Bank of India looks to raise Rs 500 cr more from asset sale this year

Bank of India looks to raise Rs 500 cr more from asset sale this yearBANK OF INDIA

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To increase capital base, state-run Bank of India has raised Rs 540 crore through monetisation of its non-core assets so far in 2016-17 and is planning to raise a similar amount in the rest of the year.

“We are looking at divestment of our investments in associates and monetisation of non-core assets. The total quantum targeted is Rs 1,000 crore, of which we have already monetised more than half of it so far this year,” bank’s managing director and chief executive Melwyn Rego told reporters on the sidelines of annual banking summit Fibac here today.

In June, the bank had raised Rs 540 crore by selling 18 per cent stake in life insurance joint venture with Dai-ichi and Union Bank of India to the Japanese firm.

He said the bank is looking at a variety of instruments to raise capital this year.

“We’ve already raised Rs 1,500 crore by way of additional tier 1 capital and a similar amount by way of tier II capital,” he said, adding apart from the capital infusion by the government last month.

The government last month released Rs 22,915 crore of its budgeted Rs 25,000 crore of recapitalisation into 13 public sector banks. Of this, Bank of India got Rs 1,784 crore while the largest chunk was cornered by SBI at Rs 7,575 crore.

Talking about credit growth, Rego said the bank is targeting a credit growth of 6-8 per cent this year.

“Our focus has been very clear that it would be retail-led growth. This is both from the angle of reduction in risks and capital optimisation,” he said.

He said the bank has shown considerable growth in retail side. In 2015-16, retail growth was 13 per cent and home loan and loan against property grew around 19 per cent.

Rego said BoI has a strategy called ‘Star Mission 1’, which includes NPA management, CASA augmentation and rebalancing of asset portfolio. The bank has shown a deceleration in growth of NPAs.

During June quarter, BoI reported Rs 741 crore net loss as against a net profit of Rs 130 crore a year ago, which is much lower than the net loss of Rs 3,587 crore reported in the fourth quarter of last fiscal.

Its gross NPAs rose to 13.38 per cent from 6.8 while net NPAs jumped to 7.78 per cent from 4.11 per cent. Total restructured standard assets stood at Rs 11,496 crore while total stressed assets rose to 16.35 per cent.

In the June quarter, Casa level stood at near 35 per cent from 29 per cent in March 2016.

“On rebalancing of the portfolio, 56 per cent of our portfolio was corporate loans in March 2015 and it has been reduced to 52 per cent in June 2016, and correspondingly the retail portfolio has increased from 44 per cent to 48 per cent,” he added.

RBI should step up communication on financial stability issues

  • RBI should step up communication on financial stability issues: FSB

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RBI and other Indian authorities should look at enhancing public communication on macroprudential policies, global body FSB said today as it emphasised that such a strategy can be a “soft tool” to convey intended messages to market participants.

Releasing its peer review report of India, the Financial Stability Board (FSB) said the authorities should consider enhancing public communication on macroprudential policies.

There are reasons for keeping some information related to financial stability confidential since its publication may cause adverse market reaction, but in general “a public communication strategy can represent a soft tool for macroprudential purposes that conveys the intended messages to financial market participants”, it said.

The global body, which has entities from 24 countries and jurisdictions, stressed that additional work needs to be done by India to put in place a comprehensive macroprudential policy framework.

On ways to bolster public communication, FSB said there can be “more detailed press releases of the outcome of FSDC/FSDC-SC (Financial Stability Development Council – Sub Committee) meetings and greater use of the FSR to explain macroprudential policy decisions”.

Besides, authorities should consider issuing a comprehensive periodic report or summary on the FSDC’s activities.

Enhanced public communication on macroprudential policies can also introduce more accountability and educate the public on financial stability issues, it added.

Noting that the current channels of communication on financial stability have varying degrees of transparency, FSB said assessment of risks in the FSR (Financial Stability Report) is quite extensive.

“Senior RBI officials sometimes give speeches on financial stability issues. Changes in the RBI’s tools for macroprudential purposes are disclosed on the RBI website and in an annual publication, but focus mainly on the change itself rather than the policy context and its implications (if any) in the macroprudential stance,” the report said.

As per the report, there is only a limited integration in the FSR between the discussion on risks and policy actions that have been taken or are being considered.

“There is no comprehensive periodic report on activities or decisions of the FSDC while communication of the FSDC/FSDC-SC meetings on the MoF (Ministry of Finance)/RBI websites tends to be brief and often does not describe judgements considered or decisions made,” it added.

Telangana against merger of State Bank of Hyderabad with SBI

Etela Rajender

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The Telangana government is against the proposedmerger of State Bank of Hyderabad (SBH) with the parent State Bank of India (SBI), state’s finance minister Etela Rajender said on Wednesday.

“SBH should retain its identity. It is a Telangana bank. It has to remain that way,” the minister told PTI. “It was in existence even before 1956… it belonged to the (erstwhile) Hyderabad state… in Nizam’s era.”

Asked if there was a proposal to pass a resolution in the legislative Assembly opposing the move, similar to Kerala adopting a motion against State Bank of Travancore(SBT)’s merger with SBI, he said he hasn’t yet talked to the Chief Minister K Chandrasekhar Rao on the issue.

“We have to take some decision (in formally opposing SBH’s merger with SBI)”, Rajender said.

The Union Cabinet had recently given its nod for the merger of five associate SBI banks, including SBH and SBT, with the parent lender, along with the Bharatiya

Shape up or lose out RBI’s Gandhi to banks

  • RBI's Gandhi asks banks to shape up or face irrelevance

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Reserve Bank of India Deputy Governor R Gandhi on Wednesday chided banks for neglecting the small and medium enterprises (SME) segment and warned that if the lenders did not fulfil their social responsibilities, the very existence of banks would be in jeopardy.

It is not that the SME segment has not been profitable, but banks have shown a lacklustre attitude towards the “big area”. As a result, new generation financial technology (fintech) companies and non-banking financial companies (NBFC) have entered the space and have become “instant success,” Gandhi said.

Indian banks are not alone in their apathy towards the SME segment. Neglected throughout the world, the funding gap to the SME segment is about $2 trillion in emerging markets alone, Gandhi said quoting a study.

In India, fintech companies have “entered the area and have become an instant success.” If banks have to be socially relevant, they need to claim the space back.

“If only you become socially relevant and not just economically relevant, you have a chance of existence,” Gandhi warned banks at the valedictory session of the two-day long Fibac conference on banking.

“Banking is necessary, banks are not,” Gandhi said, starting his speech, quoting Microsoft founder Bill Gates’ 1994 remark.

Elaborating, the RBI deputy governor said with the emergence of new players in the lending game, including social media companies engaging in banking, the relevance of banks was fast fading.

The millennial generation seeks instant gratification, and has no loyalty towards brands, while the older generation wants improved return on their investments and more transparency.

NBFCs have already cornered the banks by offering services that could be better in comparison with those offered by the existing banks. The right to enjoy a special status as well as earning fatnet interest margin (NIM) is something that banks will have to justify in future. Surely, that is the situation already after the credit crisis, as demonstrated by protests in the western world, he said.

NIM is the difference between yields on advances and cost of deposits and is the most important factor in measuring a bank’s profitability. Indian banks enjoy NIM of three per cent or more, one of the highest in the world. This high NIM regime cannot continue for long, reasoned Gandhi.

“Banks of the future will not be the same as yesterday’s and today’s. A new paradigm of banking is needed,” Gandhi said. “Take advantage of the new technology to enmesh customer experience.”

 

BoI to tap retail investors for tier-I capital bonds

Bank of India to tap retail investors for tier I capital bonds

BANK OF INDIA

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Bank of India plans to tap retail investors for issuance of additional tier-I bonds (AT1) to strengthen capital adequacy ratio.

M Rego, managing director and chief executive, said his bank would look at this route (AT1) to raise capital. AT1 are Basel-III compliant instruments that come with restrictions on payments of interest and principal to absorb losses.

The bank had raised Rs 1,500 crore in capital by issuing AT1 bonds to institutional investors, Rego told reporters on the sidelines of annual banking summit Fibac here on Wednesday.

BoI chief said investors need to understand the complexities and risks of such products. There is a risk that the issuing bank might stop paying coupon (interest) or investors might lose the principal amount in a situation like absorption of losses and liquidation of entity.

The Securities and Exchange Board of India (Sebi) has rules for issuing AT1 bonds to the retail segment. The market regulator had prescribed minimum Rs 2 lakh investment so only informed investors would enter the niche segment.

Bank of India had raised Rs 540 crore through monetisation of its non-core assets in 2016-17 and was planning to raise a similar amount. In June, the bank had raised Rs 540 crore by selling 18 per cent stake in the life insurance joint venture with Dai-ichi and Union Bank of India to the Japanese firm.

The bank is looking at divestment of investments in associates and monetisation of non-core assets.

The total quantum targeted is about Rs 1,000 crore for 2016-17.

The government had last month released Rs 22,915 crore of its budgeted Rs 25,000 crore of recapitalisation into 13 public sector banks. Of this, Bank of India got Rs 1,784 crore.

RBL Bank IPO to open

  • RBL Bank IPO to open tomorrow

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RBL Bank will hit the capital markets tomorrow to raise over Rs 1,200 crore through an initial share-sale programme, the first IPO by a private sector lender in a decade.

 

The plan includes raising up to Rs 832.50 crore through the issue of fresh shares and up to Rs 380.46 crore in an offer for sale by existing shareholders.

 

The share sale, accounting for 10-11 per cent stake, will give the bank a valuation of over Rs 12,000 crore.

 

RBL Bank, formerly known as Ratnakar Bank, has fixed a price band of Rs 224-225 for the share sale. The IPO will be open for public subscription on August 19 and close on August 23.

 

The IPO was stuck for quite some time due to a pending case which the bank recently settled with the markets regulator Sebi, paving way for the the share sale.

 

It can be noted that Yes Bank was the last private sector lender to hit the capital markets in 2005. Taking into account state-run banks as well, Punjab and Sind Bank last went public in India six years ago in 2010.

 

With the RBI announcing on-tap licences for full-fledged banks, the number of banks hitting the markets is bound to increase as the regulations call for mandatory listing within a defined time-frame.

 

Existing investors, including Beacon India Private Equity and GPE, will sell shares through the IPO.

 

The Kolhapur-headquartered RBL Bank had made a pre-IPO placement of 2.5 crore equity shares at Rs 195 per share last year to CDC Group, DVI Fund, Rimco and Asian Development Bank.

 

Kotak Mahindra Capital, Axis Capital, Citigroup, Morgan Stanley are global merchant bankers for the deal, while HDFC Bank, ICICI Securities, IDFC Securities, IIFL and SBI Caps are the lead managers for the local market.

 

Bank employees to join All India General strike on September 2

A deserted bank during the public sector bank employees go on strike in New Delhi on Friday to protest against the proposed merger of associate banks with SBI and banking reforms announced by the government

A file picture of a deserted office of a public sector bank as employees went on strike in New Delhi to protest against the proposed merger of associate banks with SBI and banking reforms announced by the government
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A deserted bank during the public sector bank employees go on strike in New Delhi on Friday to protest against the proposed merger of associate banks with SBI and banking reforms announced by the government

A file picture of a deserted office of a public sector bank as employees went on strike in New Delhi to protest against the proposed merger of associate banks with SBI and banking reforms announced by the government

Around five lakh bank employees and officers in banks will join the All India General Strike on September 2, 2016 to protest against the Central Government’s anti-people economic policies and anti-worker labour reforms.


Employees and officers working in various public sector banks, private banks, foreign banks, regional rural banks and co-operative banks will join the strike.


C H Venkatachalam, general secretary, All India Bank Employees’ Association (AIBEA) at the National Trade Union Convention organised by the Central Trade Unions, a call for National General Strike on September 2, 2016 was given against various policies and proposals of the Government.


As far as banking sector is concerned, the government is continuing its attempt to push through their reforms agenda aimed at privatisation of banks, consolidation and merger of Banks, etc.


RBI has announced ‘on tap’ bank licensing policy to allow more and more private banks. Licenses have been given to big corporate houses to start ‘Small Banks’ and ‘Payment Banks’. More and more private capital and FDI are being encouraged.


Associate Banks and other Public sector banks are sought to be merged on the plea that they are small and hence not viable. But Corporates are being given license to start Small Banks, said Venkatachalam.


Banks are sought to closed in the name of mergers and consolidation. Efficient and well-performing Associate Banks are sought to be closed and merged with SBI.


Bad loans have increased alarmingly to the extent of Rs 13 lakh crore. Instead of taking tough measures to book the culprits and recover the money, more and more concessions are being given to the defaulters.


“In the name of ‘cleaning Balance Sheets’, all these huge bad loans are sought to be taken out of public glare to silently write them off. On an average about Rs. 50,000 crore of bad loans are being written off per year,” said Venkatachalam.


He alleged, Centre is amending laws giving unfettered rights to corporate to hire and fire workers and stripping the workers of their trade union rights.

Doha Bank set to open branch in Kerala

  • Doha Bank set to open branch in Kerala

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Qatar-based Doha Bank will open a state-of-the-art branch in Kochi next week, the only branch of a Gulf Cooperation Council (GCC)-based bank in India.

 

Kerela Chief Minister Pinarayi Vijayan will inaugurate the branch, which will be located in the LULU International shopping Mall at Edapally, a press statement said yesterday.

 

It will mainly cater to the needs of the large NRI population, both in Kerala and the Gulf.

 

The inauguration is set to take place on August 27 in the presence of senior government functionaries from Kerala, senior businessmen from Qatar, Board members of Doha Bank and prominent local corporates who have business interest in the GCC.

 

Doha bank, which commenced its operation in Mumbai in April, 2015, provides corporate banking, retail banking, treasury, trade finance and foreign exchange services.

 

The bank is focused on the GCC trade flows and is also poised to be the bank of choice for the GCC-based non-resident Indians, mainly from Kerala, and the business community who are based in the GCC countries and India, the release said.

 

Doha Bank has its operations in Dubai, Abu Dhabi, Kuwait and India besides its representative offices in Singapore, London, Turkey, Korea, Tokyo, Australia, Canada, South Africa, Bangladesh, China, Frankfurt, Sharjah and Hong Kong.

ICICI goes live with banking transaction product on mobiles

ICICI bank signboard is reflected in a puddle on a street in New Delhi

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Private lender ICICI Bank Thursday went live with a product that was showcased first at a start-up competition which allows customers to do banking transaction while using other application on mobile phones.

Customers can transfer money, pay bills and recharge from within any application or browser using smartphone keyboard which will reduce transaction time, the bank said in a statement today.

The bank claimed that it is the first lender in Asia to offer such a product under the label of ‘iMobile SmartKeys’, which has been developed by one of the winners at the ICICI Appathon, its mobile app development challenge organised earlier this year, it said.

The product has been introduced to customers within three months of the competition.

“We are delighted to introduce this product which is a testimony to our continuing co-creation initiatives with innovative technopreneurs,” Group Executive and Chief Technology and Digital Officer B Madhivanan said.

He further said the bank will continue to rely on this model of “co-creating with quality start-ups and technology companies” for introducing innovative services.

Users will have to long press the ‘globe’ to launch the ‘iMobile SmartKeys’ and do the transaction, it said.

India to soon allow banks to pledge corporate bonds to borrow from RBI

Indian rupee currency notes

India will soon allow banks to pledge corporate bonds ascollateral to borrow funds from the central bank’s overnight repo window, although with some limitations, the country’s capital market regulator said in a report on Thursday.

As of now, banks can only pledge government securitiesto borrow from the Reserve Bank of India, and allowing them to pledge corporate bond could spur more buying of the debt by lenders.

The report added it would impose some limits, including limiting the corporate bonds that can be pledged to top-rated securities.

It did not specify when the final approval would be given since it would require change in the RBI Act, while a clearing and settlement mechanism would also need to be developed.

Bankers have long called for this action as a way to develop the country’s young corporate debt markets, at a time when many companies are shut out from loans because lenders are focused on cleaning up their portfolios from soured assets.

“Internationally, many central banks accept corporate bonds as collateral for their liquidity operation. It is not uncommon for central banks to take a lead with a view to developing the financial market,” said the report issued by Securities and Exchange Board of India (SEBI).

Though issued by SEBI, the report reflects the joint views of the India’s Finance Ministry and a slew of regulators, including the Reserve Bank of India and the country’s pension and insurance regulators.

SEBI also proposed allowing insurance and provident fund companies to invest in hybrid capital debt instruments, including additional Tier I or perpetual bonds.

Banks are the main issuers of those securities and would benefit from an expanded buyer base.

The panel also proposed setting up a platform to guarantee and settle corporate bond trading, to make it similar to the one for government bonds.