SBI organized loan mela in collaboration with Jamkash Vehicleads Pvt Ltd

In Srinagar the State Bank of India (SBI) organized the loan mela, received a good response. Scores of customers visited the mela on Wednesday.

SBI Regional Manager Ajay Gupta informed that the mela was organized in the main branch at Residency road, with an aim to make people aware of the facilities being provided by the bank to its customers.

The mela was organized in collaboration with Jamkash Vehicleads Pvt Ltd with the main objective to sanction spot car loan to customers. In the mela latest models of Maruti vehicles were also displayed.

Gupta said in addition to car loan, the bank also offers housing and other loans to its customers. Gupta and the bank’s Chief Manager B L Jalali informed that the SBI is also offering complete financial services, including insurance, mutual fund and gold coins.

Jalali added bank is also providing conventional deposits and loan facilities for commerce; industry and agriculture sectors. He stated the bank is paying 10.50 per cent interest on deposits for 1,000 days and to the senior citizens bank is offering 11%.

Banks charge extra for deposit over 1000 notes

From now if you have to deposit a big amount in cash in the bank then be ready to pay extra. According to the new SBI rules, Rs 100 will be charged for every 1,000 notes, irrespective of denomination, over the limit of 1,000 notes.

Recently such incidence was reported when Madan Joshi, a scrap dealer at Howrah's Bajrang Market, got a rude shock when he went to deposit Rs 2,00,000 in cash - a routine he has been following several times a month for a long time in his account at the Belur branch of the State Bank of India. The cashier at the bank accepted the cash, but charged him Rs 200 for counting them, and this sound very unusual. "I was told that from now on, if I deposit such big amounts in cash, I will have to be prepared to pay extra. But why should this happen?" Joshi asked.

Joshi told, "I was told that I should make it a habit to pay in cheques if I have to avoid paying this extra counting charge from now on".

"I am extremely upset with the new system, as for businessmen like us, who need to withdraw and deposit cash all the time, it would mean losing a lot of money!" he was disappointed at this. Therefore if you are a businessman like Joshi and used to transact large amounts of cash across the counter, then be prepare to pay extra as banks have started levying charges on cash deposits in current accounts.

"If somebody deposits more than 1,000 notes of any denomination, then he has to pay handling charges," an SBI official said.

As per the his information few months back he received a circular from the SBI corporate centre on levying cash handling charges on cash deposits in current accounts. Giving details about the process, the official said that the bank does not levy charges up to 1,000 notes. So, if a customer deposits Rs 1 lakh with 1,000 notes of Rs 100, he does not have to pay any charges. But if the notes are of Rs 50 denomination, the depositor has to pay Rs 100 as counting charges.

"For each additional 1,000 notes over the specified limit will attract a charge of Rs 100. We generally do this to discourage huge cash transactions. The bank has to depute huge manpower for computation and supervision of fake notes. The counting machine can count notes but cannot differentiate between fake and soiled notes," he said.

The officials of Axis Bank and HDFC Bank also informed that they have started charging cash handling charges for current accounts. When it was inquired from a top RBI official he told that it has given some flexibility to the banks in the areas of cash handling and management a few months back. "The bank can levy cash handling charges if they want to do so. This is up to the bank," he added.

On Monday Credit card major SBI Cards & Payments Services Pvt Ltd (SBI Card) informed that its card issuance has come down to nearly a third of its peak monthly issuance of one lakh cards, which reflects the general downturn in the economy.

In India the non-banking finance company, which is a joint venture between the State Bank of India (SBI) and GE Money, is having a credit card base of over three million.

As per the information provided by Diwakar Gupta, CEO, SBI Card, the delinquency level for the industry averaged around 15 per cent and SBI Cards portfolio reflected this trend. Outstanding credit of SBI Card is around Rs 2,000 crore.

“We are seeking to build a quality portfolio. We are reaching out to card holders, who are having a good track record but are facing repayment difficulties due to the current economic downturn, with restructuring packages, which includes a softer Equated Monthly Installment option,” said Gupta on the sidelines of the launch of the ‘SBI Dena Bank Card’.

He said that the company, which has suffered a loss of Rs 150 crore in 2007-08, has been fast in dealing with delinquencies.

There has been increase in the cost of funds up to 14 per cent, earlier it was nine per cent levels, the card company recently has hiked the interest rate charged on outstanding credit rollover from 3.1 per cent to 3.35 per cent per month.

The CEO informed that on seeing the business requirement, SBI Card might require capital infusion next year, and further added that the company’s current capital adequacy ratio is over 11 per cent as against the regulatory minimum of 10 per cent.

While speaking during the launch of the SBI Dena Bank Card, Bhaskar Sen, Executive Director, Dena Bank, said the new credit card will have rich features and will be trustworthy offering for Dena Bank customers.

In addition to offering an attractive rewards program, the card, will also offer customers benefits like Flexipay — an easy installment plan where customers can choose the one best suited to their financial needs, and nil surcharge on purchase of fuel and lubricants at any petrol pump across India. The card has two variants --- gold and international.

SBI to be the sole loan provider for Nano cars

The State Bank of India (SBI) will be the only bank which will provide car loan to buy Nano, across the country. Tata Motors and State Bank of India (SBI) have got into a first-of-its-kind alliance for extending car loans to buyers for the world's cheapest car - Nano.

Nano dealers will accept only SBI cheques. Even the people who want to do payment in cash need to have to issue demand draft of SBI in favor of Tata Motors.

According to reliable sources the companies are having talks for finalizing the terms and conditions of the alliance but the formal announcement is likely to be made just before the first Nano rolls out from either Pantnagar or Pune.

Tata Motors sources said they want to utilize the vast network of SBI and its seven associate banks. SBI is having a branch network of around 11,000 branches. Moreover, its seven associate banks have a combined network of 2,000 branches.

Since the Nano is going to be a common man's car, therefore SBI with its associates has been considered to be the best fit for a product that has to get customers from rural India.

As Tata Motors have shifted its plant from Singur to Sanand, it has also enhanced its manufacturing capacity from 3 lakh car in a year to 5 lakh car a year.

As promised by the Tatas the Nano car will be rolled out by the last quarter of this year. The first car will be rolled out of the Tata plants in Pantnagar, Uttarakhand and Pune in Maharashtra.

SBI increases interest rates on foreign currency deposits

State Bank of India (SBI) has increased interest rates on foreign currency deposits. The new rates will come into effect from today.

According to bank release after the hike the USD deposits with a 1-2 year maturity will now have a rate of 4.21 per cent (3.71 per cent) while for tenures 2-3 year and 3-4 year it will be 3.52 per cent (3.02) and 3.81 per cent (3.31) respectively.

Likewise, deposits in Euro and Pound in 1-2 years maturity rates have been increased to 5.74 per cent (5.24) and 6.77 per cent (6.27), the bank said.

SBI has also hiked the resident foreign currency accounts (RFC) and non resident external (NRE) fixed deposit scheme rates.

Bank sources said RFC deposits, having the tenure of 1-2 years will have a rate of 4.21 per cent whereas deposits having tenure of 2-3 year will attract a rate of 3.52 per cent.


Bank further added the revised rates for NRE deposits having 1-2 years, 2-3 years and 3-5 years maturities will be 4.96 per cent (4.46), 4.27 per cent (3.77) and 4.56 per cent (4.06) respectively.

SBI directed to pay Rs 30,000 to govt official for wrongly blocked credit card

In May 2000 Krishna Kumar, a senior government official got a rude shock, after having a pleasant dinner evening with his family at the time of payment of bill he came to know that his credit card has been put on a high alert. When Kumar gave his credit card for the payment of the bill at the restaurant after the dinner, the restaurant manager told him that his credit card has been put on a high alert, listed as a ‘pick up card’ by his bank and would have to be seized.

When Kumar, a legal adviser with the Ministry of Law verified with the bank authorities about his credit card he was embarrassed to learn that the State Bank of India to “prevent an anticipated misuse by any third party” had indeed blocked his card.

However the ‘assumption’, proved to be costly for the bank when the State Consumer Commission took it to task in its recent order and directed SBI to pay a sum of Rs 30,000 as compensation to Kumar.

Expressing the act as the “grossest kind of deficiency in service”, Justice J D Kapoor, president of the commission, disproved the bank’s plea that it had done so to prevent misuse of the card. Justice Kapoor added, “It was obligatory on part of the service provider to immediately inform the card holder that his card was being blocked.”

The commission observed that “deficiency” of service on part of the bank can clearly be seen from the fact that the bank officials had “not verified” whether the card was in possession of the actual cardholder.

“Although the card was blocked to protect the interest of the customer, such actions are not advisable and it is incumbent upon the bank to inform the customer immediately, so that he can arrange for an alternate source of cash,” the commission noted.

Later Kumar sent a legal notice to SBI claiming damages and then approached the State Commission for redressal. In his complaint he stated that he was yet to get his card back from the authorities.

On the other hand bank on its part gave a statement that it had blocked the card in April the same year, as it had received three requests from an airline to verify a transaction that had been attempted by the cardholder.

The airline had informed that the transaction was beyond the permissible credit limit on the card. Therefore, foreseeing that a third party or the card holder himself was trying to make an “unauthorized transaction”, the authorities blocked the credit card. The bank authorities further added that it had attempted to contact Kumar via phone and courier, although it was unable to present any printed records of the above.

Disapproving the bank’s claims, Justice Kapoor directed it to pay the compensation, considering the “mental agony, humiliation, and loss of reputation” suffered by the complainant.

“The credit card has still not been returned to the complainant, who amounts to further deficiency in service on part of the bank,” Justice Kapoor added, instructed the bank to pay the sum within a month from receiving the order.

'RRBs’ can play a significant role in financial inclusion

Speaking at a day long seminar of State Bank of India in Mumbai, K J Taori, general manager, agri business unit, said the regional rural banks (RRBs) have an important role in the real last mile financial inclusion. He said their role can be of greater importance then the scheduled commercial banks (SCBs) in achieving the goals of financial inclusion.

The seminar, titled as ‘Charting a roadmap for IT-enabled financial inclusion’ was held by Frost & Sullivan and was presented by Atom in association with The Financial Express on Thursday.

Taori said RRBs will be able to do all this only when they are technologically upgraded and other requirements are met by the government as well as banks sponsoring them. He added that that all RRBs should be given financial support so that they can actively participate in the financial inclusion program. Taori pointed out in actual the RRBs’ requirement is dual which include upswing and downswing.

Speaking on the similar lines, Anandi Lal, general manager, priority sector and RRB, Dena Bank, added that RRBs can have even a greater role in financial inclusion than SCBs who are responsible for their sponsorship. But, technology should be different for the things like collection, deposits and advances for RRBs, said Lal stressing on the need for the speedy computerization of all RRBs.

Mukund L Abhyankar, chairman, The Cosmos Co-operative Bank outlined that even as customer education was the need of the hour, but connectivity is definitely a problem for smooth functioning of biometric cards in rural areas.

However, he appreciated the recent guideline issued by the Reserve Bank of India directing banks not to levy any charge for transactions through ATMs in future.

Addressing the reporters on the sidelines of the seminar, Shyamal Acharya, SBI chief general manager, rural business, said that his bank is planning to offer credit products through its no-frills accounts.

“Also, SBI is looking to mobilize more deposits in such accounts to enhance business viability of its rural banking/ financial inclusion operations,” said Acharya.

During the current fiscal year SBI will be opening around 1,000 branches in the rural and semi urban areas.

State Bank of Hyderabad merger likely to be cleared by banking major

State Bank of Saurashtra (SBS) merger with the parent State Bank of India (SBI) has reached the last lap it is expected that the banking major is likely to clear decks for the merger of another associate bank - State Bank of Hyderabad (SBH).

Sources have all the information of the developments said that merger is expected it is only matter of time.

The sources informed, “SBS is going to establish the model for the merger of other associate banks. For any bank, it’s human resource integration that’s the most important. Even in the case of SBS, that issue still remains unresolved. Once solved, it can be replicated for other banks”.

Probably it will take another three months for SBI to resolve the HR issues in SBS.

SBI is working on Project SHIP signaling for the merger of sequence of associate banks in the near future.

SHIP is short form for four associates — State Bank of Saurashtra, State Bank of Hyderabad, State Bank of Indore and State Bank of Patiala.

“We know its coming. Though finance minister P Chidambaram has assured the unions that no merger proposal would be taken up without a thorough consultative process, things seem to be moving fast in favour of SBI,” Harsha Vardhan Madabhushi, SBH’s director, said. Nowadays sbi car loan scheme is becoming popular as of the low interest rates and easy repayment facility available.

Harsha Vardhan said, the decisions are being automatically certified by the government as they being observed as the bank’s internal issues.

“The unions are not able to digest the deviation from the commitment. There is a plan for indefinite strike starting sometime in September 2008 against the merger proposal,” Madabhushi said.

Indore and Patiala are among the unlisted bodies of seven associate banks of SBI.

Therefore the merger process becomes easy for the SBI since it can be done through a board resolution.

“All the four banks are wholly owned subsidiaries directly controlled by SBI. There is no need for any AGM and the merger decision can be taken anytime after convening a formal meeting of the boards of directors,” a source said.

SBH was established in 1941 by the erstwhile Nizam of Hyderabad, the SBH came into SBI’s control after the Subsidiary Banks Act came into effect in 1959.

Earlier bank used to look after Nizam’s central bank managing the Osmania Sikka and the treasury, with time bank has grown into an institution with about 12,671 employees and over 1,000 branches.

The bank’s branches still take care of the population in the erstwhile Nizam’s region of parts of Telangana in Andhra Pradesh, Karnataka and Maharashtra.

By the end of the quarter ended on June 2008, the bank’s total income was at Rs 1,369.87 crore including an interest income of Rs 1,226.49 crore and a profit of Rs 55.82 crore.

By the end of the fiscal year March 2008, the bank had earned an income of Rs 5,080.29 crore and net profit of Rs 556.99 crore. Currently SBH is having an equity base of Rs 17.25 crore.

SBI general insurance biz final stage set

State Bank of India country’s largest lender is venturing into general insurance business. Almost all the formalities have been fulfilled and by the next month the bank will be finalizing the terms for joint venture with Insurance Australia Group (IAG).

a senior SBI official informed, "We are currently working on the structure of the joint venture agreement. We expect to finalize the operating structure by September. Once a mutual agreement is reached, the new company is expected to get operational in the next three to six months".

An agreement was signed between SBI and IAG in May this year to form a new company for the planned insurance business. According to the agreement, State Bank will be holding a 74 per cent stake in the entity and the rest 26 per cent will be of Australian partner. However State Bank officials, refused to give the details of the financial terms and management structure of the proposed joint venture company.

It is being expected the SBI's entry into general insurance will increase competition amongst the existing players. At present public sector United India Insurance, New India Assurance, Oriental Insurance and National Insurance are the major share holders of the business. While in the private sector leading players are Bajaj Allianz, ICICI Lombard, IFFCO-Tokio General Insurance and Reliance General Insurance.

Government-run State Bank is making aggressive plans for the expansion of the business on various fronts, including custodial business. Although the bank wanted to form a JV with French financial-services Major Societe Generale, a Finance Ministry official informed that the Government was not in favor of the deal.

RBI scanning seven more SBI branches for fake currency

The Reserve Bank of India (RBI) is scanning seven more branches of the State Bank of India (SBI) after fake notes with a face value of Rs 1 crore were recovered from the currency chest of its Domariyaganj branch in eastern Uttar Pradesh.

Officials said an RBI team is scanning branches where the money was supplied from the Domariyaganj branch.

Bank manager Dashrath Cirgainya said the currency chest had about Rs 184 crore and the bank branch supplies cash to smaller branches of the district and the neighbouring districts.

The RBI team raided the bank Aug 4 after the arrest of its cashier Sudhakar Tripathi.

Tripathi on Thursday confessed to the police that he had exchanged fake currency of nominal value of Rs 1.5 crore with the original ones in the bank's currency chest.

The scam being probed by the Special Investigation Team (SIT) of the state police was Saturday recommended to the Central Bureau of Investigation (CBI).

A CBI official confirmed that the agency would start investigation as soon as it receives an official request from the Uttar Pradesh government. What an amazing rewards point and cashback offers at SBI Credit Card but for few luck customers so don't miss the adventure!

"Looking at the intensity of the case, a joint director rank official is likely to probe the case," a CBI source confirmed.

The SIT team led by Superintendent of Police Anil Kumar met RBI officials Saturday.

"The SIT will carry on the investigations until the CBI takes over the case," Kumar said.

The police officials fear a fake currency racket involving a staggering Rs 50 crore might be thriving in the regions of Uttar Pradesh bordering Nepal.

State Bank of India launches debit card in Canada

State Bank of India (SBI) has launched its first debit card in Canada to raise its client profile here.

SBI is also looking at 84 locations globally to increase its association with international business, chairman O.P. Bhatt said Wednesday while launching the card here.

With seven branches across Canada, the State Bank of India-Canada (SBIC) - SBI's 100 percent-owned subsidiary - claims to have captured 65 percent of the trade conducted between that country and India.

The debit card will allow cash withdrawal at all cash vending machines at SBIC branches, and will be accepted in the US and around the world, including India where the SBI has 14,000 automated teller machines (ATMs).

SBIC clients will also get access to other ATMs around the world displaying Interac, Cirrus and Maestro symbols.

Additionally, the debit card can be used for purchases from merchant members in Canada, the US and other countries.

"The debit card will provide our clients with access to their money around the clock and around the world," said SBIC president and chief executive Arun Nagaranjan.

Unveiling the debit card at a gala dinner Wednesday night, Bhatt, who had flown in from India, said the launch completed SBI's product profile in Canada 26 years after it started operations here.

With the Indian economy growing at a rate of about nine percent and its exports and imports increasing by 20 to 25 percent annually, the SBI chairman said his bank was ready for increasing its global presence to meet demands of its business clients.

"Till last year, our international business contributed seven percent to our balance sheet, and about seven percent of our profits. This year, it went up to 10-11 percent. We want to raise this figure to 25 percent in the next five years," he said.

Bhatt said SBI had to expand outside India as 50 percent of business houses engaged in international business banked with it. Now it's very easy to get the information about cashback offers, reward points of sbi platinum credit card and also their hidden terms & conditions.

"Since we are the largest financial service provider in India, we have to go where our clients do business. We are looking at 84 locations around the world to increase our engagement with international business," he said.

Bhatt said SBIC, despite being a 100 percent-owned subsidiary, was actually a Canadian bank as it was incorporated here. "Thus, it enjoyed all the advantages of a Canadian bank and the advantages of its parent bank - the SBI," he said.

"The bank has already captured about 65 percent of the total trade between India and Canada. But given our advantages, we would like to capture a larger percentage."

The second area for business abroad, Bhatt said, involved capturing the non-resident Indian (NRI) segment - whether it is their remittances or their local businesses.

"Increasingly, SBI is offering facilities of banking transactions for NRIs to meet their requirements such as buying a house in India," he said.

The third area of thrust for the SBI in its bid to expand global operations was to increase its operations in the retail and corporate sector.

Bhatt also said SBI planned more branches in Canada, possibly next year

SBI recovers Rs 2,000-cr bad loan

State Bank of India (SBI) is likely to report an improvement in its asset quality when it presents its first quarter results. According to top SBI sources, the bank has recovered bad loans worth around Rs 2,000 crore during April-June 2008.

Top SBI executives, when contacted, refused to comment. SBI managing director SK Bhattacharyya said: “We can’t divulge details before the first quarter results announcement.”

SBI’s credit quality had deteriorated during 2007-08, as it booked fresh bad loans worth Rs 2,700 crore, mainly on account of retail loans, and to some extent, mid-sized corporate loans. As on March 31, 2008, the bank had gross non-performing assets (NPAs) of Rs 12,837 crore compared with Rs 9,998 crore, a year back.

“On the other hand, the bank is slated to make a provision of around Rs 1,000 crore against mark-to-market (MTM) losses of its investment,” an SBI official said on conditions of anonymity. Out of this sum, around Rs 700 crore is expected to be provided for against depreciation of bonds the bank received from the government on account of its rights issue.

Banks are booking MTM losses against depreciation of bonds and equity investments during April-June 2008 period. Nevertheless, SBI is expected to clock double-digit growth in the first quarter to June 30, 2008 over the corresponding period a year back. This is despite the fact that demand for loans from sectors like commercial real estate and auto has slowed down.

Coming back to SBI’s bad loan management, government’s debt waiver-cum relief scheme would help SBI reduce its bad loans by another Rs 2,000 crore. SBI has waived overdues of around 25 lakh farmers, aggregating about Rs 7,000 crore. “It’s estimated that around 30% of the total waived sum had become NPAs,” another SBI insider indicated. Gross NPA stood at 3.04% as on March 31, 2008 while the net NPA stood at 1.78%.

SBI set to launch mobile banking

MUMBAI: State Bank of India (SBI) will open 101 branches running core banking solution (CBS) on July 1, its foundation day. SBI also plans to launch mobile banking the same day, sources told ET. This will make it the first state-owned bank to offer mobile banking.

The branches will be opened by finance minister P Chidambaram in New Delhi. Representatives of the new branches will participate via a videoconference. SBI has 10,100 of its 10,385 branches running CBS — where branches are networked to enable a customer to access his account from any SBI branch.

If SBI can reach even half of its customer base of 1.3 crore, it will emerge as the biggest player in mobile banking. The move comes close on the heels of the RBI releasing draft guidelines on mobile payment.

SBI, which bought its M-banking application from Spanco Telesystems, has been running internal pilots. "So far, it was offered only for staff to familiarise them with the product for effective marketing," said an SBI official.

Besides balance inquiries and transaction alerts, SBI’s M-banking will help users transfer funds up to Rs 1,500. The operator-independent service can be used to pay utility bills and will work on most of the basic handsets.

RBI has mandated that M-banking service must work on all mobile operators and use SMS as a medium for transactions. Many private banks offering M-banking will have to tweak their service to comply with the regulation.

"Looking at the huge and diverse customer base of SBI, we have developed a solution which will work across mobile operators and support various methods of communication," said Spanco Telesystems vice president (technology) Kamal Maheshwari, the company that has developed the solution for SBI.

"Going forward, we plan to add mobile wallet and merchant payment options to the system, which will virtually replace debit and credit cards with the phone," added Mr Maheshwari.

SBI gears up to hike PLR

Bank awaits RBI move to finalise the extent of increase.

State Bank of India, the country's largest lender, is likley to raise its prime lending rate (PLR) and is awaiting fresh monetary actions from the Reserve Bank of India (RBI) to finalise the extent of the increase.

SBI had decided to hold on its prime lending rate of 12.25 per cent when the central bank raised the repo rate, or the rate at which it lends to banks, by 25 basis points to 8 per cent. In its assessment, the bank could absorb the increase as the impact on its net interest margin was less than two basis points. SBI's net interest margin was 3.04 per cent at the end of March this year.

The bank's asset-liability committee (Alco), which met on Saturday, is divided on the issue. But a senior executive said the bank will be unable to absorb further increase in policy rates and will be forced to alter its prime lending rate.

The magnitude of the hike will be decided after RBI announces fresh measures to tame inflation which touched a 13-year high of 11.05 per cent at the end of the first week of June.

While SBI Chairman OP Bhatt had earlier said that the bank will have to review its PLR or alternatively look at raising interest rates on some of the loans it offered, the Alco had decided against the move. A part of the reason, executives said, was due to the anticipation of more steps from the central bank.

"We had anticipated that RBI will step in again since inflation continues to be a concern due to rising crude prices. But we can't do anything now till RBI announces its actions," a senior executive said.

A decision from SBI will set the tone for others. While the largest bank in the country is in a unique position, having raised its deposit rates earlier this month, other players have refrained from raising lending rates so far.

While none of the public sector players have raised rates so far, HDFC Bank, Jammu & Kashmir Bank and Yes Bank have increased PLR by 25-100 basis points.

A host of banks have increased their deposit rates but lending rates are expected to be hiked only after RBI announces fresh steps. On Sunday, Punjab National Bank had indicated that it will increase PLR by 50 basis points.

Others like mortgage player HDFC have said that they will decide towards the end of the month.

SBI nudges higher after keeping lending rate steady

Meanwhile, the BSE Sensex was up 280 points, or 1.84%, to 15,469.81, on positive cues from global markets. US stocks closed higher on Friday, 13 June 2008, helped by a government report that showed underlying price pressures rose moderately in May 2008, easing fears that inflation would force a near-term rise in interest rates.

On BSE, 1.28 lakh shares were traded in the counter. The scrip had an average daily volume of 6.91 lakh shares in the past one quarter.

The stock hit a high of Rs 1365 and a low of Rs 1339 so far during the day. The stock struck a 52-week high of Rs 2396.54 on 14 January 2008 and the stock hit a 52-week low of Rs 1226.58 on 14 June 2007.

India’s largest commercial bank had underperformed the market over the past one month till 13 June 2008, declining 20.60% compared to the Sensex’s decline of 12.47%. It also underperformed the market in the past one quarter, declining 22.15% compared to Sensex’s decline of 3.62%.

The bank's current equity is Rs 634.88 crore. Face value per share is Rs 10.

The current price of Rs 1344.30 discounts its Q4 March 2008 annualised EPS of Rs 119.29, by a PE multiple of 11.26.

Prime lending rate (PLR) is the minimum short-term interest rate charged by commercial banks to their most creditworthy clients. The decision was taken at a meeting of the assets-liability committee (Alco) of State Bank of India (SBI) on Saturday, 14 June 2008. The Alco met to deal with the issue of interest rates in the wake of the Reserve Bank of India's (RBI) move to raise repo rates, or the rate at which it lends to banks, by 25 basis points to 8%, on 11 June 2008, to contain inflation.

On 5 June 2008, State Bank of India signed an agreement with Societe Generale Securities Services, a division of Societe Generale Group, to form a joint venture company for providing custody services. The joint venture company will offer custody and related services in India. State Bank of India (SBI) and Societe Generale Securities Services (SGSS) will hold 65% and 35% respectively of the equity in the new company.

SBI’s net profit rose 26.1% to Rs 1,883.25 crore on 26.7% rise in operating income to Rs 16,393.93 crore in Q4 March 2008 over Q4 March 2007.

SBI provides banking, treasury and credit management services to individual and corporate clients.

SBI revises foreign currency deposit rates

Largest public lender State Bank of India on Tuesday hiked the interest rates on foreign currency non-resident bank account deposits and non-resident external term deposits with effect from June 1, 2008.

Foreign currency non-resident bank FCNR (B) deposits in US Dollar, having maturity of one year to less than two years, would now attract an interest rate of 2.41 per cent as compared to 2.33 per cent earlier.

Rate of interest for deposits with 2-3 years maturity has been revised to 2.71 per cent from 2.43 per cent earlier, SBI said in a press release issued here.

For deposits having a maturity of five years, the rate has been revised to 3.47 per cent, against 3.11 per cent earlier, the bank said.

For Euro deposits, which would mature in 1-2 year period, the revised rate stood at 4.34 per cent against previous rate of 4.21 per cent while for 2-3 years and 3-4 years, the revised rates are 4.23 per cent from 3.78 per cent earlier and 4.11 per cent, against 3.68 per cent, the bank said.

Similarly, for deposits in Pound, the bank has revised the rate to 5.40 per cent (5.06 per cent), for a tenure 1-2 years while for 2-3 years and 3-4 years, rates have been revised to 5.26 per cent (4.65 per cent) and 5.21 per cent (4.62 per cent) respectively, the bank said.

For NRE deposits having a maturity 1-2 years the bank has revised the deposits to 3.16 per cent (3.08 per cent) while for 2-3 years and 3-5 years, the rates have been revised to 3.46 per cent(3.18 per cent) and 3.81 per cent (3.45 per cent) respectively, the bank said.

Stories behind SBI’s withdrawn circular

The fact that the country’s largest bank was forced to withdraw an innocuous internal circular on farm loans only indicates the inability of even well run banks to take independent decisions.

An internal circular issued early last week by State Bank of India to its branches advising restraint on lending for purchase of tractors and farm equipment became a major controversial issue.

The intended benefit to the bank was, of course, recovery of some loans that had become sticky. In the sub-category of advances for buying tractors and farm equipment, SBI has a large share of problem loans.

Taken out of context, the paragraph dealing with a freeze on such loans was construed as ‘anti agriculture’. Not just the farmers’ lobby but the equipment manufacturers and inevitably the political parties as well criticised the SBI’s alleged anti-farmer stance.

Goodwill negated

If the UPA government had earned some goodwill from the farming community through the Rs. 60,000-crore loan waiver scheme, the action of the country’s biggest bank, it is alleged, had negated the advantage through just one circular instruction. For SBI, there was no option but to withdraw the circular in full.

There can be no better demonstration of the misunderstanding over the banks’ role in agriculture finance and indeed in all other traditional and non-traditional commercial bank functions than was seen last week. In fact, there are larger messages that emanate from this controversy.

Proxy for government

The first has to do with the autonomy of public sector banks. Much of the criticism was directed not just at SBI but at the UPA government itself. SBI or for that matter any of the other large public sector banks acting as a proxy for the government is not new.

Autonomy for these banks has been a mirage. The Finance Minister has on more than one occasion ‘talked’ to the PSB chairmen into lowering interest rates even when the RBI’s monetary policy stance has been anti-inflationary and hence favoured higher interest rates.

Political compulsions

Second, agriculture has been a sensitive issue. The loan waiver scheme announced in the budget sought to make political capital for the ruling alliance. Considering the magnitude of the waiver and the fact that what was being waived was not some government dues but loans provided by banks to farmers from out of their resources, there was hardly any worthwhile criticism of the scheme as such. (The one area of confusion regarding the source of funds for the waiver was subsequently cleared .The budget would provide the funds.)

Three, the above is clearly the outcome of a belief that government owned banks are an extension of the government and that they exist only to carry out their owners’ bidding. The conclusion is inescapable that in popular perception, public sector banks are like the electricity boards dispensing free power to some classes of consumers and are generally adopting practices that run contrary to accepted commercial principles.

Four, those who say that the farm loan waiver scheme is a socially relevant one and that it does not matter if commercial banking principles and practices are given a go by for the sake of larger goals miss one obvious point.

An avoidable lapse

Already there are indications that even farmers who would have repaid their loans are holding back hoping to get a waiver. It is also likely that banks will slow down their lending to agriculture, especially for financing tractors and equipment. These are medium term loans and the risks of political interference here are higher than in short-term crop loans.

Five, there is obviously an urgent need to spruce up the public relations machinery of the PSBs. SBI’s back tracking over the tractor loan circular was not unexpected. But surely it could have made a much better job of communicating the original intentions.

The circular, as pointed out, is by no means anti- farmer. Many other public sector bank chiefs who were interviewed claimed that they have no problems with tractor loans. Clearly such statements are for the consumption of their political masters.

Six, the biggest loser in such futile exercises is the reform process. The Finance Minister and other policy makers probably do not get the vital feedback from the banks.

On the premise that the higher ups will not like inconvenient news, it is far easier to paint a positive picture than even try to highlight some negative factors.

SBI withdraws freeze on tractor loans

The State Bank of India on Wednesday withdrew its circular freezing loans for buying farm equipment like tractors.

"We regret that our circular dated 16th May, 2008 concerning tractor loans has been misunderstood and has given rise to concern. The circular is withdrawn with immediate effect," SBI chairman O P Bhatt said in a statement on Wednesday.

In the circular, SBI had asked its branch managers not to sanction loans to farmers for purchasing equipment like tractors, combined harvesters and power tillers as nonperforming assets in this segment of farm loans have risen to 17%.

Loans given by the bank under this segment amounted to Rs 7,000 crore out of a total lending of Rs 43,000 crore to the farm sector.

SBI was under tremendous pressure once the contents of the circular came out in the open. The temporary freeze on loans for farm tools at this time of the year, when agricultural activities are in full swing, would have affected the farmers badly.

The finance ministry is believed to have been unhappy with SBI’s circular as it would have dented the government’s attempts to ease the credit burden on farmers through its farm loan waiver exercise.

Government was also under pressure from Congress and its UPA allies to impress upon SBI to withdraw the circular. FM’s office played a key role in persuading the bank to rescind its controversial order.

SBI’s joint MD Anup Banerjee said the bank was not averse to giving loan to farmers, but as nonperforming assets were mounting in this segment, it had decided to temporarily discontinue giving loans for purchase of farm equipment.

He said SBI would educate the farmers to make use of the government’s farm loan waiver scheme to return bank loans. This, he said, would enable defaulting farmers to get of fresh loans. Banerjee said, this would make banks comfortable in giving fresh loans to farmers.