Top Banking News of the week

24 Sep 2010 , 06:14 PM

Top Story

Bankloans increase by Rs277bn; deposit rose by Rs336bn
The Bank loans and Bank deposits for the fortnight endedSeptember 10 have registered a high growth, after period of torpid growth forthe last two months.  

Accordingto the data released by RBI,loans to businesses and individuals have risen by Rs277bn during the fortnightended September 10 to Rs 3,331,809 crore. This is the highest fortnightlygrowth since July 2, during which banks lent a record Rs904.92bn to fundtelecom companies pay their 3G licence fees.

 

Bankdeposits have also registered a fast growth in the fortnight ended September 10after most banks revised interest rates on their term deposits. Total depositsrose by Rs 335.81bn, the highest since the beginning of the fiscal.

 

Thisfiscal year, bank deposit growth slowed while credit growth has moved at afaster pace. While deposits have risen 14.5%, credit has gone up by 19% on ayear-on-year basis.

Govt pegs October-Marchborrowing at Rs1.63 lakh Cr          
The Governmenttoday said that it will borrow Rs1.63 lakh crores in the October-March period.The borrowing will be done in an orderly manner and there will not be anyfrontloading of the bond auctions, according to reports.        

FY11 borrowing will continue till the second week of February 2011. AverageGovernment borrowing in the October-March period will be Rs100-110bn per week.     

The Government has so far borrowed Rs2.73 trillion of the budgetedRs4.57-trillion gross borrowing for the fiscal year 2010-11. It had planned tosell debt worth Rs2.87 trillion in the April-September 2010 period.   

FII limit in G-sec,Corporate Bonds hiked by US$5bn

Bond yields rise on debt auction, tighter liquidity

RBI wants low-cost banking for masses
Banks should reduce the cost of services by becoming moreefficient in order to extend services to people in un-banked areas, said SubirGokarn, deputy governor, Reserve Bank of Indiaat a seminar organised by Confederation of Indian Industry on opportunities andchallenges for financial services in Indiaand Europe. “Banks should bring down thecost of services so that people in un-banked areas can also avail theirservices,” said Gokarn.

 

He said financial inclusion should not be just about addingnumbers but providing banking services to the masses and the UniqueIdentification Number (UID) project can be leveraged for taking bankingservices to rural and semi urban areas. Gokarn said greater transparency andstability in the financial sector is needed to avoid any recurrence of thefinancial crisis. ReadMore….

In focus

Amomentary lull with reason
Midway into his rate-hiking cycle, Reserve Bank of India (RBI) Governor DuvvuriSubbarao has reason to pause. After raising interest rates for the fifthtime this year – bringing the repo rate at which banks park money with the RBIto 6% from 4.75% at the beginning of the year – Subbarao’s monetary stancecan be described as neither expansionary nor contractionary. Overnight moneytoday costs a third less than what it did just before the financial crisisstruck Indiaand therein lies the space for monetary policy as the economy, in the centralbank’s view, “rapidly converges to its trend growth rate”.

 

Howfast interest rates climb from here on will depend on whether the rate hikesthus far can rein in inflation expectations. If wholesale inflation does slowdown, as is expected, from 9.8% now to 6-6.5% by March next year, MrSubbarrao’s softened position will be fully warranted. One area of immediateconcern for the central banker is the negative real rates of interest availablein Indiaat this juncture. This has a direct bearing on the slowdown in depositgeneration by banks, which in turn affects their ability to lend. Theincremental credit-deposit ratio peaked at close to 180% and raises theprospect of growth being constrained by credit unless real interest rates forsavers turn positive. Read More…

Whenbeer is too dear
The European Central Bank(ECB) president has been fighting fires all over the continent as a debtcrisis loomed-Greece was just the beginning. And now a glass of beer may givehim a bad hangover.

Research from UniCredit this week details theeconomics of Oktoberfest, the beer party running over more than two weeks insouthern Germany.Six million guests, with a billion euros to spend, are going to find that thecost of two litres of beer, some grilled chicken and transport is 3.4% morethan last year.

How do you say “inflation” in German?Trichet, whose ECB targets inflation under 2%, has to be squirming. . He’s keptmonetary policy loose so far to treat Europe’sfinancial headaches. Read More…

Domestic News

Centreset to form financial stability panel

Overriding the reservations of the Reserve Bank of India (RBI),the finance ministry will set up a council this fiscal that will be tasked withmaintaining financial stability and developing financial markets, taking on arole the central bank believes is its preserve.

 

The Financial Stability and Development Council (FSDC) will beheaded by finance minister Pranab Mukherjee, who outlined the proposal in hisbudget speech, saying it would “help to strengthen and institutionalizethe mechanism for maintaining financial stability”. FSDC’s creation willbe the second key change in the framework that governs India’sfinancial sector. The views of some experts, including two former central bankgovernors, reflect a sense of unease in the way the financial sector’sinstitutional structure is evolving.

 

“This is an important institutional change in the regulatorystructure of the financial system with long-term implications,” former RBIgovernor Bimal Jalan, who also worked in the finance ministry, wrote in arecent column in the Business Standard.

 

According to a senior finance ministry official, who did notwant to be named, FSDC would create an institutional mechanism that wouldreflect reality. This reality is that the legislature, through itsrepresentative, the finance minister, is ultimately responsible for maintainingfinancial stability and propel financial market development, the official said.FSDC will not be a legislative body, and can be created through an executiveorder. Work on establishing it is under way and it will be formed before theend of the current fiscal, said the official, who didn’t want to be named. ReadMore…

 

IDBI Banks financial Inclusion drive

Canara Bank plans bond sale to raise Rs10bn: report

Nod for flat repayment of gold loans by RRBs

LIC Housing Finance plans Rs5bn bond sale: report

Oriental Bank raises Rs2bn via Tier II bonds

Kotak Mahindra Bank hikes Term Deposit rates by 25 bps

ICICI Investment announces first closure of EmergingIndia Fund

CRISIL enhance Corporation Bank’s CD Programme

Karur Vysya Bank adds 15 more ATMS

Indusind Bank at 52-week high

L-1 to sell intelligence-services unit to BAE

Kotak Mahindra Bank launches Click2Remit

CRISIL ‘AAA’ for State Bank of India’s Lower Tier IIBonds

Toyota Kirloskar signs MoUwith UCO Bank for auto loans     

Global News

Sri Lanka central bank leaves rates unchanged
Sri Lanka’s central bank kept both of its benchmark interest rates unchanged for thefirst time in three months, judging cuts in July and August are sufficient tosupport economic growth.  Credit disbursedby licensed commercial banks, licensed specialised banks and registered financecompanies, together, recorded a year-on-year increase of 9.9 per cent, in July2010.

 

Credit flows to the private sector are expected to increasefurther in the period ahead, given that Sri Lanka’s economy is poised togrow by an encouraging 7.5 to 8.0 per cent in 2010, following the GDP growth of7.8 per cent in the first half of 2010.

 

Taking into consideration the developments discussed above, theMonetary Board, at its meeting held on 21 September 2010, has decided tomaintain the policy interest rates of the Central Bank unchanged at theircurrent levels. Accordingly, the Repurchase rate and the Reverse Repurchaserate of the Central Bank would remain at 7.25 per cent and 9.00 per cent,respectively. ReadMore…

Ireland raises €1.5bn via bond auctions

Turkey helps Iran avoid bank sanctions

ADB Trade Finance to mobilize US$1.5-2bn

Michael Geoghegan to step down from HSBC

ANZ Group not completed due diligence for stake in KoreaExchange Bank: report