Mindless Branch Expansion May Prove Disastrous For Banks

Chidambaram: India’s banking system making mark on national & global platform

Mar 28 The Finance minister P. Chidambaram has said that India’s banking system has made its mark on the national and the global platform with its resilience, prudence and strong regulatory norms. Addressing the launch of 100th overseas branch of Bank of Baroda in Dubai today, Mr. Chidambaram said that not a single bank in public or private or co-operative sector in India has failed since the global financial crisis of 2008 which bears a testimony to the strength of India's banking system. Mr. Chidambaram told that banks in India are in fact growing at the rate of 7000 per year which comes to around 19-20 banks being opened in India every day. The finance minister announced that in Uttar Pradesh on a single day tomorrow 300 banks will be opened. Mr. Chidambaram told that banks have not only grown up in India by leaps and bounds; but they have also been fully capitalized. An additional $2.5 billion capital will be infused in the public sector banks in the current financial year. Lauding the opening of 100th overseas branch of Bank of Baroda at the Dubai International Financial Center, he said the bank which came up for the Indian diaspora is now serving with same expertise to the local economy in Dubai,UAE and the west Asia region. The CMD of Bank of Baroda, Mr.S.S.Mundra told that the bank operates 4200 branches with 100 overseas branches in 24 countries.Its first overseas branch opened 60 years ago in Mombasa and the first branch in UAE opened in 1974.Since then the bank has played a key role in strengthening trade and economic co-operation between India , UAE and the West Asia region. India’s Ambassador to UAE, M.K.Lokesh and the Consul General of India in Dubai,Sanjay Verma was also present on this occasion. http://newsonair.nic.in/news.asp?cat=National&id=NN10123 WEDNESDAY, MARCH 27, 2013 Pubic Sector Banks Policy OF Branch Expansion Without Fresh Recruitment May Help In Increase in Per Employee Business But Quality Erosion May Spoil Bank's Future Public Sector Banks have opened hundreds and thousands of branches during last few years without adding equivalent number of employees in their bank. This has resulted not only in deterioration of quality of service but also adversely affected the quality of assets, quality of lending and quality of monitoring and control over the assets. It may be noticed from below given chart that total number of employees in public sector banks has come down from 8.83 lacs in the year 1998-99 to 7.71 lac in the year 2011-12 . In a span of 13 years of reformation , number of branches has increased at least two fold and the volume of business has gone up by at least ten times. To read more click on following link http://importantbankingnews.blogspot.in/2013/03/pubic-sector-banks-policy-of-branch.html Mar 28, 2013, 07.51 PM IST Record bank borrowings: What do they indicate? Saikat Das moneycontrol.com High bank borrowings continue to exacerbate liquidity tightness in the system. Lenders net borrowed nearly Rs 1.61 lakh crore from the Reserve Bank of India's daily borrowing window on last Tuesday, the penultimate money market working day in the financial year 2012-13. This was way above the central bank's comfort zone of 1% of total deposits in the system or around Rs 70,000 crore. "There is an element of seasonality which is leading to the tight liquidity situation in the system. Companies have demand for funds due to the year-end pressure. From April onwards, it may ease to an extent. However, banks borrowings are unlikely to drop sharply any time soon," said Ananda Bhowmick, senior director at India Ratings, the Indian arm of global rating agency - Fitch. On account of advance tax payments and year-end pressure banks have been net borrowing around Rs 1 lakh crore every day from RBI's borrowing-lending window known as Liquidity Adjustment Facility (LAF) in the banking parlance. The central bank too recognized the liquidity tightness in its mid quarter policy. "RBI is fighting inflation. Hence, it is natural to have deficit liquidity in the system," N S Venkatesh, executive director - IDBI Bank   told moneycontrol.com. "From April onwards, it is likely to come down. Even if the tightness persists, RBI will swing into OMO operation to ensure adequate liquidity. Governmnet is expected to start spending in the new year. Moreover, the first half borrowing target (58%) in FY14 is lower than the previous year's target (around 65%). It is unlikely to exert any additional pressure on liquidity tightness," he said. RBI mentioned of actively managing crisis through various instruments including open market operations (OMOs), the process wherein the central bank buys back bonds from banks to pump in money into the system. Earlier, RBI had injected an additional of Rs 18,000 crore by cutting banks' CRR obligation by 25 bps. Banks are mandated to keep 4% of their deposits with RBI in the form of cash reserve ratio or CRR. The Union government will borrow Rs.3.49 lakh crore from the market in the first half (April-September) of the year 2013-14. Total borrowing will be at Rs.5.79 lakh crore for the full year. Money will flow out by way of subscription in government bonds issued for the same purpose. RBI LAF since last seven days Date March, 2013 Net borrowing (approx) Rs in lakh crore 26 1.61 25 1.49 22 1.44 21 1.38 20 1.30 19 1.20 18 1.43 "Money is clearly not in the circulation," said an executive director of a south-based public sector bank who deals with treasury operations. He did not wish to be named. "LAF will start falling from April onwards. However, banks need to fulfill their CRR requirement for which they will have to keep borrowing money. Moreover, the government is holding high cash balances with the RBI. It suggests, the government has not yet started spending. Tax refunds too are not happening," he said. Among various sources of fund raisings banks mostly find repo or the rate at which banks borrowing from RBI the most attractive at 7.50%. The collateralized borrowing and lending obligation or CBLO market offers almost similar rate. However, bulk deposits are expensive with rates quoting in the range of 9.50-9.75%. On a fortnightly basis, banks are mandated to maintain CRR obligation in proportion of their deposit accumulation. Earlier, RBI said that the government's cash balance with it would cross Rs 1 lakh crore mark before FY13 ends. The Finance Ministry is likely to save an additional Rs 5,000 crore as compared to FY12. Repo is one of the two components in LAF. The other one is reverse repo or the rate at which banks park their surplus liquidity with the regulator. http://www.moneycontrol.com/news/business/record-bank-borrowings-what-do-they-indicate_843505.html