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)".

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.