Govt approves SBI acquisition of State Bank of Indore

The acquiring process of State Bank of Indore by its parent bank State Bank of India has got the approval of Indian government. This was informed by the junior finance minister to the lawmakers.

Earlier SBI, country’s largest lender had acquired one of its subsidiaries - State Bank of Saurashtra. There are six other associate banks and SBI plans to acquire all the associates eventually. Namo Narain Meena told the lower house of parliament in a written reply, "SBI has already initiated the process".

State Bank of Indore on Oct 31 had informed the Bombay Stock Exchange that its board as given its approval to the acquisition of the bank by SBI, including a share exchange ratio proposed allotment of 34 equity shares of SBI in view of every 100 equity shares of State Bank of Indore.

The minister informed but bank employees’ unions have expressed their concern over the proposed acquisition in the banking sector, especially the state-run banks. He stated, "Some of the apprehensions are closing of bank branches, retrenchment of existing employees, regional sentiments about some particular banks, etc".

He also informed that government has not given "direction to any specific bank to consider proposal for merger or amalgamation with a particular bank." The proposal for acquisition has to be taken up by the managements of the banks and government will just play a role of supporter, as the common stakeholder.

SBI General Insurance & IAG include JWT India and Interpub in its list

State Bank of India, India’s largest lender in a tie up with Insurance Australia Group (IAG) has set up a joint venture, SBI General Insurance. Recently the duo completed the initiated creative pitch process following the company has appointed two JWT India and Interpub to its list. The amount size is in the range of Rs 8-10 crore.

The SBI General Insurance officials declined to comment on the development and the agency officials were also not available for comments. Sources closely related to the development have confirmed the two agencies are already part of the SBI General Insurance list.

In the joint venture SBI holds a major stake of 74 per cent and IAG holds the remaining stake of 26 per cent. IAG is an international general insurance group carrying out operations in Australia, New Zealand, Thailand, Malaysia, China and the UK through various brands.

Thus SBI entry into the general insurance segment with a bunch of financial products has completed the financial services areas. However bank, through its subsidiary SBI Life Insurance Company of India is already offering life insurance products.

Banks union threatens to go on strike in protest to State Bank of Indore- SBI merger

Although the merger of State Bank of Indore with State Bank of India (SBI) had got green signal but the All India Bank Employees’ Association (AIBEA) is against this merger, thus in protest of this merger AIBEA has proposed to go on a one-day strike by November-end. According to union the merger is a “violation” against the agreement, and if the merger is pursued then it might think of going on an indefinite strike.

The union took decision to go on strike after SBI submitted a copy of ‘Scheme of Acquisition of State Bank of Indore by SBI’ to the Bombay Stock Exchange.

CH Venkatachalam, general secretary, AIBEA told Business Standard, earlier in June, this year the labour minister had held meeting with the bank management in which it was told not to go ahead with the merger, both the management and the union representatives agreed on this.

Venkatachalam added, “It’s clearly a violation by the SBI management, we have decided to go on a one-day strike by the end of this month against the decision”.

The union representatives will be meeting on Thursday or Friday to finalize the date of strike.

“I am not ruling out an indefinite strike,” he added.

He informed the bank (State Bank of Indore) is doing good business, even better than SBI, so why to go for merger? As State Bank of Indore provides support to the regional development projects, so, Venkatachalam feels if the bank is merged, then it will loose capability of supporting regional development.

He told comparatively the business per employee at State Bank of Indore is Rs 7.01 crore, while SBI figures stand to Rs 5.56 crore only. Likewise the advances per employee for State Bank of Indore accounts to Rs 3.43 crore as against Rs 2.63 crore for SBI, whereas deposits per employee of the former figures to Rs 4.50 crore against Rs 3.40 crore for the latter, and also in the priority sector lending it is 34 per cent for State Bank of Indore as against 26 per cent for SBI.

SBI - State Bank of Indore merger gets approval from govt

The State Bank of India (SBI) and State Bank of Indore merger have been finally approved by the government. A senior finance ministry official informed that the government has given an in-principal approval to the merger.

The official informed, “The boards of both the banks will now work out the modalities of the merger, and come to the government for final approval. We expect the merger to be completed by December”.

The official added that State Bank of India is not planning any more mergers of its subsidiaries with self. Last year in August SBI had merged State Bank of Saurashtra with self.

At present country’s largest commercial bank is having five other associate banks- State Bank of Travancore, State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Hyderabad.

SBI announced reduced interest rates for irrigation and crop loans

State Bank of India country’s largest lender has announced cut on interest rates of irrigation and crop loans to reduce the impact of a drought which can block burgeon economic recovery.

In India only 42% of agricultural land is irrigated, this year is facing the worst dry spell in more than two decades, and more than a third of the country's 625 administered districts have declared drought in their areas.

The effect of dry conditions can be seen on other things, in rural areas, which consists of more than 60% of the country's 1.2 billion population the demand for everything can come down from motorcycles to cell phones.

The government is urging state-run banks to appease farm loans and support irrigation in order to avoid decline in farm output, which would reflect on economic growth.

Niranjan Parsha, general manager of SBI's agriculture business unit, in an interview told Dow Jones Newswires, "Though the monsoon has now revived, this (lower interest rates) will help provide a further fillip to agri lending, which should start picking up from this month".

SBI stated in a statement for new minor irrigation loans of up to 2.5 million rupees ($51,125), the bank will be charging an interest rate of 8% in the first year and 9% for the second and third year.

At present on such loans bank is offering from 10.50% to 13.25%.

Moreover on loans provided for crops, on more than 300,000 rupees to 2.5 million rupees the bank has reduced the interest rate to 10% for one year from the existing 11.75% to 12.75%

Bank will offer the reduced rates for the summer-sown and winter-sown crop seasons up to March 2010.

Mr Parsha informed at present bank’s agriculture loan book accounts to 570 billion rupees and aims to increase it by 158 billion rupees in the remaining part of the fiscal year ending March 31, 2010.

Bank has also reduced the loan processing charges and has extended the repayment period by a year for new loans for the farmers.

SBI face staff crunch, innumerable home loan applications pending

Recently State Bank of India (SBI), announced new home loan scheme in which it is offering 8% interest rate, after this since February SBI counters across country are receiving innumerable home loan applications. As per bank sources there is acute shortage of manpower in the bank’s loan processing centers due to huge number of loan applications are pending with the bank creating major dissatisfaction among the customers.

For instance in SBI’s Kolkata branch around 1000 home loan applications are pending for more than a fortnight even though bank had promised to sanction loan to the valid proposals with in a week.

The Bengal circle SBI officials have promised to take corrective measures to clear the pending application. For beginners SBI has planned to expand its loan processing desk to tide over the increasing flow of applications.

SBI chief general manager in Kolkata Jayanta Kumar Sinha told, “There are cases where customers had to wait longer than usual. This is primarily for two reasons. We took a long time to process a loan when we detected faults in the application. And there was also a gap in manpower”.

Mr Sinha said, “We plan to expand the loan processing desk as we expect the flow of application to double this year to 20,000”.

SBI officials, pointed out although the situation to some extent in all circles is similar, the problem is severe in Kolkata, as the demand of home loan in the city is high. Mr Sinha told, “Last year, we had received nearly 10,500 personal loan applications in Kolkata alone totalling Rs 688 crore. In terms of the number of applications, Kolkata was the highest in the country”. The bank is receiving around 60% of the home loan applications.

There are around 120 staffers in SBI’s retail asset central processing centre (RECPC) in Kolkata, which exclusively processes and sanctions retail loans received from the city people. But this appears to be inadequate in comparison to the flow of loan applications bank is receiving every day. There have been some cases for which bank have taken even more than 45-50 days for sanctioning home loans.

The bank sources say around 100 retail loan applications are received out of which approximately 60 are home loan applications.

Another senior SBI official acknowledges, “We have now geared up to process 100 applications every day. But there is a backlog of 840 applications”. On the other hand according to some sources working with the bank stated that over 1,200 loan cases are pending. But no official confirmation has been given by the bank about this.

SBI officials informed the high-value applications worth Rs 1 crore are given the priority and cleared first. There are few cases where valid applications were cleared after 45 days which were related to projects built by private promoters and where the ticket size is less than Rs 20,000.

Home loan processing is, more unwieldy, in comparison to education loans or car loans. “Home loans are offered for a longer period and so the processing job is a bit rigorous. We need to follow know your customer (KYC) guidelines on borrowers, for vendors and even on guarantors.”

Most of the banks do KYC verification by their own but SBI, out sources the legal verification to its 30-odd empanelled lawyers.

SBI announce cut in deposit rates by 25-50 bps

India’s largest lender, State Bank of India (SBI) has announced cut in interest rates on term deposits by 25-50 basis points (bps). The revised rates will come into effect from Monday. The cut has been done across various maturities.

Since April SBI has reduced its interest rates five times bringing the cumulative reduction to about 175 bps. The revised rates will be applicable to fresh deposits and the term deposits that come up for renewal. The maximum rate of 7.75 per cent is being offered on deposits for 8 to 10 years.

As per revised rates on one year to less than two years it will be 6.5% instead of 7% offered earlier. The Chief financial officer S Ranjan told the new cut and renewals of old term deposits at lower will together bring down the cost of deposits by 6-7 bps.

The rate for deposits of one year to less than two years will be 6.5 per cent as against 7 per cent offered earlier. Today’s cut along with renewals of old term deposits at lower rates were expected to bring down the cost of deposits by 6-7 bps, said Chief Financial Officer S Ranjan.

In 2008-09 SBI’s cost of deposit was 6.30 per cent, which is higher from 5.59 per cent for 2007-08. In the last two-three years bank has been under pressure because of high-cost deposits it had constricted in order to fund credit growth therefore to protect its net interest margin (NIM) it had opted for aggressive reduction in its deposit rate.

In October 2008 bank had offered 10.5 per cent annual interest rate on 1,000-day deposits to retail depositors with which bank earned Rs 1,000 crore daily. On the other hand its NIM reduced to 2.93 per cent in 2008-09 from 3.07 per cent in 2007-08.

There has been reduction of up to 300 bps in deposit rates since December last year; in comparison to this the benchmark prime lending rate has been reduced by 150 bps. The bankers say although they find little room for an aggressive deposit rate cut but in the second quarter it will remain subdued. Dhanalakshmi Bank CFO Bipin Kabra pointed out as now the banks do not have any liquidity problem therefore banks will go for cut in their costs.

However the Andhra Bank Chairman and Managing Director K R Kamath say at this point banks cannot find any room for further cut in deposits rates.

SBI Davanagere main branch organize 2-day car, home loan mela

Country’s largest lender the State Bank of India (SBI), Davanagere main branch in association with its four other branches including Harihar is organizing a two-day `Home and Car Loan Mela' at Abhinava Renuka Mandir, P B Road, in Davanagere. The mela will be held for two days July 25 and 26 between 10.30 am to 5.30 pm.

Speaking at a press conference, chief manager of Davanagere branch H Ranganath informed, in this mela SBI is looking forward to do a business of at least Rs 15 crore. He added in earlier mela held in December bank had done a business of Rs 8 crore. In the mela loans will be sanctioned on the spot to the eligible customers. Ranganath said people coming to mela should carry any photo identity card, residential address proof, bank account statement for 6 months, salary certificate (for house loan) and a quotation for car loan.

The bank will also give one month time (till September 30) to the eligible customers to submit other documents, he said. He informed the bank will charge 8% interest rate for the first year, followed by 9% for the next two years and after that it will be charge floating rate according to the existing rates. He said the customers who take loan in the mela no processing fee will be charged from them.

In the press conference branch managers T Sidda Naik, Ashok Patvarkher, along with deputy managers Devendra Bellary and K Umapathy were present.

Center advice SBI to have talks with bank unions on consolidation proposal

Last month the boards of SBI and the State Bank of Indore had passed resolutions approving the consolidation proposal. But the Center has directed the SBI not to follow the Reserve Bank of India the issue of acquirement of State Bank of Indore.

Now the Government has asked the SBI management to have talks with bank unions and try to convince them about the merits of the consolidation proposal.

Earlier SBI had approached the RBI and the Government for their approval of this transaction. An RBI may take some time to give approval because it seems that the central bank has some uncertainties over the method in which the SBI operations was carried out.

However the unions of all the six associate banks had called for protest strike on July 6 with regard to approval of consolidation proposal by boards of SBI and the State Bank of Indore.

The advice for meeting between the unions and the SBI management was given by the Deputy Chief Labour Commissioner, Mr N. K. Prasad, at a conciliatory meeting with the representatives of six bank unions, SBI management and senior management of all six associate banks of SBI.

Mr C. H. Venkatachalam, General Secretary, All India Bank Employees Association (AIBEA), told Business Line, “Since the SBI management has now agreed to discuss the State Bank of Indore merger proposal with the bank unions, we have decided to defer the strike call given for July 6 in all six associate banks”.

A number of bank unions are against the consolidation proposal, as the SBI senior management had not taken the employees into confidence before taking the decision on the consolidation.

For now, at the meeting the senior management of the other five associate banks — State Bank of Mysore, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, State Bank of Patiala and State Bank of Travancore — had clearly informed that they had no proposal for merger with SBI.

The proposed acquiring of State Bank of Indore by SBI will be the first consolidation deal in the banking industry after the Finance Minister, Mr Pranab Mukherjee, last month had emphasized that public sector banks must look at consolidation as a serious option. He had said that consolidation is important in order to reduce risk to financial stability and also to face competition.

The Finance Minister had also clarified that the proposal for consolidation in the banking sector had come from the management themselves and that the Government will only play a supportive role as a common shareholder.

SBI offers inventory funding for dealers at lower interest rate

On Monday State Bank of India (SBI) country’s largest lender announced from July 1 it will introduce a 'Dealers Accounts Drive' which will be in operation for over six-months. Under this new account bank will offer inventory funding for dealers at reduced interest rate.

SBI's CGM-SME, Mr B S Bhasin, explained, “The interest advantage to dealers would be to the extent of 0.50 per cent”.

Bhasin informed the new reduced interest rate will be in addition to the recent 0.50 per cent reduction in the bank's prime lending rate. In addition to this during campaign period dealers who take finance from the bank will also be get the benefit of full waiver of mortgage charges.

Mr Bhasin pointed out, “Normally, dealers who avail credit facilities from the bank offer some collateral security in the form of lending property. When such collateral security is offered as a part of the services, banks charge a fee for creation of such security. SBI has waived these mortgages for dealer accounts during the campaign period”.

Besides this, SBI will also offer a wide range of deposit and transaction products to dealers like roaming current account.

He added, “With over 11,800 branches, SBI offers access to dealers' current accounts from anywhere across the country”.

Banks currency chests short of coins, RBI says demand is more than supply

Banks handling currency chests are facing shortage of coins. The State Bank of India (SBI) and Bank of Baroda (BoB) serving other banks have also confirmed that there has been short supply of coins from the Reserve bank of India (RBI) and for several months the coins have not been made available to the banks.

RBI deputy general manager K Mohan while confirming said that there is a short supply of as required by the different currency chests handled by different banks. The officer stated banks handling currency chests to supply coins in different regions are required to make a periodical serrate with their office, which takes care of 187 currency chests in 11 districts in western Maharashtra and Goa.

He informed, "We distribute coins equitably," he pointed out, but maintained that the demand was more than the supply. He explained that the RBI supplies coins to its currency chests when it obtains a remittance from the mint. "We depend on the government of India's mint," he said.

However the Margao branch of SBI had received coins of one and two rupees denomination some what in February this year, while BoB got supplies around October-November last year. It is not only the big time gap but also the volume supplied is also far less.

Although around 500 bags would have satisfied the need for coins in the denominations from Rs one to five, but the supply was around 60 bags each for the one and two rupee coins. BoB provide supply to several banks like the Union Bank of India, Dena Bank, Syndicate Bank, Bank of Maharashtra and Corporation Bank.

One of the customer, Vivek a restaurant owner confirmed that when he sent one of his employees to BoB to get coins worth Rs 1000, he returned empty handed. He added, "This time, I shall go to the bank myself and convince them to part with half the number of coins at least".

In the short supply of coins beggars, though, have proved helpful. As after day’s collection several beggars roaming around the city head for eateries with their coins.

A Syndicate Bank source pointed out that the bank depends on the BoB for its coin supply, but in the absence of proper supplies the bank and its clients are hard hit.

The Syndicate Bank, handles the currency chest in Karnataka, publicizes through newspaper advertisements the venue, time and date when the bank van would make available the currency. The source also added that at the time of festivals and weekly markets, the bank's Hubli branch makes available coins to those who require it for trading purposes.

In spite of the fact that chocolates, blades at grocery stores, coupons at restaurants and Maggie cubes are being used to settle bills in the absence of coins, and this works out to be a profitable venture for businesses. The South Goa Hotel and Restaurant Owners' Association has started a campaign asking people to write to the RBI office in Mumbai (department of currency management) about the problem.

SBI aims to be among top ten banks in the world

State Bank of India (SBI), country's largest bank, is planning to make its position among top ten banks in the world in the next three to five years, pointed out SBI chairman O P Bhatt during his maiden visit to Vadodara on Monday. Bhatt spoke to select chief executive officers (CEOs) of Gujarat Inc as part of CII-CEO Network series.

Bhatt told media persons, "SBI has set a high global ambition and we plan to open ten new foreign branches this financial year". The new branches will be opened in Hong Kong, Singapore and United Kingdom among other places.

He stated, "Even if one puts together market capital of 89 scheduled banks of India, it is not equivalent to that of one leading bank of China," and added that presently no Indian bank is positioned among top 50 banks of world. Bhatt while supporting for consolidation said Indian banks should grow as Indian industries are becoming global with investments outside India.

Meanwhile the Union minister of finance Pranab Mukherjee has given approval on banking industry's consolidation in a recent meeting with bankers, on the other hand the Associate Banks' Officers Association (ABOA) has opposed to the idea of merger and announced a protest strike on July 3, 2009, fearing job losses.

Bhatt, while quoting his observation on the merger of State Bank of Saurashtra with SBI, has given assurance that there will be no retrenchments. He added, "There was not even a ripple, the merger was smooth and we can do the same with other associate banks as well".

In spite of the recessionary phase, the bank has done 30,000 recruitments last year and this year too there will be 10,000 fresh recruitments.

SBI to extend special home loan interest of 8% till September

This year the State Bank of India (SBI) had announced a special home loan scheme in which it had capped the interest rate at 8% for one year. The scheme came into effect from February is expected to be extended by another five months up to September.

When SBI announced the scheme it had caused a flutter in the market, popped up the competition in the banking and home finance space. Reacting to the SBI announcement Deepak Parekh, chairman of the country’s largest mortgage company HDFC, even termed the reduction in interest rates a ‘gimmick’. Afterward, Canara Bank and LIC Housing Finance also reduced rates to attract customers. Although, SBI’s concessionary offer remains the lowest to date.

Officials’ privy to the development pointed out, “The proposal is to extend the home loan scheme up to September to benefit those who felt the April deadline was insufficient for availing of the scheme”. They added, “The proposal has been forwarded to the chairman’s office and approvals for the extension will be made public shortly. The deposit level at the bank is robust and SBI can afford to offer the loans at lower interest for an extended duration”.

Moreover, on Saturday SBI extended soft loans being offered to its existing small and micro enterprise customers under SME Help (to purchase fixed assets, including generating sets) and SME Care (for working capital loans) schemes to September 2009. Therefore term loans in the SME Help scheme will now be available for two years at 8% against one year when the scheme was launched earlier this year.

The bank has even slashed the interest rate to 8% for all new SME customers with loan requirements up to Rs 5 lakh. For the working capital also the reduced rates will be applicable as well as term loans unless they are offered they are covered under the credit guarantee scheme for small and micro enterprises (CGTMSE).

Furthermore, for new SMEs with fund-based loan requirements above Rs 5 lakh but below Rs 25 lakh, the bank is offering fixed rate of interest of 10% for two years to units covered by CGTMSE.

As per information provided by officials besides home loans, the bank will probably extend the deadline for auto loans and for warehouse-based receipts loans from May to September. However these schemes, are offering auto loans at 10% for one year and ware house based receipt loans at 8%, and were announced on February 20. According to banking analysts lower-than-expected response from borrowers may have resulted in SBI extending its loan schemes.

At present the demand for home loans is very low because buyers are waiting for property prices to fall before they can avail of the reduced interest scheme. Moreover Canara Bank's decision to offer a fixed rate of 8.25% on home loans up to December '09 might have also impelled SBI to extend its own scheme till September '09.

Recently, PSBs have been under intense media glare for failing to reduce their benchmark prime lending rates (PLR) to the same extent that key policy rates have been systematically brought down to encourage bank lending. In fact , PSBs say that over three-fourth of their disbursals are at sub-PLR levels and when they will reduce the PLR they will be forced to reduce interest rates further on loans that are linked to the prime rate such as on farm loans. Therefore they say this can affect their profitability.

SBI announced financing details for Nano, will charge 10% interest on loans

Finally Tata Nano was launched yesterday and keeping to his promise Mr Tata told that the company will offer Rs l lac price for the initial 1 lac customers only because the prices to the related products have increased therefore he will be revising the price of the car for the later customers.

Hence a majority of Tata Nano customers will have to pay more interest payments on the steep booking amount over the next one year. The reason being the Tata Motors will be able to deliver only 50,000-60,000 cars during 2009-10, though the company plans to accept 100,000 applications.

Therefore every customer who books the base version which will cost around Rs 112,000-123,000 from the State Bank of India (SBI), the preferred lenders will have to make an upfront payment of Rs 2,999 as interest charge according to the calculation made at the rate of 10 per cent, and processing fee. Moreover on any further delay in delivery the customer will have to pay additional interest payment at the same rate.

While for the later models the customers will have to pay around Rs 3,300 and Rs 3,900.

Customers who are not willing to avail finance from banks will only have to pay the application fee of Rs 300.

SBI, the sole booking agent for the Nano, has announced its financing details, while most other banks —public, private and non-banking finance companies (NBFCs) — will be revealing their plans over the next few days. It is believed that most of the public sector banks will be keeping the lower interest rate on the advance booking amount than the existing car loan rates.

SBI while announcing its financial details said it will be finance the entire booking amount of the Nano for which for a period of three months the applicant will have to pay an interest rate of about 10 per cent upfront. For the introducing model, customers will have to make a down payment of Rs 95,000. Therefore advance booking amount for the Tata Nano CX will be Rs 120,000 and for the top-end model the booking amount will be Rs 143,000.

Individuals are free to either pay the entire booking amount by themselves or can get finance.

In case there is delay of beyond 90 days in the allotment, Tata Motors will have to pay an interest rate of 8.5 per cent for one year to two years and 8.75 per cent for a period of more than two years.

At the time of allotment of the car, the loan will be converted into a regular car loan in which the interest rate is 11.75 to 12 per cent in case of SBI, with a maximum repayment period of seven years. A senior bank official informant SBI will be taking in consideration the minimum income and other KYC (know-your-customer) requirements before sanctioning the loan.

The customers can obtain applications forms from at over 30,000 locations in about 1,000 cities through Tata Motors passenger’s car dealerships, SBI and its branches, its subsidiaries and associates, other preferred financiers and outlets of Westside, Croma, World of Titan and Tata Indicom exclusive stores.

SBI first CAB set up in Lucknow

India's largest lender State Bank of India (SBI) on Wednesday launched its first kind of Currency Administration Branch (CAB), which will exclusively handle currency notes.

CAB also known as cash factory, is part of the bank's proposal to open one currency chest in every city which will disburse notes and rupee coins to the local banks and ATMs, besides from identifying counterfeit currencies.

SBI (Lucknow circle) chief general manager Shiv Kumar explained, "The cash factory will be the nodal point for issuing currency notes to all local SBI branches as well as ATMs. About half a dozen sophisticated notes sorting machines will sort out currency notes in four varieties in the branch office".

Kumar explained the first range currency notes will be fed into ATMs. The second range, known as re-issuable notes, will be reserved for customer transactions, while the third one, non-issuable, will be sent back to the Reserve Bank of India.

He added the mutilated and bad notes identified by machines will come under the fourth range and will be scrutinized manually.

Kumar informed the next cash factory will be set up in Kanpur.

He added, "The new arrangements are aimed at a more efficient and cost-effective centralized currency administration system instead of having multiple currency chests in a centre as prevalent today".

For the SBI branches, supervising the chests along with routine functions is an additional work. Officials stated by setting up of the cash factory it would be great help in better management of currency notes with fewer infrastructures.

They said that the CAB will also help in boosting the fight against fake currency in Uttar Pradesh, which is becoming a hub for counterfeit currency notes being allegedly smuggled across the absorbent and largely unguarded border with Nepal.

Last year in August, a Reserve Bank of India team had discovered counterfeit currency amounting to over Rs.5 million (Rs.50 lakh) from the currency chest of the State Bank of India's Domariaganj branch in Siddharthnagar district.

Then, the bank's chief cashier was arrested and a large amount of both genuine and fake currency notes were recovered from his house.

SBI chairman reassured margins to remain unaffected by cut in home loan rate

O P Bhatt State Bank of India’s chairman has reassured analysts that the bank decision of cutting home loan rates to 8% will not affect the margins. He also indicated that the bank will raise capital but the process for this will be done only after the elections.

Addressing the chief investment officers (CIO) of top fund houses in Mumbai on Wednesday, Mr Bhatt pointed out that the bank is considering adding nearly 1 lakh new customers to its existing base by offering the special home loans offer. This will also make possible for them to cross-sell other products to these customers, which in turn will result in additional revenues as well as savings by way of lower marketing costs.

Explaining about the 8% offer, Mr Bhatt notified the decision is also motivated by the fact that the bank invests a significant amount of surplus cash in the repo market where returns are only 4%. Therefore by redirecting this money as loans to home buyers, the SBI will be able to make twice that rate of interest. Mr Bhatt notify the CIOs that even if a part of surplus cash — one which they receive 4% — is forward as loans to home buyers; it will in turn boost margins.

However by the quarter ended December 3008 SBI net interest margin (NIM) improved to 3.15% from 3.01% in the corresponding period last year. Mr Bhatt notified analysts that he is expecting real estate sector to stimulate with SBI’s 8% scheme. As per the report of Antique Stock Broking, Mr Bhatt acknowledged that there are ownership issues with respect to maintaining the government share while raising capital. The report also stated, “Besides, political will of the new government would also be considered”.

As per the report Mr Bhatt, is expecting NPAs to rise gradually. NPAs might even double in case the economy continues to remain under stress, but he warned that it will not touch the 90 level like the earlier. The report also citied Mr Bhatt as saying that NPAs will rise in the short term due to provisioning norms, but will return to standard assets when the economy starts improving. He even anticipates negligence in export-oriented sectors like textile, gems and jewellery, auto components and IT sector.

The SBI chairman revealed that high-cost deposits comprise about 25-30% of the total assets and are for shorter duration. As these bulk deposits get revalued, the cost for the SBI will come down. However he stated that in the short run, the bank might feel some pressure on its NIM as it raised term deposits for three years whereas the impact of the cut in lending rate will be visible on the entire portfolio.

SBI announce freeze on rates on new home loans for 1 year

On Saturday State Bank of India (SBI) country’s largest public sector bank has announced freeze on interest rates on new home loans at eight per cent for one year.

But for its existing customers, a new scheme SBI Lifestyle Loan has been initiated under which customers will be able to avail eight per cent interest rate for one year.

As per SBI release this facility will be available to the amount of 10 per cent of their home loans but up to a maximum of Rs. 5 lakh.

The release also added the new scheme of eight per cent interest rate will be applicable for loans taken during February 2 and April 30.

The release stated the bank would be resetting the interest rate after the freeze period to the same rate as originally applicable under the respective schemes.

The existing borrowers of the bank under the two home loan schemes — loans up to Rs. 5 lakh and Rs. 5-20-lakh range — will also be offered at eight per cent for one year.

The release said at this point after the freeze period the originally constricted rate will be applicable.

In the release bank’s newly launched packages for SME borrowers —SME Care — were also mentioned under which an additional working capital facility of 20 per cent of the fund based limits to customers will be offered.

The release stated, “The loan will be given to take care of inventories of raw materials, finished goods as also delayed payments from their buyers in the current downturn at an interest rate of 8 per cent”. The repayment tenor of the loan will be one year.

The bank added in addition to this bank has also introduced SME Help, under this term loans will be given to purchase fixed assets including generator sets with concessionary interest rate of eight per cent for the first year.

The release stated after the first year, the applicable rate will be charged for the loans.

SBI awarded 2 IBA Award

State Bank of India has bagged two prestigious awards from Indian Banks Association namely "RURAL BANKING INITIATIVE "AND "BEST IT ARCHITECTURE". The award was given on 20th January 2009 in the IBA & TFCI's 5th Annual Banking Technology Awards function, 2009 held at Mumbai.

SBI is having a network of 4261 rural branches in Rural Banking Initiative, which is a astounding 38% of its network. All these branches including diverse geographical terrains- some in the hilly and mountain raven regions like Leh at an altitude of 13000 feet above the sea level are on Wide Area Networking Platform. One of the Bank's aims is to offer service even in the remotest part of the country. In alliance with this acknowledged objective, the Bank is setting up another 1000 new branches in rural and semi-urban areas before March 2009.

In IT Architecture, State Bank of India (SBI) which is largest premier financial institution in India having a network of 11,500 branches and an additional 4600 branches of its associate banks spread across India has upgraded its IT Architecture by getting on an ambitious Core Banking System (CBS) implementation with an aim of connecting all the branches that will serve to 150 million plus accounts with a daily transaction volume of 25 million plus transaction per day. The environmental friendly feature of SBI's CBS architecture has allowed flawless edge with other IT initiatives like ATM, Internet Banking (both retail and corporate), Payment Systems (NEFT, RTGS, SWIFT, ECS, and EDI), Government Business, Financial inclusion, Treasury and Foreign Exchange.

SBI and Allahabad bank reduced interest rates

The two public sector banks State Bank of India India's largest lender and Kolkata headquartered Allahabad Bank has reduced their interest rates for new loans to micro, small and medium enterprises by 1 percent. The new rates will come into effect immediately in line with the special package announced by the Reserve Bank of India and India Banks' Association.

State Bank of India has reduced interest rates on working capital loans to micro, small and medium enterprises by 0.5-1 per cent to be effective from 16 December. The State bank release stated, “With this reduction, the micro enterprises will be able to avail working capital finance at as low as 10.25 per cent”. Bank sources informed the reduction in rates will be applicable for small firms with working capital limits up to Rs 10 crore.

However Allahabad Bank said that new interest rates will be applicable for all existing and new loans to micro industries and has been reduced by 100 basis points. Whereas interest rate for small and medium enterprises with fund based exposure up to Rs 10 crore has been reduced by 50 basis points.

Allahabad Bank has also taken a decision of reducing interest rates for fresh housing loans up to Rs 20 lakh for a maximum tenure of 20 years to be available from the bank till 30 June 2009. The bank release stated, "The revised rate of interest for a loan up to Rs 5 lakh will now be 8.5 per cent (fixed) and for loan over Rs 5 lakh to Rs 20 lakh, the interest rate will be 9.25 per cent (fixed)".