State Bank of India record 25% profit jump

Buoyed by a 45.4% surge in net interest income, State Bank of India, the country’s largest lender, beat expectations with a first quarter net profit of `2,914 crore — a growth of 25% over last year’s `2,330 crore. The better-than-expected results pushed the bank’s share price up 7% to a new high of `2,797.8. The Sensex which had dropped 155 points after disappointing IIP numbers was yanked out of the red by the SBI stock which rose `180.With the stock closing at `2,784, the bank’s marketcap gained over `11,000 crore to touch `1,76,750 crore, overtaking TCS to become the third-most valuable company in the country.“We expect a credit growth in the range of 21-22% for the current fiscal,” said bank chairman OP Bhatt.The quarterly results came on a day when the Rajya Sabha approved the State Bank of India (Amendment) Bill, paving the way for the government to lower its stake in the bank to 51% from 55%. Finance minister Pranab Mukherjee, however, indicated that the dilution of government stake would not be rushed through. “It is just an enabling provision and it does not mean that it is going to be implemented tomorrow,” he said replying to a debate on the Bill. The consolidated net profit of the group grew by 21.99% to `3,365.26 crore for the quarter, compared to `2,758.53 crore in the first quarter of 2009.SBI’s net interest income grew 45.4% to `7,304 crore at the end of the first quarter, bettering forecasts of `6,595 crore. The bank’s net interest margin was 3.18% as of end-June. “Net interest income is looking very good. Going forward, I think this growth should continue as, in a rising interest rate environment, SBI is best positioned in the sector,” Vaibhav Agrawal, an analyst at Angel Broking, told wire agencies.The state-owned bank reported a growth of 20.74% in its gross advances which went up by `1,14,035 crore. The bank’s market share in advances also increased to 16.55% ending June 30, as against 16.43% during the same period last year. The bank will now take a call on increasing the deposit and lending rates for existing borrowers. “We’ve announced the results, after which we’ll take a call,” said Mr Bhatt, adding, that there is an upward bias on both deposit and lending rates.Non-performing assets, or bad loans, of the bank, however, showed a steep rise with fresh slippages of `4,081 crore. Gross NPAs also increased 35% to `20,825 crore for the period ending June 30 as against `15,318 crore during the same period last fiscal. The bank attributed the growth in NPAs to classification of agriculture debt relief advances which stood at `354 crore. Net non-performing assets (NPAs) stood at 1.7% as against 1.55%, with the bank making provisions for NPAs at `1,733 crore in the quarter as against `1,344 crore in the previous corresponding quarter.“We will review deposit rates and benchmark prime lending rate and a hike would be a minimum of 25 basis points,” said Mr Bhatt. He said that deposit rates have almost bottomed out for the industry and there is definitely an upward bias as far as advances are concerned because of the way the RBI is managing the inflation and liquidity. The bank has a credit pipeline in excess of `50,000 crore.The bank is also looking to raise `20,000 crore from rights issue this fiscal. “Our preferred option is the rights issue. We’ll again initiate discussion with the government on whether they want to participate or not,” said Mr Bhatt, adding if rights issue does not happen, the bank will explore other options such as preferential issue and follow-on offer.

RBI hikes short term rates to tame inflation

The Reserve Bank today raised its short-term lending and borrowing rates by 0.25% and 0.50% respectively to bring inflation to 6% by March 2011 from double digits now, but the move would put pressure on banks' interest rates.
In its monetary review, the central bank, however, kept its cash reserve ratio (CRR), the cash which banks are required to keep with RBI, unchanged.The RBI raised upwards the inflation target from 5.5% to 6% and said that economy will grow by 8.5%, up from earlier projection of 8 per cent, this fiscal.The increase in short-term lending rate (repo) to 5.75% and short-term borrowing rate (reverse repo) to 4.5% will be effective immediately.Earlier this month, RBI had hiked repo and reverse repo rates by 0.25% as inflation remained above 10% for the fifth month in succession. Prior to this, RBI had raised thrice its key rates, since January."Inflationary pressures have exacerbated and become generalised with demand side pressures clearly visible…given the spread and persistence of inflation, demand-side inflationary pressures need to be contained," the RBI said.RBI's projection of a higher inflation than the earlier estimate could partly be attributed to the government's move of raising fuel prices.The central bank said there can be an up to 1% impact on WPI-inflation owing to fuel price hike.In June, the government raised petrol prices by Rs 3.5 a litre while decontrolling them and hiked diesel prices by Rs 2 a litre, LPG by Rs 35 a cylinder and kerosene by 3 a litre.The RBI said that the monetary policy stance would be aimed at containing inflation while it will be prepared to respond to any further build-up of inflationary pressures.Revising upwards the GDP target for this fiscal, the RBI said that indications are that the economy is steadily reverting to its pre-crisis growth trajectory.However, uncertainty over global recovery could have possible adverse consequences for India, the apex bank said.If the global recovery slows down, it will affect all emerging market economies, including India, through the usual exports, financing and confidence channels, the RBI said.A global slowdown also carries the significant risk of a potential slowdown in capital inflows, it said, adding that it may act as constraint to domestic investment.On liquidity pressures in the system due to payment for spectrum, the RBI said though current market conditions indicate that liquidity pressures will ease, the system is likely to remain in deficit mode "for now".In another significant move, the RBI said it will now undertake mid-quarter policy reviews, on the lines of major central banks abroad, "to take the surprise element out of the off-cycle actions."These reviews will be conducted at an interval of aboutone and a half months, after each quarterly review, the central bank said.

Indian rupee to have a distinct symbol

The Indian rupee will have its own symbol, a mix of the Devanagri 'Ra' and Roman 'R', to become the fifth currency in the world to have a distinct identity.
The new symbol, designed by IIT post-graduate D Uday Kumar was approved by the Union Cabinet today.The rupee will join the elite club of US dollar, British pound-sterling, Euro and Japanese yen to have its own symbol.The symbol will be printed or embossed on currency notes or coins, information and broadcasting minister Amnika Soni told reporters after the Cabinet meeting.Kumar's entry was chosen from among 3,000 designs competing for the currency symbol. He will get an award of Rs2.5 lakhs.She said the government will try that the symbol is adopted within six months in the country and globally within 18 to 24 months.The symbol will feature on computer key boards and softwares so that it can be printed and displayed electronicaally and print, she said.Soni said it would also help in distinguishing the Indian currency from rupee or rupiah of countries like Pakistan, Nepal, Sri Lanka and Indonesia.

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.