Banking News

RBI’s decision to allow new players in the banking sector has received a big thumbs up from Indian industry according to the article  published in one of the leading newspaper. This will not only increase the employment opportunities in the banking sector but will also induct new processes and technology, improve efficiency, enlarge the capital base to meet the credit needs of the economy.

This decision of RBI comes out with a good news for bank jobs aspirants. But some questions are still unanswered.

  • Will there be any role of IBPS in recruitment in these banks?; or
  • Will the banks conduct there own separate exams?

But main thing is that more banking job opportunities is coming soon.

Major reason for RBI to allow corporate houses to form banks is to expand access to financial services in a country where only about half the population has a bank account.

Licence winners are expected to be announced by the first quarter of 2014.

Below is the list of 26 applicants who applied for licence from RBI:

  1. Aditya Birla Nuvo, part of the Aditya Birla conglomerate, which includes Idea Cellular and Hindalco Industries.
  2. Bajaj Finance, part of the Bajaj Group, which includes motorbike maker Bajaj Auto.
  3. Bandhan Financial Services, a microfinance lender.
  4. Edelweiss Financial Services, a diversified financial services firm.
  5. IDFC, a finance company which lends to the infrastructure sector and has investment banking, private equity, research and mutual fund operations.
  6. IFCI, a financial consultancy and advisory company.
  7. Indiabulls Housing Finance Ltd, part of the Indiabulls group conglomerate.
  8. India Post, part of the ministry of communications and information technology. Indian post offices offer savings schemes and sell insurance and mutual funds.
  9. India Infoline, part of the IIFL group, which has interests in brokerage, wealth management, insurance and consumer loans.
  10. INMACS Management Services Ltd, which provides management consultancy, corporate finance, audit, tax and legal advisory services.
  11. Janalakshmi Financial Services, a microfinance company.
  12. JM Financial. Former Citigroup CEO Vikram Pandit would become non-executive chairman of JM’s banking arm if it wins a license.
  13. LIC Housing Finance, a unit of Life Insurance Corp of India, the country’s largest insurer.
  14. L&T Finance Holdings, part of India’s largest engineering conglomerate, Larsen & Toubro.
  15. Magma Fincorp, a finance company that gives loans for vehicles, gold and small enterprises.
  16. Muthoot Finance gives loans against gold.
  17. Reliance Capital, controlled by billionaire Anil Ambani. Japan’s Sumitomo Mitsui Trust Bank and Nippon Life Insurance of Japan would each own stakes of between 4 and 5 percent in the proposed bank.
  18. Religare Enterprises, a financial services firm controlled by the Singh brothers who also control Fortis Healthcare. U.S.-based bank Customers Bancorp Inc will invest $51 million in the bank if the group gets a licence.
  19. Shriram Capital, part of the Shriram Group, which includes truck financier Shriram Transport.
  20. Smart Global Ventures.
  21. SREI Infrastructure Finance, which mainly finances infrastructure projects.
  22. Suryamani Financing Co Ltd, a financial services provider.
  23. *Tata Sons Ltd. Tata is the holding company for India’s largest conglomerate.
  24. Tourism Finance Corp of India, which provides financial services for tourism-related activities.
  25. UAE Exchange India, a remittance and foreign exchange services firm.
  26. Value Industries, affiliated with Videocon Industries, which has interests ranging from white goods to energy.

*Tata Sons Ltd, the holding company for India’s largest conglomerate, among those seeking to set up the first new Indian banks since 2004.

Benefits of allowing new players in banking sector:

  • Encourage existing players to improve efficiency.
  • New players with sound financial base will bring in the much needed capital that is required to support the credit needs of the economy.
  • Generate huge employment opportunities.
  • With the entry of new players there will be an expansion in banking services and hence help in increasing financial inclusion.

Read from here the article published in one of the leading newspapers relating to this news.

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Banks are one of the biggest recruiting agencies in the country as it hires for its posts from almost all the streams. But the Recruitment and selection process is a hectic task for Banks as well as for the Candidates.

But don’t worry Public sector banks are planning common interview for jobs to make the selection process much easier.
IBPS discussed with the Indian finance minister that aspirants those who will clear out the IBPS common written exam (CWE) need to appear for only one interview to land for a bank job in India. A final merit list will be declared and aspirants can choose any bank as per merit.

According to an article published in a leading newspaper dated September 27,2012, the new system of common interview may be introduced as early as this year itself and candidates who took the common written exam on June 17 may be the first to attend the common interview. Over 7.5 lakh candidates took the exam for probationary officers and the result is expected in the first week of October.
You can read the complete article from here.

Also, IBPS is planning to waive the fee for appearing in the common interview. At present, candidates need to shell out Rs 150-250 per interview, which banks recover from candidates as the cost for conducting interviews.

Benefits if this decision is implemented:

  • Public sector banks, which recruit about 30,000-40,000 people a year on an average, expect to save time and cost once this common interview becomes a reality.
  • This decision will be helpful for all those candidates who clears the common written exam of IBPS but are not called for an interview.

The responsibility of taking this common interviews shall be given to IBPS as 20 banks are expected to give this authority to IBPS. Country’s largest lender, State Bank of India(SBI) will not be a part of the process. IBPS also conducts common written test (CWE) for these banks.

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State Bank of India (SBI),Country’s largest banking and financial services company in India by revenue, assets and market capitalisation. It is a state-owned corporation with its headquarters in Mumbai, Maharashtra.

The Bank  is set to hire 20,000 staff across both the officer and clerical cadres over the next one year, reports the Hindu Business Line.

Public sector bank SBI had 214000 employees on its rolls as of June 2012. As of June this year SBI had 80,329 officers and 95,018 clerks on its rolls. The Bank is set to expand its staff by ten per cent over the next one year. A major part of the new recruitment that will be made by SBI over the next one year will be for the 1,200 new branches that the bank proposes to open in the current year.

Why so many Recruitments?

As you all are aware that there are large number of retirements in the banking sector  in the next 4-5 years. In SBI only, about 35-40 per cent of the staff or about 70,000-80,000 people will be retiring across all levels. Recruitment of clerks is higher in number because of a large deficit in clerical staff in many SBI’s branches as reported by MD. A recent article in businessline revealed about these vacancies.

Notification for the Recruitment:

Interview process is currently going on for clerks while the Bank will shortly be starting the process for recruiting probationary officers. Notification for the same will be announced soon. We will keep our readers updated.

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The rupee has depreciated by more than 18 percent since May 2011, moreover with the rupee breaching the 53 dollar mark, profit margins of companies that import commodities or components would come under severe pressure, which could result in price increases for the consumer. The rupee depreciation will particularly hit the industrial sector and put higher pressure on their costs as items like oil, imported coal, metals and minerals, imported industrial intermediate products all are getting affected. Although the prices of most of the imported commodities have fallen, the depreciating rupee has meant that the importer gets no respite as they need to pay more to purchase the same quantity of raw materials. The depreciating rupee would keep the price of imported commodities elevated. Thus the industrial sector is bound to get adversely hit.

Impact of Rupee Depreciation
Primarily the consequences of weak rupee are to be felt through:

A. Increase in the Import Bill
A depreciation of the local currency results in higher import costs for the country. Failure of a similar rise being experienced in the prices of exportable commodities is going to result in a widening of current account deficit of the country.

B. Higher Inflation
Increase in import prices of essential commodities such as crude oil, fertilizer, pulses, edible oils, coal and other industrial raw materials are bound to increase the prices of the final goods. Thereby making it costlier for the consumers and hence inflation might be pushed up further.

C. Fiscal Slippage
The central government fiscal burden might increase as the hike in the prices of imported crude oil and fertilizer might warrant for a higher subsidy provision to be made for these commodities.

D. Increase in Cost of Borrowings
Interest rate differentials in domestic and global markets encourage the industry to raise money through foreign markets however a fall in the rupee value would negate the benefits of doing so.

Usual discussions on the fall in the rupee bring up macro-economic matters such as slowing economic growth, corporate earnings and market volatility. However, the woes aren’t restricted to corporate corridors or the Dalal Street. For the common man, the falling rupee is going to hit where it hurts the most-the pocket.

From essentials such as food and education to foreign vacation and the swanky gadget you plan to buy, the falling rupee will hurt you in more ways than one.

•GROCERY BILL
High inflation has been pinching you for more than a year now. Now, the weakening rupee has made crude oil, fertilizers, medicines and iron ore, which India imports in large quantities, costlier. Though these items are not for your daily consumption, they impact your finances indirectly. For instance, since India depends on imports for a large part of crude oil it consumes, a weak rupee will influence petrol and diesel prices. “Fuel being directly connected with the cost of transportation, prices of goods that are transported from one part of the country to another, such as food, are bound to rise. This will have a direct impact on the household budget.
• Fast moving consumer goods (FMCG), such as soaps, detergents, deodorants and shampoos, of which crude oil is an input, are likely to become more expensive. The impact of rupee depreciation on the FMCG sector will be due to higher cost of imported raw materials. The companies were already facing cost pressures. The rupee depreciation has added to their woes. They will have to revise prices. Hindustan Uniliver and Procter & Gamble have already taken steps in this direction. Pulses and oil, which account for a large part of India’s imports, will also be affected. “Crude palm oil prices set the pace for prices of other edible oils. It is imported in large quantities and any rise in its price will add to the inflationary pressure.

• JOBS AND REMUNERATION
Not only is the rupee falling, for some, the pay cheque may shrink as well. Every industry which is dependent on imports will have to face an increase in cost of production and operations. “In order to nullify the increase, these companies will have to rationalize costs within their control. One of this will be human resources. So, either lesser number of people will be hired or the salary bill will be kept constant or reduced. However, it is a good time for industries which earn in dollars. “The information technology sector stands to gain, but global recessionary conditions may set off the impact.

• BUYING A CAR
Depreciation of rupee has impacted the automobile sector in three ways. First, input costs have raised as these companies use imported components. Second, some companies will have to pay higher royalty to foreign parent firms. Third, many have foreign currency loans in the form of external commercial borrowings and foreign currency convertible bonds. Therefore, more or less all auto companies will have to increase prices. Maruti has already revised prices twice in last two months. Others like Hyundai, Honda and Ford that have large import content in their cars will have to soon increase prices to protect margins.

• ENTERTAINMENT
The imported paperback, your favourite pizza and the latest laptop will also become more expensive. There is an increase in the cost of imported books as well as the cost of sourcing them. In most cases we are trying to absorb the increased cost, but there may be scenarios where the end-user will get impacted. Electronic consumer goods such as computers, televisions, mobile phones, etc, with imported components will also become costlier. International food chains which run outlets in India are not denying the impact on profitability. “The depreciating rupee has had a significant impact on our capital expenditure as we import a lot of special kitchen equipment. There has been an indirect impact too as a small part of inputs are imported by our suppliers. If the trend continues, we will be forced to pass on some burden to customers,” says Vikram Bakshi, managing director and JV Partner, McDonald’s India (North & East).

  • State Bank of India said that Union Finance Ministry has assured that the bank would be adequately capitalized by March 2012, however, the route to re-capitalise it has not been decided yet.
  • Whether it would be a rights issue, preferential or QIP route is still not decided.
  • The Government is the largest shareholder of the bank with 59.4% holding.
  • Chaudhari said that the government has to take a call on what level of ownership it wants to maintain in the bank. If it wants to have 59.4% stake in SBI, then it would be a rights issue. If it is to be raised from the level of 59.4%, then it would be a preferential issue, if it has to be lowered, then it has to be through a QIP issue.
  • The SBI had reported a Tier-I capital adequacy ratio of 7.60% as of June 2011, against the suggested level of 8%. It is said that such a low Tier-I capital ratio provides an insufficient cushion to support growth and to absorb potentially higher credit costs arising from deteriorating asset quality.
  • State Bank of India has said that it has de-risked its Rs 30,000 crore export credit portfolio by entering into a tie-up with Export Credit Guarantee Corporation.
  • The export credit defaults of SBI will be guaranteed by ECGC and capital requirement for this portfolio shall drop by 80%.
  • Currently the risk weightage for this portfolio is 100% and by going with ECGC, it will drop to 20%.

The key highlights of the ICICI Bank Q2 Results -

  • ICICI Bank has announced a 43% rise in consolidated profit in the September quarter, riding on demand for loans from companies and strong earnings growth at its life insurance subsidiary.
  • Consolidated net profit increased to Rs.1,992 crore, beating Bloomberg’s estimate of Rs.1,424 crore. Earnings per share rose to Rs.13 from Rs.11 last year.
  • On a standalone basis, profit rose 22% to Rs.1,503 crore from Rs.1,236 crore last year.
  • The loan book rose 20% to Rs.2.33 trillion from Rs.1.94 trillion last year. Demand for loans helped the bank earn a net interest income of Rs.2,506 crore, 14% higher than last year.
  • The bank’s deposit base, at Rs.2.45 trillion, closely tracks the loan book at Rs.2.33 trillion.
  • ICICI Prudential Life Insurance Co. Ltd made a net profit of Rs.350 crore, 23 times last year’s Rs.15 crore. The rise in profit was on account of the transfer of Rs.254 crore so-called non-par funds to the insurance firm’s profit and loss account, in line with IRDA norms.
  • ICICI Bank’s mutual fund business made a net profit of Rs.20 crore, up from Rs.13 crore last year.
  • A 50% drop in provisions also contributed to the rise in the bank’s profit. Provisions declined to Rs.319 crore in the July-September quarter from Rs.641 crore, mainly because of a 30% drop in the bank’s non-performing NPAs.
  • ICICI Bank has seen a Rs.743 crore increase in restructured loans, mainly from the micro-finance sector. Total restructured loans at Rs.2,500 crore as of 30 September were lower than Rs.2,600 crore restructured last year.
  • The bank also managed to maintain its net interest margin (NIM) at 2.6%.

Karur Vysya Bank and SBI cards are likely to enter into a deal and launch co-branded credit cards for customers. The information was shared by CEO of SBI Cards, Mr Kadambi Narahari. He also said that SBI Cards is soon planning to come with its signature brand cards

State Bank of India has hinted that it could increase interest rate on savings bank accounts by as much as 125 basis points after the Reserve Bank of India announced deregulation of saving bank rate in its second quarter review of monetray policy on October 25.