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Samachar lehar feb2012

  1. 1. February 2013
  2. 2. Samacher Lehar- February 2013 IssueSl. No Topic/Sub-Topic Page No.1. Our Bank in News 02 Third Quarter Review of Monetary Policy 2012-13 Statement by Dr. D.2. 7 Subbarao, Governor, Reserve Bank of India3. KHAS BAAT 134. Agriculture & Other Priority 215. BASEL 236. Bonds & Money Market 257. Credit Growth 258. CARD 279. Deposits 2810. Liquidity 3011. Minsitry of Finance 3012. Forex Inflows 3313. Housing Worries 3314. Human Resources 3415. Inflation 3616. Infrastructure 3617. Insurance 3718. Mutual Funds & Capital Market 3719. NPA 4020. Other Banking News 4421. 4922. RBI Directives & Guidelines 5023. ` Movement 5324. Technology 5325. Random Payment System Issues of Systemic Relevance for the New Year 55 A Revolution in Monetary Policy Lessons in the Wake of the Global26. 63 Financial Crisis27. Consultative Paper on Review of Corporate Governance Norms in India 8728. FAQs on RBI as Banker to Government 12229. Promoting Retail Investor Participation in Government Bonds 12530. FAQs on Central Depository Services (India) Limited 134 The Magical World of Mathematics - The Charm, Challenges and Career31. 145 Prospects32. Financial Inclusion of Urban Poor in India 15433. RBI to issue norms for companies merging with overseas firms via IDRs 16334. RBI cautions banks charging high prices on products 16435. RBI to address long-pending grievance of MSME sector 164 Foreign investments should be allowed into Alternative Investment Funds36. 165 : approval seeked by Sebi Existing rules on insider trading to be synced with the guidelines of37. 166 Companies Bill : Sebi38. Post Bank of India to be established soon 16839. RBI likely to finalise norms for NBFCs this month 168 Listed Companies should Disclose data as per clause 36 of the Listing40. Agreement : Sebi 169
  3. 3. Canara Bank Samachar Lehar February 201341. SEBI proposes tougher norms for corporate governance 17042. Working group set up to resolve consumer complaints : RBI 17143. New rules expected for taking foreign tax credit from 2013-14 17144. RBI relaxes overseas borrowing limit for NBFC- IFCs 17245. Tax recovery norms get stricter from 01-01-2013 173 FinMin likely to discuss the controversial tax rules in parliament next46. 174 month47. Sebi is likely to propose stringent public shareholding norms 17548. RBI might consider bringing down G-Secs to be held under HTM 17649. Sebi notifies regulations for setting up a SRO to monitor MF distributors 17750. New set of guidelines for consent order mechanism : Sebi 17851. Investors should not fall for fraud regulatory calls : Sebi 17852. Banking Ombudsman Scheme to be reviewed, updated and revised : RBI 17953. Irda board approves the new product guidelines 18054. Irda releases exposure draft on Standardization in Health Insurance 18155. Sebi eyes 24/7 monitoring through IMSS 183 Comments on final norms for new banking licenses submitted to RBI :56. 184 FinMin57. Implementation of GAAR postponed to 01-04-2016 18558. Swap Facility for Expansion of Export Credit in Foreign Currency 18659. Banking facilities in small towns soon 18660. Budget might include the constitutional amendments on GST : FM 18761. Capital adequacy norms should be relaxed : FinMin to Rbi 18862. No registration fee for registrations of new distributors : Amfi 18863. Govt. to consider proposal for setting up holding company for PSU banks 18964. CCEA authorises NIF to buy public cos shares 19065. CBDT clarifies onsite software development not taxable 19266. Debt segment on bourses : Sebi 19367. Sebi relaxes IDF regulations, margin requirement under offer for sale 19468. Real estate, broking firms should be allowed to set up banks : FinMin to RBI 19569. PSUs may not be allowed to issue tax-free bonds in FY14 : FinMin 19670. Sebi notifies Investment Advisers Regulation, 2013 19771. Funds used for IPO should be scrutinized by monitoring agency : Sebi 19872. FinMin to approach cabinet for creation of debt management office 19973. Govt. likely to increase the annual agricultural lending target 20074. Banks should offer 30-year fixed rate home loan : RBI panel 20175. Insurance regulator releases framework for monitoring insurance frauds 20276. Budget 2013-2014 aims at providing Investor-friendly India : FM 20277. Aadhaar must for new EPFO accounts 20378. RBI committee lays down their recommendations for PACS 20479. EPFO is likely to roll back the mandate of furnishing Aadhaar number 20580. Investment ceiling for insurers should be 5% in group companies : IRDA 20681. RGESS to be launched on February 9, 2013 : FinMin 20682. MCX-SX will commence live trading in equities from February 11 20783. Govt may agree with Shome committee on retro tax 20884. RBI to issue inflation-indexed bonds to wean investors off gold 20985. Centre refuses the proposal of uniform GST rates 21086. Key Banking Indicators 211 1 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  4. 4. Canara Bank Samachar Lehar February 2013 OUR BANK IN NEWSOur New C&MD:Sri Rajiv Kishore Dubey, has taken over as Chairman & Managing Director of CanaraBank on 11th January 2013. A professional banker par excellence, Sri Dubey carries withhim vast knowledge and multi-dimensional banking experience, spanning over threedecades. His key areas of expertise include planning and budgeting, resource mobilization,credit, risk management, HR, IT and marketing. A post graduate in English, Sri Dubeyacademic credentials also include LLB, MBA in HR and a Certified Associate of the IndianInstitute of Bankers. Born on 10.09.1954, he joined Punjab National Bank in the year 1977as a Management Trainee and moved up to the ranks of a General Manager in 2008 andwas appointed as an Executive Director of Central Bank of India in 2010. Amongst themany awards, he Best Bankers Awardcontributions in SME Sector by the SME Chamber of India. Sri R K Dubey is certain to bringto bear his rich fund of experience to his new assignment as Chairman & ManagingDirector of our bank. Canara Bank Welcomes our new C&MD & wishes him the verybest in his tenure at our bank. (HM&L Section, HR Wing, HO)CAM Training to Vijaya Bank Staff:A weeklong prestigious Credit Training Programme to the Officers and Managers of Vijaya Bank was launched at StaffTraining College, Bangalore by Smt. Mythili Krishnamurthy, GM and Sri Lalit Vaid, GM &Principal. The programme was inaugurated by Sri H Upendra Kamath, C&MD, VijayaBank. He profusely appreciated and thanked Canara Bank for its generosity and co-operation in extending this Credit Training Programme to the staff of Vijaya Bank.Secretariat, STC, Bangalore)Cash Subsidy Transfer Scheme:To launch the services under the Cash Subsidy Transfer Scheme, Smt Archna S Bhargava,ED, met the Honble Finance Minister of Kerala, Sri. K M Mani on 02.01.2013 and apprisedhim of the progress made in Wayanad and Pathanamthitta Districts of Kerala under thescheme. She also conveyed the Sanction for Rs. 500 Cr Paddy Crop Loan to farmersregistered with SUPPLYCO at a concessional rate of interest at 4 % for loans up to Rs 3to Unemployed Youth under Kerala State Self Entrepreneurship Development Mission.reduced substantially to help the students and the MSME loan rate has also been lowered.In this regard, she attended a programme along with Kum. P K JayalakshmiMinister for welfare of ST, Youth Affairs, Museum and Zoos, Govt of Kerala at Kalpetta, 2 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  5. 5. Canara Bank Samachar Lehar February 2013Wayanad Dist. of Kerala to launch Direct Cash Transfer Scheme. Further, she distributedPass Books and ATM Cards to the beneficiary ST students under Post-Matric scholarship.Sri S S Bhat, GM, PC&FI Wing, HO also participated in the event. (CC&PR Section, CC&BPWing, HO)Canara Utsav:CED Cell for women, HO is organizing Canara Utsav, an exhibition-cum-sale of productsmanufactured by women entrepreneurs at Vidyaranya Prarthana Mandira, Sri AvaniSringeri Shankar Mutt, Mahalakshmipuram, Bangalore. Smt Jija Madhavan Harisingh,IPS, Director General of Police (Retd), Home guards & Fire Force, Government of Karnatakawill inaugurate the utsav. The function will be presided over by Sri K S Prabhakara Rao,GM, PC&FI Wing, HO. (CED Cell for Women, RD Section, HO)Cash Subsidy Transfer Scheme:In a function organized by our bank at Sira, Tumkur Dist, Sri K H MuniyappaMinister of State for MSME, Govt of India launched Direct Cash Transfer scheme underPost Matric Scholarship for SC Students of the district. Sri Sogadu ShivannaMinister of Planning, Statistics & Environment, Govt of Karnataka presided over thefunction. Sri G S Basavaraj, MP, Sri T B Jayachandra, MLA and other dignitaries werepresent. Smt Archna S Bhargava, ED, along with Sri S S Bhat, GM, PC&FI Wing, HO, SriRavindra Bhandary, GM, Bangalore Metro, and Sri G S Hoolikatti, DGM, Bangalore Ruralrepresented our Bank. (CC&PR Section, CC&BP Wing, HO)Sri A K Gupta, ED inaugurated the renovated premises of Call Centre operating fromNaveen Complex, on 04.01.2013. Smt Shantha Rangaswamy, GM, Retail BankingDivision, while explaining about the development, she said the renovated premises cannow accommodate 84 agents at a time. (Retail banking Wing, HO)Canara Utsav:CED Cell for Women, HO has organized a Canara Utsav, an exhibition-cum-sale ofproducts manufactured by women entrepreneurs. After having been inaugurated on04/01/2013, the Canara Utsav willl continue for 2 more days up to 06.01.2013 atVidyaranya Prarthana Mandira, Sri Avani Sringeri Shankar Mutt, Mahalakshmipuram,Bangalore. (CED Cell for Women, RD Section, HO)Canbank VC to deploy big part of Rs 500 cr corpus in 2013:Canbank Venture Capital Fund Ltd, the wholly-owned subsidiary of Canara Bank, is set todeploy a major portion of the present fund -- Emerging India Growth Fund (EIGF) during2013. While Canara Bank is the anchor investor in EIGF with Rs 100 crore, other maininvestors include the Oriental Bank of Commerce, IFCI, SIDBI among 18 public sector banksand institutions. Canbank Venture Capital is at present investing from its fifth fund, EIGF,with an existing corpus of Rs 455 crore and plans to raise the remaining from institutionalinvestors so as to take the total corpus of the fund to the targeted level of Rs 500 crore.Depending on the pace of the investments, which will pan out during 2013, the fundmanagers may also seek in extension of the fund life by a year. (BS dt. 05.01.2013 p5) 3 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  6. 6. Canara Bank Samachar Lehar February 2013At IIT Bombay, tech takes the cash out of shopping:A cashless world is no longer a theory at the Indian Institute of Technology-Bombay (IIT-B).Thanks to a novel initiative, shopping here is all about a tap on their mobile phones. The Canara Bank av S. Joshi, Head,Government Business, ItzCash. About 2,000 students are using this cashless card initiativesystem in an educational institution. We aim to extend it to 4,000 students in the next (BL dt 07.01.2013 p.1)Canara Utsav:Canara Utsav, an Exhibition - cum sale, organized by CED for Women, HO, at Bangalorefor 3 days from 04.01.2013 to 06.01.2013 was a grand success. Sale to the tune of Rs 5lakh was achived by the women entrepreneurs from around 52 stalls they had put up.GMs from HO Sri K S Prabhakar Rao, and Smt Lalitha Lakshmanan, visited the stalls. SmtK Suseela, AGM, PC & FI Wing, HO distributed the certificates to the participants. (CED forWomen, PC &FI Wing, HO)Vigilance Study Circle:Vigilance Study Circle, Bangalore, as a part of Vigilance Awareness Week 2012, organizeda Quiz competition for students of various Schools in Bangalore on 8th January 2013 atHead Office Auditorium. About 45 students from 15 Schools in and around Bangaloreparticipated. Sri A K Gupta, ED distributed the prizes and also spoke on the occasion. Ms.Bhanu Raman, GM & CVO, Canara Bank, Sri M N Krishnamurthy, CVO, BEL, Ms. KavithaKestur, CVO, BEML, and CVOs of Public Sector Undertakings and executives of our bankwere present. (Vigilance Wing, HO)Cash Subsidy Transfer Scheme:Our bank launched the Direct Cash Transfer in Mysore District on 09.01.2013 at TNarasipura, for students. Smt. Archna S. Bhargava, ED launched the program atGovernment Girls High School, T Narasipura and distributed Passbooks to beneficiarystudents and also distributed School bags & notebooks to poor students. She explainedthe initiatives taken by our bank under the Direct Cash Transfer programme. The programwas attended by Shri S.S. Bhat, GM, PC & FI Wing, HO. He explained about the schemeand benefits available to the beneficiaries with the implementation of Direct CashTransfer scheme. Various scholarship schemes are handled by Social Welfare Departmentof the State Government which has about 25000 beneficiaries in Mysore Dist. As per therequirement of Ministry of Finance, accounts of all the 25000 beneficiaries have alreadybeen opened with Bank branches. Shri. K Mahadeva, Head Master, Government Girls HighSchool, T Narasipura applauded Canara Banks efforts in implementing Centralway for others. He also requested other Banks to follow Canara Bank to reach the benefitto the last Mile Customers. All Banks in the District have been actively opening accountsto ensure that each household has a Bank account and also that each beneficiary of theschemes too have a Bank account. Mysore District has 6.88 lac households and Banks haveopened over 24.30 lac saving bank accounts. In the 16 schemes selected for 4 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  7. 7. Canara Bank Samachar Lehar February 2013implementation in the District, about 34039 beneficiaries are covered. About 29476accounts of beneficiaries have been opened . In Karnataka, our bank has more than 700branches and Pragathi Gramin Bank, our bank sponsored RRB has got 410 branches. InMysore District, Canara Bank has 29 branches with 79 service area villages and 12 wards.During the campaign period, more than 10000 accounts have been opened taking thetally of accounts to more than 43000. (CC&PR Section, CC&BP Wing, HO)Canara Bank revises deposit rates:Canara Bank has revised interest rates on deposits of less than Rs 15 lakh, with effect fromJanuary 18, 2013. The revised rates for deposits held for 180 to 269 days is 7.50 per centfor domestic and NROs, 9% for deposits held from 270 days to less than 1 year. For 1 to 10years, it is 9.05%. For NRE deposits, the revised rate is 9.05% for 1 to 10 years. Additional0.50% is applicable to senior citizens on domestic deposits. Further, Canara Tax SaverDeposit, a tax saving instrument under section 80 C, fetches interest of 9.05% with amaturity period of five years. (DH dt. 18.01.2013 p.17) (News item also appears in p.4 ofBusiness Standard)Skill training:Help Group members supported by the Vishalakshi Mahila Vividhyodesha Co-operativeSociety, Bengaluru. The three days long programme concluded on Saturday. SriVenkataswamy Naidu, Corporator, Chief Guest for the valedictory programme, applaudedthe efforts of the Bank. Sri Sunil S Kurtkoti, DGM, PC&FI Wing and Smt K Suseela, AGMwere present on the occasion. (CC&PR Sec, CC&BP Wing, HO)Republic Day celebrations:Republic Day was celebrated with traditional fervor and patriotic flavor on 26th at HO. SriR K Dubey, C&MD unfurled the national tricolor. While addressing the gathering heemphasized that the bank would live up to its founding principles of removing illiteracy,spreading education to all with special care for women and poor. On this occasion Sri R KDubey, honored eminent personalities like Padmshree Chittani Ramachandra Hegde, aYakshagana Doyen, Dr Narayan Sawanth, Homeopath healer, Sri M G Kivadasannavar,Founder of Samarthanam Trust for disabled and Padmashree Anitha Reddy, Foundertrustee of AVAS. Along with the above persons, Master Karan Prasad and Sri C Veerannawere honoured for bravery. Few other achievers in the field of arts, sports and culture andmeritorious students from lower strata of society were also felicitated. Bank donatedmedical kits to Rangadore Memorial Hospital and Shri Shanakara Eye Hospital and Rs25,000 to Master Ranganath, a blind boy aged 11 years for his medical treatment. Sri P VMaiya, Director also graced the occasion. (CC&PR Sec, CCBP Wing, HO)e-Lounge:Our C&MD Sri R K Dubey -do most of the basic transactions without any manual intervention on 26th January 2013at Koramangala Branch, Bangalore. (CC&PR Sec, CCBP Wing, HO)Canara Bank to open 2,000 ATMs:Canara Bank said it would open 2,000 ATMs by March 2014, taking the total number ofcash dispensing machines to over 5,000 by the end of next fiscal. (BS dt.29.01.2013 p.4) 5 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  8. 8. Canara Bank Samachar Lehar February 2013 -Sri A K Gupta, -Delhi on 28.01.2013. Also as a part of our CSR activity he donated wheel chairs/Tricycles topoor and physically challenged persons on this occasion. Sri T Sreekanthan, GM, CO Delhiand Sri S Jayakumar, AGM of the branch along with many staff were present for the event.(CCPR Sec, CCBP Wing, HO) 6 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  9. 9. Canara Bank Samachar Lehar February 2013 Third Quarter Review of Monetary Policy 2012-13 Statement by Dr. D. Subbarao, Governor, Reserve Bank of India"First of all, on behalf of the Reserve Bank, a warm welcome to you all to this Third QuarterReview of Monetary Policy for 2012-13.2. Earlier this morning, we put out the Policy Review document. Based on anassessment of the current macroeconomic situation, we have decided to reduce the policyrepo rate under the liquidity adjustment facility (LAF) by 25 basis points from 8.0 per centto 7.75 per cent.3. Consequent to this, the reverse repo rate under the LAF, determined with a spreadof 100 basis points below the repo rate, gets calibrated to 6.75 per cent. Similarly, themarginal standing facility (MSF) rate, determined with a spread of 100 basis points abovethe repo rate, and also the Bank Rate stand adjusted to 8.75 per cent.4. These changes have since come into effect immediately after the announcement.5. We have also decided to reduce the cash reserve ratio (CRR) of scheduled banks by25 basis points from 4.25 per cent to 4.0 per cent of their net demand and time liabilities(NDTL) effective the fortnight beginning February 9, 2013.6. This reduction in the CRR will inject primary liquidity of around 180 billion into thebanking system.Considerations Behind the Policy Move7. Todays decision to further ease the monetary policy stance was informed by threeconsiderations.8. First, both headline wholesale price inflation and its core component, non-foodmanufactured products inflation, have softened through the third quarter. This providedsome relief from the persistence that dominated the first half of the year. Severalindicators such as the weaker pricing power of corporates, excess capacity in somesectors, the possibility of international commodity prices stabilising as well as inflationmomentum measures suggest that inflationary pressures have peaked. However, furthermoderation in inflation going into the next fiscal year is likely to be muted as thecorrection of under-pricing of administered items is still incomplete and food inflationremains elevated. Accordingly, the setting of monetary policy has to remain sensitive tothese conflicting pressures and attendant risks.9. Second, growth has decelerated significantly below trend through the last fiscalyear and through this year so far, and overall economic activity remains subdued. On thedemand side, investment activity has been way below desired levels and consumptiondemand too has started to decelerate. External demand has also weakened due to languidglobal growth. On the supply side, constraints in the availability of key raw materials andintermediates are becoming binding. While the series of policy measures announced bythe Government has boosted market sentiment, the investment outlook is still lacklustre,especially in terms of demand for new projects.10. The third consideration that informed our decision is that liquidity conditions haveremained tight. Although the Reserve Bank lowered the cash reserve ratio, CRR,successively in September and October 2012, and carried out open market operations(OMO) injecting systemic liquidity of 470 billion during December and January to 7 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  10. 10. Canara Bank Samachar Lehar February 2013augment liquidity, the average net LAF borrowings at 910 billion in January have beenabove the Reserve Banks comfort level. This tightness could potentially hurt credit flow toproductive sectors of the economy. The structural deficit in the system provided a strongcase for injecting permanent primary liquidity into the system.Monetary Policy Stance11. The policy document also spells out the three broad contours of our monetarypolicy stance. These are :* first, to provide an appropriate interest rate environment to support growth asinflation risks moderate;* second, to contain inflation and anchor inflation expectations; and* third, to continue to manage liquidity to ensure adequate flow of credit to theproductive sectors of the economy.Guidance12. As has become standard practice by now, we have also given the followingguidance for the period forward :13. With headline inflation likely to have peaked and non-food manufacturedproducts inflation declining steadily over the last few months, there is an increasinglikelihood that going into 2013-14, inflation will remain range-bound around the currentlevels. This provides space, albeit limited, for monetary policy to give greater emphasis togrowth risks. This policy guidance will, however, be conditioned by the evolving growth-inflation dynamic and the management of risks from the twin deficits.Expected Outcomes14. We expect that todays policy actions, and the guidance that we have given, willresult in the following three outcomes :* first, investment will be encouraged, thereby supporting growth;* second, medium-term inflation expectations will remain anchored on the basis of acredible commitment to low and stable inflation;* and, finally, there will be an improvement in liquidity conditions to support credit flow.Global and Domestic Developments15. Our policy decisions have been based on a detailed assessment of the global anddomestic macroeconomic situation. Let me comment first on the global outlook.Global Economy16. Since the Reserve Banks last Quarterly Policy Review in October 2012, headwindsholding back the global economy have begun to abate gradually, although sluggishconditions prevail. In the US, activity gathered momentum in the third quarter of 2012 butthis is unlikely to have been sustained in the fourth quarter. While a political consensus toavert the fiscal cliff has calmed financial markets, how the debt ceiling is managed willbe crucial in shaping the market sentiment on the way forward. The euro area economy isthreatened by continuing contraction, notwithstanding the liquidity firewall of theEuropean Central Bank (ECB) and the EUs commitment to act collectively to backstop theunion. Overall, however, apprehensions that the sovereign debt crisis will disrupt theglobal financial system have ebbed.17. A pick-up in the pace of growth of China is likely. But growth in other emergingand developing economies has slowed owing to a combination of a slump in externaldemand and domestic structural bottlenecks. Furthermore, inflationary pressures persistin some of them. Overall, global economic prospects have improved modestly since theReserve Banks last review in October 2012 even as significant risks remain. 8 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  11. 11. Canara Bank Samachar Lehar February 2013Indian Economy18. Moving on to the domestic economy, GDP growth slowed significantly this year,dropping to 5.5 per cent in the first quarter, and dropping even further to 5.3 per cent inthe second quarter. The decline in the GDP growth rate became more broad based, withconsumption demand also slowing alongside stalling investment and declining exports.19. In July 2012, the Reserve Bank projected GDP growth for the current year, 2012-13,of 6.5 per cent. In the October Review, we revised this downwards to 5.8 per cent,signalling increasing global risks as well as accentuated domestic risks. As part of thisreview, we revisited this growth projection taking into account developments over the lastthree months. During this period, industrial activity has remained subdued. Sluggishexternal demand continues to inhibit improvement in services. While the coverage of rabisowing has picked up, severe winter in certain parts of the country could affect cropprospects. New investment demand, which should be the key driver of an upturn,continues to be weak. While the series of recent policy initiatives by the Government hasboosted market sentiment, it will take some time to reverse the investment slowdownand reinvigorate growth.20. Accordingly, we have revised downwards our baseline projection of GDP growthfor the current year from 5.8 per cent to 5.5 per cent.Inflation21. Let me now turn to inflation. Headline WPI inflation eased significantly from 8.1per cent in September 2012 to 7.2 per cent by December. Notably, inflation on account ofnon-food manufactured products, which have a weight of 55 per cent in the WPI, fellsharply in November-December as input price pressures eased. The momentum indicatorstoo suggest a moderation in headline as well as non-food manufactured productsinflation. The Reserve Banks industrial outlook survey also points to a softening of therate of increase of output prices, suggesting that the pricing power of corporates hasweakened. Fuel group inflation moderated in December, mainly reflecting the temperingof inflation of non-administered petroleum products as well as the range-boundexchange rate of the rupee.22. Food inflation, on the other hand, showed a contrarian behaviour, moving intodouble digits in December, reflecting both cyclical and structural factors.23. In contrast to WPI inflation, CPI inflation as measured by the new consumer priceindex, rose to 10.6 per cent in December, largely reflecting the surge in food inflation.Excluding food and fuel groups, CPI inflation remained unchanged at 8.4 per cent duringthe third quarter.24. In the October Review, the Reserve Bank made a baseline projection of inflation forMarch 2013 of 7.5 per cent. An environment of slower growth and excess capacity in somesectors suggests that inflation has come off its peak. However, it is expected to be range-bound around the current levels due to persisting food inflation, the pass-through ofdiesel price adjustments over the next several months and the possibility of adjustment inother administered prices. If international commodity prices, including the price of crude,further decline, they should cushion the phased increase in diesel prices, to the extentthey are not offset by exchange rate movements. A sustained reduction in inflationpressure is, however, contingent upon alleviation of supply constraints and progress onfiscal consolidation. This will also help mitigate the cost-push pressures stemming fromthe surge in wages. 9 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  12. 12. Canara Bank Samachar Lehar February 201325. Keeping in view the expected moderation in non-food manufactured productsinflation, domestic supply-demand balances and global trends in commodity prices, werevised downwards the baseline WPI inflation projection for March 2013 from 7.5 per centto 6.8 per cent.Monetary and Liquidity Conditions26. Let me now turn to monetary and liquidity conditions. Money supply remainedbelow the indicative trajectory of the Reserve Bank. This essentially reflected thedeceleration of growth in aggregate deposits and moderation in economic activity. On theother hand, the overall non-food credit growth was around the indicative trajectory.However, bank credit to industry showed a significant deceleration while credit toagriculture registered an increase.27. Keeping in view the seasonal pattern for the last quarter, M3 growth projection forthe current year has been scaled down to 13.0 per cent while non-food credit growthprojection is retained at 16.0 per cent.28. Liquidity conditions tightened from the second week of November on account of abuild-up in the Centres cash balances, festival-related lumpy increase in currencydemand, and structural pressures brought on by the widening wedge between depositgrowth and credit growth. Anticipating liquidity pressures, the Reserve Bank lowered theCRR and conducted open market operations. Despite these measures, the liquidity deficitin the system remained above the Reserve Banks comfort level.Risk Factors29. Macroeconomic management going forward is subject to a number of risks. Letme briefly address them.* First, the widening of the current account deficit (CAD) to historically high levels,especially in the context of a large fiscal deficit and slowing growth, exposes the economyto the twin deficit risk. Financing the CAD with increasingly risky and volatile flowsincreases the economys vulnerability to sudden shifts in risk appetite and liquiditypreference, potentially threatening macroeconomic and exchange rate stability. Largefiscal deficits will accentuate the CAD risk, further crowd out private investment and stuntgrowth impulses.* Second, despite the recent calm, global risks remain elevated, with the potential forspillover into the Indian economy through trade, finance and confidence channels. In theUS, the risk of political inaction to manage the debt ceiling or even a sudden onset of fiscalausterity can lead to a turmoil in financial markets, followed by a downturn in economicactivity. Escalation of the euro area sovereign debt stress in view of the continuingabsence of credible and comprehensive policy responses remains a contingent global risk.Risks also stem from geopolitical tensions that can adversely impact supplies and prices ofkey commodities, particularly of crude oil. Furthermore, these forces can potentiallyincrease global risk aversion with implications for financing of our CAD.* Third, inflation over the last three years has been a result of demand pressures as wellas supply constraints. With demand pressures now on the ebb, the supply constraintsneed to be urgently addressed. In the absence of an effective supply response, inflationarypressures may return and persist with adverse implications for macroeconomic stability.* Fourth, the key to stimulating growth is a vigorous and sustained revival in investment.Achieving this will, however, depend on a number of factors such as bridging theinfrastructure gaps, and resolute pursuit of structural and governance reforms. 10 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  13. 13. Canara Bank Samachar Lehar February 2013* Finally, risk aversion in the banking system stemming from concerns relating togrowing non-performing assets (NPAs) is constraining credit flow. Notwithstanding theimportance of repairing asset quality, banks should be discerning in their loan decisionsand ensure adequate credit flow to productive sectors of the economy.30. Let me conclude by summarising our macroeconomic concerns. Inflation has comeoff from its peak, but its further downward movement is going to be slow and gradual. Onthe other hand, economic activity has slowed, trailing well below its potential andopening up a negative output gap. What the economy needs most of all and mosturgently is new investment. This will step up currently flagging aggregate demand andalso ease the supply constraints so that existing capacity is fully utilised and new capacityis built up. A strong and effective supply response is particularly important for bridgingthe infrastructure gaps and correcting structural imbalances in other segments of theeconomy, including key food articles. Critical to this effort are a credible andcomprehensive fiscal adjustment by the Government, implementation of structuralreforms, hastening the approval process, and improving governance to inspire the trustand confidence of potential investors. The Reserve Bank, on its part, will have to calibratemonetary policy to the evolving growth-inflation dynamic and the management of thetwin deficits risks. 11 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  14. 14. Canara Bank Samachar Lehar February 2013 ***** 12Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  15. 15. Canara Bank Samachar Lehar February 2013 KHAS BAAT…..Lenders ask Kingfisher to bring at least Rs.800 cr:A core group of lenders asked grounded Kingfisher Airlines Ltd to infuse at least Rs.800crore into the carrier before the banks considered any further loan recast and theextension of a no-objection certificate (NOC) that would enable the airline to resumewill meet again by the end of this month to take a final call. Until and unless we give a no-objection certificate, DGCA (Directorate General of Civil Aviation, the regulator) will not (Mint dt. 19.01.2013 p.12)Norms for issue of commercial paper eased:In a bid to make Commercial Papers (CPs) attractive, the RBI has allowed issuers tobuyback these instruments before maturity. The central bank, in its directions on CP, hasalso diluted by a notch the minimum credit rating requirement for CPs so that morecompanies can tap this route to meet their short-term funding requirements for theiroperations. A CP is an unsecured money market instrument issued in the form of apromissory note. (BL dt. 03.01.2013 p.11)RBI panel suggests gold-backed products:To curb gold imports and bring down trade deficit, a RBI panel has suggested a host ofdemand reduction, supply management and gold monetisation measures. The panelwants higher import duty on gold imports. However, it also cautioned that beyond a level,raising the import duty may lead to buyers turning to unauthorised sources.Documentation of gold sales and purchases has been emphasised. The panel hassuggested that carrying of gold and jewellery by Indians coming from abroad could bemade a less attractive option. (BL dt. 03.01.2013 p.1)Stiglitz not in favour of biz houses owning banks:Nobel laureate economist Joseph Stiglitz has expressed discomfort at the idea of allowingcorporate houses to own banks, saying this amounted to conflistatement comes at a time when the corporate sector is gearing up to foray into thebanking sector, with the RBI set to release the final guidelines in this regard. Earlier, thegovernment had said the central bank would consider giving banking licences to non-banking financial companies and industry houses. (BS dt. 04.01.2013 p.5)Draft norms on lending against gold seen easing investors fears:The draft norms on lending against the yellow metal appear to have placated investoconcerns, as shares of gold loan companies surged by 10-20 per cent in Thursdays trade. Aworking group of the RBI, under the chairmanship of Mr KUB Rao, admitted there is a needto increase monetisation of idle gold stocks in the economy for productive purposes. Itsuggested a higher loan-to-value ratio for gold loan companies (75% versus 60%) that willallow NBFC to lend more money against gold securities. (BS dt. 04.01.2013 p.4)Regulations to restrict size of banks needed, says Stiglitz: 13 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  16. 16. Canara Bank Samachar Lehar February 2013Strong regulations are needed to restrict the size and interconnectedness of banks, MrJoseph Stiglitz, the 2001 Nobel Prize winner in economics said. It was believed that banksthat are too big or too interconnected cannot fail. However, the financial crisis of 2007-08has taught us different lessons, Stiglitz said in the 15th C.D Deshmukh Memorial lectureorganized by RBI to honour the memory of the first Indian governor of the central bank. o fail or too correlatedto fail have an incentive to gamble. If they win, they walk off with the profits, if they lose, (BL dt 05.01.2013 p.11)Govt has no loan dues from RBI:The Government had no loan dues from the central bank as of December 28, the RBI saidin its weekly statistical supplement on Friday. State Governments had borrowed Rs710Crore from the central bank in the week ended December 28. (BS dt 05.01.2013 p.3)Banking ombudsman: Customer complaints up marginally in FY12:Customer complaints in Banking Ombudsman offices of the Reserve Bank of Indiaincreased marginally to 72,889 in 2011-12. The numbers of complaints in the previousyear were 71,274. According to RBI, Kanpur and Delhi continued to receive the highestnumber of complaints followed by Chennai and Bhopal in 2011-12. While the number ofcomplaints rose marginally, the rate of disposal of complaints was same at 94 per centlike in the previous year. About 25 per cent of total complaints received pertained to thebanks failure to meet commitments and non-observance of fair practices code, while 21per cent were card-related (credit/debit/ ATM) complaints. (BS dt. 05.01.2013 p3)RBI sets up panel to review grievance redress mechanism:The RBI has set-up a working group to review and make improvements in the grievanceReserve Bank of India to review, update, and revise the Banking Ombudsman Scheme, -12, the bankingcustomer complaints in the same year, RBI said in its annual report of the BankingOmbudsman Scheme 2011-12. (BL dt. 06.01.2013 p.3)Give preference to non-corporate sector for new banking licences: Rangarajan:The RBI, while allotting new banking licences, should give preference to the non-corporatesector, said Mr C Rangarajan, chairmis possible for the Reserve Bank to initially start with non-corporate business and find outwhether there are suitable applicants and thereafter proceed to look at the other interview to PTI. RBI is in the process of finalising the guidelinesfor giving new bank licences. Parliament approved the Banking Laws (Amendment) Billlast month. (BS dt. 07.01.2013 p.16)Gold loans-RBI favours banks over NBFCs:A paper on gold loans by a RBI working group favours banks over NBFCs. Currently, NBFCsdevise lending formulae after taking into account the overall value of gold jewellery,which includes making charges, manufacturing loss, tax, etc. According to the paper,current RBI guidelines allow NBFCs to tweak the calculating method according to their 14 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  17. 17. Canara Bank Samachar Lehar February 2013convenience, without the overall lending exceeding 60 per cent of the loan-to-value (LTV).(BS dt. 06.01.2013 p.6)Cut lock-in period for tax saving deposits to 3 years: Bankers:Bankers on Monday urged the Finance Minister Mr P Chidambaram to reduce the lock-inperiod for tax-saving deposits to three years from the current five years and allow them toissue tax-free bonds like other financial institutions to finance infrastructure projects.Citing rising NPAs due to the overall economic slowdown, bankers wanted tax incentiveson some categories of provisioning. Bankers also demanded tax concessions for issuingperpetual bond, which is counted as Tier I or equity capital for meeting Basel III norms. (FEdt. 08.01.2013 p.8)PSBs to lag behind private banks in Q3 earnings:Stable margins, stronger loan growth and better asset quality will help private sectorbanks outperform public sector banks (PSBs) yet again in the third quarter, according toanalysts. For public sector banks, an additional provisioning of 0.75 per cent, as directed bythe RBI, is likely to impact the earnings this quarter, say analysts. As far as interest incomeis concerned, public sector banks will lag behind private sector banks by about 7-8 percent with a marginal com- pression carried forward from the second quarter,said MrVaibhav Agrawal, Senior Analyst with Angel Broking. (BL dt. 09.01.2013 p.6)SBI for 2% interest on current account: r, State Bank of India, has recommended the Reserve Bank ofIndia that banks pay an interest of up to 2% on current accounts. SBI Chairman Mr PratipChaudhuri, said non-payment of interest on current accounts is an oppressive market hown boldness in opening up the saving bank interest market, (FE dt.09.01.2013 p.8)SBI not merging its associate banks this fiscal:State Bank of India is not looking to consolidate any of its associates with itself during theSaurashtra and State Bank of Indore with itself during the recent years. (BL dt. 09.01.2013p.6)Draft norms on bank CCP exposure out:central counter-parties (CCP) such as Clearing Corp of India. RBI has said banks will have tomaintain adequate capital with regards to their exposure to CCPs to protect potentialderivatives, exchange traded derivatives transactions and SFTs will be subject to thebuffer to the risk that a institution faces through exposure to the capital markets. (FE dt.11.01.2013 p.8)Financial Technologies, SBI, ICICI Bank sign MoUs: 15 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  18. 18. Canara Bank Samachar Lehar February 2013SBI, ICICI Bank and Financial Technologies were among those that signed MoU withGujarat International Financial Tec-City (GIFT City) for setting up operations in the city.While Financial Technologies signed a MoU to set up a financial services training centre,SBI, ICICI BoB, HDFC and Dena Bank signed MoUs for setting up banking operations in thecity. GIFT City had launched a 29-storey tower and is set to launch a second tower in a fewmonths. These towers involve a construction cost of Rs 700 crore and are likely to housebanks such Bank of Baroda, Dena Bank and Syndicate Bank, said Mr R K Jha, director, GIFTCity. (BS dt. 13.01.2013 p.14)Bankers seek 50 bps cut in policy rates:Bankers requested the RBI for a sharp cut in its policy rate along with a cut in the cashreserve ratio, or the portion of deposits that lenders need to keep with the central bank.The RBI will review its monetary policy on 29 January. In the customary pre-policymeeting, chaired by RBI Deputy Governor Dr K.C. Chakrabarty, the lenders requested a 50bps cut in the RBI policy rate, presently at 8%. One bps is one-hundredth of a percentagepoint. HDFC Bank Ltd MD Mr Aditya Puri, talking to reporters after the meeting, saidbankers had demanded a 50 bps cut in policy rates. Banks do understand that a high rateof inflation in the economy has warranted high interest rates. Punjab National Bankhelp banks in lending more. (Mint dt. 16.01.2013 p.11)An ombudsman by a name that appeals to the common man:to something that the simple and appeals to the common man. In a recent meeting oncustomer service, some banks in a suggestion to the RBI, pitched for Customer Careofficers as a replacement. Hopefully, a change in the name would also lead to betterservice. (ET dt. 16.01.2013 p.19)IMF sounds warning on bank licence:The IMF has warned India against licensing corporate entities to step into the business ofcommercial banking, saying the risks associated with such a move potentially outweigh pdatesaid it would be prudent for India to first put in place and gain sufficient experience inimplementing a comprehensive framework for the purpose before considering the entry work forconsolidated supervision of both bank-led groups and financial conglomerates is stilltotal independence for the RBI from government influence. (Mint dt. 17.01.2013 p.1)Banks bank on consumers with highest credit rating:In a major indicator of the growing risk aversion among banks in a slowing economy, dataon lending to consumers with the highest credit rating and that too against securedscore of over 800. Around three years back, most banks were lending to consumers evenwith a score of 500-600. Post 2008, banks have started tightening their credit policies andreducing exposures primarily to unsecured debt like credit card and personal loans. There 16 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  19. 19. Canara Bank Samachar Lehar February 2013is a shift towards secured products such as two- Mr ArunThukral, Managing Director of CIBIL said. (FE dt. 17.01.2013 p.2)The Finance Ministry has sought the opinion of the law ministry on a proposal to set up aholding company for all 24 PSBs. Such a move will need amendments to a number ofexisting acts, including the bank nationalization acts of 1969 and 1980 and the SBI ActThe setting up of a holding company, with an aim to recapitalise public sector banks, wasaim was to devise a mechanism to handle the growing capital requirements of PSBswithout straining the financesapproved. Setting up one holding company for all the PSBs will require amendments to ago to the cabinet in three- (Mint dt.17.01.2013 p.1)Reduce SLR in line with global standards-IMF:Excessive government control of public sector banks poses a risk of capital misallocationthat may constrain economic growth, a financial system stability assessment updatein the financial sector contributes to a build-up of fiscal contingent liabilities and creates arisk of capital misadebt manager may have led it to require banks to hold larger holdings of government debtthan might be needed on prudential grounds. The IMF has recommended that theStatutory Liquidity Ratio, the money that banks keep aside as liquid assets or invest ingovernment securities, be reduced in line with international standards. (BL dt. 18.01.2013p.6)State Bank of India plans by-invitation-only branches in 20 cities: -invitation- -rich clientsand non-resident Indians. These branches will remain open 24X7 and have facilities likelounges, conference rooms, personal business centres and cafeterias. The branches willoffer all the banking products and services of SBI and its subsidiaries. In 2010, SBI hadopened the first by-invitation-only branch - Kohinoor Banjara in Hyderabad. Its subsidiary,State Bank of Bikaner and Jaipur has recently opened a similar branch - Kohinoor Royale inJaipur. (BS dt. 18.01.2013 p.4)Gold Investment is not a hedge against inflation, says Chakrabarty: Terminginvestment in gold as speculative activity and not hedge against inflation, Reserve Bank ofIndia Deputy Governor Mr K C Chakrabaty said high returns the precious metal offers onlyreflects high risks associated with it. Discounting the argument that gold is a hedgeagainst inflation, the Deputy Governor wondered how a hedge instrument can offer asyears, how can it be a hedge against inflation? The second logic is that gold is a safe 17 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  20. 20. Canara Bank Samachar Lehar February 2013Education Society. (BL dt 19.01.2013 p.6)Swiss govt to accept group requests for banking info from Feb:Switzerland will be able to provide banking and other details sought by other countries,identification,senior official in the Swiss Finance Ministry said. The development follows intensifiedglobal pressure on Swiss authorities in the past couple of years to act against the secrecywalls of Swiss banks, which have been often accused of providing a safe haven to illicitwealth from abroad and not sharing the account details citing their client confidentialityprovisions. (BL dt. 22.01.2013 p.6)Speed up settlement claims of nominees:The RBI has directed urban co-operative banks not to insist upon succession certificatesfrom the nominees while settling claims in cases of deceased depositors to make theprocedure fast. (ET dt. 22.01.2013 p.7) -12, show RBI data:concern for the Reserve Bank of India, had worsened in 2011-12 and bankers say thesituation has not improved in the current financial year. Data from the RBI show the gapbetween deposits garnered and loans disbursed was the highest in the 1-3 year and 3-5year segments in 2011-12. In that year, banks garnered around Rs 16 lakh crore ofdeposits in 1-3 year tenures and they disbursed loans of around Rs 18 lakh crore. In the 3-5year tenures, deposits garnered were just around Rs 5 lakh crore and loans disbursed wereabout Rs 6 lakh crore. The worsening of ALM position of banks was stark in 2011-12 as inthe previous financial year, banks had garnered more deposits than they had disbursedloans in the 1-3 year segment. (FE dt.24.01.2013 p.10)Banking licences-Corporate honchos rule out conflict of interest:Chief Executives of leading corporate houses, led by Bajaj Auto Chairman Mr Rahul Bajaj,have come out in favour of granting banking licences to conglomerates, saying the RBIshould instead ensure Chinese walls between group companies and bank applicants, sothat banks avoid lending funds to group companies. However, Mr Deepak Parekh,Chairman of HDFC, the promoter of HDFC Bank, has asked corporates to stay out of thebanking business, citing past experiences. Many economists have cautioned againstgiving a banking licence to a conglomerate, saying it would lead to a conflict of interestbetween the bank and group companies. (BS dt. 24.01.2013 p.3)Panel suggests steps to strengthen coop credit:An internal committee of the RBI has highlighted the weaknesses in cooperative banksand recommended a slew of measures to strengthen the cooperative credit system in thecountry in a bid to push through financial inclusion. The committee observed that out of 18 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  21. 21. Canara Bank Samachar Lehar February 2013370 central cooperative banks, 209 would require additional capital totaling Rs 6,500 croreover the next four years to reach 9% mandated capital ratio. (FE dt. 25.01.2013 p.10)Wait for banking licence norms set to get longer:The final guidelines for new banking licences could take a while, contrary to expectationsthat the RBI would announce those by month-end. Banking aspirants have been keenlyawaiting the norms since the draft guidelines were issued about a year and a half back.The process has hit a roadblock, mainly on two counts. First, the Finance Ministry hassuggested that real estate and brokerage companies be considered eligible for setting upentities in the banking space. According to RBI sources, this has delayed the process as thecentral bank now has to reinforce its earlier logic on why these companies should not beallowed. Second, some recent comments of entities like the International Monetary Fundthat industrial houses should not be allowed in banking have made RBI rethink the issue.(BS dt. 25.01.2013 p.1)Cautious RBI signals just a 25 bps rate cut:Although core inflation pressures have eased dramatically, and the Reserve Bank of India -emerge qui -widening currentaccount deficit might prompt the central bank to limit a cut in policy rates to 25 basisapproach is highlighted when it sayof commitment to the revise (FE dt.29.01.2013 p.1)RBI wants to issue new licenses as soon as possible:"Issuing of new banking licenses is in the final stage. We had consulted the government.They have made certain points to which we have rthat. Both the government and RBI will want to launch this as soon as possible." said Dr DSubbarao, Governor, RBI. (Mint dt. 30.01.2013 p. 5)RBI does its bit, cuts repo & CRR:Lending rates are set to fall after the RBI trimmed both the repo rate and the CRR by 25basis points each to 7.75% and 4%, respectively. The central bank last cut the policy rate by50 basis points in April 2012 and has injected Rs 1 lakh crore into the system since mid-September through a combination of open market operations and CRR cuts. Bankersthe latest cut in the CRR. (FE dt. 30.01.2013 p.1)Borrowers to be end beneficiaries:Bankers have said they will soon cut lending rates but not deposit rates-offering cheer toboth borrowers after the RBI announced a cut in key policy rates. SBI Chairman Mr PratipChaudhuri said the benefits of lower rates will be passed on to the borrowers, adding thatthe deposits rates may not be lowered immediately. He pointed out that SBI has 19 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  22. 22. Canara Bank Samachar Lehar February 2013lender to lower deposit rates. Mr K R Kamath, C&MD of Punjab National Bank and C&MDof Indian Bank Association said cutting lending rates without reducing deposit rates will rsNet Interest Margins. (ET dt 30.01.2013 p.15)Ultra small bank branches in AP:As part of the financial inclusion plan, the Andhra Pradesh Grameena Vikas Bank (APGVB),a regional rural bank sponsored by the State Bank of India, has opened 105 ultra smallbranches (USBs) across the state as per the guidelines issued by RBI. These USBs are being facility targetingsmall villages having population of 2,000 and above. (FE dt. 03.01.2013 p.8)Yes bank eyes acquisition:Looking to expand its business and grow its financial metrics going forward, the new-generation private sector banking firm Yes Bank Ltd has said it is open to possibleacquisitions in banking, broking and asset management businesses, even as its organicgrowth plans are sufficient to meet its near-banking, broking and asset management businesses, its founder and CEO Mr Rana Kapoorsaid. (BL dt. 31.01.2013 p.6) 20 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  23. 23. Canara Bank Samachar Lehar February 2013 Agriculture & Other Priority…..Govt may hike annual agricultural lending target for Banks:The government may increase the annual target of the banks for lending to theagriculture sector by 22%, in the upcoming union budget, to 7 lakh crore, in view of theachieve their direct lending targets and focus on the new improved Kisan Credit Cardscheme," said a Finance Ministry official. The banks will be able to meet the new targetseasily, the official said, since the revised classification includes companies of individualfarmers and partnership firms directly engaged in agriculture and allied activities. (ET dt.23.01.2013 p.10)Bank lending limit to small units for plant, machinery raised:The RBI has upped the existing investment limits in plant and machinery/equipment forlending by banks to micro enterprises. The revision, which is within the overall ceiling ofRs 25 lakh for micro enterprises as defined in the Micro, Small and Medium EnterprisesAct, is in view of the increase in price index and cost inputs. As per the revised sub-targetsfor lending to the micro and small enterprises sector, 40 per cent of total advances to thesector should go to micro (manufacturing) enterprises having investment in plant andmachinery up to Rs 10 lakh (existing limit: Rs 5 lakh). (BL dt. 01.01.2013 p.6)Banks wary of using a risk-based system to give education loans: -based pricingregime for education loans could prove a non-starter, say bankers. The proposed system isbased on assigning ratings to universities, institutes and colleges as well as students. Inthe six interactive meetings that banks and Finance Ministry officials had with educationconcept was mixed. While some reputed institutions welcomed such a rating model,many others (most South-based institutions opposed the idea) did not want collegeratings to be taken up by banks or other external agencies. The fear among many privatelyrun professional colleges is that an adverse rating may lead to students shunning them.(BL dt. 11.01.2013 p.5)CAG asks banks to recover money from ineligible beneficiaries:The Comptroller and Auditor General (CAG) has asked banks to recover money fromineligible beneficiaries under the Agricultural Debt Waiver and Debt Relief Scheme(ADWDRS) of 2008. The performance of audit of the ADWDRS by CAG has revealed thatbody wants banks to fix responsibility of bank officials as well as auditors for the lapses.Further, banks should consider lodging first information reports in cases of tampering ofrecords. (BL dt. 15.01.2013 p.5)Lenders want to recast SME loans without NPA tag:When some of the lenders urged RBI to permit them to restructure SME loans withoutsaid that banks are free to restructure the loans as many times as they want, providedthey classif 21 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  24. 24. Canara Bank Samachar Lehar February 2013improve lending to SMEs. On whether there could be some special dispensation given tocredibility to (ET dt.23.01.2013 p.13) 22 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  25. 25. Canara Bank Samachar Lehar February 2013 BASEL…..Punjab & Sind Bank to raise Rs.1,000 cr:Punjab & Sind Bank on Tuesday said it will raise about Rs.1,000 crore by issue ofpreference shares. The board has approved raising of capital through preferential issue ofequity shares up to Rs.1,000 crore at a rate to be decided later, Punjab & Sind Bank said.(FE dt. 02.01.2013 p.8)12 banks may get Rs 12,000-cr capital infusion next week:The Government may soon consider a proposal for capital infusion of Rs 12,000 crore invarious state-owned banks, a top Finance Ministry official has said. The formal approval ofthe Cabinet has been sought and this may be taken up next week, D. K. Mittal, Secretary,Department of Financial Services (DFS), said. Also, the DFS is seeking nod for not comingback to the Cabinet up to 2018 for all the capital infusions to be made PSBs for Basel IIIrules purposes. Besides SBI, the banks that may get the capital support include BoM, UBI,and IOB. (BL dt. 04.01.2013 p.1)Basel-III: RBI mulls liquidity buffer from SLR portfolio:Following the Basel committee of banking supervision easing implementation of liquiditycoverage ratio, the Reserve Bank of India ( RBI) on Monday said Indian banks might beasked to carve out usable liquidity from their existing statutory liquidity portfolio. Underliquidity coverage ratio, banks are expected to hold a minimum level of highly liquidassets that can be sold in the open market to tide over a liquidity crisis. In normalconditions, these assets must at least be equal to the total net cash flows of the bank on aregular basis. (BS dt. 08.01.2013 p.5)Govt may infuse Rs 3000 Cr into SBI:The Government has indicated a capital infusion of Rs 3,000 crore ($544.32 million) intoa preferential allotment of shares, Mr Pratip Chaudhuri said. Capital infusion plans for thenext fiscal have not been finalized yet he added. (Mint dt 08.01.2013 p.11)Govt set to infuse Rs. 12,517 cr in PSBs:The Union cabinet approved infusion of Rs 12,517 crore in around 10 state- owned banksover the next three months. The Cabinet has also given in-principle nod for providing needbased re-capitalisation of banks till 2018-19 for ensuring compliance with the Basel IIIcapital adequacy norms. "Pursuant to the Budget announcement made on March 16,2012, we are infusing additional capital into the public sector banks. We will infuse beforethe end of this fiscal year a sum of Rs 12,517 crore," FM Mr P Chidambaram said. (ET dt.11.01.2013 p.9)Govt may use stake sale proceeds to fund banks:The Government is set to change the usage of earnings from disinvestment from the nextnew usage pattern of disinvestment proceeds from fiscal 2013-official told. Disinvestment proceeds are deposited in the National Investment Fund, 23 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  26. 26. Canara Bank Samachar Lehar February 2013the Government proposes to use the disinvestment proceeds for subscribing to shares inrights issues by Central Public Sector Undertakings, including banks and insurancecompanies. (BL dt. 17.01.2013 p.1)Finmin requests RBI for relaxing capital adequacy norms:The Finance Ministry has requested the RBI to relax capital adequacy norms for banks inline with the recommendations made earlier this month by the Basel Committee onBanking Supervision. "RBI is fully seized of the matter and we have also requested it tolook into the issue. We are in conversation with them," said an official source. RBI deferredthe implementation of Basel III, the global capital norms for banks, by three months toApril 1. The deadline for the full implementation of the stiff liquidity norms or LiquidityCoverage Ratio (LCR) for banks, which were to kick in from 2015, has been extended till2019. Earlier this month, oversight panel Group of Governors and Heads of Supervision,which includes representation from India, of the Basel Committee on Banking Supervisiondecided to ease the LCR regulations. (ET dt. 17.01.2013 p.9)SBI board nod to Rs 3,004-cr capital infusion:The SBI board has approved a capital infusion of Rs 3,004 crore by the governmentthrough preferential allotment of shares. The infusion would help the bank shore up itstier-I capital. As of September-including tier-I capbanks capital base under Basel-III norms, effective April 1. On January 10, the governmenthad cleared first tranche of the Rs 12,517-crore capital an infusion into public sectorbanks. The Cabinet had approved infusion of Rs 3,004 crore for SBI. (BS dt. 20.01.2013 p.6)Syndicate bank to raise Rs 3500 Crore more:Mid sized state run Syndicate Bank, which raised Rs 1,000 crore of Tier II bonds and $500million (about Rs 2,680 crore) of overseas bonds in October 2012, obtained boardapprovals to raise Rs 1,500 crore of tier-I capital and Rs 2,000 crore of tier-II subordinateddebt C&MD Mr Sanghvi said. Syndicate Bank expects its credit portfolio to grow by about18% this fiscal and by at least 20% in the next fiscal, driving the need to furtherstrengthen CAR, which currently is at 10.29% as per Basel-I and 11.38% as per Basel-II. Thebank expects the CAR to improve by about 80 bps with every Rs 1000 crore of additionalcapital, said Mr sanghvi. (ET dt 24.01.2013 p.10)RBI asks banks to issue Tier-II bonds to retail investors:The Reserve Bank asked banks to issue bonds to retail investors, as to deepen the Indiathrough enhanced retail participation, banks, while issuing subordinated debt for raisingTier-II capital, are encouraged to consider the option of raising such funds through public (BS dt. 25.01.2013 p.5) 24 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  27. 27. Canara Bank Samachar Lehar February 2013 Bonds… Money Market….Exim Bank raises $750 million:The Export-Import Bank of India has raised $750 million by issuing 10 year Reg S bonds tofunds it operations including extending lines of credit to the Governments of othercountries, export finance and support Indian companies overseas investments, said Mr (BL dt.09.01.2013 p.6)Plan to cut banks govt bond holding:To increase liquidity, the Reserve Bank may reduce the quantum of government securitiesto be held by banks under the held to maturity (HTM) category, Deputy Governor Mr H RKhan said. "We will consider reducing the G-secs under the HTM category to increaseliquidity in non-disruptive manner," Khan told. (Mint dt. 10.01.2013 p11)Call, bond rates down:The inter-8.15 percent. It had opened at 8.10 percent. The 8.15 percent government security, whichmatures in 2022, ended lower at Rs 101.87 (Yield: 7.86 percent) from the previous close ofRs 102.04 (Yield: 7.84 percent) (BL dt 19.01.2013 p.6) Credit Growth…..Festive demand sees spurt in retail loans, but worst far from over:Retail loans kept the momentum of credit growth going for banks in November, thanks toa late pick-up in the festive demand, according to the monthly data put out by the ReserveBank of India on Monday. Total retail loans for the month grew 16.3% from a year ago toRs 8,58,000 crore against a growth of 13.3% in November last year. In October, retail loanshad increased 14.1% to Rs 8,33,734 crore compared with the increase of 14.3% last year.Overall, bank credit during November grew almost 18% annually, to Rs 46,61,000 crorecompared with a 17.16% growth in the same period last year. (FE dt. 01.01.2013 p.8)Small private banks in wait mode:Small and mid-size private banks are not in a hurry to pare their lending rates, even asHDFC Bank, the second largest private sector lender, said it was reducing its minimumDeposit rates continue to remain high and unless there isDhanlaxmi Bank, told. (BS dt. 02.01.2013 p.5)Credit growth surge in last fortnight of Dec:Banks credit growth showed a sharp rise at the end of December, with loans worth Rs65,000 crore disbursed in last fortnight, compared with Rs 3,500 crore during the firstfortnight of the same month. According to bankers, the quarter-end pressure to meet 25 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  28. 28. Canara Bank Samachar Lehar February 2013targets has resulted in the surge of credit off take. Similarly, deposit growth, which fell inthe previous fortnight, rebounded to Rs 43,000, the latest data release from the RBIshowed. (BS dt. 11.01.2013 p.5) -Dec, show RBI data:Hit by slowdown, balower compared with the same period last year, according to the latest data by ReserveBank of India. For April-December 2012, incremental credit at Rs 3, 89,110 crore was lowerthan Rs 4,04,530 crore in the corresponding period of 2011. Credit growth for April-December slackened to 9 per cent compared with 10.8 per cent last year. In October,Reserve Bank of India, recognizing the weak demand for credit, lowered its FY13 growthprojection for non-food credit to 16 per cent from 17 per cent. (FE 19.01.2013 p.12)Car loans may get cheaper:Consumers can soon get cheaper car loans from banks. Bankers expect these rates to dipby at least 25 basis points (BPS). Kotak Mahindra Bank has already cut car loan rates by 25-50 basis points to 11.5-people are spending. More people are opting for small Cars. Hence, there are no majorconcerns in the loan growth. Big players like SBI, HDFC Bank, Kotak and IndusInd areSecurities Ltd. (BL dt. 20.01.2013 p.1)Banks ease debt collection norms to support cash-strapped firms:Banks are relaxing collection norms on working capital loans to companies, whoseworking capital cycles have lengthened, straining their cash flows. In cases of genuinecash-flow constraints, banks are giving companies more-time to collect their accountsreceivable than earlier stipulated in their loan agreements. A senior State Bank of Indiaofficial said that in the case of working capital loans, previously, if the company did notcollect a certain portion of its receivables within 90 days, these were removed for thepurpose of calculatineed of the company, we have increased their period to 120-150 days and in some cases, (FE dt29.01.2013 p.10) 26 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  29. 29. Canara Bank Samachar Lehar February 2013 CARD…..Credit card spending on the rise, signalling consumer confidence:A sharp jump in the credit card spending in the past one year indicates consumers have sthird-largest economy. Credit card outstanding of Indian borrowers grew 26% to Rs.24,700crore in the 12 months to November, marking a significant rise over the previous year, theRBI data show. Credit card spending expanded 3.7% in the year ended November 2011.Before that, for two years credit card portfolios of banks had shrunk. (Mint dt. 03.01.2013p.7)Corp Bank launches RuPay Aadhar card:Corporation Bank has launched Corp RuPay Aadhaar card. A bank release said that thisproduct is primarily aimed at providing easy and hassle-free banking services to thefinancially excluded and underprivileged sections of the society having Aadhaar number.The card can be used at the conventional ATMs, micro ATMs or at the handheld machinesused by business correspondents and at point-of-sale terminals at merchantestablishments. The fascia of the card contains the Aadhaar number and this card can bea photo card or a non-photo card, it said. Corporation Bank is a partner in the directcash/benefit transfer scheme launched by the Government. (BL dt. 06.01.2013 p.3)Citi bank goes paperless:Citibank India on Monday announced a new paperless mobile payment system for itscredit and debit card customers that would do away with the charge slips and would beimplemented for the entire global network of its US-based parent Citigroup. (FE dt.22.01.2013 p.10)IndusInd Bank eyeing Rs 1,000-cr credit card biz:IndusInd Bank aims to touch Rs 1,000 crore in its credit card business by March 2014,according to Mr Romesh Sobti, MD and CEO, IndusInd Bank. That would be two per cent oftheir loan book then. At present the credit card portfolio is about Rs 380 crore. Mr Sobtifees, for - (BL dt. 22.01.2013 p.6) 27 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  30. 30. Canara Bank Samachar Lehar February 2013 Deposits…...Oriental Bank waives penalty on premature withdrawal of FDs:Oriental Bank of Commerce (OBC) has waived penalty on premature withdrawal of fixedOBC.withdraw these prematurely (say from the second day up to the 10th year, depending onmaturity profile) without having to fork out any penalty. (BL dt. 02.01.2013 p.8)Axis joins state lenders in raising deposit rates:Axis Bank joined state-run lenders such as Dena Bank and Corporation Bank in raisinginterest rates for deposits in select tenor, sending contrary signal to the market, which isexpecting lower interest rates. Axis Bank, the countrys third-largest private sector bank,on Tuesday raised rates from 9% to 9.25% for deposits of size Rs 1 crore to less than Rs 5crore and for maturity of 18 months to less than five years. "We have raised rates for ALM(asset liability management) reasons," said a senior treasury official. (ET dt. 09.01.2013p.10)Bankers want RBI to allow interest on current accounts:Banks will ask the Reserve Bank of India to allow them to pay interest on current accountdeposits, in the run up to thflow into the system which otherwise stays with the establishments. Current accounts arenow 9.85 per cent of total deposits with banks. RBI will announce its third quarter reviewof the monetary policy on January 29. (BS dt. 14.01.2013 p.10)Banks want PAN rule relaxed for non-deduction of tax at source:Banks want the revenue authorities to do their depositors, who are economically weak,aged and infirm, a good turn. They have moved the authorities to allow them to act uponself-declarations made in Form 15G and Form 15H (for non-deduction of tax at source) bythe above mentioned category of people even if they do not have a permanent accountupon the Finance Ministry that such a move will alleviate the hardship caused to theeconomically weaker sections, the aged and the infirm. (BL dt. 14.01.2013 p.5) -year low:The growth in bank deposits continues to be sluggish and is at a nine-year low, accordingto the latest data from RBI. In the fortnight ended December 28, 2012, deposits grew just11% year-on-year, RBI data showed. The last time deposit growth dipped below 13% wasin December 2003. The RBI has projected a deposit growth of 15% for banks for FY13.Outstanding deposits of banks stood at Rs 64,77,246 crore as on December 28, 2012, agrowth of just 6% for the first nine months of FY13. Credit growth in the first nine monthsof the financial year was 7.1% compared with 10.5% last year. (FE dt. 16.01.2013 p.8) 28 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  31. 31. Canara Bank Samachar Lehar February 2013The drive to bring down high-cost and bulk deposits resulted in 1.88% decline in totaldeposits as on December 31, 2012 on a sequential basis for public sector lender IOB.Besides, the bank has also reported a growth of just 2.82% in gross advances for thequarter ended December 31, 2012. Cdeposits from 34% (as a percentage of total deposits) as on September 30, 2012 to 22% as DH dt. 21.01.2013p.15)Banks must popularize long-term deposits, says RBI working group:A working group of the RBI has suggested that banks must popularize long-term depositschemes having tenure of over 5-year and raise funds through long-term bonds. Thegroup recommended that large institutional investors such as provident funds andinsurance companies must be encouraged to invest in long-term bonds issued by banks.Further, banks must also invest in long-term government bonds having a tenure of 30-years as well. Banks can also explore the option of take-out financing and securitization togarner long-term funds. (FE dt. 23.01.2013 p.10)Deposit growth outpaces that of credit so far this quarter:Bank deposit growth, which lagged credit growth in the October-December quarter of thecurrent financial year, appears to be gathering momentum in the fourth quarter. As perthe January-March quarter, bank deposits grew by a robust Rs 62,750 crore while creditgrowth was relatively moderate at Rs 17,380 crore. In the October-December quarter, the2,23,238 crore, deposit growth was relatively muted at Rs 68,470 crore. (BL dt.24.01.2013p.6)ICICI, Axis Bank raise deposit rate ahead of RBI policy:have raised deposit rates by 25-30 bps on longer tenure maturities, raising doubts onwhether banks will cut lending rates even if the central bank eases its monetary policy inreview. While ICICI Bank has revised the deposit rate by 25 bps in the two to five yearsrate hike came into effect from 26 January, while for Axis Bank, the rate hike was effectiveJanuary 24. (BS dt.29.01.2013 p.5) 29 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  32. 32. Canara Bank Samachar Lehar February 2013 Liquidity…..Banks pin hopes on RBI to overcome liquidity crunch:Banks facing liquidity deficit are hoping that the Reserve Bank of India will conduct openmarket operations (OMO) to help them tide over the crunch. While CRR is a morepermanent measure which carries with it the risk of boosting inflation, OMO is considereda more targeted measure, as it injects liquidity when really needed, according to bankers.growth has been slowing due to investmentsEswar said. (BL dt. 12.01.2013 p.5) Minsitry of FinanceBanks should review non-core- operations:The Finance Ministry has asked PSBs to review their exposure to non-core operations suchas insurance venturesbanks to look at their non-should look at non-core areas of investment when big global banks are exiting from theirnon-core are (Mint dt 07.01.2013 p.11)New licence norms likely in 4-6 weeks:The RBI is likely to issue final guidelines for grant of banking licences to new playerswithin the next 4-6 weeks. According to people with knowledge of the matter in theFinance Ministry, the RBI may release its final guidelines for new bank licences by Januaryend or early next month. The Finance Ministry is currently in the process of sending itsfinal comments to the RBI on the draft guidelines issued by the RBI on the matter, afterwhich the final guidelines would be announced. (Mint 07.01.2013 p.11)FM on banking benefits:Finance Minsiter Mr P Chidambaram said the government was making all-out efforts toensure benefits of banking facilities are made available to common people. Whilespeaking on the occasion of inauguration of Central Madhya Pradesh Rural Bankheadquarters in Chhindwara he said the processes for disbursing loans in education,home and agriculture sectors had been simplified so anyone could avail these creditfacilities. (BS dt 10.01.2013 p.5)Finmin notifies merger of 3 Orissa rural banks:The Union Finance Minister has notified the merger of three Orissa-based Regional RuralBanks (RRBs) - Kalinga Gramya Bank, Nilachal Gramya Bank and Baitarini Gramya Bank tocreate a new RRB, Gramya Bank. The new bank will be based in Bhubaneswar. After themerger, the bank will have 8,000 employees and is expected to do a business of Rs. 10,000crore per annum. The new bank will be sponsored by Indian Overseas Bank. Prior to themerger, Kalinga Gramya Bank was sponsored by UCO Bank, Nilachal Gramya Bank was 30 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  33. 33. Canara Bank Samachar Lehar February 2013sponsored by Indian Overseas Bank and Baitarini Gramya Bank was sponsored by Bank ofIndia. (FE dt. 12.01.2013 p.8)Financial holding co to infuse equity into PSBs likely:The Finance Ministry will soon send a note to the Cabinet for setting up a FinancialHolding Company (FHC), which will leverage its capital base to infuse funds into publicsector banks, a senior ministry official said. The proposal, based on the recommendationsof the Shyamala Gopinath committee, has the backing of the RBI. The Ministry will alsosend its views on bank licence norms to RBI next week. Officials said corporate withexposure to real estate would not be allowed to apply for bank licences. In the first round,the government may prefer existing NBFCs including micro-finance NBFCs such as SKSMicrofinance as candidates, the official said. The FHC is being set up mainly to leverage itsbalance sheet in scontribution from the exchequer. (FE dt. 13.01.2013 p.1)FinMin sends views on banking permits to Reserve Bank:With the Finance Ministry sending its comments to the RBI, the final norms on freshbanking licences may soon be announced. According to sources, the Ministry wants a keyestate and stock broking firms from applying, said those in know of the development.Sources added the clause was not needed as RBI has already talked of ring-fencing banks.The Ministry has also asked the central bank to define the terms promoter and promotergroups more clearly. The comments also included permitting non-operative financialholding companies (NOFHC) to apply for bank licences rather than non-operative holdingcompanies and the capital adequacy norms for and NOFHC. (BS dt. 16.01.2013 p.6)Finmin in favour of realty, banking firms setting up banks:The Finance Ministry has expressed the view that the Reserve Bank should allow realestate companies and broking firms to set up banks as adequate safeguards will be thereto prevent exposure of promoters to related entities. In its comments to RBI on the givingout new bank licences, the Ministry has said that such entities can be allowed, but thereshould be a complete ban on taking exposure in the group companies or entities relatedto promoters, sources said. Even the vendor and large customers of such promoters cantget loan from the new bank, sources said, adding that this move will minimiseaccumulation of risk. (FE dt. 21.01.2013 p.13)8% growth will return Finance Minister: ts ofconfidence it would again achieve 8 per cent yearly growth. (BS dt 21.01.2013 p.6) al guidelines on new bank licences in two weeks: FMThe Reserve Bank of India (RBI) will announce new bank licensing guidelines within afortnight under which four-five licences are likely to be given to private sector entities,Finance Minister Mr P. Chiof India will announce the final guidelines for licensing more private sector banks. We 31 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page
  34. 34. Canara Bank Samachar Lehar February 2013number of large corporate houses, including Anil Ambani-led Reliance Group, financialconglomerates Religare and Shriram groups, engineering-to-technology major L&T groupand Aditya Birla group, are said to be interested in entering the banking business,depending on the regulatory framework. (Mint dt. 31.01.2013 p.26) 32 Samachar Lehar February 2013 issue- Compiled by RSTC Gurgaon Page