Top banks, PNB, BOB, cut interest rates

Come January 1 2009 and two leading public sector lenders Punjab National Bank and Bank of Baroda will reduce their prime lending rate by 50 and 75 basis points.

The BPLR of PNB would stand reduced to 12 per cent, from the existing 12.50 per cent, effective from January 1.PNB also announced a reduction in its peak deposit rate by 100 basis points to 8.5 per cent for deposits of one year to less than three years beginning new year.Earlier this month, the bank had reduced its peak deposit rate to 9.50 per cent from 10.5 per cent.

In a separate regulatory filing to the BSE, Bank of Baroda said "The bank has decided to reduce its Benchmark Prime Lending Rate (BPLR) by 75 basis points from existing 13.25 per cent to 12.50 per cent with effect from January 1, 2009."

LIC raises stake in HDFC Bank to over 5 per cent

Country's largest insurer Life Insurance corporation of India has increased its stake in HDFC Bank to over five per cent following acquisition of shares from the open market.LIC purchased 1.6 lakh shares from the open market hiking its stake in
the company to 5.01 per cent.The equity holding of the insurer increased by 0.04 per cent from 4.97 per cent earlier.

As on June 2008, LIC holding in the bank stood at 2.15 per cent which went up to 4.7 per cent in September this year.Yesterday, LIC hiked its stake in Vijaya Bank to 9.53per cent by acquiring shares worth nearly Rs 30 crore from the open market.

Domestic institutional investor acquired over 94.29 lakh shares representing 2.18 per cent stake in the state-run lender.Before the acquisition, LIC held over 3.18 crore shares representing 7.38 per cent stake in the bank which subsequently increased to 9.53 per cent after the purchase.

Merrill Lynch sells stake in Religare

Merrill Lynch has sold its nearly 5% stake in financial services company Religare Enterprises,promoted by Malvinder and Shivinder Singh for an undisclosed sum.Last November Merrill Lynh had bought a 5.56% stake in Religare as part of a pre-initial public offering (IPO) placement.

The one-year lock-in period expired last month, and Merrill Lynch has since sold its post-IPO stake of 4.97%. The buyers of the stake or the price at which it changed hands were not immediately known, although a Religare official said the sale happened last week.

Based on Religare’s average stock price of Rs 299 last week, Merrill Lynch could have cashed out for Rs 113.6 crore, generating a return of 87.5% in one year. Merrill had acquired 5.56% stake in Religare for Rs 60.6 crore last October through its wholly-owned subsidiary Indopark Holdings.

Despite the stock market crash, the scrip is trading much above its IPO issue price of Rs 185. The stock had shot up after listing to touch Rs 729 on the NSE. Promoters currently hold 54% stake in the company.

After Rbi's rate cut, banks announce cut in deposit rates

After Saturdays announcement by RBI of cutting the repo and reverse repo by a 100 basis point, some private sector banks have announced cuts in the deposit rates offered by them.HDFC Bank, the second-largest private bank, has slashed interest rates on deposits.on some of its flagship products, with the reduction being steep for short maturities. The rates for deposits with a maturity of six months and 15 days have been reduced from 10.5% to 8.25%. For nine months and 15 days, the rates are from 10.5% to 9% while for one year and 15 days, they are now 10% from 10.5% earlier. The bank has also slashed the rates for two years and 15 days from 10.5% to 9.5%, making it the first private bank to cut deposit rates after some of the PSU banks cut rates a couple of weeks before. HDFC Bank has also slashed rates on its bulk deposits.

ICICI Bank is yet to take a final decision on rate cuts. Axis Bank is carrying out a review and may take a decision soon.IndusInd Bank’s will review its decision to cut deposit rates next week. For the past few weeks, it has been offering 11% for 200 days, 400 days and 1,000 days.Yes Bank on Saturday said that it has reduced its prime lending rate by 0.50 per cent with effect from December 8.The bank's PLR accordingly stands reduced to 16.5 per cent from the earlier 17 per cent.

The State Bank of India on Friday said it will consider rate cut after the Reserve Bank of India announces reduction in benchmark rates.SBI has already reduced benchmark lending rate by 75 basis points to 13 per cent, beginning last month. Most PSU banks have slashed deposit rates from December 1. They have done away with the special offer of 10.5% on deposits. The country’s largest bank, State Bank of India, offers 10% for 1,000 days. Corporation Bank has decided to offer a maximum rate of 9.5% for 1-3 years, Union Bank will offer a maximum rate of 10.05% for seven years and 9.5% for one-seven years.

HDFC plans to raise yen loan

HDFC, the country’s largest housing finance company (HFCs), has said that it is keen to raise funds overseas and is awaiting further details of the Reserve Bank
of India’s (RBI) guidelines.On Saturday, RBI had said that it would allow HFCs to raise short-term borrowings overseas as a temporary measure.

Although RBI has reduced the CRR and brought down the repo rate, thereby bringing down the cost of funds for banks, none of these measures have brought down the cost of funds for HDFC. The corporation continues to pay double-digit interest rates to banks. With interest rates ruling high, fixed deposits, which offer returns up to 10.9%, have once again become the mainstay of HDFC’s borrowings, accounting for over 20% of funds.

In the past, HDFC had raised overseas funds in various currencies, including yen. According to bankers, since the funds are anyway converted into rupees and hedged, the currency does not matter. What is crucial for HDFC will be RBI guidelines on the tenure and cost. Since all its liabilities are long-term with an average loan tenure of seven years, HDFC will require long-term funds.

Even from the cost perspective, a foreign currency borrowing has to have a tenure of at least three years to justify the fixed cost of fund raising, including fees paid to bankers. The guidelines on foreign borrowings are expected to be out within the next couple of days.

Along with guidelines on foreign currency borrowings, HFCs are awaiting an easing of capital requirements in line with the relaxations allowed for banks. National Housing Bank — NHB usually follows the prudential norms on home loans prescribed by RBI.

Religare ties-up with Karur Vysya for equity trading services

Financial services provider, Religare, and Karur Vysya Bank,announced their tie-up offering Religare's equity trading services to the bank's customers.The new alliance is in line with Religare's strategy of increasing its reach and penetration across the country.The arrangement with Religare will provide the three in one facility of demat account, bank account and trading account to Karur Vysya's customers.

The equity trading service would be part of value -added offering for the bank's savings account customers. Religare would map its own branch network with the network of the bank to service the bank's clients.Pre-trading account opening activity would be done at the bank branch and post-trading account opening of the clients would be served by Religare-designated branches.The partnership is a step forward to further strengthen the bancinvest channel created by Religare, which already includes tie-ups with IndusInd Bank, Tamilnad Mercantile Bank, Corporation Bank and Bank of Rajasthan, among others.