Tuesday, December 2, 2008

BANKING NEWS - 1.12.2008

Credit cards of Indian banks recovered from terrorists
Business Standard / Mumbai / November 29, 2008
Police are yet to contact banks whose credit cards are said to have been found from terrorists who carried out brazen attacks on Mumbai.
A marine commando involved in the combat operations at the Taj Mahal Hotel said that seven credit cards had been recovered from the terrorists along with an identity card issued in Mauritius. In a televised press conference, a marine commando said that cards issued by ICICI Bank, HDFC Bank, HSBC, Axis Bank, and State Bank of India had been handed over to Mumbai police, which was providing ground support.
“We found a purse in a bag in which there was a Mauritian government identity card, seven credit and debit cards of banks like HSBC, HDFC Bank and ICICI Bank and cash worth Rs 6,840. We have given all the details to the police,” the commando said. He, however, refused to divulge details of the identity card and the bank documents found there.
While police are yet to contact banks, the credit card issuers said they will extend their full co-operation as and when the cops contacted them.
“It is something where everyone will do their bit. We have not been contacted by any authority regarding the details of the credit cards used by the militants. If you notice carefully, the photo identities of the credit cards are on the top of right side of the cards, which are not issued by any bank in India. Also, there is a possibility that these could be genuine customers’ credit cards who visited the hotel before the attack,” said an executive at one of the banks.
ICICI Bank said that it issues credit cards in India, Sri Lanka, and the UK. The bank has issued about 5,000 credit cards in the UK. “The bank immediately blocks the cards once reported lost or stolen by the card holders. If the police contact us for any information, we will act as per their orders,” an ICICI Bank executive said.
An industry expert said that the origin and issuing details of a card can be traced from the first four digits of the 16-digit number on the face of the card. The number also helps a bank to trace all transactions made on the card in the past. “ICICI Bank credit cards are centrally processed. With the help of the numbers on the cards, it can be easily found out where, when and to whom these cards have been originally issued,” he said.
HSBC Bank too said it is not clear if the cards belonged to the terrorists. “In case the cards were issued by us, the police will contact us. If at all any of our bank’s cards is found, we have to see how much information we can share with the public since these are extremely sensitive investigations,” said an executive at the bank.
SBI Cards, Axis Bank and HDFC Bank said that there was no official communication with them regarding the cards retrieved from the terrorists.

AIBEA demands a serious and thorough probe as to how these Banks have extended their credit cards to the terrorists. We have always complained that credit cards are being given by these Banks, especially by the new private banks like ICICI Bank and the foreign banks, without proper scrutiny or KYC norms. In the name of capturing market share, credit cards are being foisted on all and sundry. More often than not, the innocent people are also being harassed in the name of recovery of dues. Government and RBI should institute a separate probe into the whole question of credit card issuance by these Banks. AIBEA also reiterates its demand for nationalization of all the private Banks.

Banks' support to kin of victims
Business Line / Mumbai / Nov 29
As a mark of respect to police, army and bank personnel killed in the terrorist attacks, some banks have said they will offer token cash and jobs to their families. Saraswat Co-operative Bank has offered to give jobs to one member of the immediate families of the police officers and constables and Union Bank of India has decided to donate Rs 1 lakh each to the family of every National Security Guard, marine commandos, Mumbai police and defence personnel who gave their lives in the operation, said press releases from the banks.

Challenges will remain: Leeladhar
Business Line / Mumbai / Nov. 26
Challenges to the Indian economy still remain as the global uncertainties continue to persist, though the impact of the global crisis on India is to a much lesser extent, said Mr V. Leeladhar, Deputy Governor, Reserve Bank of India.
In his address at the Bankers’ Club, Kolkata recently, Mr Leeladhar said that the RBI will continue to closely monitor the developments in the global and domestic financial market and will take swift and effective action, as is appropriate.
While the recent measures taken by RBI are in line with the need of the hour, it has to be borne in mind that they are ad hoc in nature in response to a particular situation, Mr Leeladhar said.
U.S. Bank acquires Downey Savings & Loan operations
Staff and wire reports, Thursday, November 27, 2008
PRESCOTT - Downey Savings & Loan has new ownership.
Minneapolis-based U.S. Bank is taking over the savings and loan's banking operations, according to a press release from the Federal Deposit Insurance Corp.
Downey Savings & Loan has branches near the Prescott Gateway Mall at 3030 E. Highway 69 and in the Village at the Boulders shopping center at 1260 Gail Gardner Way.
Steve Dale, senior vice president and director of media relations for U.S. Bank, says it is business as usual for employees and customers.Dale said customers should get a letter about the switch in about a week."The deal is that they (customers) now have the safety and soundness of US Bank," he said.Federal regulators also shut down PFF Bank & Trust of Pomona, Calif., Friday, according to an Associated Press Story.U.S. Bank acquired the deposits of both banks.Downey, the 23rd-largest savings and loan in the nation, had assets of $12.8 billion and deposits of $9.7 billion through Sept. 30.The Office of thrift Supervision, which is the federal regulator for both banks, said Downey gave nontraditional, high-risk home mortgages and suffered growing losses since 2007, according to the story.The FDIC estimates that the resolution of Downey will cost about $1.4 billion and PFF will cost about $700 million.

‘RBI alone should take final decision on M&As among banks’
Business Line / K.R.Srivats / New Delhi / Nov 30
The Reserve Bank of India (RBI) alone should take the final decision on allowing mergers and acquisitions (M&As) between banks, and the opinion of the Competition Commission should be made available as an input to the central bank. This is the view of an advisory panel appointed by the committee on financial sector assessment (CFSA), to look at financial sector stability.
In September 2006, the Government and the RBI had constituted the CFSA to undertake a self-assessment of financial sector stability and its development.
The Competition Commission has been given powers to even nullify mergers & acquisitions (M&As), and the opinion of the RBI has no binding effect on the Commission. Moreover, before entering into any M&A, the entities involved in the transaction have to give notice to the Commission and wait for a maximum period of 210 days.
The advisory panel has pointed out that the current provisions of the Competition Act are likely to raise issues of a regulatory overlap/conflict in future. It can also pose a serious problem to the financial sector because the RBI may have to take quicker decisions in situations of compulsory amalgamations to avoid bank failures. “Waiting for the mandatory 210 days would be impractical,” sources in the advisory panel said.
Compulsory amalgamation measures, in the case of failed banks, enable the retaining of public confidence in the systems and avoid systemic risks.
The compulsory amalgamation of a bank with another bank is based on a scheme prepared by the RBI and sanctioned by the central government. An amalgamation scheme for a failed banking company with another banking institution is preferred rather than a reconstruction scheme.
“The flexibility available with the RBI in permitting M&As may get weaker under the provisions of the Competition Act. It is being felt that RBI’s powers should not get diluted or weakened and the current status must continue,” sources said.
Currently, the law provides for voluntary amalgamation at the instance of the banks and compulsory amalgamation at the instance of the Reserve Bank. Voluntary amalgamations could be resorted to by banks for various reasons including avoiding the risk of insolvency. The RBI is empowered to sanction such voluntary amalgamations.
In recent years, private sector banks have shown keen interest in taking over weak banks through the process of voluntary amalgamations.

Govt under pressure to give pension for PSU bank employees

Mahua Venkatesh, Hindustan Times, New Delhi, November 27, 2008
In the wake of the financial sector collapse, widespread job cuts and a lack of social security net in the country, pressure is building up on the government and the managements of the state-owned banks to provide pension benefits to all employees of the PSU banks. The issue has been brought up at the recent meetings between the Indian Banks’ Association and trade unions on wage revision.
Though, this is not the first time this issue has been brought to the fore but in the context of the current fiasco, the government may have to look it, a banking source said.
That apart, the issue has come up at a time when foreign and private sector banks are battling for survival, public sector banks have registered substantial growth in business and profit margins.
Employees, however, would have to forgo their provident fund benefits in order to switch to pension options. “Both pension and provident fund benefits may not be provided to employees,” a banking source said.
This would also mean additional financial burden on PSU banks.
For banks, about 15-16 per cent of the total expenses is directed towards employees. The 27 PSU banks have about seven lakh employees at present. Banking sources said depending on the employee strength of the bank, liabilities could vary from Rs 800 crore to Rs 1,000 crore.“Trade unions have been bringing up the issue for sometime, but it has not got any weight till now as it would have meant sizeable outflow for PSU banks but now, things are different, we will look into the matter,” an insider said.

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