Antwerp banks agree on diamonds as collateral

Banks lending to Antwerp's indebted diamond traders will create up to 1 billion euros ($1.36 billion) in new credit vehicles by accepting diamonds as collateral, the Antwerp World Diamond Centre (AWDC) said on Tuesday.

The deal is meant to pump needed liquidity into Antwerp's $50-60 billion, debt-dependent trade, by getting banks to take diamonds, not just receivables, as lending insurance.

With little appetite to buy diamonds in the downturn, Antwerp's more than 1,800 registered diamond traders have been selling at losses, and sometimes have not been getting paid on time or at all, leaving them scarce collateral to borrow funds.

"Additional funds will benefit all stakeholders of the diamond sector -- diamond dealers, banks and mining companies -- and will restore the confidence in the diamond trade," said Freddy J. Hanard, Chief Executive of the AWDC in its statement.

Antwerp's import and export volumes of polished diamonds have plunged 32 percent and 28 percent, respectively, in January to April compared to 2008. Import and export volumes of rough diamonds have dropped 45 percent and 30 percent, respectively.

An AWDC official said the drops have been even more severe in other diamond markets.

Dutch state-controlled bank ABN Amro, the Antwerp Diamond Bank, the State Bank of India, the Bank of India and India's ICICI Bank were the main players signed on to the agreement.

Led by ABN Amro, they are the most important financiers of the Antwerp trade, which handles about 80 percent of all rough diamonds and more than half of all cut stones traded globally.

Under the deal announced on Tuesday, the banks will provide new credit facilities up to 1 billion euros, for a period of two years, in exchange for diamond stocks, not normally used as collateral in the industry.

"The AWDC will be in charge of the valuation for the securities and the transparency of the operation, so as to secure the position of the banks," the AWDC said.

The scheme must still be approved by Belgium's banking and finance regulator.

In addition, the Flemish regional government was considering a request for a temporary additional guarantee of 200 million euros.

New bank notes of Rs 1000

The Reserve Bank of India will shortly issue Rs 1000 denomination banknotes with `L' inset letter in both numbering panels in Mahatma Gandhi Series - 2005 bearing the signature of Dr D Subbarao, Governor, said RBI release issued here.
Except for the change in the inset letter, the design of these notes to be issued now is similar in all respects to the banknotes in Mahatma Gandhi Series -2005, with additional or new security features issued on October 21,2005.

All banknotes in the denomination of Rs 1000 in Mahatma Gandhi series issued by the Bank from the year 2000 will continue to be legal tender, it said.

Union Bank offers home loan at 8%, matches SBI’s rate

Public sector lender, Union Bank of India matched the special home loan rate of State Bank of India (SBI) by offering home loans at 8 per cent for all new loans up to Rs 50 lakh for the first year. Interest rates for existing home loan borrowers will remain unchanged. Maximum tenure of the loan will be for 20 years.


“As property prices have stabilised in the tier II and tier III cities, the demand is likely to pick up strongly in these pockets. So it is a good time to expand our portfolio now. The bank expects to disburse

Rs 1,500 crore of home loans under the new scheme. The bank home loan book is 8 per cent of its total advances at Rs 7,000 crore,” said TY Prabhu, executive director, Union Bank of India.

The special home loan scheme open up to September 30, 2009, will offer both floating and fixed rates of interest. For the first year, it will remain fixed and then revert to floating rates of interest which will be linked to the a retail benchmark rate referred to as floating reference Rate (FRR).

In February this year, SBI announced a happy home loan scheme with home loans at 8 per cent irrespective of the quantum of the loan, got an overwhelming response. About Rs 2,348 crore of home loans were dispersed under this scheme in the first two months of its launch in February and March.

SBI rates were closely matched by Canara Bank, which offered home loans at 8.25 per cent for the first year and 9.25 for the next four years and then fixed at 10 per cent for the remaining tenure of the loan.

Subsequently, PNB on April 30 announced a special home loan scheme of 9 per cent for all loans up to Rs 50 lakh for the first five years after which a reset clause will come into force.

Public sector banks have been aggressively reducing interest rates on its retail loans specially the home loans in a bid to grow their retail portfolio.

Since the credit offtake is dipping to less than 17 per cent as corporate demand for loans is yet to take off, banks are trying to expand capital by extending finance to retail customers.

SBI to push for mergers of associate banks

After merging State Bank of Saurashtra, India's largest lender State Bank of India might soon start the process of integrating its remaining associates, beginning with two large ones -- State Bank of Patiala and State Bank of Hyderabad.


According to the roadmap set by State Bank, all its associates will merge with the parent entity "as quickly as possible" to make SBI one of the top 25-30 banks in the world.

With the return of the Congress-led UPA to power, without the crutches of the Left and other difficult allies, SBI expects banking reforms to move forward, a top SBI source told PTI.
"The merger-process of State Bank of Saurashtra has already happened and the roadmap is to complete the consolidation process in the shortest possible period," the source said, adding that it could begin with State Bank of Patiala and State Bank of Hyderabad.

Once the new Government extends permission for mergers, the process could happen in the immediate future, the source said. "It will be more feasible now," the source said.

The Patiala and Hyderabad subsidiaries, which are wholly owned by the parent bank, had clocked impressive results in the last financial year. These two subsidiaries are quite large and SBH is now virtually of the size of Canara Bank.

(Economic Times)