Indian Banks

Irda intends to allow investors more choice.

The Insurance Regulatory and Development Authority (Irda) is planning to allow more options with the unit-linked pension plan. At present, there is only one product in that space and insurance companies are mandated to offer a 4.5 per cent return on such plans.

“We are looking at coming out with more exposure and more disclosures in the pension space. In case people are looking for more equity exposure, they should have an option. We are looking at these issues,” said R Kannan, member, actuary, Irda.

The return of 4.5 per cent is not guaranteed during the currency of the policy but can change depending upon the interest rate movement. The guarantee depends on the reverse repo rate and has to be reviewed annually. The return, however, can only move between three and six per cent.

He added that policy holders today could not change the proportion of debt and equity. “If a customer wants to take high-risk equity exposure, he does not have a choice.”

The sector regulator is also likely to come out with Initial Public Offer (IPO) norms for life insurance companies by the end of next month.

“Now the companies are busy with sales and later they will work on valuation. We will study the trend and disclosures by companies for a couple of quarters. So, in May or June, we can expect insurers will be ready to go public,” said Kannan.

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Yields on government bonds have dropped 10-15 basis points over 6 trading sessions and market participants are speculating the central bank may have been one of the buyers from the market.

The Reserve Bank of India (RBI) normally conducts auctions to buy bonds in so called open market operations, and also picks up from the secondary market.

Market talk the central bank may be buying surfaced after the Clearing Corporation of India data showed a total of Rs 2,830 crore ($625 million) of bonds were bought over the past five sessions under an “others” category, which includes insurers, provident funds, pension funds and the central bank.

“The RBI could be buying bonds on behalf of state government or in anticipation that there may be shortage of a particular security,” said one person familiar with the central bank’s operations.

“This is not a strategy-led buying, but is a part of the continuous process of central bank investment. That is why the amounts are miniscule compared to the total volume,” he said.

Volume in government bonds market shot up to Rs 10,100 crore on Monday from a daily average of Rs 8,440 crore last week. As on 0900 GMT on Tuesday, volumes were robust at Rs 6,500 crore.

The big sellers were foreign and private sector banks.

The most-traded 8.13% 2022 bond was trading at 8.09%, down 1 basis point on the day. Compared to February 4, the yield is down 15 basis points.

The central bank buys or sells bonds as part of its investment call on behalf of state or federal governments, other central banks and itself.

“We publish this data with a week’s lag every week in the weekly statistical supplement,” said a spokeswoman at the RBI.

The RBI had bought Rs 37,068 crore of bonds under its open market operation during December and January to help ease a cash crunch with banks. Since then, liquidity has improved thanks also to accelerated government spending.

Three dealers said the central bank, which partly owns 6.57% 2011 bond that matures on Thursday, may be buying bonds in anticipation of the cash flow. Redemptions in the bond are estimated to total Rs 17,083 crore.

The central bank does not comment on daily market operations and traders said insurance companies, which receive cash flows during this time of the fiscal year, could be buying bonds.

“A lot of insurance companies keep buying bonds based on their cash flows. I don’t really think it is RBI buying that we have been seeing in the market recently,” the head of rates trading at a large foreign bank said.

“The RBI can directly buy through open market operation if they want to. Such buying would actually contradict their own view, hence don’t think it’s them,” he said.

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State Bank of India (SBI), the country’s largest lender, on Monday became a signatory investor to the Carbon Disclosure Project (CDP), a collaboration of over 550 global institutional investors with assets under management to the tune of $71 trillion.

CDP is an independent non-profit organisation, holding the largest database of primary corporate climate change information in the world.

Over 3,000 organisations across the world’s largest economies measure and disclose their greenhouse gas emissions and climate change strategies through CDP. These disclosures aid them in setting reduction targets and improve performance.

SBI, on its part, had been undertaking several environmentally and socially sustainable initiatives through its 14,000 plus branches spread across the length and breadth of the country. It has also enunciated a ‘Green Banking Policy’ in 2007. Therefore, a partnership with CDP only reiterated its resolve and commitment towards sustainable development, said SBI chairman O P Bhatt.

“Our bank was the first in the entire banking, insurance and financial services sector to have conceptualised and owned wind farms for the generation of green power. The same partly substituted the thermal power used by our offices in India. We have already launched a project to measure and manage organisational foot print to achieve carbon neutrality,” he added.

Paul Simpson, CDP’s chief executive said, “We are delighted to welcome financial powerhouse SBI as a signatory. As most of the world’s economic recovery will now come from emerging economies like India, it was crucial for us to have a strong partner like SBI to promote the truly global fight for sustainable development.”

“We are pleased SBI has become a signatory, as this conveys a strong message to the Indian financial sector and the strategic role it can play in promoting a sustainable future” said Ravi Singh, secretary general and CEO of WWF-India.

“Being a major bank, SBI stands to become a great catalyst in encouraging the adoption of sustainable strategies by businesses and the financial sector. We congratulate SBI on becoming a signatory to CDP; this is a very important milestone for the initiative” said Seema Arora, principal counsellor & head of CII-ITC Centre of Excellence for Sustainable Development.

Each year, on behalf of signatory investors, CDP collects climate change and carbon emission data from over 5,000 large companies globally, including the top 200 companies listed on the National Stock Exchange (NSE).

Over 550 institutional investors — ranging from pension funds and insurance companies like Allianz and Swiss Re to blue-chip banks and asset managers such as Black Rock, HSBC, Goldman Sachs and Morgan Stanley — are signatories.

In India, investors like HDFC Bank, IDBI, IDFC, Reliance Capital, Tata Capital, IndusInd Bank and Yes Bank have also become signatories. CDP sends an annual letter and a questionnaire on behalf of these financial institutions to the top 200 Indian companies by market capitalisation. In 2010, 51 companies responded to the questionnaire.

In the disclosure, Indian companies reported on their carbon emissions data, reduction targets, associated risks and opportunities and increasing board-level managerial resources in spearheading the execution of climate change strategies within their organisations.

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Rising lending rates, low-cost deposits to offset higher deposit mobilisation cost.

Rising term-deposit rates might not lead to any significant erosion in banks’ net interest margins for the current financial year, said bankers and analysts.

“Contrary to the dip expected, the net interest margins of banks have risen by six basis points sequentially,” Manish Chowdhary, Aditya Narain and Pooja Kapur, analysts with Citigroup Global Markets, said in their third quarter review of Indian banks’ financial performance.

In the last six months, banks have increased deposit rates several times. Since October, the rates have risen by 150-250 basis points. In comparison, lending rates have risen by 75-125 basis points in the last five months.

State Bank of India, the country’s largest lender, has raised deposit rates four times since August. It is offering as much as 9.25 per cent for 555-day and 1,000-day deposits.

However, when concerns were raised over higher deposit costs reducing banks’ net interest margins — a key ratio to assess their financial performance — bankers disagreed.

“It’s not that we have raised only deposit rates. Lending rates have also gone up. Plus, there is growth in (low-cost) current and savings deposits. So, I don’t expect any significant impact on our net interest margins this year,” said a top official of Union Bank of India.

The government-owned bank closed the first nine months of this financial year with a net interest margin of 3.3 per cent. “We believe our margin will remain at these levels for the entire year,” the official said.

Private lenders also dismissed claims of a likely drop in margins this financial year.

“Quarter-after-quarter, we have maintained our margin through a slew of initiatives. Driven by the growth in our (low-cost) current and savings deposits, we hope to maintain it over 3.7 per cent,” said P R Somasundaram, managing director and chief executive, Lakshmi Vilas Bank.

The bank is paying 10.1 per cent on deposits with a maturity of one to two years, one of the highest. It closed the first nine months of the financial year with a net interest margin of 3.7 per cent. Its margin stood at 2.99 per cent last financial year.

The impact of the rise in deposit rates on banks’ margins occurs with a time lag, analysts say. As a result, margin contraction in the current financial year is likely to be limited, they say.

Most banks, however, expressed doubts over sustaining their margins next financial year if interest rates continued to rise.

“Next year’s performance will depend on many things. If the rise in policy rates continues, banks will have to take a call regarding passing it on to their clients. If the rates go up significantly, it may slow down economic activity. So, there’s a possibility that our margins may be hurt next year,” said a senior official with a Mumbai-based public sector bank.

Since March, the Reserve Bank of India (RBI) has raised key policy rates seven times to tame inflation. While the repo rate has risen by 175 basis points to 6.5 per cent, the reverse repo rate has gone up by 225 basis points to 5.5 per cent.

Most analysts expect the central bank to raise rates further as inflation continues to stay above its comfort zone.

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Decides not to roll over a part of loans maturing in January and February.

To prevent corporate arbitrage and protect interest margins, State Bank of India (SBI) has cut its short-term loan portfolio by over Rs 4,000 crore by not rolling over a part of loans maturing in January and February.

Many companies are not willing to pay more than nine per cent for short-term loans while the interest rates on commercial paper (CP) and certificate of deposits (CDs) are higher by at least 75-100 basis points. CP and CDs are financial instruments used by companies and banks to raise short-term funds.

Besides the rising cost of funds, there is also an element of companies benefiting from the interest rates prevailing in markets at the cost of banks. Some take money at a lower rate and park it with market instruments, including debt paper. “The bank will not like to lose out due to the corporate arbitrage benefit”, an SBI executive said.

The bank has to strike a balance between absorbing the rising costs of funds and maintaining its net interest margin. Its peak rate on term-deposits shot up from 7.5 per cent in August 2010 to 9.25 per cent in February. In the same period, it raised its prime lending rate from 11.75 per cent to 13 per cent.

SBI’s advances grew by 21.9 per cent to Rs 7,39,971 crore as of December 2010. Credit rose by Rs 46,700 crore in the third quarter as borrowings by oil companies went up due to rise in global crude oil prices. Short-term loans form over 15 per cent of its loan book.

An SBI official said deciding against rolling over some short-term credit would not impact the bank’s credit growth. The country’s largest lender has already indicated about the slowing credit growth in the fourth quarter.

While announcing the third quarter results, Chairman O P Bhatt had said the bank would have to lend Rs 55,000 crore in the last quarter to keep the growth at 20 per cent. However, it may not be able to sustain the same. The bank could give loans worth Rs 46,000 crore so that growth could be 18-19 per cent for 2010-11.

The bank is rolling over short-term credit to companies ready to take loans on new terms (read higher interest rate than loan which matured).

“Some companies, including a housing finance firm, were earlier reluctant to take credit at higher rates but came around after the stiff rise in market rates,” he said.

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Bank (A Government of India Undertaking) Clerical (Single Window Operator ‘A’) Recruitment Project 2011-12. Allahabad Bank invites ON-LINE Applications only from Indian Citizens for recruitment of 1100 Single Window Operator ‘A’ in clerical cadre. Candidates are required to apply on-line through Bank’s website http://www.allahabadbank.in/

Application Fee: Rs.50/- – SC/ST/Physically Challenged (PC)/Ex-Servicemen/ DisXS/ DXS, Rs.300/- – GEN/OBC candidates.

Apply Online on or before 15/03/2011

Detailed Advertisement: http://www.allahabadbank.in/OpenUploadedDocument.asp?id=20&type=RF

For Payment Challan: Click Here

Apply Online: http://registration.sifyitest.com/allahabadbankcl/index.php

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Karur Vysya Bank Invites Applications for appointment in Probationary Officer Scale-I for Post Graduate / B.E. / B.Tech. Graduates from a college affiliated to a recognized University. Send your resume on or before 02.03.2011.

Exam Fee: Demand Draft for Rs.400/- (Rs.200/- for SC/ST candidates) drawn in favour of THE KARUR VYSYA BANK LIMITED and payable at CHENNAI only. The Candidates should bring the demand draft while appearing for written test.

Last Date for Application: 02.03.2011

Detailed Information: http://careers.kvb.co.in/AdminUpload/Proboff_2011a.htm

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Syndicate Bank (A Government of India Undertaking), a Premier Nationalized Bank, invites applications from Indian citizens for recruitment of 750 Assistant Manager Rural Development (AMRD) in JMGS-I (2011-12).

Application Fee: Rs.50/- for SC/ST candidates, Rs.300/- for OBC/General Candidates.Requisite Application Fee has to be paid at any of the Branches of Syndicate Bank, by means of a Payment Challan as per the format given in the Bank’s website.

How To Apply: Candidates are required to apply online through website www.syndicatebank.in on or before 09/03/2011.

For detailed advertisement: Click Here

For Payment Challan: Click here

Online Application Form: http://registration.sifyitest.com/syndbankamrd

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