Wednesday, June 30, 2010

Four PSU banks set base rate at 8% and SBI set base rate at 7.5%

From tomorrow all the banks will move to base rate system as instructed by the Reserve Bank of India.

Punjab National Bank (PNB), Bank of Baroda (BoB), Union Bank, Central Bank of India and Bank of Rajasthan have announced their base rates. These banks have set their base rate for lending at a uniform 8%.

PNB while filing with the Bombay Stock Exchange said that the card rate under any lending scheme of the bank will be the sum of base rate and the increase.

PNB added it calculated the base rate by taking the average cost of deposits of the last quarter as the benchmark.

The State Bank of India (SBI) has also announced a base rate of 7.5%.

Chanda Kochhar, managing director and CEO of ICICI Bank pointed out that base rate will not affect cost of funds for companies or the growth of credit.

As per RBI instructions all new loans sanctioned after 1 July and those due for renewal from 1 July, (except exempt categories as per RBI Guidelines) will be priced on base rate instead of Benchmark Prime Lending Rates (BPLR).

Monday, June 28, 2010

SBI launched `SBI Tiny no frills account’ as part of its financial inclusion program

For all nationalized banks it has become mandatory to rope into RBI’s `Financial Inclusion Programme` as four hundred plus million population that is still unbanked.

The State Bank of India with over sixteen thousand four hundred plus branches has become leader by taking up this challenge by introducing `SBI Tiny no frills account` for the urban slum communities & Rural India. In this new account there is no need of `KYC` documents and the account can be opened with a zero balance. In this account one can deposit or withdraw from Rs.10/- to Rs.10,000/- the upper limit for this account is Rs.50,000/-. Bank has various loan schemes to cater different needs of rural farmers and urban slum based persons.

The SBI Tiny also provide facility for the local poor NGOs to become Customer Service Providers (CSPs) that work like a local branch at each slum dweller/villagers` doorstep in the community. For this NGO get some percentage benefits as well as it helps their socio-economic empowerment objectives. From this RBI will be benefited as it is making this database for the (Unique Identity Number) UID scheme of the Government of India.

Laxmibhai at one of the SBI Tiny Centers said, ``I rob some money from my husband at night and come and save it in our SBI Tiny account in the morning, this way I can manage our house`s essentials through the entire month and do not need to get loans at the end of each month``.

This scheme is being strongly promoted by Don Bosco Rehabilitation and Research, Matunga (R&D), for various poor NGOs, in rural areas, Out of our institutions ex-street boys and urban slum communities. The R&D provided its support for such savings to over one million marginalized in various communities of Maharashtra.

The R&D has been conducting various training workshops in rural Maharashtra viz. Yewla, Nagar, Amravati, Beed, Lonavla, Pune and now it has started networking with social action NGOs in Jharkhand and Uttaranchal. The aim of this unique scheme is to cover as many of the poor unbanked population in the country.

Monday, June 21, 2010

SBI tries to encourage existing customers for second home loans

Now days most of the young generation owns a house at the age of 25. This has become possible due to increase in disposable income. Today a well qualified working individual with a multi-national company gets salary in lakhs thus they are in much better position in comparison to their parents. Also, now days banks have made their loan terms and conditions easy which has made possible for these youngsters with high income to take loans for buying car, home, or even for pursuing higher education.

Therefore banks whether public sector or private banks are always in chase of new customers. State Bank of India, country’s largest lender apart from chasing new customers, is sighting on existing customers in order to offer those second home loans. Bank is doing this to grow its retail portfolio.

Besides corporate sector employees, after planning commission there has been substantial jump in the pay of employees working in the Government (Central and States), as a result banks are trying to woo existing customers with good track record with an offer of a second home loan. SBI is also encouraging its employees to take a second home loan.

SBI is trying to woo its existing borrowers for second home loans as for investment purpose.

According to bank figures, 96 percent of its home loan borrowers are first-time borrowers.

A senior official said, “We know that customers' income is rising. Hence, we look at their Equated Monthly Installment to Net Monthly Income ratio. If the higher income is sufficient to cover the second home loan, we would make the offer without any hesitation. We don't look at the value of the property, but the customers' capacity to repay his/her loan.”

For this fiscal SBI is aiming to achieve 32 per cent year-on-year growth in its home loan portfolio. It is planning to distribute Rs 22,000 crore (Rs 17,130 crore in FY2010).

As per bank data in the first two months of the current financial year, the home loan portfolio have grown by approximately Rs 2,800 crore, from Rs 71,193 crore as on March 31, 2010 to around Rs 74,000 crore.

Along with sourcing customers, sanctioning and disbursing loans, SBI is also focusing on follow-up with customers in cases where they fail in their mortgage payments.

The bank has tied-up with SBI Cards which has expertise in soft recovery. The follow-up involves contacting customers on telephone, reminding them about the delay in payment, and reverting to the bank with their response.

The bank is also working on increasing the capacity of its 116 retail loan processing centers so that they can process loan application faster.

Thursday, June 17, 2010

SBI to introduce wealth management program for its high net worth clients

State Bank of India (SBI), India’s largest lender, in the current fiscal will be venturing into the wealth management business. Through this program bank aims to tap high net worth clients, a top bank official said.

SBI's Chairman, O P Bhatt, told shareholders at its annual general meeting that, "We plan to introduce wealth management services in a phased manner in the current fiscal."

The bank is also searching for a global partner for its merchant acquiring business. It is planning to form a separate company to carry out operations.

He said, "It is proposed to conduct the merchant acquiring business under a separate company with an experienced and reputed global partner.

Bhatt informed that in the next 5 years bank will also install 6 lakh point-of-service (PoS) terminals across rural and urban areas.

He added, this initiative will aid in SBI’s debit card acceptance pan-India.

The SBI chief told soon bank will be signing an agreement for the operation of a joint investment fund in collaboration with sovereign entities of Oman.

Currently, the SBI group has 17,337 branches out of which 4,841 branches are of its six associate banks.

Wednesday, June 16, 2010

SBI implements SCE system to improve efficiency & provide high quality of customer service

The State bank of India (SBI, country’s largest lender is adopting private banking strategies to improve efficiency, high quality of customer service and also act as a forum for sharing practices. Working on this line bank has implemented the concept of Super Circle of Excellence (SCE) to focus on select branches to achieve high growth.

By end of March 2010, under SCE were 661 branches, out of which 331 branches are under 16 dedicated SCE regions and 330 selected on the basis of one-per-region, facilitated by SCE coordinator.

The branches under SCE have been selected on a twin track approach, - one subset comprising bunch of branches in metro and large urban centers to meet the growing competition and other subset consisting of branches selected on the basis of one per region in order to transfer best practices from high-performing branches to other outlets across the country.

These branches will mainly focus on growth in retail business, CASA deposits and income from cross selling.

The SCE branches overall functioning is judged on a multi-dimensional efficiency matrix, covering all aspects of business. These branches have set standards by achieving high growth in retail operations and by providing outstanding customer services. The aim of these branches is to achieve a zero complaint status.

These branches comprise 5.32% of the total network of the bank. These branches are making significant contribution in business of SBI. As on March 2010, these branches have achieved growth of 12.94% in retail deposits, 15.90% in retail advances, 16.99% in personal advances and 13.36% in the cross-selling income, and have been maintaining steady growth.

These branches are extensively adapting new technology initiatives such as , internet banking, mobile banking, RTGS, NEFT, demat and e-trade to improve efficiency in providing services and to decongest the branches and increase overall customer experience. The SCE subset has contributed nearly 18% in total technological product coverage of the bank.

As on March 2010, the SEC branches have seen increase in retail deposits of Rs 53,451 crore (experiencing a year-on-year growth of Rs 9,879 crore, or 22.67% as against 21.97% achieved by non-SCE branches). Likewise, these branches achieved a growth of Rs 22,834 crore,y-o-y growth of Rs 6,488 crore in personal advances. While in CASA deposits these branches achieved an estimated growth of Rs 32,652 crore (Rs 7,650 crore), the ratio improved to 40.15% in March, 2010, from 35.20% in the year-ago period.

Also, the cross-selling income at these branches grew at Rs 27.66 crore (Y-o-Y growth of 112.17% from 97%).

To provide high quality of customer service and improve efficiency SBI has undertaken potential mapping application through SCE department through data warehouse portal to correctly measure and tap on the right potential available in the area of operation of each SCE branch. Bank has devised a feedback system with 25 parameters to determine the level of customer satisfaction in SCE branches on a matrix of 100. The feedback form is directly dispatched to customers and the responses keyed in online in the centralized CSM application developed by SCE department.

As continuous track of deficient areas is being kept therefore the average CSM scores is now in the range of 85-87 as against 80-82 in March 2009.

Friday, June 11, 2010

State Bank of India to provide training to its employees to make them competitive

State Bank of India will be providing intensive training to its over two lakh employees to upgrade their skills so that they can efficiently perform their duties in the changing business environment and competition. The employees working at various levels in banking technology, e-learning and other areas will take up the training program.

The bank is making arrangements to make its employees attend a two-week training program once in 18-24 months. Ms Mahpara Ali, Head, Strategic Training Unit (STU) of SBI, told Business Line told, “Our major focus is on upgrading the skills of employees in view of the major expansion of workforce in recent years and competitive business environment.” She added, the main focus of STU is to provide training to at least 1.2 lakh employees a year.

The STU is a unified training establishment, was set up recently, and is linked with over 50 learning centers and four apex training units of SBI located in different parts of the country.

Ms Ali said, “The idea is to consolidate entire training process for undertaking skilling and re-skilling of our employees. We will do this through e-learning predominantly.” STU is reviewing skill requirements for the bank and examining the resources and capabilities.

However STU has designed over 150 e-learning course modules in key areas such as risk management, foreign exchange, treasury handling or credit proposals and also front office management.

STU has in-house developed the entire-technology platform for e-learning modules. At present SBI is not seeing it training unit as an independent source for earning revenue. The official said, “Our focus is only on staff. However, we have trained staff of other public sector banks and some foreign banks on their request on cost-to-cost basis.”

Earlier SBI has also provided training to personnel from the Vigilance Department, Central Bureau of Investigation and State-run insurance companies.

Ms Ali informed the bank has assigned a separate budget for training she did not revealed the exact figure.

She said, “All the infrastructure is owned by SBI. We have over 400 full-time faculties in addition to many visiting experts. Training huge staff itself means lot of expenditure.”

From past two years SBI has been a major recruiter among the banks. In the last two years it has hired over 60,000 officers and clerks and is fulfilling our staff requirement for the current year.

Wednesday, June 9, 2010

SBI’s Bhatt appointed as new Chairman of IBA

The Indian Banks Association elected its new office bearers for 2010-11 after its Annual General Meeting held on Tuesday.

O P Bhatt, State Bank of India’s Chairman has been elected as the new chairman of the Indian IBA for 2010-11. He will be taking charge from M V Nair, Chairman and Managing Director of Union Bank.

While HDFC Bank's Managing Director Aditya Puri, Bank of Baroda's Chairman and Managing Director M D Mallya and Canara Bank's Chairman and Managing Director A C Mahajan have been elected as Deputy Chairmen.

Rana Kapoor, Managing Director and Chief Executive officer of Yes Bank will be the Honorary Secretary of the Association.

Tuesday, June 8, 2010

SBI offers teaser rates on car loan

All the banks are preparing to move to base rate system from July 1 which is likely to increase interest rates. At this time State Bank of India (SBI) has extended its teaser rate offer to its car loans. Bank has announced to offer 8% on its car loans up to June 30.

Under the Ezee Car Loan Scheme bank is offering car loans at 8% per annum for the first year and 10% for the second and third years. The EMI (equated monthly installment) on a car loan will be as low as Rs 1,559 in the first year and Rs 1,647 in the second and third years for every Rs 1 lakh.

From the fourth year the interest rate will be reset at the card rate (rack rates which doesn’t include dealer discounts or other subventions) contracted on the date of sanction, depending on the tenure of the loan.

Currently banks are offering floating rates which is around 9.5-14% depending upon the tenure of the loan. While fixed rates are set in the range of 10.5-15%.

According to experts the Ezee loan scheme is best for the borrowers who can pay off the loan in 3-5 years. The loan is offered for 3 years in this scheme. If you loan with a longer repayment tenure then bank might slap a penalty of 2% of the repaid amount subject to certain conditions. Thus before selecting the scheme you should evaluate your repayment capacity and stick to the schedule.

Meanwhile all banks are still busy in calculating the new barometer for pricing their loans. This can affect the loan offer from the fourth year amid uncertainty as it will depend on what the banks would fix as the benchmark rate, below which they will not be able to lend, unlike under the current dispensation.

According to experts if you can pay off the loan in first 3-5 years then it would make sense to take loan now as the interest rate will be low during the initial years.

However the clear picture on base rates will be visible only in July, so if you take car loan now the contracts from the fourth year will be signed under the shadow of uncertainty.

Monday, June 7, 2010

SBI to keep base rate around 8 per cent

State Bank of India, country's largest lender will be announcing its base rate by June 15- the new benchmark at which banks lend to clients-- and the rate will be calculated based on SBI's cost of deposits.

SBI Chairman O P Bhatt said in Mumbai, "For State Bank alone, we are looking at the cost of deposits and not the cost of funds (for the calculation of base rate). The tenure (of deposits) we have not decided."

Although Bhatt did not tell what would be SBI base rate but it can be around 8 per cent. Bhatt said, "Right now, we have such a wide variety of options we need to make sure that our customers do not suffer nor should the bank."

The meeting of chiefs of leading state-owned lenders was held under the guidance of SBI to discuss various operational challenges while switching to the new benchmark system as directed by the Reserve Bank of India in order to enhance the transparency in lending.

As per RBI guidelines from July 1 all banks have to switch to base rate system from the existing benchmark prime lending (BPLR) but they have been given free hand till December 31 to choose the parameter using which the benchmark rate will be computed.

The chiefs who attended the meeting under SBI guidance to discuss the base rate implementation included Union Bank Chairman and Managing Director, M V Nair, Bank of Baroda CMD M D Mallya, Bank of India CMD Alok Misra, Central Bank of India Executive Director Ramnath Pradeep amongst others.