Important News 31st July

Mundra appointed RBI deputy governor-Business Standard

He'll take over as the fourth Deputy Governor of RBI after K C Chakrabarty resigned mid-tenure

The government has appointed S S Mundra, chairman and managing director of Bank of Baroda (BoB), a deputy governor of the Reserve Bank of India (RBI).

Mundra (60), who will assume charge on Thursday, has been given a three-year term.

Mundra took charge as chairman and managing director of BoB in January 2013. Prior to his elevation, he was the executive director of Union Bank of India.

One post of RBI deputy governor fell vacant after K C Chakrabarty retired nearly three months before schedule, in the last week of April.

Of the four deputy governors, two are selected from outside RBI, while the other two are from within. Of the two outsiders, one is a commercial banker and the other an economist. Earlier in July, RBI extended Deputy Governor H R Khan's term by two years.

Born on July 18, 1954, Mundra holds a Masters in Commerce and is a Certified Associate of the Indian Institute of Banking & Finance (CAIIB). He started his career as a probationary officer with Bank of Baroda in 1977 and has more than three decades of experience in the sector.

He has held a wide range of responsibilities in the domestic as well as international operations of the bank.

Mundra has also held key leadership positions such as the zonal head of the Maharashtra & Goa zone. He was also the chief executive of Bank of Baroda’s UK operations for a period of three years.

The central bank is planning to have one more deputy governor; this would need a change in the rules. Till the time this is done, RBI has proposed to appoint an officer on special duty or chief operating officer with the rank of a deputy governor.

In April, the government appointed R Gandhi as deputy governor. Gandhi, 58, who was handed a three-year term, succeeded Anand Sinha who retired in January.

Top public sector banks shed bulk deposits last fiscal

Mumbai, July 30:

Bulk deposits, that is, those above ₹1 crore, are a significant resource for banks, often constituting 10-30 per cent of the total deposit base.

Public sector banks compete with each other in mopping up such deposits, especially towards the end of the fiscal, in a bid to increase their balance sheet size.

Such deposits are provided by corporates, cash-rich public sector units and high net worth individuals. The incentive for them is a premium of 0.5-1.5 per cent on the rates they would get at the retail level.

For banks, however, these deposits often raise costs and squeeze their margins. But banks go for them for administrative convenience and to avoid the hassle of building a retail depositor base.

However, last fiscal, top public sector banks such as State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, Canara Bank and Union Bank shed a considerable amount of bulk deposits.

One reason for this was the lack of deployment opportunities, as no major projects took off and there was no need to raise such huge funds.

According to an SBI official, "Bulk deposits are generally for a shorter time and are volatile. Currently, since the credit offtake is not very significant, we don’t really need to raise funds which are volatile, high cost and which can impact our net interest margin and profitability."

The country’s largest lender, SBI, cut its bulk deposits by about ₹14,000 crore last fiscal.

As on March 31, 2014, the bank’s share of bulk deposits came down to 10.11 per cent from 11.63 per cent in end-March 2013.

SBI’s total deposit base as on end-March this year stood at ₹13.95-lakh crore.

A few weeks earlier, SBI had cut interest rates on bulk deposits in two maturity buckets by 25 basis points: seven to 60 days (to 6.25 per cent); and 61 days to less than one year (to 6.75 per cent).

Punjab National Bank, the country’s second largest public sector bank, had cut its bulk deposits by more than 50 per cent last fiscal.

The share of such deposits in total deposits was brought down to 4.99 per cent from 12.49 per cent. PNB has a deposit base of ₹4.51-lakh crore.

Similarly, Canara Bank shed ₹25,681 crore worth high-cost deposits.

The share of bulk deposits came down to 6.5 per cent in March 2014 from 15 per cent in March 2013. Canara Bank’s deposits were nearly ₹4.21-lakh crore.

Bank of Baroda also lowered its high-cost deposits taken at a preferential rate by nearly 50 per cent to ₹12,700 crore as on March-end 2014.

Enough liquidity

Banks currently don’t seem to need the money. According to K Subrahmanyam, Executive Director at Union Bank of India, "Our bulk deposits are below 15 per cent. We will keep reducing bulk deposits. As of now, there is liquidity in the market."

Since there is not enough pick-up in credit market, bulk deposit rates are currently low — at 6-8 per cent — for deposits with maturity periods of three to six months.

RK Goyal, Executive Director at Central Bank of India, said, "We are in a continuous process of reducing our bulk deposits, even if credit picks up gradually, as these are very costly. We intend to bring it down to about 19 per cent this year."

Central Bank of India’s high-cost deposits were reduced to 21.84 per cent of total deposits as on end-March 2014 and further to 21.10 per cent in the June quarter of this fiscal

No KYC for Kisan Vikas Patra but interest payment to face TDS-Economic Times

NEW DELHI: The government will not insist on know your customer (KYC) guidelines on Kisan Vikas Patra(KVC), a post office savings instrument product that is being reintroduced after an over two-year hiatus, but interest payments above the prescribed threshold will be subject to tax deduction at source.

"There will be no KYC but interest payment would face TDS (tax deducted at source)," the official told ET.

Small savers, however, may be spared as only interest outgo above Rs 10,000 will be taxed. "In rural areas, where the unbanked population is still high, it will bring small savers into the organised channels instead of chit funds and such schemes....The convenience of picking up the instrument from the nearest postoffice is huge," said D K Pant, chief economist,

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