Union Bank sees margin pressure on rising cost of deposits--ET 14th September 2013
MUMBAI: State-run Union Bank of India is likely to see pressure on its margins in the near-term due to rise in cost of deposits, a top official of the public sector lender said today.
"Margins are under pressure as cost of deposits have gone up marginally due to revision of FCNR rates. However, we have reduced the bulk deposit rates," Union Bank of India (UBI) Chairman and Managing Director D Sarkar told reporters on the sidelines of an event here.
The bank will hold its base rate as of now, on the back of liquidity tightening measures from the Reserve Bank and wait for the next policy review for its future decision, he added.
Last week, the bank rolled back its earlier reduction in base rate by revising it by 25 basis points to 10.25 per cent.
On the restructuring side, Sarkar said the bank may see some addition in restructuring as some power discom (distribution companies) accounts may be recast in the future.
He, however, said the bank would try to contain the bad assets at the present level.
On the impact of rupee fall on remittances flow to the bank, Sarkar said UBI expects increased inflow in this segment.
The bank posted a 9.5 per cent rise in net profit at Rs 560.22 crore in the first quarter of the current fiscal.
It also improved asset quality with gross NPA coming at 3.5 per cent in the June quarter as against 3.76 per cent a year earlier and net NPA of 1.96 per cent from 2.2 per cent reported a year ago.
Slowdown effect: Oriental Bank to go slow on branch expansion
NEW DELHI, AUG. 25:
Oriental Bank of Commerce (OBC) plans to moderate its branch expansion plan this fiscal in the wake of the current economic slowdown. The public sector lender will look to open only about 125-150 branches this fiscal, S.L. Bansal, Chairman & Managing Director of the bank, told Business Line.
In the past two fiscals, OBC opened as many as 375 branches, which had helped it improve its CASA (current account, savings account) base and explore more business. The branch expansion this fiscal would be carried out with a special focus on unbanked areas for greater financial inclusion, Bansal said.
Branch expansion is a function of availability of business opportunities. If the bank desires good growth in CASA, more and more brick-and-mortar branches would be required, Bansal pointed out. Cost benefit analyses would be carried out while planning on branch expansion, he added. Currently, OBC has 3,600 delivery channels with 2,025 branches and 1,525 automated teller machines.
Fee based income
Due to the economic slowdown and lesser demand from corporates, fee-based income had been impacted, he said.
To cope with this challenge, OBC rationalised its service charges in line with its peers. This helped the credit-related, fee-based income grow 18 per cent in the first quarter this fiscal, Bansal said.
OBC is also relying on its own joint venture life insurance company to bolster its income.
Another component of its fee-based incomes is recovery in technically written-off accounts. Last year, OBC recovered Rs 550 crore in this segment. “We expect to continue this trend in current year as well,” Bansal said.
Bansal expressed confidence that the present situation in the economy will further improve on the back of recent measures taken by the Government.
No job cuts
On how the slowdown was impacting employee morale in the bank, Bansal said bank employees understood market dynamics better these days.
“From my experience, I can share that present day employees show high degree of professionalism and dynamism in their functioning and respond to the market needs which will help the bank in the long term,” he said.
He also ruled out any move to reduce workforce as it was not a viable solution.
“It is certainly not an option that public sector banks are looking at. The issue of excess manpower is now a rarity. Skilling, re-skilling and optimum utilisation of manpower is the order of the day,” he said.
Banks have taken other measures for reducing costs like shedding of bulk deposits.
OBC reduced its bulk deposits by 24.73 per cent on a year-on-year basis and this had helped improve net interest margin to 2.9 per cent as of the first quarter this fiscal, Bansal said.
http://www.thehindubusinessline.com/industry-and-economy/banking/slowdown-effect-oriental-bank-to-go-slow-on-branch-expansion/article5058735.ece
Rs. 9000 cr farm loans disbursed at zero per cent interest in MP-The Hindu
In a push to make agriculture more profit-oriented, the Madhya Pradesh government provided Rs. 9,000 crore in loans to 30 lakh farmers on zero percent interest rate in 2012.
Stating this, an official release said in Bhopal on Friday that the state government, under the leadership of Chief Minister Shivraj Singh Chouhan, has taken a number of key decisions to make agriculture profitable during the last nine years.
During the earlier regime, crop loans were given at the rate of 15-16 percent interest. The present BJP-ruled government reduced it to seven per cent in 2003, 5 per cent in 2008, 3 per cent in 2010 and zero percent in 2011 and 2012 for purchasing fertilisers and seeds, benefitting many farmers.
Due to extension of crop loans to farmers at zero percent interest rate, percentage of recovery of loans in the cooperative sector also increased to 78.04 percent in 2012.
Under another significant decision in the cooperative sector, over 45 lakh farmers were provided Kisan Credit Cards.
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