RBI processing 18 foreign bank applications for licence: Meena

The Reserve Bank is processing applications of 18 foreign banks, which have shown interest in setting up branches and representative offices in the country, Parliament was informed recently. "As on date, applications by RBI from 18 foreign banks for opening maiden branch/Representative Office are under various stages of progress", Minister of State for Finance Namo Narain Meena said in a written reply to the Rajya Sabha. "As on June 30, 2010", Meena said, "more than 300 foreign bank branches are present in the country."

RBI seeks more banks for rural areas

Reserve Bank of India has said that it favoured granting more licences to banks in a bid to expand financial services to the country's low-earning masses and push into its rural hinterland. The proposal comes as the RBI pursues what its governor D Subbarao has described as a path of "financial inclusion", embracing swathes of rural India which currently have little access to banking services. Companies could initially be allowed to take over regional rural banks before being issued a bank licence, the RBI said in a discussion paper.

Banks tread with care on MFI turf

Banks have turned cautious in terms of their exposure to the microfinance sector. This has put micro lenders, especially the smaller ones, under stress as their key source of funding may shrink in future. Banks are going back to their drawing board to review the business model of microfinance institutions (MFIs), who borrow from them to on-lend to poor borrowers at higher rates. This followed the Reserve Bank of India’s recent alert about exposure to MFIs. What perhaps peeved the banking regulator is the fact that barring Bandhan and Ujjivan, no leading MFIs showed any interest in reducing their lending rates. RBI sees the MFIs’ lending rates as usurious.

Pass on 1% rate subsidy on home loans: RBI

The Reserve Bank has asked banks to put in place a suitable mechanism to provide the benefit of the 1% interest subsidy granted by the government on home loans to buy a house of up to Rs 20 lakh. “Banks are advised to put in place a suitable mechanism to ensure that the eligible borrowers avail of the benefit of interest subvention for one housing unit only,” RBI said in a notification. It further said that after sanctioning and disbursing eligible loans under the scheme, banks will claim disbursement of subsidy from the Reserve Bank on a monthly basis.

Banks working on customised portals for easy access on mobiles

Soon banks will start offering customised portals for customers, which will make accessing the site through mobile phones easier. When a customer visits a bank's Web site using mobiles, it gets disproportionately aligned in the mobile screen. Icons that customers would normally like to see on the screen are often hidden and have to be searched for. To encourage more customers to use the mobile banking medium, leading private and public sector banks are in talks with software providers to offer customised portals for mobile Web users. So, soon with the help of the software, an Internet banking screen will be fit straight into a mobile with all the necessary features visible clearly. So, irrespective of the model of the phone, you can access banks' Web site; all you need is a GPRS connection.

Open no-frills a/cs for minorities but adhere to KYC norms: RBI

The Reserve Bank of India (RBI) has asked banks that while they should ensure opening of no-frill accounts by members of the minority communities, know-your-customer (KYC) norms should also be properly followed. In a communication to banks, RBI said the Ministry of Minority Affairs had brought it to the notice of the regulator that banks were not opening no-frills accounts in favour of students from minority communities who wished to avail of government scholarships. “You (banks) are also advised to ensure opening of no-frills accounts or other accounts for students from minority communities or other disadvantaged groups. However, while opening such accounts, KYC norms, as appropriate, may be followed,” RBI said.

RBI sets timeline for risk management framework

The Reserve Bank of India has specified a detailed time frame for implementation of advanced approaches to calculate capital charge and hence the risk capital required to be allocated for market risk, operational risk and credit risk. Banks whose request for implementation of advanced approaches to managing these risks is approved by the RBI would see enhanced asset quality. As a result, sustainability and quality of their earnings would improve and these banks would command a premium valuation over their peer set. This would be a part of a bank's risk management framework. Adoption of advanced approaches would help in hassle-free migration to the impending Basel III norms which are under discussion as well as enable the efforts to ensure convergence of Indian Accounting standards with IFRS by April 1, 2013 as outlined by the RBI in its latest annual report.

Credit default swaps may be allowed in corporate bonds soon: Shyamala Gopinath

Credit default swaps (CDS) may soon become a reality in India. Plans are afoot to allow plain vanilla CDS on corporate bonds in the over-the-counter (OTC) market, according to Ms Shyamala Gopinath, RBI Deputy Governor. The introduction of CDS will provide the participants an instrument to manage credit risk, Ms Gopinath has said in an article published in the July 2010 issue of Banque de France's Financial Stability Review. The article titled Over the Counter (OTC) derivative markets in India—Issues and perspectives has been reproduced in the RBI's Web site. A CDS is essentially bond insurance. It is a contract used to insure the holder of a bond against default by a bond issuer. Ms Gopinath says that the introduction of CDS will also aid in the development of corporate bond market in India.

IRDA goes on air to empower customers

“What can I do to lessen your trouble,” a young woman asks a man. When he replies that he has a problem with his insurer, she promptly asks him to dial 155 255, the toll-free number of a call-centre facility launched on July 20 by the Insurance Regulatory and Development Authority (IRDA). Using catchy tunes ‘inspired' by classic Hindi film songs, the advertisement offers tips on how to solve problems related to insurance policies. The radio ads are part of a series of promotional campaigns initiated by the IRDA, in addition to print advertisements, to increase awareness about its new grievance-redress mechanism.

Minimum investment in Ulips to go up

Insurers to raise threshold to give returns prescribed by Irda. The minimum ticket size for unit-linked insurance plans (Ulips) is set to go up from next month. Insurance companies plan to raise this to match the returns prescribed by the regulator. For instance, the second largest life insurer, SBI Life, is likely to increase the minimum ticket size from Rs 1,200 to Rs 1,500. “Policies with low ticket sizes will be difficult to service on a monthly mode. Insurers will increase the ticket size to offer the charges prescribed in the new regulation,” said SBI Life’s Chief Financial Officer Abhijit Gulanikar. Similarly, Bajaj Allianz is going to increase the minimum ticket size from Rs 5,000 to Rs 10,000 in the revised products. “.

More gold goes into investment than jewellery

For the first time, Indians have converted proportionately more gold into investment than into jewellery. In the quarter ending March 2010, net retail investment in gold by Indians in percentage terms has soared past that in jewellery, marking the biggest change in the way the yellow metal is used in India. The change has been catalysed by the rapid expansion of non-banking finance companies (NBFCs) into every Indian city to allow the middle class to use gold as collateral for almost any type of investment. Top of the heap are companies like the listed Manappuram Finance and Muthoot Finance, who have opened more outlets in 2009-10 than other NBFCs which deal in other types of products including housing.

India to become world's fastest growing economy by 2013-15: Morgan Stanley

The two hands to produce count for more than that one mouth to feed, after all. Driven by a sterling demographic dividend, continuing structural reform and globalisation, India is poised to accelerate its growth rate to 9-9.5% over 2013-15, even as China will cool down to a more sedate 9% by 2012 and to 8% by 2015. So finds a new report by Morgan Stanley, authored by Chetan Ahya (managing director for Asia and India economist, who writes a monthly column for ET) and Tanvee Gupta.

DTC offers few sops to individuals

The Union cabinet on Thursday approved a legislation to usher in a new direct taxes code (DTC) where the tax incidence for individuals was lowered marginally, but raised for companies. At the same time, DTC has also imparted greater predictability about the tax regime by writing tax rates into schedules accompanying the legislation that will require parliamentary consent. The text of the entire legislation was unavailable, but people privy to it said the Bill was largely in line with the revised draft DTC introduced in June this year. DTC is expected to be tabled in Parliament soon, a minister present at the cabinet meeting, said. Once it is tabled in Parliament, the speaker is expected to refer it to a multi-party standing committee of lawmakers to suggest changes after providing all stakeholders a hearing, the minister added.

China is richer than you think

China's richest citizens are even wealthier than the statistics suggest, and may hold as much as 9.3 trillion yuan ($1.4 trillion) of hidden assets, according to a Credit Suisse-sponsored study by a top economic think-tank. Official statistics for 2008 failed to capture income equivalent to about 30 percent of China's gross domestic product, the "Analyzing Chinese Grey Income" report found. And nearly two thirds of that unreported income goes into the pockets of the richest 10 percent, widening China's already troubling wealth gap, said Wang Xiaolu, the economist at the China Society of Economic Reform (CSER), who headed the survey.