26 PSU banks achieve 9% Crar
26 out of 27 public sector banks have achieved the minimum 9 per cent crar in the minimum capital to risk-weighted assets ratio (crar). 22 banks out of these have even crossed 10 per cent mark.

Indian Bank is the only bank that has not achieved the required Crar. In order to allow for banks to function in a more competitive environment, the government had adopted a policy for providing an autonomous status to banks subject to certain benchmarks.

IDBI, banks differ on SIDBI disinvestment price

Industrial Development Bank of India (IDBI) failed to reach an agreement on 21st August, 2000, with banks and financial institutions on the final pricing of its 51% stake in SIDBI, thus delaying disinvestment process. At the meeting in New Delhi chaired by Banking Secretary, Shri Devi Dayal  top IDBI officials failed to reach an agreement with public sector banks and financial institutions to offload SIDBI shares at a price of Rs. 50 per share, recommended by SBI Caps, who is the merchant banker handling the deal. The price of Rs. 50/- per share was considered too high by PSU banks including State Bank of India, Corporation Bank, Canara Bank, Indian Bank, Bank of Baroda, Punjab National Bank and by LIC and GIC, who felt that a price of Rs. 30-35 was more realistic keeping in view the market perception about the institution. The Government had announced two years back  the sale price of 51 per cent stake in SIDBI, which has a paid-up capital of Rs. 450 crore.  However, the actual process only began early this year after the IDBI Act was amended in the Budget Session of Parliament. SBI Caps  has been asked to make a fresh presentation which would include projections in five years and factors affecting the bank’s performance, besides the factors like impact of WTO regime, the Rs. 500 crore non-interest earning  contribution being made by SIDBI to the Credit Guarantee Scheme and the investment required to revamp State Financial Corporations (SFCs) etc.

Strict legal action on defaulters of banks

The finance ministry and the Reserve Bank of India have ordered a strict legal action on loan defaulters and directed banks to initiate legal actions, including attachment of property, from October 1.

At the same time, a limited interest rate waiver on the defaulters keen on a one time settlement with the banks for loans amounting to less than Rs. 10 crore has been offered. This covers 80 percent of the total Rs. 51,667 crore non-performing assets. 

The bank chairmen have been asked to personally monitor the bad and doubtful loans of above 
Rs. 10 crore and come out with a rehabilitation package, or initiate the recovery proceedings with the debt of recovery tribunal. The banks’ chiefs have also been asked to submit a list of defaulters by July 15.

Special cells for cases to be referred to the debt recovery tribunal are to be created.

Revamping of Deposit Insurance Corporation

The Deposit Insurance Corporation (DIC) is likely to be revamped with an insurance fund of Rs. 12,000 crore to provide insurance coverage to bank deposits up to Rs. 1 lakh. RBI is interested to subscribe to the capital of Rs. 500 crore of Deposit Insurance Corporation. According to the report on reforms on deposit insurance in India submitted by the committee headed by RBI Deputy Governor, Shri Jagdish Capoor, the new deposit insurance scheme envisages lower premium for strong banks and higher premium for the weak bank as the premium is likely to be charged on the basis of risk-rating of the banks. The report adds that it will be desirable to base pricing of risk-based premium on the latest available CAMELS rating. In the case of entities which do not have a reliable CAMELS rating (like the Regional Rural Banks and the Co-operative Banks), RBI may have to opt for the flat rate deposit insurance, till the CAMELS database becomes available. The committee has suggested that banks, which do not report data to the deposit insurance agency in time, may be levied a penalty of 50 to 100 basis  points more for causing increase in the asymmetry of information. According to the report, the financial institutions and non-banking finance companies will not be covered by the scheme immediately.

C-D ratio  of PSU banks put at 50.3%

The credit deposit (C-D) ratio of nationalised banks at 50.3 per cent and for regional rural banks (RRBs) at 40.9 per cent was much lower than the all India average ratio of 57.1 per cent as on March 31, 2000, according to RBI.

The credit deposit ratio was relatively high for foreign banks at 80.1 per cent, for State Bank of India (SBI) and its associate banks at 67.2 per cent, for other scheduled commercial banks at 60.6 per cent according to the ‘Banking Statistics: Quarterly Handout March 2000’ released here on July 11.

Population group-wise metropolitan centres had the highest C-D ratio of 82.2 per cent followed by urban centres (40.6 per cent), rural centres (39.4 per cent) and semi-urban centres (34.4 per cent).

IDBI first quarter sanctions up 47%

IDBI has witnessed 47 per cent growth in sanctions and disbursements for the first quarter of Financial Year 2001.

The total sanctions have touched Rs. 6,737 crore, up by 47.3 per cent and disbursements have touched Rs. 2886 crore, up by 47.2 per cent due to clearance of several non project proposals.

Hike in CRR and Bank Rate

The RBI hiked the bank rate and cash reserve ratio (CRR), and reduced all refinance limits for banks in response to the rupee’s fall to a record low of 45.08/09 in intra-day trades on 21.07.2000.

The bank rate has been increased by 100 basis points to 8 per cent effective from 21.07.2000 while the CRR has been hiked by 50 basis points to 8.50 per cent and is to come into effect in two equal tranches; beginning July 29 and August 12. The increase in CRR will suck out a cumulative amount of Rs. 3,800 crore from the system. 

RBI net credit to Centre up

The RBI’s net credit to the central government during the close of the account for 1999-2000 has declined to Rs. 5,587 crore.

The budget for 2000-01 has placed the net market borrowing of the central government at Rs. 76,363 crore.  It was Rs. 73,077 crore in 1999-2000.

8070 NBFCs meet NoF requirement

Out of the 26,938 non-banking finance companies (NBFCs), 8,070 stepped up their net-owned  funds (NoF) to Rs. 25 lakh or more to be eligible for fresh registration.

In the first three years since 09.01.1997 when the directions for NBFCs were first released by RBI, there was no statute for NoF.  After this, it is compulsory for NBFCs to have statutory  NoF of Rs. 25 lakh or more in order to be eligible for registering again. The mandatory period of three years ended on January 9, 2000.

As per the provisions under the NBFC Act and NBFC Acceptance of Public Deposits (Reserve Bank) Directions, 1998, NBFCs which do not have the required NoF cannot accept any more deposits from the public.

SIDBI to issue tax-free bonds

In a bid to mobilise additional resources, Small Industries Development Bank of India will for the first time issue tax-free bonds of Rs. 1,000 crore with a tenure of 10 years.

The bank is also planning to raise about Rs. 1,000 crore during the current fiscal of which about 
Rs. 500 crore will be through private placement while the remaining amount will be through issue of bonds.

Ministry of small scale industry and agro and rural industries secretary Shri D.P. Bagchi said the government should add to the RBI’s long-term fund for the industrial sector as it would help funding of small scale units.   

Meanwhile, the process of distribution of Industrial Development Bank of India has been initiated and the final modalities are to be announced shortly, Shri S. Narain, CMD, SIDBI  said.   Consequent to the delinking of SIDBI from IDBI, the financial institution which presently holds the entire stake in SIDBI, will have to reduce its holding.  Accordingly, IDBI along with other financial institutions, public sector banks and other government bodies will hold 51 per cent stake in SIDBI with the remaining amount is being transferred to the public.

HDFC, ICICI lead e-bankers

According to the Credit Suisse First Boston’s latest report, e-initiatives by the Indian financial intermediaries are not just hype and there is a “sensible underlying strategy”.

Both Housing Development Finance Corporation and ICICI have emerged as clear winners in the e-game, says CSFB.

The report has given a check-list of eight parameters for assessing e-forays – e-health scoring, group structure, strength of client franchise impact on initiatives on profitability, impact of traditional business on profitability and risk profile, ability to generate attractive RoE and attractiveness of valuations. On all counts, the four players - ICICI, ICICI Bank, HDFC and HDFC Bank - have excelled.

Both the banks are pushing hard on the e-commerce front even though their strategies vary. The business-to-business segment is expected to account for over 90 per cent of e-commerce in India. While ICICI has larger number of corporate customers, HDFC Bank is focussing on top 200 customers in the corporate sector.

NABARD gives Rs. 537 crore aid for rural infrastructure

National Bank for Agricultural and Rural Development (NABARD) has sanctioned Rs. 537.21 crore for strengthening rural infrastructure in 13 states as under :

(Rs. crore)
PUNJAB 30.70
BIHAR 28.92
Nearly Rs. 4,500 crore have been budgeted for the current fiscal under RIDF.

The projects to be covered by these states would be related to provision of rural connectivity and increased irrigation facilities in the rural areas. Moreover, the projects would also be related to development of seed farm, cold storage, market yards and drinking water supply scheme. NABARD had already sanctioned around Rs. 490 crore under RIDF for similar purpose.

According to NABARD, RIDF has been made up of contributions received from scheduled commercial banks. Since the creation of RIDF in 1995-96, the contributions from these banks have been increased from Rs. 2500 crore to Rs. 3500 crore during 1996-97 and 1999-2000. The committed contribution aggregated to Rs. 13,500 crore by 1999-2000.