banking services.

“We have approached RBI today and hopefully having met all the conditions of RBI, an in-principle approval might be given. If it is given, I think, it will be a revolutionary step because it will bring banking, subject to Cabinet approval, to the doorstep of the ordinary man in this country,” Telecom and IT Minister Kapil Sibal told PTI.

The RBI is in the process of granting fresh banking licences and has set July 1 as the deadline for applying.

The India postal network has 1,54,822 post offices in the country. Of these, 1,39,086 are in rural areas and 15,736 are in urban regions.

There are around 90,000 bank branches in the country and provision of real-time banking services through postal network is estimated to triple the current banking network.

The The Department of Post (DoP) has plans to start 50 bank branches in the first year and scale it to a total of 150 branched in 5 years.

The Minister said after RBI’s in-principle approval the Department of Posts will require the Cabinet approval to go ahead with its plan.

“If RBI agrees that this (banking licence for DoP) is the proposition that must move forward because most of the Aam Aadmi (common man) does not have access to banking facilities. Post bank is ideal way to bring banking facility to the doorstep of aam aadmi,” Sibal said.

Department of Posts has started inter-ministerial consultations for seeking Cabinet approval on around Rs 1,900 crore fund requirement to start Post Banks. The total amount includes Rs 500 crore paid-up capital required under new banking licence guidelines.

The Post Banks are proposed to be owned by DoP but with a completely independent board, governance structure and operations. It will have representation from Ministries of Finance and Communication & IT.

SBT tells customers to ‘cover’ positions in forex market

http://www.thehindubusinessline.com/industry-and-economy/banking/sbt-tells-customers-to-cover-positions-in-forex-market/article4843431.ece

State Bank of Travancore (SBT) has launched a series of meetings of exporters and importers aimed at giving them a lowdown on what is happening in the economy and foreign exchange market.

The first of the meetings was held in Kochi where 60 customers of the bank participated, S. Vasudevan, general manager of the SBT Network in the region, told Business Line.

RUPEE FALL

The bank had lined up a number of experts dealing in forex market and related fields to update the audience on what had triggered the precipitous fall of the rupee in recent times, among other things.

“Ensure you are effectively covered and at no cost should any position kept open for long” was the advice tendered to anxious customers, Vasudevan said.

Foreign Institutional Investors have a right to pull back their money from India in the context of signals from the US Federal Reserve that it might go slow with its loose money policy.

This had driven up demand for dollars overnight, pummelling the value of the rupee in the bargain. But experts handling the session felt that it was a short-term phenomenon only.

‘REBOUND’ EFFECT

They felt that the rupee would start benefiting from the ‘rebound’ effect when markets open on Monday. Promised support from Reserve Bank of India and the Centre also will lend valuable support.

SBT had a turnover of Rs 24,026 crore in foreign exchange in 2012-13. It proposes to organise similar meets at potential business centres across country as part of a strategy to expand forex business, Vasudevan said.

Leena Nair, chairperson, Marine Products Export Development Authority, inaugurated the proceedings, which included a general debate and question and answer session.

SPECIAL SESSIONS

Special sessions were held on the nuances of Foreign Exchange Management Act and regulation of foreign trade; risk to exports; policies of Export Credit Guarantee Corporation; and SBT products in foreign trade.

S. Vasudevan delivered the welcome speech while E. K. Harikumar, chief general manager (commercial banking), SBT, presided over. Chandrasekharan, general manager (treasury) spoke on the occasion.

Among bank officials who handled various sessions were Latha Subramaniam from forex treasury, Mumbai; S. Harikrishnan, general manager; K.S. Narayanan, assistant general manager; and R. Mahalingam, senior manager, Export Credit Guarantee Corporation.

Mayadevi P., deputy general manager of Ernakulam zone of SBT, proposed vote of thanks.

Need Rs 3,000 cr to merge one associate bank this year: Pratip Chaudhuri

http://www.business-standard.com/article/finance/need-rs-3-000-cr-to-merge-one-associate-bank-this-year-chaudhuri-113062100972_1.html

The State Bank of India (SBI) today said it would need up to Rs 3,000 crore to merge one of its associate banks with itself, adding that one of these banks would be merged  this year.

Pratip Chaudhuri, chairman of SBI, told shareholders during the annual general meeting (AGM): “SBI will need Rs 1,000 to Rs 3,000 crore in capital if it were to merge one of its associate banks with itself.”

After the AGM, Chaudhuri told reporters a committee headed by S Vishvanathan, managing director (associates and subsidiaries) at SBI, is looking into all the aspects. “That committee would report to the board (and) then we will finalise the name.”

When asked whether it would be a listed entity or an unlisted one, Chaudhuri said: “We have an open mind.”

Currently, SBI has five associate banks – State Bank of Hyderabad, State Bank of Bikaner and Jaipur, State Bank of Patiala, State Bank of Travancore and State Bank of Mysore.

Out of these, State Bank of Hyderabad and State Bank of Patiala are unlisted while rests are listed.

Earlier there were speculations that bank might first prefer to merge unlisted entities first as they completely owned SBI. But Chaudhuri cleared the air by saying all aspects will be looked into and it has open mind over the issue.

Incidentally Chaudhuri had a key role in merging in another associate bank State Bank of Saurashtra in 2008 as its managing director. Seventh associate bank, State Bank of Indore was merged in 2010.

On SBI's own capital raising plans this year, he said a decision would be taken by next month.

According to Chaudhuri, the recent depreciation in rupee was a result of global phenomenon and not restricted to India. "I think it’s not a reaction to India, it’s a reaction overseas everywhere” he said.

“Some of the money is headed back to US (and) all the markets including England, Germany all have lost substantially," Chaudhuri said, adding that it affects India more because of our dependence on the inflows.

ICICI, Axis, HDFC Bank fined over Rs. 10 crore for violating KYC norms

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The Reserve Bank of India on Monday said it had imposed penalties on Axis Bank, HDFC Bank and ICICI Bank for violating guidelines related to details of customer identity known as "know your customer" rules.

The central bank investigated the banks following an investigation by an independent organisation, which had alleged widespread money laundering practices at their branches.

The RBI said it had not found initial evidence of money laundering against the three banks.

Axis Bank was fined Rs. 5 crore, HDFC Bank Rs. 4.5 crore and ICICI Bank, the country's second-largest lender, Rs. 1 crore.

Cheque bounce offence likely to go

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/cheque-bounce-offence-likely-to-go/articleshow/20420176.cms

The government will soon bring an amendment in the Negotiable Instruments (NI) Act that will restrict banks from dragging a person to court for an offence like cheque bounce. All such cases, after the changes are affected, will have to be decided only through arbitration , conciliation or settlement by Lok Adalats.

It is estimated that more than 30% of all the pending cases in courts across the country are either related to cheque bounce or traffic challans. The proposed amendment has been recently suggested by an inter-ministerial group (IMG), which was set up last year to make suggestions for necessary policy and legislative changes to deal with a large number of cases pending in various courts.

The law ministry is working closely with the finance and surface transport ministries to make suitable changes in the law and cases falling under both categories (cheque bounce and traffic challans) will be ineligible to be taken to courts unless some other criminal intent is alleged. The changes in the NI Act will make it compulsory for the disputing parties to resolve the matter through alternative dispute resolution mechanism. Amendments in the Motor Vehicles Act are suggested for cases related to traffic challans.

"The use of alternative dispute resolution mechanism on the lines of Section 89 of the Code of Civil Procedure , through arbitration; conciliation; judicial settlement including settlement through Lok Adalat of mediation may be made compulsory in cheque bounce cases by making suitable amendments in the negotiable instruments act," the IMG recommendation said.

The IMG report, being implemented by the finance ministry, said a summary procedure for dealing with cheque bounce cases as a schedule of procedure may be codified, and developed by the department of financial services. The same may suitably be incorporated in the Negotiable Instruments Act, it added. The existing rules for court fees do not take into account the amount involved in the cheque or volume of complaint cases. "The court fee may be made Ad-valorem to act as a deterrent for indiscreet and vexatious complaints ," the IMG has said. Provision may also be made for defaulting party to bear the cost of litigation in cheque bounce cases, it added. 

Don’t lend short for long-drawn projects, SBI chief tells associate banks

http://www.thehindubusinessline.com/industry-and-economy/banking/dont-lend-short-for-longdrawn-projects-sbi-chief-tells-associate-banks/article4766140.ece

State Bank of India (SBI) Chairman Pratip Chaudhury has cautioned associate banks against committing short-term funds for long-gestation projects.

He said this with specific reference to exposure to a series of big-ticket infrastructure projects in Kerala, where State Bank of Travancore (SBT), an associate bank, is headquartered.

BIG PROJECTS

Chaudhuri was here to attend the annual general meeting of the associate bank and also a corporate social responsibility event that coincided with it.

Among projects announced in the State are Metro Rail in Kochi; monorail in Thiruvananthapuram and Kozhikode; a high-speed rail corridor; the Vizhinjam container terminal and the Kannur international airport.

By no chance should short-term funds be advanced to these projects since it could lead to a mismatch of deposit base versus long-term advances committed.

Chaudhury advised banks to examine how and when revenue stream from a project starts kicking in. It is easy to take a decision on projects, for instance Metro or monorail, with an assured revenue stream.

NOT SAME

It would not be the case with projects such as a flyover or a bridge, which propped up the contentious issue of toll as a means of realising costs over a period of time.

Chaudhury said parent SBI was sitting on a cash surplus of Rs 40,000 crore. It is willing to fund projects being executed by reputed contractors known for speed of implementation.

Separately, he reiterated his demand that all loans, including home and vehicle, be brought under a single regulator.

Why should there be a separate regulation for commercial banks and housing finance companies when they lend funds to the same sector, he wondered.

PAT FOR SBT

He complimented SBT for maintaining a good credit-to-deposit ratio of 69 per cent, indicating the extent of credit sanctioned within the home State relative to the deposit base.

This should help remove the misconception that the bank is taking away funds outside for investing in lucrative projects in other States.

Chaudhury said the associate bank had revealed solid financial position with a net profit of Rs 615 crore during 2012-13, backed up with a deposit base of Rs 85,000 crore and advances of Rs 67,000 crore.