Bank account portability will make change of bank simple

It is very difficult to close and open a new account as there are many procedures required for this. Due to this customers find it painful to switch bank accounts even though they are not happy with their current bank’s service.

Think if it’s become possible for you to simply change the bank without changing your bank account number. This can become a reality if in India bank account portability process is adopted. Same is the case with the mobile number portability concept, the customer and not the bank will own the account number. In the countries like South Africa, Scandinavia and Europe people have already adopted the bank account portability.

“Along with technology it may happen. Today it may not be possible but tomorrow it will be. Within the bank today it is possible. You need to have only one ID and bank account can be taken anywhere. In fact bank account remains at one place only. You can get the service from anywhere,” says K.C. Chakrabarty, the chairman and managing director of Punjab National Bank.

This service will enable the account holders who want to move their payment relationship from one bank to another, therefore increasing customer mobility and lowering switching costs for their current accounts. This service will also help consumers who are mostly ignored after becoming a customer of the bank and fail to get benefit from privileges like lower interest rates on loans to new customers and sloppy service on phone banking. Though this service is yet to be implemented in India, banks say they have taken steps in the right direction.

Gunit Chadha, Managing director and chief executive officer of Deutsche Bank, said, “I think customers have the choice right now. You can in-operate an account and move to another account. And you can have no frills account with transaction account portability. So in effect there is already bank account portability because a customer can make a choice.” Chadha said although many banks have not put bank account portability high on their priority list.

It will still take few years for bank account portability to get implemented in India. Its not only the regulator will have to push for it but also all banks will have to equally come forward and technologically compatible for the flawless transfer of bank accounts.

PNB and Mitcon signed MoU for carbon credit finance

Punjab National Bank and MITCON Consultancy Services Limited (MITCON) will be working together in the area of carbon credit financing. An agreement was signed between both the groups for co-operation in the area of carbon credit financing.

According to statement released by PNB under the MoU, the bank and MITCON will be working together for producing the business for services linked to carbon credit business.

The statement stated MITCON will be offering services related to identification of project, its registration with the Clean Development Mechanism Executive Board and recurring verifications, while PNB will be looking after banking related services.

Carbon credits or Certified Emissions Reductions are certificates which are issued by CDM Executive Board to projects in developing countries. These certificates are issued to certify that they have reduced green house gas emissions by one tonne of carbon dioxide per year.

These carbon credits are bought by developed countries to attain their targets under the Kyoto Protocol.

Dividend chasing not for the faint hearted!

As the dividend season draws to a near close, for those investors who had been chasing stocks for dividend earnings, it is a time of stock taking as to whether it was a worthy strategy.. It is true that investing in high dividend paying companies is sensible since dividend paid is tax free at the hands of the investors, but what should be given greater importance is preservation of capital. If a company consistently pays high dividend, that is a reflection of its financial health and this could also indicate its future growth potential.

In earlier days, investors took a fancy for the MNC stocks because of their generous dividend payouts. But the domestic companies had caught up with them and the liberal tax treatment could be another reason for the large payouts since in many of the companies, the promoters’ shareholding is substantial.

Many investors assume that the percentage of dividend declared is per share basis and not on the basis of the face value of shares. The dividend announced is on the assumed face value of share of Rs 10. For instance when Hero Honda announced 950 per cent dividend, it was not Rs 95 per share, as it would have been if the share’s face value is Rs 10. But it is Rs 19 per share since the face value of Hero Honda’s share is Rs 2. To Hero Honda’s credit, it should be said that it made clear the dividend amount per share and face value of the share in its published results. With face value of shares ranging from Re 1 to Rs 10 and in some cases even Rs 100, it may be time for SEBI to tell all the companies emulate the example of Hero Honda.

While the tax free status of the dividend definitely makes them a big draw, that alone does not make investment sense if one takes into consideration the actual investment yield. For instance, Punjab National Bank (PNB) had paid a dividend of 130 per cent (Rs 13 per share of Rs 10 face value). At current prices, 100 shares of PNB would cost about Rs 50,000 and for 100 shares, the dividend received would be Rs 1,300, which works out to a yield of a mere 2.6 per cent. (13 divided by 500(share price) x 100). There are traditional favourites for high dividends – the PSU banks, the PSU oil companies, other public sector companies, MNCs, FMCG companies etc. The PSU companies pay high dividend because the majority shareholder happens to be the Government. But the continuous increase in crude oil prices and the un-remunerative local retail petro prices have eroded the profitability of the PSU oil giants – IOC, BPCL and HPCL and the dividend declared this year by them is just a fraction of what they used to pay. It would be wise for an investor to spread the risk while hunting for high dividend payers. Instead of investing in a few high value stocks that pay substantial dividend, it would make investment sense to opt for a basket of mid-value stocks across different segments that pay reasonable or same dividend. For example, Asian Paints (share FV Rs 10) that trades around Rs 1,240 a share, paid a dividend of Rs 17/share. Balmer Lawrie, which had an EPS of Rs 53.37, paid the same dividend but its share quotes around Rs 400 (face value Rs 10). If one invests in the latter the same amount as in Asian Paints, his dividend income is three times more. External factors also could undermine a stock’s value. Dredging Corporation of India, which was believed to be main beneficiary of the Sethusamudram ship canal project, saw its value skyrocket to Rs 1,300 + levels (year’s high). But it has been steadily on the decline and has come now to Rs 500 + levels after the project was caught in controversy. Though a good dividend play, the stock is not expected to improve till the picture becomes clear about the future of the project and it would be risky for the investors to take a bet on it.

Mr Hitesh Agrawal, Head-Research, Angel Broking, Mumbai, says that investing in high dividend yield stocks is one of the strategies adopted by a section of the market participants and “there is nothing inappropriate” in it as far as the fundamentals of the company are thoroughly researched. But in the ongoing market meltdown a large number of even high dividend paying blue chip companies had lost a significant percentage of their share value and even if these companies had paid huge dividend, it would not compensate the loss sustained by the investors. Chasing dividend paying stocks is not for the faint hearted and investors should dig into the stocks and hold on to them during their ups and downs to ride out the storm.

As Mr Agrawal says, only if the fundamentals of the company were sound, the investors should consider them for their high dividend yield.

PNB, Axis Bank raise rates

A day after the Reserve Bank of India’s (RBI) monetary-tightening measures, banks on began raising interest rates, effecting the hike for the second time in a month.

Punjab National Bank (PNB), the country’s second-largest public sector lender, today announced a percentage point increase in the prime lending rate (PLR) to 14 per cent, while raising deposit rates by 75-100 basis points. The maximum deposit rate on offer will be 9.75 per cent a year.

Axis Bank, the third-largest private sector lender, however, opted for a more moderate PLR increase of 50 basis points. In a statement, the bank said its PLR will increase from 15.25 per cent to 15.75 per cent with effect from today. PNB’s rate hike will take effect from August 1.

The big boys — State Bank of India (SBI), ICICI Bank, HDFC Bank and HDFC — have, however, so far, remained silent on how they will respond. SBI’s asset-liability committee (Alco), which met within hours of RBI’s decision to raise the repo rate, or the rate at which it lends to banks, by 50 basis points and the cash reserve ratio (CRR), or the proportion of capital banks set aside, by 25 basis points, is expected to reconvene tomorrow.

Since April, the central bank has increased CRR by 150 basis points and the repo rate by 125 basis points to tighten money supply and combat inflation, which was estimated at 11.89 per cent in the first half of July.

PNB official dupes bank of Rs 2 lakh

A case of fraud amounting to Rs 2 lakh has been reported in the Kurali branch of the Punjab National Bank (PNB) involving a cashier-cum-computer operator. According to the investigating officer, Ravindar Pal Singh, the accused, Baldev Singh Kurali, first defrauded the bank of Rs 1.87 lakh; but when he was caught, he duped 2 customers of Rs 1.1 lakh to clear the bank’s liability.

The head of PNB, Chandigarh Circle, lodged a complaint with the Kurali police that the bank had given Rs 8 lakh in cash to Baldev Singh to disburse payments as cashier-cum-computer operator on March 10. He disbursed Rs 6,12,700 but failed to deposit back the remaining amount of Rs 1,87,300.

The bank authorities initiated an enquiry against the accused and he agreed to pay back the defrauded cash.

However, on March 15, he siphoned off Rs 1,00,500 from the account of customer Balveer Singh. He also duped another customer, Beant Singh, of Rs 10,000 as he withdrew Rs 15,000 from Beant’s account when the latter came to withdraw Rs 5,000.

PNB hits 52-week low after hike in lending, deposit rates

Punjab National Bank dropped 1.80% to Rs 396 at 10:16 IST on BSE after the bank said on Saturday, 28 June 2008 it has raised its benchmark prime lending rates by 50 basis to 13% per annum with effect from 1 July 2008.

The bank made this announcement on Saturday, 28 June 2008.

Meanwhile, the BSE Sensex was down 22.81 points, or 0.17%, to 13,779.41.

On BSE, 10,531 shares were traded in the counter. The scrip had an average daily volume of 1.51 lakh shares in the past one quarter.

The stock hit a 52-week low of Rs 395.20 in the counter so far during the day. The stock hit a high of Rs 406 so far during the day. The stock had a 52-week high of Rs 721 on 3 January 2008.

The mid-cap bank stock had underperformed the market over the past one month till 27 June 2008, declining 19.46% compared to the Sensex’s decline of 15.41%. It had also underperformed the market in the past one quarter, declining 23.60% compared to Sensex’s decline of 15.69%.

The bank has an equity capital of Rs 315.30 crore. Face value per share is Rs 10.

The current price of Rs 396 discounts its Q4 March 2008 annualised EPS of Rs 68.98, by a PE multiple of 5.74.

The bank has also increased interest rates by 50 basis points on housing loans, car loans and personal loans. It also decided to increase its deposit rates ranging from 25 basis points to 50 basis points in some of the time slabs.

Punjab National Bank (PNB) raised lending rates after the Reserve Bank of India (RBI) gave a strong signal that interest rates in the economy are headed north when it on Tuesday, 24 June 2008, raised repo and cash reserve ratio (CRR) by 50 basis points each on control over 11% inflation.

The double-stroke anti-inflationary measures are expected to tighten the liquidity in the system, as the CRR hike would suck out around Rs 16,000 crore. CRR is the proportion of deposits mobilised by banks and parked with the RBI for statutory requirement. Banks do not earn any interest on the cash reserves. Repo rate is the rate at which RBI lends money to banks.

PNB’s net profit rose 128.8% to Rs 543.76 crore on 19% increase in operating income to Rs 4417 crore in Q4 March 2008 over Q4 March 2007.

The state-run bank provides treasury and banking operations. The activities include accepting deposits, lending loans and to provide other financial related services.

PNB to walk out of Principal fund JV

Punjab National Bank (PNB) has decided to exit Principal Asset Management Company.

"They were not performing at all, so we have decided to sever all ties with them," PNB Chairman and Managing Director K C Chakrabarty said today. Both the entities are currently negotiating the exit price.

"We are negotiating the exit price, which will be at par with the shareholding. Hopefully, it will be settled soon," Chakrabarty said. PNB Principal AMC is a joint venture between the Principal Group, PNB, Vijaya Bank and Berger Paints.

Under the JV, the Delhi-headquartered bank holds a 30 per cent stake, the Principal Group has a 26 per cent shareholding, Berger Paints 25 per cent and the remaining 19 per cent is with Vijaya Bank.

The second largest public sector bank is set to start its credit card business by October.

"We have roped in Visa as the facilitating partner. Initially, it will be available for the existing customers of the bank and in the first year, we are targeting 1-2 lakh cards," he told Business Standard during a visit to Chakla, around 60 km from Kolkata.

The visit was a part of the spot assessment of the implementation of the debt waiver scheme, announced in the Union Budget 2008-09. For the bank, the total outstanding farm loan is estimated at around Rs 18,000 crore.