Category Archives: Banking

Banking

Rs. 15 lakh fine imposed by IRDA on IndusInd Bank

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A penalty of ₹15 lakh has been imposed on the Indusind Bank by the Insurance Regulatory and Development Authority. The penalty was imposed for violating corporate agency norms.

The lender of the private sector is a corporate agent of the Cholamandalam General Insurance Company as well as Aviva Life Insurance Company. Cholamandalam had submitted data which showed that the bank had received higher payments than permissible from the insurer as a corporate agent.

After inspection the regulator found that it was evident that the payouts made in the form of infrastructure services were linked to the premium income generated by the corporate agent. Th IRDA in an order said, “The charges are therefore established that the payments were received by the corporate agent apart /over and above the permissible commission rates in violation of Section 40A(3) of Insurance Act, 1938. The payments were received in the form of database sharing/incentives to the employees of corporate agent and infrastructure setting up costs for the three financial years commencing from 2007-08”.

Indusind has been asked to pay ₹5 lakh fine for each of the three financial years. The total fine becomes 15 lakh which has to be laid within 15 days.

Banking

RBI asks banks to develop cost effective village banking

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The banks have been asked by the Reserve Bank Of India (RBI) to develop cost effective village branch model. The RBI has asked to create a village model so as to promote the financial inclusion.

D Subbarao, the RBI governor at a function of Indian Overseas Bank said, “Indeed, I think there is a strong case for a much larger effort on innovating a cost effective village branch model”. Subbarao added, “As I have said on several previous occasions, banks should look upon financial inclusion not as an obligation but as an opportunity to build fortune at the bottom of the pyramid”.

The governor said that the banks need to be convinced that approaching the common man is not just a forced regulatory imperative but is a potential business opportunity, the numbers will remain the same. Subbarao also said that the RBI is looking forward to competition among the banks to develop business models for such small, low staff and low cost branches.

In the year 2010, a road map was drawn to provide access to formal banking to every village which has a population of more than 2,000. Under the roadmap, about 74,000 villages with the population of above 2,000 were found unbanked.

Banking

Union Bank of India cuts rates on agriculture loans

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The Union Bank of India on July 5, 2012 announced a cut in the interest rates of for the various categories under agriculture. The interest rates have been cut by up to 175 basis points so as to boost the credit flow to agriculture.

Loans will be offered by Union Bank for crops, investment credit, and loans for allied activities by up to ₹50,000 at base rate only. The bank in a statement said that even the interest rates for lending self help groups has been reduced by 175 bps.

The new interest rates will take effect from July 1, 2012. The current rate for the base rate for the Union Bank of India is 10.50 percent. The Union Bank for the benefit of the farmers is extending the credit under crop loan up to double the scale of finance fixed by DLTC (District Level Technical Committee).

The farmers get 3 percent interest subvention upfront to the farmers for repayment of the dues in time for both pre as well as post harvest finance for loans up to ₹3 lakh. A new scheme has already been launched by the Union Bank known as the ‘Project Hariyali’ which provides additional touch points and facilitates the branches to reach out to the farmers.

Banking

State Bank Of India announces hike in interest rates

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India’s largest lender, the State Bank Of India has increased its interest rates by 25 basic points to nine percent . The bank in a statement on June 29 said that the interests have increased for three to five year tenure deposits of less than ₹1.5 lakh.

The interest hike will be effective from July 1, 2012. Krishna Kumar the managing director, State Bank Of India said in an interview that the presence of a very substantial current account savings bank portfolio is one of the major reasons in the bank’s margins are on the higher side.

Kumar added, “As far as the savings bank portion goes, we have taken some steps recently, which we are expecting will probably also increase the current account portfolio. So that is certainly helping us maintain our lower cost of deposits, thereby enhance the overall net margins”. Kumar was also asked about the NPAs about which he said that there will obviously be an increase in the NPA during the year.

The managing director also said, “I do not believe it is something that is unmanageable. We should be able to contain the growth quite effectively”. Meanwhile, the interest rates on the other deposit tenors will remain unchanged.

Banking Business Economy Markets Personal Finance

RBI says 9% of banks in India don’t want to lend to poor

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There are many banks in India which show reluctance to lend money to the poor. This is in turn is effecting the implementation of Prime Minister Manmohan Singh government’s financial inclusion scheme.

The Reserve Bank Of India (RBI) has found that about 9% of the banks out of 92,690 in India are the most reluctant in lending. The credit ratio is less than 25% and loan disbursals through these offices fell by 15.4 percent year by year to December 2011 against a 4% rise in the corresponding period in 2009-10.

People who have limited access to institutional credit borrowed even less last year amidst the slow economy and lesser opportunities to engage in economic activities. On the other hand, banks have created the infrastructure to reach out 74,200 odd villages in the last couple of years, but these are yet to turn in to profit centres despite the fact that they have opened crores of no-frill deposit accounts.

Such branches are yet to earn any meaningful revenues in the absence of any big lending activity. Moreover, they also do not offer remittance facilities or sell risk covers which are other avenues of earning revenues.

At present the regional rural banks are the only group which reported a rise in lending through their most reluctant branches.