Corporation Bank arm gets nod for stock broking operations

State-owned Corporation Bank’s subsidiary Corp Securities has received approval from the Reserve Bank of India and Securities and Exchange Board of India to start stock broking operations, the bank’s executive director Narendra Singh said.

“We have got all regulatory approvals and have just begun operations on a gradual basis and will scale it up soon,” he said. Singh said the subsidiary was already adequately funded to handle the scaling up of operations and there was no need for any immediate capital infusion into the venture.

Earlier, chairman and managing director JM Garg had said the bank has taken over its subsidiary’s primary dealership business on its books and Corp Securities will now be a full-scale brokerage firm.

Corporation Bank is also in the process of identifying a partner for its foray into insurance business.

“We have now shortlisted around four players and hope to finalise on one partner shortly,” he said.

Singh said the bank was well capitalised and did not need to raise funds for its operations or ventures at the moment.
Corporation Bank is yet to finalise its base rate but is likely to be around 8.25-8.50%.

Most public sector banks have indicated their base rate will be in the 7.5-8.5% band while some private sector banks have hinted they may set their base rate lower at 6%.

“The rate will be computed on the basis of cost of deposit. The final base rate will be announced after our board meets on Jun 22,” he said.

He refused to divulge which tenor of deposit would be the basis for the bank’s base rate.

Singh expects some rise in the rates at which short-term lending to companies happens once the base rate regime is introduced on July 1 but does not expect corporate entities to tap other alternative sources of funds.

“Other sources of funds will take time to materialise and it takes more time, if they decide to tap any other instruments for funds,” he said. He estimates about 40% of the bank’s lending currently is below its benchmark prime lending rate of 12%.

“Post-base rate implementation, there will be an upward bias on lending across segments,” he said.

Singh said there was already a discernible upward pressure on deposit rates and the bank had raised the rate for 1,000 days by 50 basis points to 7.25%, with effect from June 15.

When asked why the bank had raised deposit rates in just one tenor, Singh said, “We think we need more funds in that period.”
On loan rates he said, “If RBI decides to hike policy rates, we will also have to look at raising lending rates as our cost of funds will rise.”

Singh expressed confidence that the bank would achieve its 25% credit growth in 2010-11 despite flat trend in loan outstanding since March 31. “Our loans outstanding have remained flat at Rs 63,000 crore, which was where it stood at March 31. There have been disbursals but we have also seen some repayments in the last two months. This is normal for the April-June quarter and I expect credit growth to rise by end of the year,” he said.

He said the bank had lent to telecommunication companies to make licence fee payment for 3G spectrum but did not provide the details of the amount disbursed.
NW18