Cashless or less-cash? (January 12, 2017)

State Bank of India (SBI) chairman Arundhati Bhattacharya has chosen to go with a cautiously optimistic stance on demonetization. “Whether demonetization came prematurely, only history will tell. While it has indeed given a huge push to the digital economy, I don’t really believe that India can be a cashless society. I always say that we will be a less-cash economy — that is a more reasonable goal to work towards,” she said. “Transactions will become less costly, but only over a period of time. But it is valid that until that happens, people will question why they should switch to digital if it costs them money, and that will elongate the transition,” she said.Quite a cautious stance.

SBI ringing in new business plan(January 12, 2017)

With the government telling public sector banks that the capital support needed by them cannot be funded by budgetary support alone, State Bank of India is working on a ‘2 by 20’ plan to grow business under its own steam. Over the next few years, India’s largest bank will seek to attain return on assets (ROA) of 2 per cent and return on equity (ROE) of 20 per cent in a bid to become independent for capital, generating enough surplus to be able to clock an annual growth of 15- 17 per cent, said a senior official. ROA is the ratio of net profit divided by total assets and ROE is the ratio of net profit divided by total equity.

SBI’s ROA and ROE have seen a steady decline year-on-year on account of rising provisioning for bad loans. Its ROA declined from 0.73 per cent in the September 2015 quarter to 0.44 per cent in the September 2016 quarter. Similarly, ROE dropped from 12.61 per cent to 7.38. In the last five financial years, SBI received capital infusion aggregating Rs.21,267 crore from the government. Further infusion of Rs.7,575 crore is expected in the current financial year.

“As long as the government keeps the funds tap open, we don’t have a problem. But given that the government can give only so much in the future, we need to prepare ourselves to attract private investors, who will closely look at ROA and ROE. “Besides, investors will also place a premium on a higher provisioning coverage ratio (PCR) and low cost-to-income ratio (CIR),” said the official. PCR is the ratio of provisioning to gross non-performing assets and indicates the extent of funds a bank has set aside to cover loan losses.

SBI’s PCR has come down from 70.48 per cent as at September- end 2015 to 62.12 per cent as at September-end 2016. CIR (operating expenses/ operating income) shows how many rupees were needed in a given period to generate one rupee in revenue. SBI’s CIR has improved a tad from 50.43 per cent as at September-end 2015 to 49.95 per cent as at September-end 2016. To boost its capital and hence its ability to lend, SBI will focus on plough-back of profits and make continuous efforts at optimising capital, including through sale of non-core assets and strategic investments

Respond to banks plea on $40-m transfer: SC to Mallya (January 12, 2017)

The Supreme Court on Wednesday sought response from beleaguered United Breweries chairman Vijay Mallya as to why he should not be asked to transfer and deposit $40 million, which he had received towards the $75-million payout package with London-based liquor major Diageo Pic in February last year, in the apex court or the debt recovery tribunal (DRT), as sought by the lenders. The bench led by Justice Kurian Joseph gave three weeks to the liquor baron to file his response to the fresh requests made by the SBI-led consortium of 17 banks and posted the matter for further hearing on February 2.

Mallya had in November told the court that he had transferred the amount to his three children through gift settlements within two days of receivingit. He had further saidthat while his three children—Siddharth, Leena and Tanya—were US citizens and sole beneficiaries of the three trusts, he was neither the settlor nor the trustee or beneficiary of any of the trusts and had no control over the trusts or the manner in which the respective corpuses of each of them was being utilised. Senior advocate Shyam Divan, appearing for the consortium, alleged that Mallya’s transfer of $40 mil-lionto his children is in“flagrantviolation” of various orders of DRT and the Karnataka High Court where -fer, alienate or dispose of any movable or immovable properties till disposal of the recovery proceedings in DRT.

“It isclear that Mallya has clearly and flagrantly violated the ordersof the HC and is guilty of contemptof court... .by transfer ring the $40 million to his children, Mallya has not only acted in contempt of the HC, but has also tried to subvertthecourse of justicebydiverting the funds offshore to shield it from the recovery proceedings ongoing before the DRT,” SBI said. Lenders further argued that it is essential that $40 millionbebroughtbackandbedepositedwiththeapex court or DRT pending disposal of the recovery pro-ceedings.Mallyahasevenfailedtoexplainwhy$40mil-lion was disbursed to his children despite an oral undertaking to the contrary given before DRT and restrained by the HC, they added.

“It is a matter of record that Mallya and his firm owes over Rs.6,200 core to the banks and the money shouldhavebeendepositedhere,” Divan said. However, senior advocate C S Vaidyanathan, appearing for Mallya, opposed fresh requests made by the lenders, saying he needed time to respond to the banks' plea for deposit of $40 million in the SC.

SC to Mallya: Explain $40m transfer to kids (January 12, 2017)

The Supreme Court sought explanation on Wednesday from liquor baron Vijay Mallya for transferring 40 million dollars to the bank accounts of his children in violation of various judicial orders barring him from such transactions. A bench of Justices Kurian Joseph and A M Khanwilkar directed the fugitive businessman, who had flown to UK to avoid judicial proceedings in the country against him, to file an affidavit within three weeks on the allegations levelled by a consortium banks, led by SBI, that his action amounted to contempt of court. Senior advocate ShyamDivan, appearing for the banks, alleged that the orders of Debt Recovery Tribunal and the Karnataka High Court had been violated by Mallya by transferring 40 million dollars to his children.

He said Mallya and his firm owed over Rs.9000 crore to the banks and the money should have been refunded to them. The Supreme Court had in October last year pulled up the elusive Mallya for not disclosing what he has done with the 40 million dollars he received from British liquor major Diageo for stepping down as chairman of United Spirits Limited. Taking exception to Mallya giving “vague“ details of his domestic and overseas properties and remaining silent on the money received from Diageo despite its order, the apex court had expressed unhappiness and directed him to disclose all information within a month.

Are Indian Banks Digital Ready? Heres A STEP Test , MrutyunjayMahapatra Dy. Managing Director, State Bank of India (January 11, 2017)

Today it is difficult to escape the word ‘digital’ in any conversation, strategy or discourse. A number of studies indicate that everyone of the human domains is getting redesigned and redefined for digital, either to take advantage of the capabilities of ‘digital’ or due to the deep-seated influence of digital- -things, artefacts and entities. Banks, especially the Indian ones, are at the absolute front line, weathering digital impact on their customers, business models and employees. Critical as it is, digital readiness needs to be understood properly and correctly. It is not unusual to see a great deal of confusion in defining digital. Some people define it based on strategy and others based on frameworks. For example, many believe that digital is about using digital technologies to do business. This approach suffers from an automation syndrome.

The proponents of automation as proxy for digitisation think that once they are able to do in computers whatever they did manually, they had digitised. Some others believe that digitisation is a channel strategy. In banks, the prevalent approach is to have digital by defining and positioning digital channels either as a collaborative to or substitution of brick-and-mortar products and channels. A few others believe that the role of digital is to push marketing of brands, products, services and also to better govern, through data, analytics, service and aggregation, the marketing and business development strategy of a bank. A second school of thought seeks to define digital, based on frameworks. This approach attempts to componentise the main aspects of digital. One framework, which is very popular is the ‘SMAC’. SMAC stands for social media, mobility, analytics and cloud computing. As all of us know, digital requires completely different ecosystem and connectors between players of such ecosystems.

In SMAC, key elements focus on the new technologies and methods which have been forcing changes in the last couple of years. To this, a new addition is ‘I’ which stands for Internet of Things (IOT). Portability, channel agnosticism, Mobile first, databased customised offerings and ability to scale up and down are some of the necessities to be successful in a rapidly changing world. Yet another framework is ‘DPRT’ which stands for disruptive, responsive, personalised and trusted nature of digital. Whatever we may accept as a definition of digital, Indian banks must embrace the impact of it unequivocally. At a lower stage of maturity, they may just do automation and at high maturity they might do cutting edge innovations and collaboration. How does one determine whether the organisation is ready for digital? I believe that a ‘STEP’ approach is highly useful, both for the leadership to gauge readiness and refine and enhance it.

The acronym STEP stands for security first, transformation preparedness, enterprise architecture, productivity as the key foundation. It is instructive to examine the framework in some detail. ‘Security first’ is the paradigm that shall override every other in the digital arena. As multichannel and collaborative partner ecosystems play together in real time, the strength of security shall be tested at every touch point. The old methods of security governance,will be able to serve the new demands only partially.Readiness of the organisation shall be good with effective end-to-end capabilities as compared to diagnostic, reactive and remedial regime followed by most banks today. Readiness would demand large investments in infrastructure, tools and manpower. Data security, confidentiality and privacy, minimally in focus today, will be on the top. Readiness shall include deployment of analytics, machine learning and deception techniques as also secure coding and testing practices. ‘Transformation preparedness’ will also be a key test of digital readiness of the banks.

Platformisation and rapid obsolescence of existing products and services would mean that cycle time of a complete makeover of organisations, especially the IT and digital-based offerings shall be short and rapid. ‘Enterprise architecting’ will be the heart and brain of a digitally-fit bank. As digitaldemands enforces new disciplines, organisations shall be ready only when they would have taken a holistic approach to business processes, technology and the organisational structure. Stakeholders will demand concrete steps and plans. ‘Productivity’ will be a synonym of digital readiness and will be defined as the ability of banks to sweat their assets--human, technology and infrastructure. As digital technologies are deployed for higher performance, tools and measurement standards to understand outcomes shall be essential. Benefits of technology deployed centrally have to be harvested in the front line. In sum, the STEP framework will hold the key to digital readiness of Indian banks.

SBI waives MDR charges for small merchants for one year (January 10, 2017)

The country's largest lender State Bank of India has waived merchant discount rate (MDR) on debit card transactions for all small merchants with annual turnover of up to Rs.20 lakh for one year. This, SBI said, has been done with a view to helping small merchants overcome apprehensions towards joining the "journey by installation" of PoS terminals in their shops. SBI further said the move is targeted primarily towards a segment of population and small merchants, who have not yet experienced the convenience of card payments. To build-up the PoS acceptance infrastructure across the country, especially in areas which hitherto had low digital penetration, SBI has been deploying terminals in smaller towns, semi urban and rural areas since beginning. Close to 70 percent of its PoS terminals are deployed in non-metro centres, and these can be found in more than 4,400 centres, SBI said.

SBI Takes the Branch-less Banking Road (January 6, 2017)

The country’s largest lender State Bank of India will take the lead among state-run lenders to launch branch-less banking called SBI Digi Bank, something similar to what Citi or DBS have done elsewhere in the world. The Digi Bank will have a financial superstore, a market place and end-to-end digitisation for products and services. SBI will soon rub shoulders with the likes of Europe’s M-Bank and Canada’s Tangerine Bank as it prepares to launch its own version of digital-only bank in the next 3-6 months.

While SBI did not respond to a mail seeking an official response, a senior official confirmed the development on the condition of anonymity. “We are working on a digital- only bank where no individual will be visible to the customer and all transactions will be done with the help of apps, internet banking and mobile banking,” said the banker. “It will be an omni-channel, omni-device digital bank which will be available to both new and existing customers.”

The digital-only bank, which will be device-agnostic, will use the Aadhaar infrastructure for not only on-board customers but also provide them services online. “So there will not be any paper, we will on-board customers online using e-KYC and all services will be provided digitally,” the banker mentioned above said. “Completely zero assisted mode may not be possible initially, so there could be couple of our people who will help customers in our InTouch branches.”

SBI InTouch is the bank’s state-of-the-art Digital Branch which facilitates instant opening of accounts, printing and issue of personalised debit card, and expert advice on investment through videoconference. The financial superstore will have products like opening of current and savings account, term deposits, loans, insurance and mutual funds. The bank also plans to offer personal financial management solutions to its customers.

SBI blocks transfer of cash to e-wallets via net-banking (January 5, 2017)

THE country’s largest lender State Bank of India (SBI) continues to block its users from transferring money using its internet banking portal to mobile wallet services such as Paytm, FreeCharge, Mobilkwik, Jio Money and Airtel Money. However, SBI customers can top-up their ewallets via debit and credit cards. An SBI official alleged that wallets were encouraging customers to siphon off money from their SBI accounts to other bank accounts, besides citing security issues. Speaking to FC, Manju Agarwal, deputy MD, SBI, said, “We have blocked our internet banking customers from loading money to wallets by debit to their accounts. However, we have not blocked our customers from loading money to wallets by using their debit cards or credit cards “This is because our internet banking platform has a reputation of being the most secured platform with not a single incident of fraud since 2012.

“It has been done based on the recommendations of SBI’s e-commerce panel, which decides if a merchant or a site is good enough and if we can to expose our APIs and can do integration with it. Also these wallets are not safe and there are security issues and so we have not approved them,” Agarwal added. Agarwal said this is more than one-year-old issue where RBI had sought an explanation from the bank. “More than one year ago, RBI had asked us we had suggested that these wallets should follow a certain protocol. For example– if money has been uploaded from A account and if the wallet holder wants to transfer the fund back into an acco u nt, it should come back to the same A account and should not be sent to B account.

Because these wallets were somehow cheating customers by loading money from a customer’s A acco unt and transferring it to a newly-opened account, which their own people had opened and siphoned off the money. Why should a person load money through a wallet and then take it out through another bank account? You will load money into a wallet to spend the money and if you have to transfer it back, then you should transfer it back to the same account. Till they don’t do this, we will not permit.” Freecharge and Paytm ref used to comment. But speaking to a news channel, BP Singh, Mobikwik founder and CEO, said SBI stopped service 3-4 months ago citing security breaches. Mobikwik’s business since then has been impacted by nearly 5-7 per cent.

SBI to end PoS transaction fees for small merchants (January 5, 2017)

State Bank of India (SBI) plans to remove transaction charges on point-of-sale (PoS) terminals for merchants who have an annual turnover less than Rs20 lakh, in a bid to boost cashless payments. “We are looking at removing MDR (merchant discount rate) for merchants who have a turnover of Rs20 lakh and below on our own,” said Arundhati Bhattacharya, chairman of India’s largest lender, on Monday. The decision to do away with transaction charges for small merchants comes days after the government’s waiver expired on 31 December. Last month, the government had said that merchants would not be charged this fee on PoS transactions at their stores. Currently, banks such as SBI charge an M DR of 0.25% on transactions less than Rs.1000 . They charge 0.5% for transactions between Rs.1,000 and Rs 2,000 and 1% for those of higher value. “We expect that removing MDR for these small merchants will help in further increasing the number of PoS terminals going ahead,” said Manju Agarwal, deputy managing director of corporate strategy and new business at SBI. According to Agarwal, the bank already has a network of 3.93 lakh PoS terminals and is adding more as demonetization sees a surge in digital payments. SBI is also the largest issuer of debit cards in the country. “Earlier we used to issue about 6,000 machines a month. These days we are doing well above machines per day. Often we are not able to meet demand as the service providers are not able to keep up with higher production levels,” Agarwal said. The bank has added about new machines in the two months since demonetization.

“As far as the overall scheme of things goes, waiving off MDR would be a small cost for a large bank. Even as a long-term business strategy, waiving off these charges will help in pushing adoption,” said Saurabh Tripathi, senior partner and director at The Boston Consulting Group in India. “Once you have achieved optimal adoption and merchants see a reasonable number of transactions, charges may be introduced,” headded.Since Prime Minister Narendra Modi announced the invalidation of Rs500 and Rsl,000 notes on 8 November, effectively taking away 86% of the currency by value out of the system, banks have begun making efforts to publicise cashless modes of transactions. Swiping cards on PoS terminals is one of the most preferred modes of cashless transactions as debit and credit cards are accepted at large retail services outlets like shopping centres, movie halls, restaurants and supermarkets.

As on 31 October, there were 2.73 crore credit cards and nearly 74 crore debit cards in the country. However, the card acceptance infrastructure continued to be limited at a little over 15 lakh PoS terminals. Typically, a terminal costs Rs.8,000-12,000, which could drop after a waiver of excise duty and special additional duty on all components used in its manufacture. The government has revised its initial target of one million new PoS terminals by 31 March to two million terminals, resulting in a race to the finish. Apart from SBI, other large banks like ICICI Bank, HDFC Bank and Axis Bank are in the business of providing PoS terminals. Still, transitioning to a cashless economy will not be easy. The global capacity for PoS terminal production is only 14 million, which severely limits the ability of banks to expand their network, Mint had reported on 1 December.

SBI plans to install 2.5 lakh point-of-sale terminals by March (January 5, 2017)

State Bank of India (SBI) plans to install 2.5 lakh point-of-sale (PoS) terminals by March and will place an additional order of one lakh terminals next week to meet the demand, deputy managing director Manju Agarwal told FE, adding that the bank has already placed an order for 1.5 lakh PoS devices. According to Agarwal, the bank has installed 45,000 PoS terminals in the 50 days of demonetisation taking their total PoS machines to 3.85 lakh.

“Our target is part of the government’s push to install one million PoS machines in the three months to March,” she said, adding that the demand for PoS is much greater than what banks are able to supply. At present, SBI charges a monthly rental of up to Rs 400 for deploying PoS along with an installation charge of up to Rs 500. RBI data showed that till October 2016, India has 15.12 lakh PoS terminals, of which SBI owned 3.42 lakh devices. According to the data, SBI is followed by HDFC Bank at 2.95 lakh PoS and Axis Bank at 2.76 lakh terminals.Following demonetisation of high value currency notes on November 8, value of transactions at PoS terminals has seen a huge jump to Rs.40,160.43 crore in December (till December 30) from Rs 35,240 crore in November. The Reserve Bank of India (RBI) had in December capped merchant discount rates, or the fee paid by merchants to banks for using PoS terminals, at 0.25% for transactions of under Rs.1,000,0.5% for transactions between Rs.1,000 and Rs.2,000, and at 1% for transactions more than Rs.2,000.

Hindustan Coca-Cola, SBI Tie Up for Digital Solution (January 4, 2017)

Hindustan Coca-Cola Beverages, the bottling arm of Coca-Cola in India, on Tuesday tied up with the country's largest lender State Bank of India to enable its over 2.6 million retailers and 5000 distributors to conduct business transactions digitally. The bank will initiate the retailers in the digitisation process with its digital payment options like Buddy P2P, Buddy Merchant, App, SBI Pay.

“We would train the retailers not only in our product but also about the loans that they could possible access,” SBI Chairperson Arundhati Bhattacharya said. She said loans to the retailers would be given based on their actual turnover. Hindustan Coca-Cola Beverages Chairman and Chief Executive Officer, and Bottling Investments Group regional director for South Asia T Krishnakumar said, “While all of our payment to suppliers and more than 90% of our collections from our partners are digitised, we propose to extend this facility to every retailer in the marketplace.” The process will be rolled out from February 1onwards in a phased manner, Krishnakumar added.

Blockchain: Ready to embrace, Indian banks? (January 4, 2017)

When I first heard of blockchain, I did not know whether it was a “block of chains” or a “chain of blocks”. “Block” in blockchain, I understand now, is a group, connected in a well-defined way, publishing and populating information uniformly and simultaneously at all the blocks. And “chain” is a multi-form connector that has its own intelligence as well as originality. Blockchain originated as a ledger for bitcoins, or the currency for the digital and virtual world. Any currency requires universal recognition of its value and location and features that cannot be replicated. Counterfeiting must be recognisable using easy tools. All these features were translated into the ledger for bitcoins, known as distributed ledger in blockchain parlance.

In common currency, exchange of value takes place with physical exchange. In bitcoins, the exchange of value occurs as ownership information is instantly published everywhere in all connected blocks using what is called cryptographic hash functions. Now, how to prevent counterfeiting or fraud currency, which is called “security feature” in currency? Here it is done by generating a unique value (hash value) for each message of transaction. The technology ensures that this value tag cannot be duplicated and any tampering becomes immediately evident, through the “magnification” features of the technology. So far, so good. However, something weird is happening today. Blockchain, primarily developed as a ledger, is assuming the cult status of a platform. Innovators are finding many uses of the unique features of the framework to devise multiple approaches for solving real-world problems of the financial world.

Permutations and combinations using the key utilities embedded in this technology have assumed the velocity of a rapidly spreading viral fever and is impacting everyone. All want to ride the bandwagon. Indian banks, financial firms and information technology companies providing products and services are no exception. For example, State Bank of India is today doing proofs of concept for half a dozen uses in different spheres of banking, either on its own or in collaboration with national and international players. More on that later. What are the key features of a blockchain framework that everyone is trying to use? Information and data sharing capabilities inside the network are a key capability. The sharing can be user-defined, peer-to-peer or, top-down or bottom-up in a hierarchical fashion. The second is the smart contracting feature, which is known as transaction owing to the bitcoin origin.

These are essentially a set of business logic to verify transactions through programmable logic. It could be one-to-one, one-to-many or, many-to-many in its most complex format. Third, of course, is the tamper-proof distributed ledger or record-keeping. Confidentiality and consensus in the form of non-discretionary and simultaneous information is the other feature. All of these lead to efficiency, savings on cost and transparency — key foundations of the financial world. Recipes, therefore, are developed using these ingredients for use in the real world. The main uses so far have been in the remittance and trade finance arena, given the necessity of information flow that needs simultaneous and exact similar notification in the value chain. In case of remittance, these are the remitter, remitter’s bank, settling bank, beneficiary, beneficiary’s bank, nostro bank, etc. In case of trade finance, the “to be notified” entities are the LC opening bank, negotiating bank, discounting entity, shipper, insurer, etc. Each one of the recipients could be defined as a block, and chained through programmed protocol.

The efficiency and speed of closing of transactions are the USPs of the technology. In blockchain, a typical trade transaction cycle comes down from 10 days to two. Newer uses are in the field of trading in currencies, stock and options trading, AML (anti-money laundering) and fraud monitoring, consortium funding-related information exchange, etc. The hyped-up possibilities have generated a feverish pace of attempts to adopt the technology. The banking and finance sector has been at the forefront of this race. In India, large banks such as the SBI have adopted multiple projects with multiple partners to test the possibilities. SBI, while exploring international collaboration and networking in this space with bodies like R3, Ripple and MonetaGo, has already initiated experiments in trade finance, consortium information, outward/ inward remittance, asset tracking, record management, e-KYC, etc.

A few beta versions are ready for testing and closed-user group deployment soon. SBI is also working with technology majors such as TCS and IBM and start-ups like Prime chain to take blockchain adoption to the next level by using their hyper ledger and BC technology. Sadly, however, in India as well as globally, most of the projects are at the stages of experimentation, trial, beta and proof of concept. The reasons for the technology not being ready for production are manifold. All these are the loose, un-explained ends and the “unsolved” nature of blockchain technology.

First, so far, the “hack-proof” claims have not been well established. Scalability is another sore point. In India, like markets, where volumes, transaction concurrency, peak loads, downstream consistencies are key success factors, blockchain has not been able to establish enough used cases. As diverse uses and private blockchains proliferate, security protocol standardisation continues to be a challenge. Lack of interoperability, service and support are nagging issues. At the forefront of the blockchain dilemma is the confusion and lack of understanding that it is not a complete business solution, only a basic protocol to ease information flow and improve transparency and efficiency. Therefore, the fever around riding the bandwagon of blockchain is expected to remain mild and not go viral in India for some time to come.

MRUTYUNJAY MAHAPATRA The author is deputy managing director and CIO, State Bank of India

SBI joins hands with Manipal (January 4, 2017)

The country’s largest lender State Bank of India Chairman Arundhati Bhattacharya on Tuesday launched a digital platform and mobile app powered by Manipal Global Education Services’ (MaGE) EduNxt Platform.

SBI cuts home loan rates (January 3, 2017)

ADAY after the reducing its benchmark marginal cost based lending rate (MCLR) by 0.90 per cent to 8 per cent, State Bank of India (SBI) on Monday announced home loan rates at 8.65 per cent per annum for loans upto Rs.75 lakh and 8.60 per cent per annum for women borrowers. For loans above Rs.75 lakh, the interest rate would be 8.70 per cent per annum for male borrowers and 8.65 per cent per annum for women borrowers. Earlier, the bank was charging an interest rate of 9.25 per cent on home loans for women borrowers and 9.30 per cent for others on loans upto Rs.75 lakh as part of the festival offer that ended on December 31, 2016.

That means the bank is charging a risk premium of 0.65 per cent on the MCLR rate of 8 per cent for home loans upto Rs.75 lakh for male borrowers and a risk premium of 0.60 per cent for women borrowers. SBI’s home loans since are benchmarked against the one-year MCLR as a result borrowers will see their rates getting reset every year. Giving an illustration, Arundhati Bhattacharya chairman SBI said that a person can save Rs.2,333 per month on 30-year, Rs.50 lakh home loan at the revised rates of 8.6 per cent. Calculated on a yearly basis, the savings go up to Rs.27,996 and over the period of 30 years, the total savings go up to Rs.8.39 lakh, she said.

If this amount saved on lower EMIs is invested in a recurring deposit at 6.5 per cent over a 30- year period, it will fetch Rs.25.80 lakh, she explained. SBI also announced a new semi-fixed interest rate mortgage product for loans up to Rs.30 lakh at 8.50 per cent which would have a fixed rate for the first two years after which it would be linked to floating rate. For male borrowers, the fixed interest rate would be 8.55 per cent for first two years after which it would be linked to floating rate. The Bank said that a woman should be the sole applicant or one of the co-applicants for home loan and also the sole owner or one of the co-owners of the property proposed to be financed by the Bank. Loans upto Rs.30 lakh will be available with both Fixed and Floating Rate option.

Bhattacharya at the press briefing said that the rate cuts were intended to "jump start" credit growth and could raise it by 100-200 bps in the year ending in March. SBI now expects credit growth for 2016/17 fiscal year to be 8-9 percent, Bhattacharya said, still lower than the lender's previous formal guidance of 10-12 percent growth. Following SBI, several other lenders including Punjab National Bank, ICICI Bank, Union Bank of India, IDBI Bank, Kotak Mahindra Bank and Dena Bank also cut their lending rates by 45-90 basis points across tenures.

Loan for all: mortgage rates slashed

SBI merger put off till next fiscal (January 3, 2017)

State Bank chairperson Arundhati Bhattacharya on Monday hinted that the mega merger of its five associate banks and BharatiyaMahila Bank (BMB) could be pushed to the next financial year as it is still awaiting the government notification on the move. “Probably, by a quarter or so (the merger could be delayed). The reason is we still have to get the government approval and even if we get it now, doing things like merger in the last quarter is never a very wise thing because there would be lot of IT system changes,” she told reporters when asked whether the merger could be delayed due to the disruptions caused by the demonetisation drive. The merger would make SBI a global-sized bank and would be amongst the top 50 lenders in the world, with an asset base of Rs.37 trillion or over $555 billion, with 22,500 branches and over 58,000 ATMs and more than 50 crore customers. Ms Bhattacharya said normally the banks close down all the IT system changes by mid-February.

“Sometimes IT system can impact something else quite unknowingly. So we don’t want to take any risks at the annual closing time. So we may want to do the annual closing and then look at it,” she added. When asked whether she has a new time in mind for the merger process to be completed, the chairperson said “not yet. Let me first get the government approval only then we will know.” When specifically asked what sort of government approval is pending, the chairperson said the government has “to notify the merger scheme.” It can be noted that the bank had announced the merger in May and its central board of directors had in August approved the process along with the share swap ratio for three of the listed associate banks and BharatiyaMahila Bank. At that time it was announced that the merger would be completed by end March 2017.

Probably,by a quarter or so. The reason is we still have to get the government approval and even if we get it now, doing things like merger in the last quarter is never a very wise thing because there would be lot of IT system changes. — ARUNDHATI BHATTACHARYA

SBI launches hybrid home loan to boost sagging growth (January 3, 2017)

India’s largest lender State Bank of India (SBI) on Monday introduced a hybrid loan where customers will be able to avail home loan up to Rs.30 lakh at a fixed rate of 8.55 per cent for the first two years of the loan tenor which will be later linked to a floating rate. For women customers of SBI, the home loan rate will be fixed at 8.5 per cent for the first two years.

Arundhati Bhattacharya, chairperson of SBI, however, while speaking to the media on Monday clarified that the newly introduced loan is “not a teaser loan”. “It is not a teaser loan. This is spread over our marginal cost of funds based lending rate (MCLR) only. It will be fixed for two years and will later be linked to the MCLR,” said Bhattacharya. SBI in a statement on Monday also said that its regular home loans up to Rs.75 lakh will be priced at 8.65 per cent interest. For women, a fully floating rate home loan will be available at 8.6 per cent. Home loans above Rs75 lakh have been priced at 8.65 per cent and 8.7 per cent for women and other customers, respectively. At present, while 40 per cent of SBI’s total loan book is on MCLR, only 15 per cent of the home loan book is on MCLR. Meanwhile, customers already part of MCLR will save Rs.8.4 lakh over a period of 30 years on a Rs.50 lakh loan.

On demand for housing loans, Bhattacharya said that the bank intends to meet builders to see what best could be done to boost the realty sector. “I don’t believe that cut in interest in the be all and end all for priming growth in the economy. We will be talking to builders what more we can do,” she said. The bank has launched SBI Bridge Loan for people who want to upgrade to a new house but have not yet been able to sell their existing loans. “We have created a product called bridge loan which can be availed on the existing property, pay the interest and within 2 years the borrowers need to liquidate the property and repay the loan,” Bhattacharya said.

She said that in normal circumstances ATM availability is around 88-90 per cent and of 49,000 ATMs of the State Bank group, nearly 40,000-41,000 ATMs are dispensing cash. “Cash availability in last one week has improved considerably and we are making efforts that in all ATMs there are two cassettes of Rs.500 notes,” she said. On loan growth, Bhattacharya said: “The loan growth target we had given earlier was of 11-12 per cent. As of now it is only 6.7-6.8 per cent after the contraction in November and December. With this rate cut, we are hoping that we would be able to take it to 8-9 per cent”. She added that since there are only three months left in the year, it is difficult at this point of time to envisage what willit be.

DeMo benefit: SBI, others cut lending rates steeply (January 2, 2017)

MUCH to the cheer of borrowers, country’s largest bank SBI has ushered in the new year with a steep 0.90 per cent cut in lending rates to make home and other retail loans cheaper. Taking the cue, PNB and UBI reduced their rates within hours of SBI’s rate cut. With Sunday’s competitive reduction, the transmission of RBI’s rate cut has got a real push and more lenders are likely to follow suit. The RBI has cut the repo rate cumulatively by 175 bps since January 2015, but banks have passed on the benefit of only 75 bps. PrimeministerModi on Saturday asked banks to prioritise lending to the poor and middle class. Banks have garnered Rs 14.9 lakh crore of deposits since demonetisation, as per some estimates..

State Bank of India’s (SBI) 1-yr MCLR rate is now 8%, a sharp cut of 0.9% Punjab National Bank’s (PNB) one-year linked MCLR rate stands revised at 8.45%, cut by 0.7% 8.65% 8.90% 8% 9.15% 9.30% 8.45% Union Bank of India (UBI) reduces its one-year MCLR by .65% to 8.65%


  • The cut in MCLR helps borrowers get the benefit of lower interest rates for new home, auto and other retail loans
  • Old borrowers at base rate will be moved to MCLR automatically on completion of one year. They have to pay a negotiated fee if they want to the enjoy the benefit of lower rate immediately
  • Marginal cost of funds based lending rate (MCLR) is the new rate at which banks lend to borrowers


Banks Modify Rates Post PM Pitch (January 2, 2017)

State Bank of India slashed interest rates to the lowest in about a decade, forcing rivals to follow suit in the fight for market share, a day after Prime Minister NarendraModi urged lenders to broaden their focus to the vast range of poorly served borrowers from the poor to the middle class. The country’s largest bank cut rates by 0.9 percentage point, or 90 basis points (bps), making its loans the cheapest among all lenders. The government-owned SBI pegged its marginal cost of lending rate (MCLR) — the benchmark for its best customers — at 8% for one year, down from 8.90%, on Sunday.

SBI's prospective home loan borrowers will be charged 8.65% (8.60% for women), on a floating rate loan. The bank is offering fixed rate loan for two years at 8.55% (8.50% for women borrowers). With this SBI is bringing back teaser rate loans which was discouraged by the Reserve Bank a few years ago. State-owned Union Bank of India and Punjab National Bank also announced cuts ranging from 60 to 90 basis points. Delhi-based PNB will charge 8.45% for a year while Union Bank will charge 8.65%. The new rates will be effective for new borrowers.

The old borrowers will get the benefit of new rates at the end of the lock-in period, when rates are revised in line with prevailing levels. The lock-in could vary from one month to three years, depending on the loan agreement. Bank executives said Housing Development Finance Corp, the largest home financier, and private lenders like ICICI Bank and HDFC Bank, which are more profitable than their rivals, will likely match SBI’s rates to ensure that they do not lose customers IDBI Bank and State Bank of Travancore had led the field by cutting rates on Friday evening itself. ET reported on Friday that banks, nudged by the government, will announce steep cuts in lending rates in the first week of January.

The move has become necessary to fuel consumption that has slumped after the November 8 demonetisation, besides encouraging a revival in investment. Prime Minister Modi had called on banks to take advantage of the flood of money they had got in the form of deposits after.Rs.500 and Rs.1,000 notes were demonetised. The deadline for such deposits was December 30. “History is witness that the Indian banking system has never received such a large amount of money in such a short time,” Modi said in his December 31address to the nation. “While respecting the autonomy of the banks, I appeal to them to move beyond their traditional priorities, and keep the poor, the lower middle class and the middle class at the focus of their activities.”

This series of rate reductions is among the sharpest in one shot since the cuts that followed the 2008 financial crisis. In the past, banks have typically lowered lending rates by increments of 5 to 10 basis points as they transmitted monetary policy or the cost of funding dropped. Sources said CEOs of five large banks—SBI, Union Bank of India, ICICI Bank, Dena Bank and Central Bank of India—had a held a closeddoor meeting 10 days ago to discuss the possibilities of a sharp reduction in rates to boost investment sentiment.

Banks collected about. Rs.12.44 lakh crore in deposits in the month after demonetisation. That compares with the average .Rs.9 lakh crore they get by way of incremental deposits in a fiscal year. However, demand for loans, reflecting investment activity, has almost dried up. Reserve Bank of India data show bank credit rose 1.2% to .Rs.73 lakh crore in the fiscal year to date — April 1 to December 9 — much slower than the 6.2% rise to .Rs.69.6 lakh crore in same period a year ago