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Sunday, April 20, 2014

Reserve Bank of India deputy governor K C Chakrabarty questions payment banks' viability

Outgoing Reserve Bank of India deputy governor K C Chakrabarty has questioned the viability of payment banks and has said that they do not serve the purpose of financial inclusion. The statement comes at a time when RBI governor Raghuram Rajan has indicated that the central bank was in favour of issuing bank licences for limited purposes such as payments.

In an interview to a television channel, Chakrabarty said, "My only question about payment banks is what will be their viability? The question is how will they earn money?" The deputy governor also said that financial inclusion was not limited to merely opening bank account. "Financial inclusion is also providing emergency credit. But the maximum request from the poor is for emergency credit." He, however, added that this was an experiment that should be tried.

The concept of payment banks was mooted by a panel headed by veteran banker Nachiket Mor, who was asked to look into ways and means of extending financial inclusion across the country.

One of the recommendations of the Mor Panel was allowing payments bank which will open accounts for the underprivileged. These accounts will enable the customer to receive funds, deposit cheques and make payments. However, it will not engage in any form of lending and instead park all funds in government bonds.

Chakrabarty, who headed two large public sector banks before taking over as a deputy governor at RBI, has sought early retirement two months ahead of his tenure coming to an end and will step down on April 25. He was responsible for several customer friendly measures during his term at the central bank. These include the move to remove pre-payment charges on loans and also a requirement that all bank branches offer a basic savings account facility for those who do not have a bank account.

The unique feature of the basic savings account was that it did not require any minimum balance requirements and could be opened on the basis of self-declaration without immediately offering any proof of address or identity.

According to bankers, if customers are to be provided free ATM access, free cheque books and are provided with regular statement of account, the break-even could be achieved only with an average balance of Rs 30,000 per account. If they were to offer an account without any balance requirement but with all these services, the customer would have to be charged separately for the services.

According to Mor, licence to payment banks will bring in tech savvy service providers such as pre-paid card operators who can leverage technology to provide services for the unbanked at low cost.

Source: Economic Times
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Doha Bank to purchase HSBC Bank Oman business in India

Qatar-based Doha Bank has entered into an agreement with HSBC Bank Oman to purchase the latter's banking business in India.

HSBC Bank Oman is an indirect 51 per cent owned subsidiary of HSBC Holdings plc.

Chairman of Board of Directors of Doha Bank, Sheikh Fahad Bin Mohamed Bin Jabor Al Thani, said that all staff of this operation (the business) will be transferred to Doha bank as a part of the purchase.

"The business being acquired consists of its two branches and had gross assets of Rs 3.5 billion (about USD 58 million) as on 31.12.2013," he said.

Sheikh Fahad Thani also said that the transaction is subject to the approvals of Regulatory Authorities in Qatar, India, Oman and Jersey.

Doha Bank was incorporated in 1978 and commenced its banking business (including its International Banking services) in Doha, Qatar on March 15, 1979.

Source: Economic Times
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Friday, April 18, 2014

Trends in Vogue inks pact with Bhartiya Mahila Bank

Trends in Vogue, a CavinKare initiative that manages hair saloons under Green Trends, has entered into an agreement with Bhartiya Mahila Bank to promote women entrepreneurship.

Under the agreement, Green Trends plans to have 500 salons nationally set up by women entrepreneurs by the end of the current financial year, a top company official said today.

"We are happy to associate with Bhartiya Mahila Bank in providing collateral free loans to prospective franchises across the country, especially women. We believe it will not only ease the process of salons but also empower more women to emerge as successful entrepreneurs...," CavinKare Chairman & Managing Director CK Ranganathan said.

Green Trends has also introduced mobile and online check- in service for customers, he said.

"We have been noticing a significant upswing trend of women from various backgrounds entering this beauty salon segment and this MoU with Bhartiya Mahila Bank will further strengthen the support," Trends in Vogue's Business Head R Gopalakrishnan said.

Bhartiya Mahila Bank Chairman and Managing Director Usha Ananthasubramanian said after this tie-up with CavinKare, the bank is confident of developing women as "entrepreneurs" across the country.

She said the bank will provide loans of up to 75 per cent of the total project cost to women entrepreneurs across the country.

"The rate of interest will be between 11.5 per cent and 12.5 per cent," she said.

Source: Economic Times
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Sunday, April 13, 2014

Banks sell Rs 10,000 crore of bad loans to ARCs in March

Faced with unprecedented levels of stressed assets, banks led by the country's largest lender SBI sold over Rs 10,000 crore of bad loans to asset reconstruction companies (ARC) in March alone.

"This single-month figure is higher than any other yearly number from the past," an industry source told PTI, wishing not to be named.

Due to the high accretion of NPAs in the recent past -- the total NPAs stood at 4.2 per cent as of September 2013 -- the banks are being nudged to sell bad assets to the 14 ARCs.

Together with restructured assets the total stressed assets in the system touched 10.2 per cent as of the December quarter. Banks have recast nearly a Rs 1 trillion worth of loans in the past fiscal alone, taking the total CDR book to over Rs 4 trillion.

SBI, which had reported 5.73 per cent NPAs in the December quarter, led the chart by reportedly selling close to Rs 4,000 crore to ARCs. This was for the first time the bank has done so.

State Bank chairperson Arundhati Bhattacharya had last week said in Kolkata that her bank was selling Rs 3,500- 4,000 crore of its Rs 6,77,800 crore NPAs to ARCs in FY14. In March banks reportedly invited bids to sell Rs 42,800 crore of bad assets.

The ARCs have not been so strong in mopping up bad assets in the past few years and often complain about a lack of seriousness from banks when it comes to sale of assets.

According to ARCs, in the past banks merely used the mechanism of inviting bids for price discovery on the assets and walked out saying the money offered by ARCs is low.

Apart from SBI, other lenders have also gone public with their intention of selling bad assets.

The state-run Bank of India said it was mulling to offload Rs 900 crore to ARCs in the March quarter alone, after auctioning Rs 2,000 crore in the first three quarters.

The troubled United Bank of India, which reported a spike in the gross NPAs to over 10 per cent as of December, was planning to sell Rs 700 crore in bad assets.

Source: Economic Times
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Saturday, April 12, 2014

Ratnakar Bank gets Rs 328 crore infusion from global investors

Ratnakar Bank said it has received Rs 328 crore in capital infusion from leading global investors like CDC Group and Asia Capital & Advisors.

Existing investors, including International Finance Corporation (IFC) and Gaja Capital, also participated in this round of capital infusion, the private lender said in a statement here.

The exercise was part of the bank's third round of financing which started three years ago.

"These new funds will assist the bank in expanding its branch network in semi-urban and rural areas of as well as providing a suite of financial products and services to the unbanked sections of society," the statement said.

Founded in 1943, the bank has its main markets in Maharashtra, Karnataka and Goa. The lender's current business size stood at over Rs 21,000 crore and it offers services to more than 5,00,000 customers.

"IFC's repeat investment will assist Ratnakar in expanding its services to the under-served SMEs, helping increase access to finance," said Serge Devieux, IFC Director for South Asia.

Commenting on its investment, Srini Nagarajan of CDC said "we are strongly aligned with Ratnakar's strategy to expand and provide a range of financial services to customer segments that are under-served by the market. Our investment approach will complement their strong management team as they continue to implement the bank's growth strategy."

Francis Andrew Rozario of Asia Capital said, "We have been impressed by the track record of the management and staff of the bank and its achievements, which include successful transformation to their performance across all segments of the economy".

Source: Economic Times
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