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Cover
Story
New
Zealand Banking Predominant Foreign Presence
--
Katuri Nageswara Rao
New
Zealand banking is unique in the sense that about a
million people opted for Internet banking, which is
25% of the population. Its banking is dominated by foreign
presence especially Australia and UK but it is competitive.
In terms of asset quality, profitability and capital
base, New Zealand banking is rated very high. Its central
bank follows a three-pronged strategy of self-discipline,
market discipline and supervisory discipline while regulating
banks. The cooperate governance standards are fairly
satisfactory. The Reserve Bank holds the view that the
present system of absence of deposit insurance scheme
has to be continued and the cost of bank failure, if
any, should be borne by the various stakeholders proportionate
to the risk perceptions and not by the exchequer. The
banking system faces challenges in the form of excessive
reliance on wholesale market and foreign sources for
funding rather than domestic savers, besides the risk
of not all that well diversified presence of foreign
banks.
@IUP. All Rights Reserved.
National
Bank of New Zealand
-- Katuri
Nageswara Rao
National
Bank of New Zealand is one of the biggest foreign banks
operating in New Zealand having strong fundamentals
with regard to capital adequacy, asset quality and profitability.
It finances substantially to agricultural and mortgage
sector. Its non-performing assets are very low at 0.2%
and it is an active player in SME sector financing as
well.
@IUP. All Rights Reserved.
Banking
Scenario
Measuring
Bank Efficiency : Productivity
vs. Profitability
-- V Pitre
The
major purpose of reforms in the financial sector is
to increase its efficiency, profitability and competitiveness.
Measuring the output in terms of productivity and profitability
is more difficult in service sector than in manufacturing.
Indicators to measure the output in banks are per employee
profit, volume of business, number of accounts, deposits
and credit but ranking based on these produces contradictory
results. Numbers of accounts per employee are higher
in RRBs than foreign and national banks. Foreign banks
are ahead in terms of per employee deposit and credit,
highest percentage of officers in total staff etc. But
ongoing automation is changing the scenario. Around
70-85% of staff members in nationalized banks and RBI
are in clerical and subordinate level but as banks are
outsourcing jobs and hiring contract workers, cost-benefit
figures are changing rapidly. Due to strict prudential
norms and other reforms, small borrowal accounts decreased
to 7% in 2001 from 22% in 1992.
This
raises the question whether efficiency should be measured
in terms of profitability or productivity.
@Business
Line, September 3, 2003. Reprinted with permission.
Indian
Banks' Rs.
12,500 Crore Problem
-- Avinash
Celestine, Vikas Dhoot
Pension
fund liability of Public Sector Banks (PSBs) is rising
day by day. The major culprits are declining interest
rates and inadequate provisioning by banks. The deficit
in funding is as high as Rs. 12,500 cr. With 1% fall
in interest rates, the provisioning required could rise
by 10-15%, thereby worsening the situation. Because
of its fixed returns, the pension scheme is far more
lucrative in an era of low interest rates. Some unions
feel that increase in membership of pension funds will
solve the problem, as it would lead to an increased
flow of funds into the plans. Actuaries, however, believe
that this will merely postpone the problem, not solve
it.
@Businessworld,
September 8, 2003. Reprinted with permission.
Technology
in Banks
Indian
Banks : Going Innovative
--
Pramod Gupta
Both
public and private banks are spending large amounts
of money on technology to provide innovative products
and services to their customers with more convenience
and satisfaction. Technology is reducing the cost of
transaction and helping to increase customer base and
enable wider reach. These innovations are happening
not only in the retail banking segment but also in the
corporate segment.
@IUP. All Rights Reserved.
Banking
Products
Banking
on Banks
-- Lancelot Joseph
While
the bancassurance model has showed mixed results in
the International market, it seems to be the preferred
route for insurance firms in India. These firms are
doing good percentage of business through this route.
The squeezing margins of banks due to strict regulatory
norms, falling net interest margins and increasing risks
are some of the reasons why this model is attracting
banks to cross-sell the products. Lured by synergies,
many banks have tied-up with insurance firms. In fact,
banks can sell a lot of financial products under one
roof. Though bancassurance model is showing encouraging
results so far, it needs proper support in terms of
technology and quality. However, insurance sector is
still at its infancy and it cannot be said that this
model is a success in India.
@Business
India, June 9-22, 2003. Reprinted with permission.
Credit
Management
Financing
of Biotechnology
-- P Nair
There
is huge scope for growth of biotechnology sector in
India. R&D spending by drug firms has been increasing
and it can grow at 12% p.a. in future. Traditional mindset
of the financer i.e., to lend against collateral, inability
of biotechnologist in presenting the project clearly
to the financial sector, lax patent rules, and infancy
stage of the sector are some of the problems faced by
bankers to finance this sector. Bankers can use some
innovative methods of financing like lending against
patents, manpower valuation, Escrows account etc., to
finance this sector.
@IUP. All Rights Reserved.
International
Banking
China's
Brittle Banking System
--
Yash Paul Pahuja
China's
recent move to increase the reserve requirement and
its intent to bail-out the nation's four biggest banks
shows that its economy is in trouble but these moves
can hurt more.
@IUP. All Rights Reserved.
Risk
Management
Credit
Derivatives : A Closer Look and Perspective
--
Krishnaphani Kesiraju
"Credit
Default Swaps", the precocious brain-child of financial
engineers is just about ten years old and has not only
caused enough ripples in the financial services market
to draw the attention of all but has also become the
cynosure of all eyes. The advantage of having financial
brain-children lies not only in their becoming earning
members but also their fecundity even at a very young
age. When child prodigies are pampered and bestowed
too much of attention, they do throw tantrums. Without
extending this analogy too far, this article takes a
closer look and briefly deals with the introduction
into the market of new credit derivative products and
applications, issues of valuation, documentation, settlement
and present state of the market. In conclusion, the
article gives a perspective on credit derivatives by
giving divergent viewpoints and rounds off on a note
of caution and a piece of sage advice. x
@IUP. All Rights Reserved.
Monetary
Management
Interest
Rates : Still
a Loan Ranger
-- Madan Sabnavis
There
are various interest rates in the market according to
the maturity and risk profile of the financial instruments.
The article has checked the linkage of these interest
rates. It studies three types of interest rates namely
central bank policy rate or bank rate, yield on 10-yr
government paper and Prime Lending Rate (PLR) of banks.
It is observed that government borrowing is being subsidized
by the system. Also, the gap between bank rate and PLR
is higher indicating that banks carry a very high cost
of intermediation. In comparison to developed countries,
the gap between government borrowing rate and best corporate
borrowing rate is the highest. It proves that banks
are reluctant to lend to the private sector due to the
compulsions such as capital adequacy and quality of
assets. So there is need to revamp the interest rate
structure in the next stage of financial sector reforms.
@Madan
Sabnavis. First published in The Economic Times,
August 20, 2003. Reprinted with permission. |
