RBI tells banks to include compensation in cheque policy

http://www.thehindubusinessline.com/industry-and-economy/banking/article3764821.ece

The Reserve Bank of India has asked banks to reframe their Cheque Collection Policies (CCPs). This should include compensation payable for the delayed period in the case of collection of local cheques.

The central bank said in case, no rate is specified in the CCP for delay in realisation of local cheques, compensation at savings bank interest rate will have to be paid for the corresponding period of delay.

The RBI has come up with the abovementioned directives as it has noticed that in the CCPs and compensation policies of various banks there is no mention about the compensation in respect of the delay in realisation of local cheques.

Instances of delayed credit to customers' accounts without any compensation for the delayed period beyond the time line indicated in the CCPs, in respect of local cheques, have been brought to the RBI’s notice.

The RBI emphasised that banks are required to specify the time line for realisation of cheques, including local cheques, in their respective CCPs.

In case of local cheques, banks should permit usage of the shadow credit afforded to the customers' account immediately after closure of relative return clearing and in any case, withdrawal has to be allowed on the same day or maximum within an hour of the commencement of business on the next working day, subject to usual safeguards.

Banks have display their revised CCPs at branches and Web sites for better customer service and dissemination of information, said a RBI notification.

I-T dept to press money laundering charges in HSBC case

http://www.thehindubusinessline.com/industry-and-economy/banking/article3757477.ece

The Income Tax department has decided to include the offence of money laundering in its soon to be filed charge sheet against individuals named in the classified HSBC list, for stashing illegal funds.

The department in its probe has found that the illegal funds were laundered in many cases which can be categorised as “criminal proceeds of crime”.

The stringent and criminal provisions of the PMLA can ensure attachment of properties of the accused and handing down of strict punishment by courts.

The I-T department is also particularly wary about the recent disclosure made by a US Senate panel that had accused HSBC of exposing the American and Indian financial systems to various terror financing, money laundering and drug trafficking activities due to its poor risk control systems.

In an official statement earlier this week, the Finance Ministry had said that the Income Tax department has begun assessment proceedings in “cases related to HSBC accounts”.

India has reportedly obtained data of over 700 HSBC accounts from French government channels.

In 80 cases till now, the department has detected undisclosed income of Rs 438 crore and taxes of Rs 135 crore have been realised so far.

SBI hopes to maintain treasury gains in second quarter

http://www.thehindubusinessline.com/industry-and-economy/banking/article3757235.ece

State Bank of India (SBI) is hopeful of maintaining its impressive performance on the treasury income front in the second quarter as well, a top bank official said today.

“We are hopeful that income from treasury will be maintained at the present (Q1) level,” Deputy Managing Director and Group Executive (Global Markets) of SBI, P.P. Pradeep Kumar told PTI here.

During the first quarter, the public sector lender has optimally managed its treasury operations to post mark-to-market gain.

SBI has a mark-to-market gain of Rs 521 crore during the last quarter, which was an important factor that helped it post its highest-ever net profit of Rs 3,752 crore.

Furthermore, the bank said that it was able to check losses in the equity portfolio by exiting from all loss-making entities.

Referring to high government borrowing plan coupled with possible hardening bond yield, Pradeep Kumar said any small change in yield is not going to impact the profitability of the treasury operations.

“I don’t think any small change will have major impact on the treasury gain,” he said.

SBI posted a 137 per cent rise in its net profit to Rs 3,752 crore in the first quarter ending June on the back of healthy net interest income.

Net profit of the public sector bank stood at Rs 1,583 crore in the same period previous fiscal.

Total income of the bank increased by 16.9 per cent to Rs 32,415 crore in the June quarter compared with Rs 27,732 crore reported in the same period last fiscal.

Finance ministry wants RBI to pay 7% interest on CRR deposits

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/finance-ministry-wants-rbi-to-pay-7-interest-on-crr-deposits/articleshow/15467462.cms

The finance ministry has suggested that the Reserve Bank of India pay 7% interest on the mandatory deposits parked with it by banks, one among several measures proposed to lower rates even if the central bank does not ease the monetary policy.

Banks have to mandatorily park a percentage of their deposits, called the cash reserve ratio, or CRR, with the RBI.

The central bank had stopped paying interest to banks on CRR in 2007.

Finance ministry officials are of the view that if the RBI were to pay interest at the reverse repo rate, or the rate at which banks park their surpluses with it, then banks will be able to lower their deposit rates, and eventually,lending rates will fall. At present, the CRR rate is 4.75%.

If the RBI were to agree to the proposal, banks will earn 7%, the reverse repo rate, on this portion of funds, helping them lower the cost of funds that can be passed on to borrowers. The RBI had not cut rates in its June 18 policy review because of the high inflation and lack of fiscal consolidation from the government.

SBI - Concerns over fresh bad loans - Rs 10,800 crores

http://www.business-standard.com/india/news/sbi-swimming-in-troubled-waters/482955/

State Bank of India, the country’s largest lender, managed to beat earnings estimates but that’s the last thing on the mind of investors and analysts. While the company reported a 137 per cent increase in net profit, the bank’s fresh accretion of bad loans at Rs 10,800 crore stood out like a sore thumb. The sharp increase in bad loans has shocked the market, as this is in variance with what the bank said it expected. 

Moreover, the increase has been driven by deterioration in three corporate accounts, which added up to Rs 3,500 crore.

However, analysts say the bank seems confident of upgrading at least two of these accounts in the coming quarters. A hydro-electric power plant is stressed as it has not got environmental clearances. As soon as the clearances come about, the account would be upgraded. Similarly, the second account, in the construction sector, has been hit as the borrower is not being paid for a project where it was a sub-contractor. One pharmaceutical/biotech account is what analysts expect could deteriorate.

What is more worrying is also the bank’s aggression in cutting loan rates. Given the fall in margins and higher slippages, the market would like to get a fix on the bank’s strategy. Though the bank has guided for a net interest margin (NIM) of 3.7 per cent in the coming quarters, analysts think this would be difficult to achieve, given it’s strategy. 

Cash for CASA: Banks reward staff to boost low-cost deposits

http://www.business-standard.com/india/news/cash-for-casa-banks-reward-staff-to-boost-low-cost-deposits/482976/

To stabilise fund flows by increasing the share of low-cost deposits, banks are giving cash incentives and recognition certificates to employees for opening the highest number of current accounts or savings accounts (CASA).

The incentive is Rs 50-100 per account but there is an overall cap on how much an employee can earn through such schemes. The move also aims to cut dependency on bulk deposits.

At Central Bank of India, incentives are given on the number of accounts opened, their quality and the average balance maintained in these. In the first quarter of 2012-13, the bank's savings accounts grew 12.7 per cent as compared to the corresponding period last year.

Union Bank of India is running a campaign for current accounts. Employees are not only being rewarded to open more accounts but also to revive inactive accounts. Its CASA ratio (of the total) was 30.95 per cent at the end of the June quarter. 

Punjab National Bank, too, is offering rewards to motivate employees for CASA campaigns.

IRDA changes rules for endowment plans

http://businesstoday.intoday.in/story/irda-changes-rules-for-endowment-plans-of-insurance/1/186666.html

Big annual bonuses on endowment insurance plans could be a thing of past. The Insurance Regulatory and Development Authority (Irda) has proposed a minimum death benefit on endowment plans, which means a larger part of the premium may go towards insuring the life of the policyholder.

For regular premium plans, the minimum death benefit proposed for entry age less than 45 years is 10 times the annual premium, or half of annual premium multiplied by the policy term, or 105 per cent of all the premiums paid, whichever is higher. 

For entry age over 45 years, the same is higher of seven times the annual premium, one-fourth of annual premium multiplied by the policy term and 105 per cent of all premiums paid.

The guidelines also link commission paid to agents with the policy tenure. For policies with a tenure of five-nine years, the first-year commission cannot be more than 14 per cent of the annual premium, 28 per cent for 10-14 year tenure, and 40 per cent for 15 years or more (35 per cent for insurers more than 10 years old).

Irda has also proposed to make policies eligible for surrender value if premiums have been paid for two years instead of the current three years