Public sector banks hike interest rate on FCNR deposits

Two public sector banks PNB and Dena bank have raised their FCNR and NRE term deposit rates after the announcement of an increase in interest rate ceiling by 50 basis points on non-resident deposits by the Reserve Bank of India.

Both the banks have increased rates by half a percentage points on non-resident deposit schemes across all maturities in dollar, British pound, euro and Australian and Canadian. The increase will be with immediate effect.

According to banks statements on the dollar deposits the interest rate has been hiked to 4.21 per cent for a maturity of 1-2 years from 3.71 per cent. For the maturity of 2-3 years, the rate has been revised to 3.52 per cent, as against 3.02 per cent.

While on the tenure of 3-4 years, the interest rate has been raised to 3.81 per cent from 3.31 per cent and on 4-5 years term deposit the new rate is at 3.95 per cent and the rate for fixed deposit for five years has been hiked at 4.14 per cent.

PSBs to give vehicle loans in ‘cautiously’ as pvt banks trim vehicle lending

Some of the private banks have stopped giving auto loans due to which consumers are finding difficulty as well as there has been significant fall down in the auto loans.

Public sector banks are coming forward to offer vehicle finance. Senior bank officials, car dealers and industry experts say that public sector banks are planning to increase their vehicle finance portfolios in a ‘cautiously aggressive’ manner.

Earlier private lenders were aggressive in the vehicle finance portfolio but due to increasing interest rates and delinquency levels, private banks, are moving forward in this sector cautiously. Senior bank official stated the genuine car buyers have been affected by this behavior of private sector lenders.

“Some private banks have decided to reduce their exposure to vehicle finance and we are trying to capitalize on this. However, we will adopt a ‘cautious but aggressive’ policy in order to ensure that we do not burn our fingers,” said Mr T.M. Bhasin, Executive Director, United Bank of India.

Mr Bhasin told Business Line that UBI has worked out plans to focus on vehicle finance in a big way during this festive season. “We are focusing on customers who have a salary-linked account with our bank. This will ensure that the loan extended is secure,” he said.

A senior official at the bank Allahabad Bank has a proposal of growing its car loan portfolio by 20 per cent in 2008-09. “There is a greater thrust on vehicle finance and we are looking at tying up with manufacturers,” he said. He further pointed out that as on September 2008 bank’s total vehicle finance portfolio stood at Rs 300 crore.

However a senior official at State Bank of India said that the bank is one of the large players in the segment and its portfolio increase is not related to the reduced exposure of private banks.

“We have been doing well in vehicle finance. Both our products and delivery system are moving down well with our customers,” said the official who did not wish to be identified.

The official stated that SBI is financing approximately one lakh cars each year and has plans to grow this by 33 per cent in 2008-09.

A senior official at Maruti Suzuki said: “Public sector banks have a wider reach and a long association with their customers. They therefore have the track record of their customers. This makes it easier to lend and also ensure that the customer does not default on his payments. Moreover, private banks lack transparency and have a multiple interest-rate structure which acts as a deterrent for some customers,” he added.

He told that Maruti Suzuki and SBI have a longstanding tie-up.

He further added that Maruti Suzuki has also tied up with SBI subsidiaries and is planning to tie up with Punjab National Bank.

PNB Bhutan branch will start operating by March 2009

Punjab National Bank is country’s second largest public sector lender bank will be starting its operations in Bhutan by March next year. For this bank has signed up a memorandum of understanding with the local partner in Bhutan.

"We have recently signed an MoU with the a prominent local business house and are in the process of obtaining regulatory approval from the Bhutan for the operation," Punjab National Bank General Manager Ranjan Dhawan told PTI.

The Reserve Bank of India has given the approval to PNB.

He told the JV is having the paid-up capital of Rs 30 crore and has been named as Druk PNB Ltd.

He told that the venture might be operational in the January-March quarter 2009.

He added in the beginning the venture will have two-to-three branches which would be extended in due course of time.

In addition, the bank is also planning of starting overseas operations in four locations - Norway, Dubai, Shanghai and Singapore in the near future.

The bank has submitted an application for regulatory approval for a representative office in Norway.

RBI has already given approval for the up gradation of the bank's Shanghai (China) representative office to a branch.

Further PNB has plans of up gradation of its representative office in Dubai International Financial Centre (DIFC) into a branch.

Simultaneously, the bank has walked out of the Malaysian joint venture led by Bank of Baroda.

LIC & PNB launched insurance scheme for credit- linked women SHGs

Life Insurance Corporation, the country’s largest insurer and Punjab National Bank the second largest public sector lender together have launched a life insurance scheme for credit-linked women self help groups in order to provide life and permanent disability cover.

This is the first time such program has been launched on a national level, after the announcement by finance minister P Chidambaram in his budget speech this year. Initially the scheme will be covering 5,000 members of SHGs credit-linked to PNB and the annual premium is Rs 200 from which 50% of this will be contributed by the insured and the rest will come from the Social Security Fund of the central government. You may also check out PNB home loan here to get the rates which would help you to compare the rates from all other lenders available in the market.

Currently there are 30 lakh SHGs credit linked to banks. In the budget speech for this fiscal, Chidambaram had allocated Rs 500 crore to the corpus of Social Security Fund.

In case of death of insured person or gets permanently disabled in an accident, LIC will pay Rs 75,000, while in case of normal death, Rs 30,000 will be paid. In case of permanent partial disability, the insured will get Rs 37,500.

“The claim would be settled only after adjusting the outstanding credit against the member in favour of PNB,” LIC chief (SBU – Pension and Group Schemes) P Satyanandam said.

Under this scheme the insured is entitled for a scholarship of Rs 1,200 per annum for her children studying in 9 th -12 th standard.

At present LIC is offering life and permanent disability cover to people in 44 categories, and covers 35,000 SHGs.

LIC main aim is to cover 2.5 lakh self help groups in 2008-09 under the scheme.

“I am confident that we would exceed (the target) by launching such programs in collaboration with other public sector banks, which were advised by the finance minister to facilitate expansion of such services,” Satyanandam said.

“LIC is also in talks with Oriental Bank of Commerce and Punjab & Sind Bank for the scheme,” the insurer’s divisional manager (Pension and Group Schemes) Narendra Kumar said.

“PNB has announced 2008-09 as the financial inclusion year. The bank is opening no-frills account for the poor and is providing them an overdraft limit of Rs 2,000.”

“We have already opened 7 lakh such accounts. The bank would bring 1.5 crore homes and 7.5 crore people under the financial inclusion programme by 2010,” PNB’s executive director J M Garg said.

PNB to launch schemes for farmers

Punjab National Bank (PNB), to save farmers from the cruel hands of money-lenders is planning to launch debt-swap scheme. Farmer get trapped in cruel cycle of debt trap when he takes loan from private money lenders who charge high interest varying from 50% to 200% against the loan.

Farmers keep paying the interest while the principle amount remains the same. Under this initiative taken by PNB, farmers will be able to take loan up to Rs 50,000 to repay the loan to money lenders.

After the state level bankers committee meeting (Haryana) J M Garg executive director, PNB told FE, “Farmers don’t need to produce documents if they want to take loan up to Rs 25,000. If the amount is above 25,000 then bank will carry out the verification procedure. To ensure the money is being rightly used, the bank will procure the certificate from money lenders declaring that debt has been written-off. The scheme will be introduced first in northern region and later will be launched in other parts of the country. Bank will charge the interest rate based on prime lending rate (PLR) from farmers”. Last year PNB had distributed agriculture loan of Rs 20,000 crore and still has a target of around Rs 25,000 crore for this fiscal. On the other hand the finance ministry has taken a decision that at least 3% of the target for agriculture in 2008-9 will be earmarked for giving loans under ‘Debt Swap scheme’.

PNB has another plan in the process, the setting up of agriculture hubs across the country. Explaining about this venture Garg said, “Our branches are getting overburdened with handling loan processing applications in agriculture sector, which usually cause unnecessary delays.

To solve these problems various hubs will be introduced where specialized staff will take care of the applications which will simplify the cumbersome procedure. The idea is that one hub will cater to the cluster of 20 branches”.

PNB, OBC reduce interest rates on non-resident deposits w.e.f. August 1

From August 1 country's second largest public sector lender Punjab National Bank and Oriental Bank of Commerce have lowered interest rate on Foreign Currency Non-Resident (B) deposit schemes for dollar, British pound and euro.

Banks in a press statement stated the interest rate on US dollar deposits for a maturity of 1-2 years has been reduced to 2.5 per cent from 2.56 per cent. While for the maturity of 2-3 years, the rate has been reduced to 2.75 per cent as against 2.85 per cent.

The interest rate for tenure of 3-4 years has been lowered to 3.11 per cent from 3.20 per cent and for 4-5 years term deposit the rates have been revised to 3.34 per cent and the fixed deposit for five years it is 3.49 per cent.

The bank statement stated the interest rate on NRE Term deposits, for August is 3.25 per cent for maturities of one year to less than two years as compared to 3.31 per cent last month and 3.50 per cent for maturity in between 2-3 years. It further added the interest rate has been pegged at 3.86 per cent for the maturity of 3-5 years against 3.95 per cent earlier.

PNB hikes deposit rates & PLR by 100 bps

After the Reserve Bank of India announcement of hike in the short-term inter-bank lending rates (repo rate) and mandatory cash reserve (CRR) by 0.50 per cent and 0.25 per cent, Punjab National Bank (PNB) has raised its benchmark prime lending rate (PLR) by 100 basis points to 14 per cent with effect from August 1.

PNB is country’s second-largest public sector bank by assets has also decided to hike its deposit rates by 75-100 basis points across various maturities to make them more competitive in the market. The deposit rate hike will also be applicable from August 1.

Dr K. C. Chakrabarty, PNB Chairman & MD, told reporters, “These decisions have been taken today looking at the extraordinary situation prevailing and to provide better returns to the depositors. Today the inflation rate is almost 12 per cent. We will not be able to induce the people to save unless we increase the deposit rates. We also hope to protect our net interest margin at 3.5 per cent”.