SBI sets base rate at 7.5% per annum

State Bank of India, the country’s largest lender, has set base rate at 7.5% per annum. The base rate would be effective from July 1.SBI'srate is key as all banks would factor that in while setting their own rates.As per the new norms, existing customers will have to migrate to the base rate when their loan contract comes up for renewal. The new rule does not apply to finance companies, including mortgage firms such as Housing Development Finance Corp. They may continue with the PLR mechanism while charging interest rates.SBI can well afford to do this since it has access to a big chunk of relatively low-cost deposits, thanks to its pan-India footprint.
In a bid to end the practice of retailers and small enterprises subsiding large companies, the Reserve Bank of India has mandated that all banks arrive at a base rate for lending, below which no loans can be extended. Once this rule comes into force on July 1, large corporates, which benefited from so-called sub-prime lending rate (PLR) lending, will have to pay at least the base rate.Most state-run banks may fix their base rate between 8% and 9% since their cost of funds does not vary significantly, unlike the private banks. For India’s top private lenders, the challenge will now be to fix the base rate close to SBI or even lower if they have to woo blue chip corporates that are used to shopping around for bargain rates.

Cyber Terrosism will affect major financial markets

Internet is increasingly seen as the Wild Wild West (www) and a virtual world of lawlessness in the US. Under Obama’s new Cyber Security
policy, India will be an active partner in combating cyber terrorism, says cyber security expert Clifford Gregory, also senior VP (security solutions), IonIdea, an Indian outsourcing firm. He spent over quarter century in the US Military developing cyber security programmes for the Senate and White House, apart from working for the FBI, Metropolitan Police, US Secret Service, and other Federal and security agencies.
Each malware attack costs a company $70K, while lost or stolen hardware costs amounts to $300K. Spear Phishing (specific target) costs $500K, damage by disgruntled employees cost a neat one million each, resulting in a $5 million tag when you destroy a brand. These cost figures are averages. If your company is dependent on data regarding customers, the loss could be multiplied.An assessment done in major bank having global operations of 1,600 large Indian companies including BPOs. Three major weaknesses were noticed. One is access control specifically knowing the person logged onto the system with access to customer data was the person who was authorised to do so and it was that companies should adopt either multi-factor authentication or direct observation via CCTV to provide this level of assurance. Two, was in the area of information transit. Some vendors made great efforts to protect data within their networks, but simply did not consider what might happen while the information was in transit. The third gap was in data leakage private or non-public personal information that is sent via email or other means, especially as part of a call center process or part of the software development testing process.India is one of US’s greatest allies, in combating cyber terrorism, and the opportunity could only get bigger. Any attack which may be directed against Wall Street, the effect would be felt in every major financial markets in the world.China has a single point of entry to the internet from outside their country as a defensive measure against cyberwar and this might be true one day for other nations too.

Bank can close account for want of PAN card details: Court

A bank is justified in closing the account of a customer who fails to provide permanent account number (PAN) card details, Delhi's top consumer court has said.Refusing to grant any relief to the customer whose account was closed by the HDFC Bank for want of PAN card details, Delhi State Consumer Disputes Redressal Commission's President B.A. Zaidi said: "The HDFC bank cannot be faulted for its attitude in closing the account in the circumstances." The commission was hearing an appeal filed by Ramesh Chand, who contended that he suffered due to incomplete financial transactions as the bank had closed the account without his consent.The commission, in a recent order, also held that the bank was not guilty of deficiency in service as it had offered to the complainant the facilities of its direct banking channels for utility payments, cash deposits, withdrawals and fund transfers as an alternative.Chand had approached the commission seeking directions to the bank to reopen the account.The commission also agreed with the observations of a district consumer forum which had noted that the bank intimated Chand about closing of the account in view of the high volume transactions which were not proportionate to the business conducted through the bank.Earlier, the bank had contended that as per the Reserve Bank of India guidelines on anti-money laundering it had conducted a review of all the accounts and observed that the volume of transactions in the account of the complainant with respect to cash withdrawal or deposits, and cheque deposits was very high and were not commensurate with the business conducted with it.

Mobile banking vulnerable to laundering: RBI

Reserve Bank Governor D Subbarao on Friday said mobile banking should be driven by banks, not telecom operators, considering money laundering and terror financing threats."The Reserve Bank has a clear preference for the bank-led model," RBI Governor D Subbarao said at a Banking Technology Excellence awards function hosted by the Institute for Development and Research in Banking Technology (IDRBT)."Given the growing concerns about money laundering and financing of terrorism, a bank-led model is decidedly safer and more sustainable," he said, adding, however, that a mobile operator-led model helps accelerate financial inclusion.Subbarao also said the central bank wants financial inclusion to be more than just a remittance facility, which is only possible through banks."We want our customers to get minimum services like deposit insurance, access to affordable credit and the payment system which only banks can offer," he said.However, the governor said that the RBI recognises that mobile telephony has an important role in the value chain and that it is keen that mobile service providers collaborate with banks to provide value-added services.Speaking on the use of technology in banking, he said protection of customer information and confidentiality is on his priority list as there are growing concerns about the increase in cyber crimes, phishing-related frauds, identity fraud and misuse of customer information."We proposed to set up a working group on information security, electronic banking, technology risk management and tackling of cyber frauds," Subbarao said.Further, the statistics about financial inclusion do not convey the true picture of the situation, he said.
"Even where bank accounts are claimed to have opened, verification has shown that a significant portion of these accounts are dormant. Very few conduct any banking transactions and even fewer receive any credit," he explained.RBI has asked all domestic commercial banks, public and private, to prepare their own financial inclusion plan.

Banks may hike deposit rates

With the liquidity in the system gradually drying up, banks may jack up deposit rates to mobilise funds.United Bank of India has already hiked its deposit rates by 25-50 basis points effective Wednesday, while the other Kolkata-based banks are planning to adopt a ‘wait and watch' approach for now.United Bank of India has increased interest rates on domestic retail term deposits, below Rs 1 crore by 25 basis points to 6.75 per cent per annum from 6.50 per cent a year in the time bucket of one year-to-less than two years.For the five years and above, the interest rates have been increased to 7.50 per cent from 7.25 per cent at present.
UCO Bank might not go for an immediate hike in interest rates, according to its Chairman and Managing Director, Mr S K Goel. “Deposit rates are primarily market-driven. We are watching the situation and will take a call on it at our ALCO (Asset Liability Committee) meeting likely to be held on June 30,” Mr Goel told Business Line.“We are currently comfortable on the liquidity position, but going forward we have to see how the credit picks up. Our ALCO will take a call on this soon,” said Mr J.P. Dua, CMD, Allahabad Bank.

RBI favours deregulating savings rate

The Reserve Bank of India is in favour of deregulating savings bank deposit rates of banks, Reserve Bank of India Deputy Governor, K.C. Chakrabarty said on Thursday.
"We have initiated a debate in the last policy..., the deduction is very clear, clear in favour of deregulating all interest rates, including savings bank. But the decision will be taken, when to do that, after having adequate debate on the issue," Chakrabarty said on the sidelines of a banking event.He does not expect the savings bank rate to move in a wide range after the deregulation. "This is a highly competitive market. Prices do not vary much. But what will be the rate, what customers will get, will depend on market conditions," he added. The savings bank rate is at 3.5 per cent and is the only administered rate in the banking system now. The banks offer this rate to the savings bank customers, which form a major part of their low-cost deposit base.The Reserve Bank of India has started to deregulate administered interest rate from 1991 as a part of financial reforms.

Banks see base rate hovering around 8-9%

Most public sector banks on Monday said they will keep the base rate at around 8%. Significantly, banks are moving towards a base rate system
for benchmarking interest rate, replacing the prime lending rate system. The new regime will start from July.SBI chairman OP Bhatt said his bank would keep the base rate between 7.5% and 8.5% while Punjab National Bank CMD KR Kamath said it would be hover around 8-8.5%.Even as banks change the benchmark rate, the effective rate of interest to existing borrowers will not change. It will be merely an adjustment of the rate structure. Indian Overseas Bank chief SA Bhat said the rate will be 8-9% in his bank. “The cost of deposits of most banks is around 5.75-to-6.75%. So, it is no wonder the base rate would be 8-9% for most banks,” Mr Bhat told ET.Canara Bank chief AC Mahajan said the rate will be around 8-8.5%. Union Bank of India chief MV Nair offered a more narrow band of 8-8.25%. Nevertheless, private banks are likely to keep the base rate lower than their public sector peers. Yes Bank MD & CEO Rana Kapoor said last week in Kolkata that private banks are likely to keep the base rate comparatively lower.In the base rate guidelines, RBI told banks to take into account factors like cost of deposits and average return on net worth for base rate calculation. Banks can change the methodology within six months.

Govt. Approval for implementation of 9th Bipartite Settlement

Govt. Approval for implementation of 9th Bipartite Settlement has been received and IBA is expected to issue detailed guidelines in this regard. As regards the various formalities in relation to the 2nd Option on Pension, as well as the Notification etc., further detailed instructions from the IBA are awaited.

Bankers to meet today for base rate consensus

MUMBAI: CEOs of large commercial banks will meet on Friday to arrive at some consensus on the base rate — the new system of charging interest rate on loans. Base rate is the rate, below which no bank can lend to its customers and is aimed at bringing transparency in the system.
RBI has asked banks to replace prime lending rate with base rate from July 1. At the same time, the banking regulator has given banks discretion to decide on parameters to arrive at the bank rate. While some banks may choose to peg base rate on one-year deposits, another bank may choose to peg on overnight call money rates. As a result, bank rate may vary widely from one bank to another.
So far, even as most banks have pegged their PLR in the range of 11-12.75%, bulk of the loan is disbursed at rates below the PLR — popularly known as sub-PLR. Nearly 70% of the loan is at sub-PLR rates. Now that no bank can lend below base rate, some government-owned banks are worried that private banks and foreign banks may peg their base rate very low to capture business. This is because several top-rated corporates, especially oil companies, have been borrowing for one month to three month at rates ranging from 6.5% to 7.5%.
According to a CEO of large bank, “PSU banks do not want to lose lending opportunities. They are worried that if they keep the base rate higher, they may lose business to private banks while if they keep the rate too low, they may have to take a hit on their margins. It’s a Catch-22 situation. But if major banks take a uniform decision on base rate, they could match competition to some extent.”
The meeting of bank chiefs has been initiated by State Bank of India as it will be held at SBI headquarters in Mumbai. In a media briefing, sometime in February, SBI chairman OP Bhatt had indicated that the base rate would be around 8%.
The draft report on base rate, headed by Deepak Mohanti, executive director of RBI, had suggested that banks could arrive at base rate, taking into account one-year deposit to calculate base rate. However, in the final report, RBI said each bank is free to choose any deposit to arrive at the base rate or they can have their own formula to arrive at it.

Seven Banks to get new Chiefs

The Government has cleared the decks for appointing new chiefs for seven public sector banks, including Canara Bank, Corporation Bank, UCO Bank, and Indian Overseas Bank.
With the top slots at most of these banks falling vacant over the next few months, the Government appears to have expedited the appointment process.
Mr S. Raman, Executive Director (ED), Union Bank of India, will assume charge as the Chairman and Managing Director (CMD) of Canara Bank. Mr M. Narendra, ED, Bank of India, will move to Indian Overseas Bank as CMD.
Mr Ramnath Pradeep, ED, Central Bank of India, will head Corporation Bank and Mr Arun Kaul, ED, Central Bank of India, will be at the helm of UCO Bank.
Mr R. Ramachandran, ED, Syndicate Bank, will assume charge as CMD of Andhra Bank. Mr H.S.U. Kamath, ED, Canara Bank, will move to Vijaya Bank as CMD.
Mr Nagesh Pydah, ED, Punjab National Bank, will move to Oriental Bank of Commerce.
According to Mr N. Shankar, Workmen Director, Union Bank of India, 54 per cent of the experienced workforce, right from clerical staff up to the general manager level will retire from public sector banks in the coming three years. The recruitment and promotion process needs to be expedited to fill the void created by the superannuation of experienced bankers, he said.

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