Bank of Maharashtra to raise capital from LIC

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MUMBAI: The Bank of Maharahstra will be the second bank after Dena Bank to raise capital from Life Insurance Corporation (LIC), in a move aimed at boosting their capital. The board of the bank will meet on February 10 to consider issuing shares on preferential basis to government or LIC, according to a statement issued to the stock exchange.

Widening fiscal deficit has prompted government to approach LIC to invest in government owned banks- a move which will help government to trim expenses and yet retain control over banks.

Government had targeted fiscal deficit- difference between income and expenses – at 4.6% of gross domestic product (GDP) for the current fiscal, but many fear it would cross 5% as government failed to raise money by divesting their stake in state run companies.

The board of Syndicate Bank too will meet on February 11 to discuss proposal of issuing shares to government or others, it said in a notice to the exchange. Till December end, LIC’s stake in Bank of Maharashtra stands at 6.68% while that in Syndicate Bank is 10.27%.

Dena Bank is among the first bank to announce decision to dilute equity in favour of LIC. The insurance company would be acquiring 5% stake for an investment of around Rs 125 crore and the transaction would be complete by end of this fiscal. LIC’s stake in Dena Bank will increase to little over 11% after it issues shares on preferential basis to them. However government’s stake would fall to 55% – which is below 58% threshold limit they prefers to hold in state run banks.

The current move of seeking capital support from LIC is mainly aimed at small to medium sized banks. The large banks like State Bank of India, Central Bank of India and Punjab National Bank has received capital directly from government.

Government has committed around Rs 18000 crore capital to PSU banks this fiscal. So far it has allotted Rs 7900 crore to SBI, Rs 1285 crore to PNB and Rs 700 crore for Central Bank of India. Union bank of India and Indian Overseas Bank too has received firm commitment about capital from government although the exact quantum is yet to be decided.

Axis Bank travel currency card volume crosses $2 bn mark

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MUMBAI: Private sector lender, Axis Bank today said sales and usage volumes for its travel currency card used for international travel have crossed USD 2 billion.

In a statement issued here, the bank claimed it holds 48 percent market share in the segment currently and that this is the first time anywhere in the world that any bank has crossed USD 2 billion in sales for such a card.

The city-based bank said the product, launched in 2003 crossed, had surpassed the USD 1 billion mark in 2009.

The card allows users the ability to top-up money in 11 currencies by paying in rupee terms. The money is converted to the international currency of choice at the prevailing exchange rate and customers can use it for transactions abroad, the statement said.

Does selling in European banks represent an opportunity for short-term traders and active investors?

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With traders beginning to take profits in high-flying financials from Bank of America (BAC) to Wells Fargo (WFC), should we expect a similar sell-the-news reaction after UBS (UBS) reports quarterly earnings on Tuesday?Like most banks, UBS has been moving strongly higher in recent days and weeks…(Read More)

DBS keen on operating as a wholly-owned subsidiary

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TAIPEI: DBS Bank sees significant business opportunity in India and is keen on operating as a wholly-owned subsidiary in the country if tax impediments are addressed, chief executive officer Piyush Gupta has said. “We would be happy to see the pace of regulation around subsidiarisation in India to hasten.

We would like to subsidarise in India given our large interest in the country,” he said. “In our discussions with the Reserve Bank of India, we understand that the government would address the tax issues around stamp duty and capital gains,” he said. Currently, the bank operates as a subsidiary in China, Hongkong, Taiwan and Indonesia. The idea of asking foreign banks to operate as wholly-owned subsidiaries is to enable the regulator to have better regulatory control over these entities and ring-fence risks.

The need for greater control has increased after the global financial crisis. “Just by itself subsidarising is an expensive proposition as it leads to capital inefficiencies and liquidity gets tricky but if you get quid pro quo in terms of branch licensing then the proposition gets attractive,” he said. India is the third-largest market for the group after Singapore and Hong Kong.

To exhibit its commitment and establish its brand in the country, the group may consider listing in India and Shanghai in the medium to long term. “Immediately, we have no plans to list in India. However, in the medium to long term we may consider multiple listings in Mumbai and Shanghai,” said Gupta. At present, under World Trade Organisation norms, RBI is committed to giving 12 new branch licences to foreign banks every year.

Although the number of licences given out has been way higher than this, foreign banks are not happy as the RBI is more liberal with domesticbanks when it comes to branch expansion. DBS has 12 branches and has sought RBI’s permission to open four more, in step with the Comprehensive Economic Co-operation Agreement between India and Singapore, which allows amaximum of 16 branches of Singaporebased banks.

Net profit of the bank in India at the end of March 2011 was down 52% to Rs 127.22 crore as against Rs 270.02 crore in the corresponding period last year. Total asset base of the bank grew by 26.64% to Rs 23,736 crore at the end of March 2011 as against Rs 18,742 crore in the corresponding period last year.

(The author was in Taipei on the invitation of DBS Bank)