It's a difficult time for banks both at home and abroad. But Sanjay Nayar, Chief Executive Officer, Citi India, shrugs off Citigroup's problems in the US saying they haven't really impacted the Indian operations. Nayar admits there have been a few problems with the consumer finance business but tells Business Standard that Citi's India operations are well-positioned to see double digit growth over the next few years.
The United Progressive Alliance government has made it clear to states that it will not permit them any relaxation in labour laws in special economic zones, petrochemical hubs and industrial parks such as easing norms for hiring and firing and employment of women and restricting union activity, among others. Over the last two weeks, at least three state governments have seen their proposals for relaxing labour laws in duty-free areas being rejected by the Centre.
The move comes even as Bank of India on Wednesday said its corporate clients will suffer mark-to-market losses of around Rs 125 crore. It has 34 clients with 74 derivative transactions. Last week, State Bank of India said its clients may incur MTM losses of up to Rs 700 crore at the end of March 2008.
Earlier norms on para-banking activities stated that investment by a bank in a subsidiary company, financial services company, financial institutions and stock and other exchanges could not exceed 10 per cent of its paid-up share capital and reserves. On a cumulative basis, the limit was fixed at 20 per cent of the bank's paid-up capital and reserves.
In order to offer a level playing field to co-operative banks, the Reserve Bank of India (RBI) may allow them to use new products for raising funds from the debt market. The co-operative banks could come out with subordinate debt structures like tier-II bonds, tier-III bonds and upper tier-II or perpetual bonds to raise finance.
With little clarity on the list of companies that have mark-to-market losses on derivatives transactions, banks are now asking their corporate banking departments to scan the books of borrowers and also seek details of their foreign exchange exposure. Within this pie, banks are segregating companies with turnover of Rs 30-40 crore (Rs 300-400 million) to Rs 100 crore (Rs 1 billion) and those which are above this threshold.
There may not be any legal obstacles to the State Bank of Saurashtra's merger with the State Bank of India but it is the United Progressive Alliance's political compulsions that are holding back the deal, which is expected to pave the way for merger of the other six SBI associates with the parent. In response to the law ministry's objections, the RBI has told the government that the Centre could go ahead with the merger without any immediate legal glitches.
A host of public sector banks had cut interest rates in the earlier part of this year following an advisory from Finance Minister P Chidambaram in January. Private and smaller state-owned banks, however, did not cut rates.
Banks may have to spend up to Rs 800 crore (Rs 8 billion) in training close to one million employees to comply with the Reserve Bank of India's proposed loan recovery norms. RBI has proposed that banks should tie up with the Indian Institute of Banking and Finance (IIBF) or organise programmes in their own training colleges to ensure that every agent passes the exam conducted by IIBF during a one-year period. 'Agents' would include agencies as well as bank employees.
Three years after IDBI became a bank, Yogesh Agarwal, bank's third chairman and managing director in as many years, is trying to put the pieces in place. After all, as he pointed out in an interview with Business Standard, the erstwhile development financial institution is grappling with a unique situation, where IDBI and the two commercial banks it acquired since 2005 offer loans at different interest rates.
Lenders ask RBI to ensure cheaper credit for infrastructure sector. Banks say while hardening of rates may be required to combat inflation, even a 50 basis point rise could render many projects unviable. In a meeting with RBI, bankers factored in the impact of higher interest rates on most sectors as a part of the inflation management drive but indicated that the government & the central bank should take steps to ensure cheaper credit for building roads, power plants & ports.
Citibank has put on sale yet another residential property on Altamount Road in south Mumbai. Earlier it had sold off prime residential property at Mumbai's National Centre for the Performing Arts for Rs 34 crore. Most of the banks are selling residential properties as they are offering a fixed cash compensation every month to their employees. Bank offices have now shifted to suburbs and employees prefer to live close to workplace. Such sales unlock value and releases capital.
The household sector's savings in physical assets increased by 16.12 per cent to Rs 5,17,837 crore (Rs 5.17 trillion) in 2006-07 compared to Rs 4,45,915 crore (Rs 4.45 trillion) in 2005-06. While savings in financial assets have gone up by 11.20 per cent to Rs 4,67,985 crore in 2006-07 compared with Rs 4,20,841 crore in 2005-06. This data shows that Indian households are increasingly opting for physical assets as instruments of savings rather than relying on financial tools.
International claims of Indian banks have risen by 41.15 per cent to Rs 1,49,167 crore (Rs 1491.67 billion) at the end of June 2007 on account of higher exposure to guarantees, derivatives and credit commitments. Exposure of Indian banks to derivatives rose 79 per cent to Rs 13,999 crore (Rs 139.99 billion) at the end of June 2007, as against Rs 7,818 crore (Rs 78.18 billion) in the corresponding period in June 2006, data released by Reserve Bank of India said.
Meera Sanyal, Country Executive, ABN Amro Bank, revealed the bank's merger plans with Royal Bank of Scotland. Dutch Central Bank has approved of the merger and a country-by-country approval is being sought. As part of the deal, RBS will acquire the banking business in India and Fortis will buy the asset management company. Neither have a presence in India. ABN Amro is negotiating with RBI too on this issue. The bank will continue to operate through 28 branches in 21 cities.
The sub-prime loss-hit Citigroup is on a cost-cutting exercise in its Indian operations. CitiFinancial, its consumer finance unit, which is also reeling under the burden of rising bad loans, is considering closing about 100 of its 450 branches in India.
The Reserve Bank of India (RBI) has issued a restricted banking licence to American Express Bank (Amex) to conduct credit card and travel-related businesses in India.
The Reserve Bank of India's (RBI) denial of permission to Swiss bank UBS to acquire Standard Chartered Asset Management Company has come as a blessing in disguise for Standard Chartered Bank.
Foreign banks operating in India want the Reserve Bank of India to prepare a vision document on policy changes they can expect after March 2009.
About 35,000 credit card customers of Citibank received free tickets worth Rs 23 crore (Rs 230 million) in early 2007 under the 'Fly for Sure' promotional campaign undertaken by the bank in 2005. The customers became lucky after the bank was cautioned by the Reserve Bank of India (RBI) about consequences if customer complaints were not redressed and commitments made under the promotional scheme not honoured, banking sources said.
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