Union bank to provide wealth management services for HNW clients

Now day’s banks are providing wealth management services to their high net worth customers. Working on this line Union Bank of India launched the wealth management services for its high networth clients, which will provide a wider range of solutions to its customers.

Bank’s Chairman and Managing Director, M V Nair launched the service.

For providing this service the public sector lender has signed up with Wealth Advisors (India) Pvt Ltd, a leading company in the wealth management space headquartered at Chennai.

Nair said there has been increase in the number of customers because of speedy growth in the economy therefore demand for wealth management services are constantly increasing.

"In fact, India is one of countries where the growth in the high networth population is in double digits and it is expected to grow at around 15 per cent per annum for the next decade."

As per the reports of World Wealth Report published by Capgemini and Merrill Lynch, in India there are around 123,000 people with a net worth of $1 million.

"At present the bank has more than 500 high net income clients in the twin cities (Hyderabad-Secundarabad) and the number is expected to grow multi-fold," Nair said.

"As a part of our re-branding strategy under a new logo, we have promised our customers to deliver value for money," he said. He further added that the launch of wealth management services is a step towards fulfillment of this promise.

He said the solutions on offer will include financial planning, asset allocation and investment management.

RBI to review norms for entry of foreign banks

The Reserve Bank of India just six months before a review of norms for greater exposure to foreign banks has indicated that it will liberalize the guidelines only gradually.

In April 2009 RBI will be reviewing the norms, foreign banks have slowly started giving up hopes that the regulator will allow them to buy stakes in the healthier and bigger Indian banks.

RBI, in the latest Report on Currency & Finance, said that it might revise the entry norms of foreign banks from April 2009 in view of alleviating the risks of enhanced presence of these players in the country. It added that the emergence of large banks, involving foreign shareholding, can affect the business of smaller domestic banks and might result in a decline in lending to small enterprises, as in the case with several other economies.

It further added that an increase in presence of foreign banks will increase competition-may speed up the consolidation process of the Indian banking industry which might increase the risk of concentration if mergers or acquisitions involve large banks.

At the time of reviewing the norms for foreign banks in India, RBI main concern will be to reduce the impact of consolidation on existing domestic banks and the required supervisory and regulatory challenges considering the sophisticated operations of these foreign banking groups and their involvement in complex and sophisticated products.

RBI said that the liberalization of entry norms for foreign banks should not hinder the country’s ongoing emphasis on financial inclusion, credit to agriculture and SMEs, and public policy on credit delivery, cost and allocation.

However India will be allowing 12 branches of foreign banks in a year, it has been more liberal than the commitments. Previously between 2003 to October 2007, the central bank has given approval for 75 new foreign bank branches. But, during the second phase (April 2009 onwards), the challenges relating to co-ordination between home and host countries regulators will also be revisited.

On the other hand foreign banks have been complaining of RBI’s disinclination to open new branches. “If you ask for 40 branches, you get permission to open two,” said a senior executive at a foreign bank.

Moreover creating more rooms for foreign banks, implementation of Basel II norms will also cause further consolidation of the banking sector. RBI said then there can be changes in the ownership pattern of the public sector banks in the medium and long term.

In spite of number of bank mergers and acquisitions, the Indian banking system has become less powerful during the post-reform period. RBI added although some consolidation of the banking sector is necessary, the policies need to be formulated by the regulator to ensure that consolidation do not undermine competition in the future.

Credit card out standings converted to personal loan

To reduce the interest rate burden converting credit card out standings to a personal loan is a good idea, but one should choose the right tenure carefully.

Banks fear that non-payment of dues will increase their non-performing assets, which would be bad for their balance sheets. Hence banks are offering to credit card users, who have overspent on their card, can convert their out standings into a personal loan. Such an offer also means that many customers, who have been facing difficulty in paying off the amount, can use this method to ensure that they do not become defaulters.

The biggest benefit on this kind of conversion is that the rate of interest will be much less on personal loans. As far as credit cards are concerned there is huge interest burden (between 36-44 per cent per annum) and is increasing with each passing month. Interest rate on personal loan is much less at 16-22 per cent, lesser by almost 40-50 per cent.

But, things are not that simple. There is an additional risk involved, even though when the interest burden slopes down, it can lead to a situation where it becomes very difficult for the consumer to manage his finances.

In case you go for a personal loan option regular monthly payments have to be made and for a specific time period. While this is good because it will mean a disciplined payout, for some, the situation can worsen.

This is may be because while the credit card company allows a minimum payment of 5 per cent per month, whereas in case of a personal loan the outgo could be higher, especially if one opts for a smaller tenure. For instance, if a person has an outstanding of Rs 2 lakh, at the rate of 5 per cent he will have to pay around Rs 10,000 monthly. If the amount is converted to a two-year personal loan at say 18 per cent, the outgo would be around Rs 18,000. Hence the sudden rise in the repayment amount by 40-50 per cent can lead to a situation where the budget goes completely haywire.

Thus in such situations, investments are the first one to be affected because other expenses are more difficult to control. And if this happens, the safety net that you are creating for the future could get reduced. In case you face such situation, it is important to select the right tenure so that the burden does not increase considerably.

Many times when you go for a personal loan, the bank might put a clause where prepayment is allowed only after a certain number of months or only so many times in a year. Moreover there can be even a hefty prepayment penalty if you were to exercise this option. This can be because the bank might be losing out on the interest income.

Individuals facing a temporary problem regarding payments should take a step back and give the situation some serious thought. If they get a cash flow, in terms of bonus or from any other source, they can use that to pay off the outstanding credit card bills. Yes, you will have to bear temporary pain because of high interest rates, but it would be a better option to clear the entire loan instead of giving out equated monthly installments (EMIs) for a long time.

The biggest risk involved in this is that the person can really go down further into a debt trap, if he continues to hold the payments and spend on the card. If you have chosen the option of converting the out standing on the credit card to a loan, there is no outstanding. This can easily lure a spendthrift to use it again.

This will again lead to rise in the balance on the card leading to financial crisis as the consumer will now have a personal loan and more credit card bills that need to be paid.

Kolkata police arrested bank fraud racket kingpin

Kolkata police last night arrested one more person Manaranjan Roy (40), the manager-in-charge of Pincon involved in a bank fraud racket. After his arrest the number has reached to six. Last month the Shakespeare Sarani branch of Overseas Bank was cheated of Rs 5.5 crore by the gang.

Police arrested Manaranjan Roy near his residence at Raipur Road at Jadavpur. Police believe Roy was the key player of the racket.

Following the complaint lodged by the bank authorities last month police arrested five people including Pravin Kumar Agwaral (44) and Raghu Shetty (50), the bank manager of the Karnataka Bank few days back.

The gang had submitted eight forged letters of credit on the name of different branches of Karnataka Bank and cheated of Rs 5.5 crore. Police arrested Pravin, was the official recipient of the entire amount. During his interrogation he revealed Raghu’s name who worked as branch manager of the Karnataka Bank. It was Raghu who had confirmed the Indian Overseas Bank authorities, over telephone that the forged letters of credit were authentic and requested them to pay the amount to Pravin.

Investigating team belonged to anti-fraud section of the city police also came to know during the investigation that Manoranjan, had earlier duped Rs 2 core from a branch of United Bank of India. He was arrested in 2005 but was released on bail. Few years back he again tried to dupe Rs 6 core from Federal Bank. Police produced Manoranjan before the court and took him into custody for 14 days.

Private and public sector financial players qualify bid to manage provident fund

Leading private financial players HSBC and ICICI Prudential and the country's largest public sector bank SBI managed to qualify financial bid for managing about Rs 25,000 crore in provident fund of about four crore employees annually.

While giving the confirmation a member of the Finance and Investment Committee (FIC) of Employees Provident Fund Organization (EPFO) said, "Three asset management companies, including HSBC, ICICI Prudential and SBI have qualified in the financial bid round".

Earlier, when bid was announced 10 companies, including Reliance, Birla Sun Life, HDFC, had qualified in the technical round and later seven companies submitted financial bids.

A member of FIC of EPFO said HSBC and ICICI Prudential have quoted the lowest fee of one basis point, or 0.01 per cent, of the fund to be managed.

Regarding short listing of SBI, member said although the fee quoted by SBI and Reliance were almost same, but SBI was able to qualify the financial bid round as it had scored more points on technical grounds.

Three players selected by the FIC can be appointed to manage funds after Central Board of Trustees (CBT) gives its nod which is scheduled to meet on July 29.

The total amount of EPFO is around Rs 2, 40,000 crore with incremental deposits to the tune of Rs 25,000 crore every year.

In the beginning the EPFO will ask the fund managers to manage the incremental deposits only. Sources added once the private players are able to present better returns, they might be asked to manage additional funds.

The sources said this will help the EPFO to offer high interest rate to its subscribers as against 8.5 per cent at present.

NCDRC in its order told banks to pay for delay in cheque clearance

The National Consumer Disputes Redressal Commission (NCDRC) in its July 14 judgment has asked banks to credit local cheques to accountholders account the same day or at the most the next day. The commission in its order said the outstation cheques should be encashed between seven and 14 days, depending upon the distance from the place where the cheque is issued.

The commission in its order said you can claim interest from a bank for delayed encashment of your outstation cheques. “If there is any delay in collection of the said (outstation) cheques beyond the period… interest at fixed deposit rate, or at a specified rate as per the respective policy of the banks, is to be paid to the payee of the cheques.”

The judgment has come on the petition filed by an advocate Atul Nanda. As per the order of the commission the banks will have to pay interest to customers for delayed encashment of local cheques as well. Usually it takes up to three days to be encashed. While Nanda in his consumer litigation has said the delay in crediting the cheques to the consumers’ account was leading to “undue enrichment” of banks, which were earning crores in interest on the customers’ money for the delayed period.

The commission chairman Justice M. B. Shah directed the banks to abide by the order within two weeks. He asked the banks to write in bold letters in every branch’s notice board the salient features of their policies on collection period of outstation cheques and interest payable in case of delay. Justice Shah has asked the RBI to monitor the order.

Uttaranchal Gramin Bank to open three branches exclusively for women

Soon Uttaranchal Gramin Bank will be opening three branches exclusively for women in the hill state of Uttarakhand. The first such branch has already started operation at Dehradun’s Indira Nagar locality and being fully managed by women only.

In this branch only women are allowed to open their accounts. This is the 121st branch of the bank. There is a proposal of opening of three more such branches in Pauri and Pithoragarh districts.

A special women centre has also been opened at the head office of the bank. This centre has been started with the help from NABARD. The main drive of the women branch will be to attract Self-Help Groups (SHGs) and Non-Government Organizations (NGOs), having mostly women representatives.

"By opening women branches, we want to salute the women of the hill state who are known as matrishakti' (mothers' power) in Uttarakhand," said Chairman of the Uttaranchal Gramin Bank Threesh Kapoor.

In 2006 Uttaranchal Gramin Bank was formed with the merger of Alaknanda Bank, Ganga-Yamuna Bank and Pithoragarh bank. The bank has made a profit of Rs 8.83 crore before tax this year. This year bank has registered a jump of 233 per cent as compared to the last year.

The exceptional rise in the profit is mainly because of the merger of three banks. The bank is also promoting local artists from the state for this it has set up an art gallery at its head office.