Business Banking

IBA to allow Islamic banking in India?

International and domestic banks led by Indian Banks Association (IBA) today pitched for allowing Islamic banking, estimated at over 1.2 trillion dollars and growing at 15 per cent annually, in India.

“It (Islamic banking) is an idea, whose time has come. The IBA will study the concept, but will wait for the regulatory framework by the RBI to run it,” IBA Chairman M B N Rao told reporters, on the sidelines of an international conference on Participatory Banking.

The two-day conference is being organised by Indo-Arab Economic Cooperation Forum.

Islamic finance is based on the main concept of outlawing fixed-interest returns and speculation, as well as forbidding investments in what Islam considers vices such as dealing in alcohol, pork or gambling.

Speaking on the occasion, Vice President Hamid Ansari and Deputy Chairman Rajya Sabha Rehman Khan also supported the need for launching Islamic Banking, which would provide an opportunity to invest according to Shariya principles.

Under the Islamic Banking, the Central bank would have to work out the proper frame work as it requires sharing of profit and loss with depositors and investors, apart from ensuring that the funds comply with RBI and SEBI rules.

Sulaiman N Al-Qimlas, Deputy Chairman & Managing Director of Bayt Al Mal, which is a major financial institution in Kuwait also said that their group was interested in getting a licence to start Islamic banking in collaboration with Indian partners.

PTI

ICICI offers highest interest rates for family savings package

ICICI Bank offering a special package for the entire family with a chance of earning the highest interest rates with a series of innovative accounts tailor made to benefit the entire lifecycle.

ICICI Bank’s Senior vice President, Retail Liabilities, Sachin Sikka said that it has no strings attached. It’s a hassle-free savings account product which has no restrictions on deposits, withdrawals, or investment period, with the added attraction of a number of benefits that include a free VISA ATM cum Debit Card with access to 800 VISA ATMs island wide, as well as free internet banking,” he said.

Having taken the banking requirements of the entire family into consideration, ICICI Bank has launched a ‘Senior Citizen’s Account’ [for those over 55 years], a ‘Young Stars Account’ [up to 18 years] as well as a Savings Account which offers an interest rate of 12% percent, the highest in the Sri Lankan banking industry.

Elaborating on their package of savings account, Sikka said that ICICI Bank’s Senior Citizens account entitled depositors to an interest rate of 12% per year.

This account also offers a 10% discount at Apollo Hospital, on a tailor made health check up scheme, discounts on medicines purchased at the Apollo Hospital pharmacy, special rates for all other health check up schemes, a special ATM cum Debit card, and the chance of winning a 10 day pilgrimage to India

“In an attempt to instill the savings habit in children, whilst giving parents a reason to bank with us too, our Young Stars account is offering an unbeatable 14.5% interest rate, in addition to special prizes,” Sikka said.

The Bank’s savings account which offers an interest rate of 12 percentis ideal for the employed as well as the self employed as it gives them a chance to maintain a routine account for their day to day expenses with the benefit of earning interest on it as well.

“Hitherto people have been able to earn a higher rate of interest only on their fixed deposits. ICICI Bank is now giving depositors a chance to earn high interest rates on their savings account which can also be utilized for day to day expenses”, said Sikka.

He added that this particular offer has been well received in the market.

‘AAA(lka)’ rating for HSBC Sri Lanka Branch

Fitch Ratings recently affirmed the ‘AAA(lka)’ National Long-term rating assigned to The Hongkong & Shanghai Banking Corporation Limited’s Sri Lanka Branch. The Outlook on the rating remains Stable.

HSBC Sri Lanka (HSBCSL) is a branch of and part of the same legal entity as The Hongkong & Shanghai Banking Corporation Limited (HSBC), which in turn is a fully-owned subsidiary of HSBC Holdings plc, one of the largest bank holding companies in the world.

HSBCSL’s rating is linked to HSBC’s foreign currency Issuer Default Rating of ‘AA’ (Positive Outlook) assigned by Fitch Ratings, as well as HSBC’s financial strength.

HSBCSL’s loan growth was strong in FY06 with a year-on-year growth rate of 33.4%, which was above the growth rate of 28.3% recorded by the banking industry. The bank’s loan portfolio was evenly split between corporate and retail loans, which respectively accounted for 51.5% and 48.5% of its portfolio at FYE06.

Asset quality, although still very strong by Sri Lankan norms, is showing some signs of weakening as evidenced by a gross non-performing loan (NPL)/loans ratio of 2.2% at H107, up from 0.97% at FYE06 and 0.91% at FYE05.

This deterioration is attributed to increased defaults on credit cards, residential housing loans, and a medium-sized corporate exposure. In the face of unfavorable economic conditions, the bank has since tightened its credit underwriting standards within the consumer banking segment.

However, Fitch notes that the bank’s provision coverage of NPLs is good, with specific provisions covering 83.0% of NPLs at H107.

Despite high interest margins of 8.1% in H107 (7.3% in FY06), higher loan loss provisions and losses in the bank’s historically strong foreign exchange operations caused annualised pre-tax ROA to dip to 2.6% in H107 from 5.0% in FY06. HSBCSL’s post-tax profitability in H107 was affected by higher effective taxation of 80%, a sharp increase from 49.0% in FY06.

This caused the post-tax ROA to depress to 0.5% in H107. However, cost containment in FY06 was good with a lower cost to income ratio of 40.8% compared to 47.7% in FY05.

This is partly attributed to the staff composition of the bank, with a significant percentage of staff at lower skill levels being recruited on short-term contracts or outsourced.

HSBCSL’s deposits (65.0% of assets at H107) dominates the funding base, even though its contribution has been declining due to increasing borrowings both from within the broader HSBC group, and in a small way (LKR 1.1bn) from the local capital markets through the issuance of senior debt.

There is a significant shift evident in HSBCSL’s deposit structure, with time deposits increasing to 62.0% of the deposit base at H107, up from 50.2% at FYE05, due to increased focus on mobilising time deposits.

Overall, capitalisation remains healthy with equity/assets at 10.9% and total capital adequacy ratio at 11.7% at H107, despite the repatriation of profits to the head office.

Seylan introduces ‘2 in 1’ Automated Investment Manager

Seylan Bank introduced Automated Investment Manager, which converts idle funds in Current Accounts to Savings balances, thus, enabling the customer to enjoy the best of both worlds.

Branded “2 in 1”, the product offers to those individuals and partnerships with a current account balance of more than Rs. 10,000/-, the opportunity of leaving a minimum balance of Rs. 10,000/- in the Current Account and having the excess transferred to a matching Savings Account overnight.

These balances would automatically earn interest overnight, which is credited to the savings account on a weekly basis for the first time in Sri Lanka. Cheques issued from the Current Account would be paid by a matching transfer from the Savings Account, which would take place automatically, real time.

The Savings Account would not have a passbook but the account holder would receive a bank statement at the end of every month.

All standing order instructions, loan recoveries and bank charges could be recovered from the Savings Account, which make it easier to reconcile the Current Account statement. In addition, the account holder could also become eligible for Merit Rewards benefits by balances maintained in the Savings Account.

The fully automated product enables the bank service its customers real time and with convenience.

A spokesman for the Bank mentioned that this is a continuation of their endeavors to leverage the best that technology could offer thereby helping the Sri Lankan public with productive returns and value additions, in line with the thinking of Chairman Dr. Lalith Kotelawala.

Banks to finance Indian sugar mills

To enable sugar mills pay cane price to the farmers, the Reserve Bank today asked banks to finance the creation of buffer stocks of the sweetener without keeping margin in this regard, a move which would entail an outgo of Rs 630 crore from the entire banking system.

“Banks are advised to finance the creation of buffer stock... Banks may refer to instructions advising them that no margin is to be kept in respect of buffer stocks of sugar,” an RBI notification said.

The Government has decided to create a buffer stock of 30 lakh tons of sugar for one year with effect from August 1. This is in addition to the buffer stock of 20 lakh tons created earlier. The buffer stock of 30 lakh tons will involve an outgo of Rs 567 crore from the Sugar Development Fund.

PTI

Aitken Spence wins Nations Trust Corporate Quiz

The NTrust Corporate Quiz organized by Nations Trust Bank was held for the second consecutive year at the Oak Room, Cinnamon Grand, Colombo, with thirty seven teams drawn from Sri Lanka’s corporate elite battling it out to gain supremacy.

The teams constituted five members each and they faced a barrage of questions that tested them through five different rounds covering the following topics, About Nations Trust Bank, Financial Markets, Current Affairs, Sports and Entertainment.

“It is our intention to make this an annual event as it forges closer links with our customers, in an unusual manner where competitiveness reigns, in a fun setting. We are well on the way to making the Nations Trust Quiz an event that will be a highlight in every Corporate calendar,” said, Director/CEO of Nations Trust bank, Zulfiqar Zavahir.

“The Bank has established a valuable proposition in the corporate market attracting the country’s top drawer names through a combined approach of product excellence and superior relationship management” said Zavahir.

He added that whilst making vast strides in the Corporate and Treasury arena, its presence in the Retail, Leasing and Credit Card businesses too had grown exceptionally well, with customer value creation being one of the key drivers.