Indian Banks

Public sector lender Vijaya Bank on Thurday reported a 58.5 per cent drop in its net profit at Rs 54.23 crore for the quarter ended March 31, compared to the year-ago period. The operating profit of the bank stood at Rs 109.9 crore, a drop of 65 per cent.

“The drop in net profit was mainly on account of provisions for wage revision. The bank made a one-time provision of Rs 180 crore towards second pension for retiring employees,” said H S Upendra Kamath, cmd.

The total income of the bank during the quarter rose 15.8 per cent to Rs 1,751.6 crore, compared with Rs 1,511.6 crore in the year-ago period. Interest income rose 22.08 per cent to Rs 1,609 crore, compared with Rs 1,318 crore in the year-ago period.

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The interest rate on savings bank deposits, the last bastion of the administered rate of interest, is set to be deregulated, with the Reserve Bank of India (RBI) kicking off a discussion for a market-driven rate. The rate has remained at 3.5 per cent since March 2003.

While a strong argument favouring such a move is better transmission of the monetary policy, concerns like those regarding unhealthy competition among banks and asset liability mismatches remain. RBI seems to suggest the advantages of the move outnumber the concerns.

In a discussion paper released on Thursday, RBI charted the pros and cons of such a step. The regulator is considering deregulating the savings bank rate in a phased manner, subject to a minimum floor for some time. It ignited a debate on whether higher interest rate be paid on savings deposits without a cheque-book facility. However, it was also argued that for transmission of monetary policy to be effective, it was necessary that all rates move in line with policy rates and that the process was impeded if the interest rate in any segment was regulated.

Regulation of savings bank deposits, which constitutes 22 per cent of all deposits, has not only reduced its relative attractiveness, but also adversely affected transmission of monetary policy, RBI said.

An important drawback of a market-determined savings bank rate is that competition would increase the cost for banks and affect profitability. “It has also been observed that 49 banks, which have below average CASA deposits, constitute about 50 per cent of total assets of the banking sector. Therefore, given the attractiveness of savings deposits, it could be argued that deregulation may lead to unhealthy competition amongst banks,” RBI said.

So far, banks have, opposed deregulation of savings bank deposits, saying such a move would fuel instability. Another drawback in moving to a market-driven savings bank rate is that it would result in an asset-liability mismatch. Though savings bank deposits represent short-term savings which can be withdrawn on demand, a large part is treated as ‘core’ deposits, which, together with term deposits, were used by banks to raise their exposure to long-term loans, including infrastructure loans.

It is also argued that such a move would adversely impact financial inclusion, as banks may be discouraged from maintaining savings deposits with small amounts, due to the high transaction costs involved.

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ICICI Bank, India’s largest private lender, on Thursday reported a consolidated net profit of Rs 1,568 crore for the quarter ended March, a rise of 17 per cent compared with the net profit of Rs 1,342 crore in the year-ago period.

The bank’s earnings were hit by additional motor pool losses in the bank’s non-life insurance arm. ICICI Lombard General Insurance saw third-party motor pool losses of Rs 272 crore during the quarter. According to an estimate by the Insurance Regulatory and Development Authority, total third-party motor pool losses across the industry industry stood at Rs 3,500 crore in 201-11.

The bank’s board declared a dividend of Rs 14 per share for financial year 2010-11.

“This year we would grow in line with the industry, which is expected to grow a little over 20 per cent. Our growth will also be similar,” said Managing Director and Chief Executive Officer, Chanda Kochhar. The bank would continue to focus on project financing, working capital, trade finance and auto and home loans to expand its loan book in the current financial year, she said.

Standalone net profit for the quarter surged 44 per cent to Rs 1,452 crore from Rs 1,006 crore a year ago. The rise in net profit was aided by reduced provisions and accelerated growth in interest income. Net interest income, or the difference between interest income and interest expenditure, stood at Rs 2,510 crore during the quarter, a rise of 23 per cent over the year-ago period.

“Most of our strategic parameters have shown considerable improvement. We are through with our consolidation phase and we have resumed growth,” Kochhar said.

The bank’s net interest margin during the quarter stood at at 2.7 per cent, compared with 2.6 per cent a year ago. “We would work towards improving our margins. However, this is also a scenario in which others are facing pressure on their margins,” Kochhar said.

The improved quality of assets allowed the bank to cut its provisions, even as the loan loss coverage ratio was increased to 76 per cent, higher than the Reserve Bank of India’s (RBI) mandate of 70 per cent. The bank recorded provisions worth Rs 384 crore in the quarter, a decline of 61 per cent compared to the corresponding period last year. Net non-performing asset ratio declined to 0.94 per cent. Net bad loans fell 37 per cent from a year earlier to Rs 2,459 crore.

“Our credit cards and personal loan portfolios are down to minimal levels. The losses in these portfolios have been taken care of. New businesses and credit quality are stable. All these contributed towards reduction in our provisions,” Kochhar said, adding the bank did not restructure any loans during the quarter and the total restructured portfolio decreased during the year.

Non-interest income declined 13 per cent to Rs 1,641 crore, despite a year-on-year growth of 18 per cent in fee income. Lower lease, other income and treasury losses worth Rs 196 crore contributed to the drop in non-interest income during the period.

The bank’s operating expenses rose 23 per cent to Rs 1,789 crore. At the end of the last financial year, ICICI Bank had a total of 2,529 branches and 6,104 automated teller machines.

For financial year 2010-11, ICICI Bank’s consolidated net profit rose 30 per cent to Rs 6,093 crore. “The consolidated profits for financial year 2010-11 and the fourth quarter include the impact of additional motor pool losses on ICICI Lombard General Insurance,” the bank said in a statement.

While ICICI Prudential Life Insurance’s profit after tax for 2010-11 stood at Rs 808 crore, compared with Rs 258 crore in the previous financial year, ICICI Lombard General Insurance reported a loss of Rs 80 crore. Advances rose 19 per cent to Rs 216,366 crore as on March 31 and deposits stood at Rs 225,602 crore, a rise of 12 per cent. The share of low-cost current account savings account (CASA) deposits to the bank’s overall deposits rose to 45.1 per cent as on March 31, compared with 41.7 per cent a year ago.

The bank’s credit deposit (CD) ratio was 96 per cent as on March-end. “This is because we have a large international book, which is funded by long-term funds and not deposits. The CD ratio from domestic business is only 75 per cent,” Kochhar said.

ICICI Bank’s capital adequacy ratio was 19.54 per cent under Basel II norms, as on March 31. Tier I capital adequacy stood at 13.17 per cent.

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Karur Vysya Bank invites application for the post of Assistant General Manager – Credit ( Corporate / Retail ) / Forex, Chief  Manager – Credit  (Corporate / Retail) / Forex , Assistant General Manager – ACCOUNTS , Chief  Manager – Accounts , Inspectors, Law Officers, Principal, Faculty Member, Industrial Relations Manager, Credit Officer, Treasury Officer, Foreign Exchange Officer, and Risk Management Officers.

Last Date for Receipt of application is 16th May 2011.

Detailed Information: http://careers.kvb.co.in/scripts/careerlogin.aspx

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Andhra Bank is a Government of India Undertaking – engagement of Ex-Bank Officers on Contract Basis. Applications are invited from ex-Officers of Banks for engaging as Supervisors for implementation of Andhra Bank’s Financial Inclusion Plan on Contract basis.

Last date for receipt of completed application by Post/hand at the respective places is : 10.05.2011.

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Country’s largest private sector lender ICICI Bank today reported a 16.85% rise in consolidated net profit to Rs 1,567.93 crore for the quarter ended March 31, 2011.

The bank’s net profit stood at Rs 1,341.8 crore in the corresponding period of the previous fiscal, ICICI Bank said in a filing to the Bombay Stock Exchange.

Besides, total income of the bank rose to Rs 18,178.99 crore in the fourth quarter of FY12 from Rs 16,212.02 crore in the corresponding period a year ago, the filing said.

For the entire fiscal, consolidated net profit of the bank increased by 30.46% to Rs 6,093.27 crore, against Rs 4,670.29 crore in 2009-10, it added.

The Board of Directors has recommended a dividend of Rs 14 per share for the year-ended March 31, 2011 against Rs 12 in the previous year, it said.

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The Reserve Bank of India on Thursday said in a discussion paper deregulation of savings bank deposit rate will improve transmission of monetary policy, but warned it could lead to unhealthy competition among banks and hurt their profitability.

The RBI has released a discussion paper on deregulation of savings bank deposit rate that is currently at 3.5% and sought feedback by May 20.

“For transmission of monetary policy to be effective, it is necessary that all rates move in tandem with the policy rates. This process, however, is impeded if the interest rate in any segment is regulated,” the RBI said in the paper.

Savings deposit rate has remained unchanged at 3.5% since March 1, 2003, even as the policy rates and call rates moved significantly in either direction, the central bank said.

Savings deposit is a source of low-cost funds for banks, but deregulation may lead to unhealthy competition, thereby pushing up the cost of funds of the banking sector.

“This, if passed on to the borrower, will raise the cost of borrowing and if not, will affect interest margin and profitability of the banking sector,” the central bank said.

Savings deposit interest rate cannot be regulated for all times to come when all other interest rates have already been deregulated as it creates distortions in the system, the RBI said in the paper.

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Plans joint venture with private ATM service providers.

IDBI Bank is planning to create a separate entity in partnership with private ATM service providers for running ‘White-label ATMs’ — not tied to any bank — in the country.

“We will soon approach RBI (Reserve Bank of India) with our plan,” R M Malla, chairman and managing director, told Business Standard.

Customers from any bank can deposit or withdraw money from ‘white-label ATMs’. Their banks then pay for the service. Also, such ATMs are invariably owned by a third-party, not a bank.

At present, under RBI guidelines, ATMs can only belong to a particular bank. Transactions of customers from other banks are settled by paying Rs 14 as the charge per transaction by the bank in which the customer has his account. RBI has been reluctant to allow white-label (or no name) ATMs by non-banking entities. Malla said RBI felt only banks should own ATMs so that the flow of funds can be accounted for, regulated and monitored.

“However, with a new entity created jointly and handled by a bank, the situation would be different and RBI’s concerns can be taken care of. If globally this has happened with proper precautions, why should it not work in India with strict due diligence?” asked Malla.

Many services in the banking domain were common, he noted. Obviously, it was difficult for banks to create a common platform for these services. “There could be some entity, however, whose proper due diligence has been done and which specialises in this area. We want to be a major player in this,” he said.

IDBI has started working towards this goal. It has 1,400 self-managed ATMs across the country. “In the next 12 months, we have planned to raise the number to 2,500, with a strong focus on low-cost ATMs,” said Malla. The bank has decided to tie up with ATM service providers for this. Of the 1,100 ATMs to be added during this period, 500-750 ATMs will be outsourced.

“This will save us the cost of setting-up and running ATMs, as we will have to pay the service provider a specified amount per transaction. It will be the service providers’ responsibility to create the infrastructure and run the ATMs,” said Malla.

Adding: “We are evaluating proposals of various ATM service providers. We will set up ATMs with them. Then, at some point of time, we will partner with them for starting the white-label ATMs venture if RBI permits.”

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