NEWS IN BRIEF - NOV 2014 to FEB 2015
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Reserve Bank employees have decided to observe a strike on January 7, 2015, in solidarity with the cause of the United Forum of Bank Unions in the commercial banking sector. The All-India Reserve Bank Employees Association and the All-India Reserve Bank Workers’ Federation have urged the RBI Governor to intervene with IBA in wage negotiations. RBI employee union feels that they have important stake in bank employees’ settlement as it provided them the basis for their wage negotiations.

Sumitomo Mitsui is acquiring the entire retail banking operations of Citibank Japan Ltd. It includes network of retail branches and ATMs, together with approximately 1,600 Citi Japan employees, about 740,000 customer accounts and approximately 2.5 trillion yen (US$21 billion) and foreign currency deposits as of November 30, 2014. The Japanese lender will pay Citi between 30 billion yen and 50 billion yen depending on the number of customers and deposits it inherits.

The amount of bad loans written off or restructured by the public sector banks (PSB) has more than doubled in the past three years ending March 2014 to Rs 42,447 crore. Earlier the loans written off by PSBs soared from Rs 20,752 crore in 2011-12 to Rs 32,992 crore in 2012-13. According to Reserve Bank of India (RBI) the total write-off of loans made by the commercial banks in the past five years is over Rs 1.61 lakh-crore, which is about 1.3 per cent of GDP (gross domestic product).

State Bank of India has reduced interest rates on fixed deposits. The 0.25 per cent rate cut will be effective from December 8. and it is applicable on retail deposits (below Rs 1 crore). Now , fixed deposits of maturity between 1 year and less than 3 years will fetch 8.5 per cent as compared to earlier rate of 8.75 per cent. Similarly, the rates on fixed deposits between 3 years and 5 years will fetch 8.5 per cent. The rates on more deposits of more than five years of maturity period will be 8.25 per cent, from 8.5 per cent earlier. Earlier ICICI Bank & HDFC Bank have reduced their interest rate on fixed deposits. Due to slow credit offtake banks have excess liquidity.

Encouraged by the prospect of higher growth, Bank of America (BofA) plans to expand its banking activities in India, and would expand its presence in capital markets, particularly in infrastructure and energy sector investment. Bank of America has branch offices in Mumbai, New Delhi, Kolkata, Chennai, and Bengaluru. Bank of America Chairman and CEO Brian Moynihan announced during a meeting with Prime Minister Narendra Modi.

The government plans to raise about 891.2 billion rupees ($14.4 billion) by reducing its stakes in PSU banks to 52%. The government holds stakes ranging from 56 % to 84% in 24 PSU banks. Indian government has funded the state lenders to the tune of about $13 billion over the past decade. The Public Sector Banks are estimated to need as much as $60 billion in capital over the next four years. Govt is now striving to reduce the capital injections to lower its budget deficit.

As on November 7, 2014 a total of 7.1 crore bank accounts have been opened under Pradhan Mantri Jan Dhan Yojan. The total balance in these accounts is Rs 5,482 crore. Majority of these accounts, over 4.2 crore, have been opened in rural areas, whereas in urban areas 2.9 crore have been opened. 74 per cent accounts ( 5.3 crore) are with zero balance.

Indian Banks’ Association (IBA) in assocaition with CYFI has launched an initiative whereby every bank branch in the country will adopt a school in its vicinity to open accounts and impart financial education. The plan to open accounts for children comes even as banks are in the midst of an aggressive financial inclusion drive under the Pradhan Mantri Jan Dhan Yojana (PMJDY) to open accounts for individuals from weaker and low-income segments. The banking system has been set a target of opening 7.50 crore basic savings bank deposit accounts by January 26, 2015, under PMJDY.

Normal banking operations across the country will be hit on November 12 2014 as employees of public sector banks will go on one-day nation-wide strike to press for wage revision.There are 27 public sector banks in the country with a combined employee strength of about 8 lakh. There are about 50,000 branches of these banks across the country. The wage revision of public sector bank employees has been due since November, 2012. Indian Banks Association (IBA) is stuck to its earlier stand of 11 per cent (wage hike) while United Forum of Bank Unions (UFBU) is demanding hike of 23 per cent.The UFBU is an umbrella organisation of nine bank employee and officer unions. The PSU bank staff had earlier gone on a nationwide strike for two days beginning February 10, 2014.

The European Central Bank will work as Europe`s banking watchdog under a new system aimed at shoring up the financial system to ward off another financial crisis. As banking supervisor, the ECB will directly oversee the eurozone`s 120 largest banks, making up for more than 80 percent of total banking assets in European Union. Around 3,500 "less significant" credit institutions will continue to be monitored by the national authorities but under the oversight of the ECB.

Banking stocks are gaining due to expectations the Reserve Bank of India would cut interest rates as early as its next policy reviews in December or February. SBI and ICICI have gained 4.8 percent and 3.3 percent respectively in the week ending 31st Oct 2014. Among state-run lenders, Punjab National Bank closed up 2 percent, while Bank of Baroda gained 2.2 percent and Canara Bank ended 1.7 percent higher.

IDFC Ltd will transfer its financing undertaking including related businesses of financing, project finance, fixed income and treasury comprising interalia all assets, liabilities, movable and immovable properties, employees, consents, approvals, benefits, licences, contracts, deeds and tax balances of the financing undertaking to IDFC Bank Ltd. IDFC Ltd had earlier this year got a licence from the Reserve Bank of India (RBI) to start a new bank will issue one equity share in the new bank for every share held in IDFC Ltd. IDFC Bank will be listed on both BSE and NSE.

Japanese Telecom giant SoftBank has pledged an investment of $10 billion (over Rs 60,000 crore) in India's IT and communications space, one of the biggest investment commitments from Japan. Softbank will look for opportunities in telecom and the fast-growing e-commerce sectors in India. SoftBank is also discussing investment in e-commerce firm Snapdeal. It has already made investments in Indian companies, including InMobi and Hike.

Banks do not agree with the government proposal that said credit appraisals for loans above Rs 500 crore should be done by the larger banks like State Bank of India (SBI), ICICI Bank, Bank of Baroda and IDBI Bank. The Indian Banks’ Association (IBA) has written to the finance ministry saying the proposal was not a workable one as restricting the credit appraisal process to few banks is not in best interest of the banking industry. Bankers are satisfied with the current process of each bank appraising the risk on its own rather than relying on the lead banker.

In a letter to Prime Minister Narendra Modi, the All India Bank Employees' Association (AIBEA) has urged the central government to fill up top posts in the banks without further delay. The post of Chairman and Managing Director of Banks like United Bank of India, Canara Bank, Syndicate Bank, Bank of Baroda, Indian Overseas Bank, Oriental Bank of Commerce, etc. as well as the post of Executive Director in Allahabad Bank, Andhra Bank, UCO Bank, Union Bank of India, etc. remain unfilled. This is causing anxiety in the banking circle, says AIBEA.

In middle class, Gold remains the top investing option followed by shares and mutual fund schemes like Systematic Investment Plans (SIP), according to ASSOCHAM October '14 survey.The main reason for government and corporate employees to foray into equities is the easy availability of advisory services by experts. Though some of the PSU banks have stopped promoting gold sale because of the government's advice to cut gold import and consumption, the sale of gold ornaments, coins and bars have picked up.

Dr. Raghuram Rajan, Governor, Reserve Bank of India has received Euromoney’s Central Bank Governor of the Year Award 2014. Euromoney recorded - “Reserve Bank of India Governor Raghuram Rajan’s tough monetary medicine combatted the storm ravaging the deficit-ridden economy in the recent emerging market crisis. Now, he is battling vested interests to arouse a sleepy financial system for over one billion people. As he confronted capital outflows, the rupee at record lows, and over-blown but palpable, fears India was marching towards an Asia-crisis style abyss, Rajan duly administered tough monetary medicine to ailing bond and currency markets.”

According to Dr Raghuram Rajan, Governor, Reserve Bank of India, Bank size can help in certain circumstances due to economies of scale. Big banks can fund large projects. They can deal with large clients. They will have the exposure limits to make large loans. They can spread their costs over a larger base. On the other hand, large banks are more difficult to manage as shown by the global financial crisis. Also, large banks tend to find it harder to deal with small and medium enterprises as clients. Local banks which are smaller in size are more willing to deal with MSMEs. So every economy needs a mix of very large banks and small banks. On bank mergers, some are likely to take place going forward. They key is to have an ability to benefit from the synergies of the mergers. (Source- Indian Express)



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