Banks eye NRI deposits to boost biz

With deposit rates expected to dive after the RBI's move to slash key rates, bankers are banking on NRIs to supercharge their lockers. Moneymen say Wednesday's cut in repo rate and reverse repo rate would result in lesser movement of funds from NRE and FCNR (B) to NRO (non-resident ordinary rupee account) accounts.
The interest earned from NRO, which can be maintained jointly with resident Indians, is liable to tax in India. "The propensity to shift from NRE and FCNR (B) to NRO will reduce now as the interest rate arbitarage would be narrowed down," says M S Sundara Rajan, CMD ofIndian Bank.
However, the banking meltdown in the US and Europe will force many NRIs to look homewards to park their money. "The Indian banking and financial system is sound and that is prompting many NRIs to remit funds to India," says Rajan. The bank's FCNR(B) (foreign currency non-resident account bank scheme) and NRE (non-resident external rupee account) portfolio currently stands at Rs 3,000 crore. Rajan says that the bank has seen an increase in NRI deposits in the last couple of months. Adds Y L Madan, executive director of Indian Overseas Bank, "Worldover, fixed deposit rates offered by banks are pretty low. Our bank has seen a growth in NRI remittances since the advent of the slowdown."
Some banks have already effected a rise in their FCNR(B) and NRE deposit rates and others are expected to follow suit. While banks periodically review their FCNR(B) and NRE rates in accordance with the RBI guidelines, a hike in interest rate in such deposits assumes importance in the current scenario. "These deposits are normally of longer duration (upwards of one year) compared with domestic deposits like fixed deposits (upwards of 7 days). Given the current market scenario, our bank is in favour of mobilising long duration and low cost deposits," says P Y Nagar, general manager of Union Bank of India. Interest rates on the Union Bank of India's FCNR (B) deposits for five years now stand at 3.66% up from 3.45% earlier.

Similarly, Indian Bank recently hiked interest rates on its FCNR (B) and NRE deposits. FCNR (B) deposits of five years duration will now carry an interest rate of 3.66% up from 3.45% before the revision. Indian Overseas Bank is also expected to announce a hike in its FCNR (B) and NRE deposits after its assets liabilities committee meeting which is expected to be held this weekend.

Source:timesofindia

UTI Mutual Fund gets ‘Star Fund House of the Year’ award

UTI Mutual Fund has been awarded the ‘Star Fund House of the Year’ by ICRA Mutual Fund awards 2009 in the equity category for one year period ending December 31, 2008.

UTI Mutual Fund was also awarded nine ICRA Mutual Fund Awards 2009 under its various schemes.

On the occasion, U K Sinha, Chairman and Managing Director, UTI Asset Management Company Ltd., said, “This is a result of the structural and process changes that we had initiated around 2 years back. The efforts of UTI fund management team has culminated in UTI Mutual Fund winning the Star Fund House of the Year award in the Equity Category. UTI Mutual Fund is a process oriented fund house which strives to give its investors the best possible returns. Recently UTI Mutual Fund has also won the Outlook Money NDTV Awards 2008 for the Best Debt Fund House for the year ended June 30, 2008.”

ICRA Mutual Fund Awards, based on the proprietary ranking methodology, is devised jointly by ICRA and ICRA Online Ltd. The ranking process considers only growth oriented open ended equity and debt schemes apart from liquid schemes where institutional plans are also considered.

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Source:financialexpress

ICICI Bank may cut rates in 45 days

The country's largest private lender ICICI Bank said that interest rates are expected to come down in the next one-and-a-half months.

"I think in next six weeks, interest rates are expected to come down. I think interest rates would be adjusted on their own," ICICI Bank CEO and MD K V Kamath said on the sidelines of a CII function.

In the recent days, many banks have reduced one-year fixed deposit rates by 2 per cent. HDFC Bank has also slashed interest rates on personal and commercial vehicles by up to 150 basis points.

The bank will also cut interest rates on corporate loans and wholesale credit, a move that will benefit small and medium enterprises and large companies.

Kamath, hinting at possible rate cuts said that the banks are also looking at passing it on to the customers.

"With the lowering of borrowing cost the banks will start lending at lower cost," he said.

With inflation declining sharply in the recent weeks and slowing demand, the Reserve Bank may signal softer interest rates even though it may not tinker much with key rates in the quarterly review of its annual monetary policy to be released on January 27.

Bankers feel that the RBI may maintain a status quo in their key rates as the Central Bank has already brought down CRR and short-term rates to inject Rs 3,00,00-crore liquidity into the system.

After hiking its signalling rates till October last year, the apex bank began slashing its cash reserve ratio, repo and reverse repo rates, to support growth.

The RBI has reduced its CRR to 5 per cent, repo to 5.5 per cent and reverse repo to 4 per cent.

Source: financialexpress

Citibank launches new fixed deposit product

Citibank, today announced the launch of a new fixed deposit product--Citibank Protect & Grow.

The product offers customers the safety of a fixed deposit with the option to channel the interest earned into mutual funds.

Customers will be able to choose any combination of a maximum of four open-ended mutual funds from among those distributed by Citibank, a statement issued here said.

Citibank Protect & Grow is designed to address the needs of investors seeking the potential to obtain returns that are greater than just the interest on the compare fixed deposit. The product offering is available for a minimum deposit of Rs 15-lakh for a minimum tenure of 1 year.

The fixed deposit interest rates, computed quarterly (simple interest), applicable for Citibank Protect & Grow are similar to those on Citibank's vanilla fixed deposits, it said.

"In the current environment, wealth preservation is as important as wealth creation. Therefore, we are very happy to provide our customers with an innovative solution that helps them get more out of their safe money," Citi India's Country Business Manager, Global Consumer Group, N Rajashekaran, said in the statement.

The key advantages of Citibank Protect & Grow is that it operates like a Systematic Investment Plan (SIP). The interest earned on the fixed deposit is invested every quarter into mutual funds, helping investors ride over the market highs and lows and averaging out the cost of purchase.

Citibank Protect & Grow will be distributed via the bank's 40 branches across 28 cities nationwide.


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Source:business.outlookindia.com