Banking News update

§  Banks will further trim interest rates soon, says Finance Minister: PSBs have promised to further lower interest rates in the coming days, Finance Minister has said. The issue about interest rate reduction gathered momentum when despite RBI cutting the Repo Rate by 75 bps in three tranches since January, banks have so far lowered their lending rate only by 10-35 bps. The Finance Ministry also said that the government would favourably consider funds infusion for these banks. (BL)

§  Govt asks PSBs to present their capital requirements: Extending a lifeline to PSBs, the Union finance ministry on Friday asked them for presentations on their capital requirement. The government had allocated Rs 7,000 crore in 2015-16 for capital infusion, termed inadequate by a majority of PSBs. In 2014-15, the ministry had infused a little over Rs 6,000 crore in the state-owned banks. (BS)

§  Forex reserves rise $239 mn to $353 bn: The country's foreign exchange reserves rose $239.4 million in the week ended June 5 to $352.71 billion. Foreign currency assets, a key component, rose $192.9 million to $328.01 billion. During the week, gold reserves rose by $4.5 million at $19.34 billion. (BS)

§  RBI to introduce cash-settled interest rate futures on new tenures: RBI has decided to to introduce cash-settled interest rate futures (IRFs) on five to seven year and 13-15 year government securities (G-sec). RBI has also decided to modify the residual maturity of cash-settled 10-year IRF to between 8 and 11 years. (BS)

§  Banks with higher bad debt levels will have to give reasons, says Finance Minister: The Finance Ministry said in a statement that rising NPAs, which are impacting the credit growth of banks, have been a matter of concern for banks and the Government and were discussed in detail in the meeting. Bad debts (as a percentage of advances) have come down to 5.2% at the end of March, from 5.63% on December 31. However, the level of bad debts at the end of last fiscal is still high, compared with 4.72% at the end of 2013-14.   (BL)

§  Agri NPAs might add to banks' asset quality woes: Asset quality concerns would remain a headache for most banks in the first quarter ending June 2015. Besides the over-leverage and payment delays pushing companies to default, the adverse effect of unseasonal rains and hailstorms on farm loans will add to the pressure on bank balance sheets. (BS)

§  Debt recasts: not just small & medium firms, big ones too opt for it: The option of recasting bank loans after getting into financial trouble isn’t something that is being exercised only by medium- and small-sized companies. Even the likes of Mukesh Ambani-promoted Reliance Gas Transportation Infrastructure Ltd (RGTIL) have managed to secure a long-term loan restructuring package extending up to fiscal 2030-31 from local banks. (IE)

§  RBI's G-sec auction devolves partially: In the Rs 15,000-crore government bond auction conducted by the RBI, there was partial devolvement in the 7.68% 2023 bond to the tune of Rs 1,265.50 crore due to lesser appetite by traders amid hardening yields. The total auction for the paper was for Rs 3,000 crore. (BS)

§  10 crore enrolled under two social security schemes: FM: Over 10 crore people have been enrolled under the two social security (PMJJBY & PMSBY) schemes launched by Prime Minister in May. (FE)

§  SBI waives processing fees for home loan transfers: SBI, which recently cut its lending rates by 15bps, has waived processing fees as an incentive to those wanting to shift their existing home loans to the bank. SBI is also offering borrowers a top-up option, where the borrower can raise more than his outstanding loan account. (TOI)

§  IRDAI likely to ask banks to tie up with more than one insurer: Once banks start submitting their business proposals with bancassurance plans, IRDAI may insist on them tying up with more than one insurer. The regulator has done away with an earlier proposal on capping insurance business from one insurer by a bank. But now, industry sources said it may nudge banks to open up to at least one more insurer, in each category. (BS)

§  India nuclear insurance pool launched: General Insurance Corporation of India (GIC Re) and 11 other non-life insurers have formed the India Nuclear Insurance Pool. It will have a capacity of Rs 1,500 crore. This pool will be the 27th such market pool globally. It is expected to address third-party liability insurance to begin with and later expand into property and other hot zone (inside reactor areas) risk. This will cover both operators and suppliers. At present, only cold zones (outside reactor areas) are covered. (BS)