Sebi may allow investors from 7 more countries to invest in Indian equity and debt markets

After a slew of measures for domestic investors, the market regulator now plans to facilitate overseas investments into equity and debt markets. The Securities & Exchange Board of India is planning to sign bilateral treaties with seven more countries to allow wealthy individuals from these jurisdictions to invest in Indian stocks.

Sebi, in its board meeting in Mumbai on Saturday, will also consider several other measures, such as changing the norms for debt limit for foreign investors, and collapsing various categories of investors such as foreign institutional investors, foreign venture capital investors and non-resident Indians into a single class of investors called qualified financial investors (QFI), said a person familiar with the development.

At present, there are instances of FII funds being allowed from a particular country, but QFIs from the same country not being allowed to invest in the Indian stock markets. By merging these categories, Sebi hopes to do away with ambiguity.

The board is likely to suggest measures to ensure the compliance of minimum public shareholding of 25%. Promoters who own more than 75% will have to reduce holdings by June 2013. The regulator may also indicate penalties or other punitive action in case of non-compliance.

The potential penalties will be discussed at Saturday's meeting. As of June 2012, as many as 216 companies, including 16 public sector undertakings, have less than 25% public shareholding.

Individuals from 45 countries are currently eligible to invest in India under the QFI framework. This list will now be expanded to 52 countries, and residents of seven countries - Argentina, South Korea, Turkey, Kuwait, Qatar, Ireland and Latvia - will be allowed to invest through the QFI route. Sebi will enter into bilateral agreements with the regulators in these countries.

As per existing norms, the category of QFIs includes individuals, groups or associations and residents (not FIIs) of countries that are members of the Financial Action Task Force or signatories to the International Organisation of Securities Commission. QFIs have a separate limit of $1 billion for investment in corporate debt securities and debt schemes of Indian mutual funds. They can also invest up to $3 billion in infrastructure debt, which is part of the overall cap of $45 billion that foreign investors can invest annually in India's debt market.

The government had formed a working group in November 2009 on foreign investments in India to look into various types of foreign fund flows that were taking advantage of arbitrage opportunities across respective standalone regulations. The group has recommended the dissolution of various categories of investors into QFI - a single window for portfolio investment in India that does not distinguish between investors. Based on these suggestions, the regulator is preparing a draft guideline for the government's consideration.



Source: EconomicTimes

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Andhra Bank gets new ED

Satish Kumar Kalra has taken over as the new Executive Director of Andhra Bank in Mumbai.

Kalra joined the banking industry in 1981 as Probationary Officer in Allahabad Bank and worked in various capacities.

Prior to joining Andhra Bank as Executive Director, he was General Manager, handling the Treasury Operations of Allahabad Bank at Mumbai.

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OBC cuts deposit rates in certain maturities

Oriental Bank of Commerce (OBC) has cut the deposit rates on maturities between one and three years by 10 basis points to 9 per cent per annum.

The move has come in the wake of softening interest rates in the system and comfortable liquidity, V. Kannan, Executive Director, OBC, told Business Line.

Almost 70 per cent of the inflows of deposits to the bank come under the one to three year time period.

OBC move also comes in the backdrop of softening commercial deposit rates for one-year period.

The deposit rate reduction will come into effect from Monday. It will apply on term deposits of less than Rs 1 crore.

srivats.kr@thehindu.co.in

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Hike in FDI limit likely to attract Rs 30,000 cr: Irda

The increase in FDI limit in the insurance sector may attract Rs 30,000 crore that the industry requires over the next five years, Insurance Regulatory and Development Authority has said.

A day after the Union Cabinet cleared a proposal to allow up to 49 per cent Foreign Direct Investment in insurance, Irda Chairman J Hari Narayan said the move was essential as inflows are necessary for the sector to grow at 11 to 12 per cent.

“It (the FDI) will give boost to the insurance sector. And it is required any way. Otherwise, we don’t have required capital for the insurance sector,” Hari Narayan told PTI.

“If the insurance sector has to double then it would require at least Rs 30,000 crore (in the next five years),” he added.

Carrying forward the big—ticket reforms agenda, the government yesterday decided to move ahead with its proposal to hike FDI ceiling in the insurance sector to 49 per cent, from 26 per cent at present.

The decision was taken by the Union Cabinet, headed by Prime Minister Manmohan Singh.

The government also gave the green signal to foreign investment in pension funds, saying the FDI limit could go up 49 per cent in line with cap in the insurance sector.

According to Irda, the insurance sector constitutes around 4.5 per cent to the GDP. Last year, the total premium collected was at Rs 2.83 lakh crore.

With the increase in the FDI limit, the percentage of contribution from insurance sector to the GDP may also go up, Hari Narayan said.

“This move will increase insurance sector share in the GDP also. If the GDP rises then the percentage may remain marginally high,” he said.

The premium income of the general insurance industry, comprising 21 private and four public sector insurers, stood at Rs 27,942 crore in the first five months of the current fiscal. It was 18 per cent higher than Rs 23,748 crore in the corresponding period in 2011—12.

However, the premium income of life—insurance industry declined by 15 per cent to Rs 34,358 crore in the first five months of the current fiscal, compared to Rs 40,654 crore in the same period last year.

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HDFC drops as Carlyle exits

Housing Development Finance Corp Ltd (HDFC) shares plunged nearly five per cent after private equity player Carlyle Group LP exited from the company by selling its remaining stake for about Rs 4,300 crore.

On the BSE, the HDFC stock closed at Rs 749.65, down 4.89 per cent from its previous close. The stock touched an intra-day 52-weekhigh of Rs 793.85.

The Carlyle Group sold about 57 million shares or the entire 3.7 per cent stake in HDFC through the open market. The shares were sold at an average price of Rs 761.42 a share.

“Citi helped raise Rs 4,340 crore for Carlyle Group by selling their residual stake in HDFC, concluding the largest block trade stake monetisation by a private equity investor in India.

“The deal attracted over 45 marquee global and local institutional investors, with 75 per cent of the demand originating from long only institutional investors,” said Bhavna Thakur, Director, Equity Capital Markets Origination at Citi India.

In February, Citigroup Inc sold its entire 9.85 per cent stake in HDFC for about $1.9 billion.

“Carlyle’s exit will not impact HDFC in any way,” said Madhumita Ghosh, Head of Research, Unicon Financial Intermediaries.

priya.s@thehindu.co.in

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Muthoot Finance bags Asian Leadership Awards

Muthoot Finance Ltd, a gold loan company has been honoured with two prestigious Asian Leadership Awards.

The company won the Asian Sustainability Leadership Award for “Best Rural Outreach” and BFSI Award for the “Most Admired Loyalty Program.” The Awards, presented by Dr Chea Chamroeun, founder & President, Chamroeun University of Poly-Technology, Cambodia, was given away at a function in Dubai, a press release said.

The Asian Leadership Awards 2012, held for the first time in Dubai, recognizes brands and business leaders for their significant achievements. The popular awards honour companies and leaders across 20 different categories for their contributions towards economic development, including market share, CSR contribution and creativity.

The awards ceremony was hosted by Asian Confederation of Businesses and supported by Stars of the Industry Group, CMO Asia, CMO Council, World Brand Congress and Thought Leaders International.

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Private life insurers hail decision to hike FDI limit to 49%

Private life insurers hailed the Union Cabinet’s decision to increase the foreign direct investment (FDI) limit in insurance sector from 26 per cent to 49 per cent.

The FDI limit hike is, however, subject to Parliament approval.

Reacting to the decision, Puneet Nanda, Executive Director, ICICI Prudential Life Insurance, said this is a very welcome step.

“Life insurance industry needs a lot of capital. Many companies which need capital to fund their business growth will benefit from this decision. After Parliament approval, one could even see many more foreign players entering India”.

Currently, there are 24 players in the life insurance industry, including 22 joint ventures with foreign participation to the extent of 26 per cent.

Domain capital

Rajesh Sud, CEO and Managing Director, Max Life Insurance, welcomed the decision stating that it will bring in domain capital to the industry.

This would have been an opportunity to allow FIIs to also participate in the life insurance, since they are also a source of long-term capital, particularly in view of potential IPOs from life insurance companies, he said.
Customer penetration

Rajesh Relan, Managing Director and Country Manager, MetLife India Insurance Company Ltd, said the move is a positive move for the insurance industry.

“The biggest advantage of increasing FDI limit will be to grow the industry by increasing customer penetration with a range of products that are focused on today’s uninsured. The life insurance industry is long term in nature and requires years of capital infusion before it can sustain itself,” he said.

The growth and development of life insurance sector will further give a huge boost to the tertiary sector in India.

For the insurance companies to continue growing and increase penetration, the FDI limit increase to 49 per cent is essential and will help grow the industry, which is currently facing a slowdown, Relan said.

Shashwat Sharma, Partner for insurance sector, KPMG, hailed the decision as it would boost the confidence of global insurers and investors.

Boost confidence

The insurance industry has been struggling for a while on capital, which will now be forthcoming. There should also be more product and channel innovation with increase in competition expected, he said.

Sam Ghosh, Chief Executive Officer, Reliance Capital, said the industry was looking forward to this in the last 2-3 years.

He said such a move would help the industry grow and could even help new foreign players enter the Indian market.

Reliance Life Insurance is part of Reliance Capital.

srivats.kr@thehindu.co.in

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HDFC Bank, IOC to offer rural banking

HDFC Bank on Thursday announced its tie up with Indian Oil Corporation to provide banking services in the rural areas where IOC’s petrol pump outlets Kisan Seva Kendras will act as the Business Correspondents for the banks.

Beginning with Pilibhit in Uttar Pradesh, the private sector lender plans to cover 1,000 KSKs to be able to serve around 1,500 customers, the bank said in a statement.

The KSK outlets will offer banking services such as preliminary processing of loan applications, disbursal and collection of small value deposits, sale of micro-insurance, mutual funds and other investment instruments.

beena.parmar@thehindu.co.in

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SBI plans to roll out 4,000 'Talking ATMs' for visually impaired

Banking major State Bank of India intends to roll out 4,000 Automated Teller Machines to cater to the needs of visually challenged people in the country.

This target is expected to be achieved in the next two years, Rakesh Puri, General Manager, SBI, told Business Line here.

SBI on Thursday launched its first ever "Talking ATM" that would allow visually and physically challenged people to access banking facilities at the machine, without having to visit the branches.

This SBI Talking ATM, which was inaugurated by Puri, is located at the Jawaharlal Nehru University campus in the Capital.

NCR Corporation has supplied this machine to SBI as part of its existing contract with the SBI. This ATM has been built under "access for all" standards, said Nagesh Nayak, Professional Services Practice Manager, NCR.

SBI is the second bank after Union Bank of India to install an ATM that catered to physically and visually challenged people.

Other public sector banks are also taking steps to set up similar machines, but are mainly in pilot and testing stages.

Puri said the ATM installed at JNU campus will cater to all including the visually challenged. The ATM will have special features like audio guidance, text-to-speech conversion solution etc.

srivats.kr@thehindu.co.in

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Muthoot Finance extends NCD issue closing date to Oct 22

Muthoot Finance  said it has extended the closing date of its non-convertible debentures (NCD) issue to October 22.

“The company in consultation with the lead managers to the issue has decided to extend the issue period up to October 22, 2012. The issue shall now close on October 22, 2012,” it said in a BSE filing.

The issue was scheduled to close on October 5.

Muthoot Finance said the decision was taken after the approval given by the NCD (Non—Convertible Debentures) Public Issue Committee of the Board of Directors of the company.

The company is undertaking the public issue of secured non-convertible debentures of face value of Rs 1,000 each, aggregating up to Rs 250 crore.

It has an option to retain over-subscription up to Rs 250 crore for issuance of additional NCDs aggregating to a total of up to Rs 500 crore.

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HSBC Bank retains GDP target for India at 5.7%

The positive market sentiment and inflows on the back of the recent reform push notwithstanding, HSBC Bank has decided to maintain the GDP target for India at 5.7 per cent for this fiscal.

Recently the Government approved a spate of measures, including allowing FDI in retail and aviation and approving a diesel price hike, in a bid to turbo charge the economy and shake off accusations of policy paralysis.

HSBC Chief Economist for India and ASEAN Leif Eskesen said: “These reforms were expected but the timing and magnitude was the question. While these reforms are good and were needed, concerns still remain on their implementation and sustainability of the reform momentum. We would see a lag effect to see the impact of the reforms but in the short run there would be impact on growth because of sentiment improvement which we have already seen in terms of the stock market capital flows and exchange rate stabilisation.”

Economic conditions

“We expect the reforms to continue and with global economic conditions gradually stabilising next year investment would pick up. Hence we have revised our GDP estimate for next fiscal to 6.9 per cent. There is a need to lift growth on the supply side through structural reforms,” he added.

On expectations of a rate cut in the upcoming monetary policy review by the RBI, he said that it would be a close call as inflationary pressures continue to linger though the possibility of a rate cut had increased on the back of the recent spate of reforms.

“It is difficult to build a strong case for a rate cut till the country sees signs of inflation risk receding and more fiscal consolidation steps by the government are undertaken beyond the diesel price hike to complement the monetary policy,” he added.

Rupee movement

On the strengthening in rupee exchange rate, he said HSBC had pegged the rupee exchange rate to settle at Rs 52 a dollar post reforms. “Going ahead we have set the rupee target at Rs 49 by December 2013,” he said.

manisha.jha@thehindu.co.in

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Tilak Raj Bajalia appointed Deputy Managing Director, SIDBI

The Ministry of Finance has appointed Tilak Raj Bajalia as Deputy Managing Director of the Small Industries Development Bank of India (SIDBI). Prior to taking up this assignment, Bajalia was the Executive Director of IDBI Ltd.

Bajalia is a BA, ICWA and Certified Associate of the Indian Institute of Bankers. He started his career in a commercial bank in 1974 and moved to IDBI in 1983. Bajalia has, during his 38 years in banking, handled varied portfolios including corporate and retail finance, recovery and NPA management, restructuring and human resource management.

He was instrumental in setting up of the MSME vertical in IDBI in 2008 and has been associated as a nominee of IDBI on the Board of SIDBI since 2009.

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Retail loans: Federal Bank to decide on cut in interest rates soon

Private sector lender Federal Bank will decide on a cut in interest rates on retail loans next week, said a senior official at the bank.

“There is a possibility that interest rates may go down. Our Asset Liability Committee will decide on the rate cut next week,” said D. Sampath, Head of Retail Banking, Federal Bank.

The Kochi-based bank has announced that it will offer home loans at its base rate of 10.45 per cent from October 3 to October 18 as part of the 67th anniversary celebrations. Earlier, the minimum rate of interest on home loans was 10.78 per cent.

The home loans sanctioned by the bank in the first quarter of FY13 was almost flat at Rs 209 crore from Rs 210 crore in the first quarter of FY12.

“Our home loan growth has been flat in the last two quarters. We expect growth in this segment to double with this offer,” Sampath said.

The bank is now focusing on housing, mortgage and gold loan segment to boost its retail portfolio. “We expect our home loan and mortgage loan growth to be at about 15-18 per cent in FY13,” Sampath said.

beena.parmar@thehindu.co.in

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Kotak Mahindra Bank to collect VAT in 4 States

Kotak Mahindra Bank has got the mandate to collect VAT (value-added tax) in four States, according to an executive.

Addressing presspersons here on Wednesday, Puneet Kapoor, Executive Vice-President, Consumer Banking, Kotak Mahindra Bank, said that in a recent development the Government has agreed to open up government business to private banks.

“The first mandate we have received is to collect VAT in four States on behalf of the respective Governments,” he said.

This facility went online in Delhi in mid-September and Andhra Pradesh this month, he said.

The facility will be offered in Gujarat and Punjab soon. “The paperwork and agreement are being done with these governments. Over the course of October hopefully we should be done with everything,” he said.

To a query on the amount of business expected from the facility, he said it was a little premature to comment on it .

The bank is in constant dialogue with various government departments and ministries on getting more government business, he said.

Stating that the bank was offering higher interest rates on savings bank (SB) accounts, he said SB balances above Rs 1 lakh get 6 per cent interest rate, and those up to Rs 1 lakh get 5.5 per cent.

The facility was launched in November last year. The SB deposits stood at Rs 5,540 crore (Rs 3,307 crore) at of June end, recording a growth of around 68 per cent. “The trajectory has remained the same in July-September quarter,” he said.

Kapoor said that Kotak Mahindra Bank, which has 389 branches, plans to reach the 500-mark by December 2013. “By March 2013, we are planning to have a network of 436 branches,” he said.

Nearly 30 per cent of the branches are located in semi-urban and rural areas, he added.

vinayak.aj@thehindu.co.in

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New CMD of Allahabad Bank

Shubhalakshmi Panse has taken charge as the Chairperson and Managing Director of Allahabad Bank effective October 1.

She earlier served as the Executive Director of Vijaya Bank. Panse was responsible for the administration and business development of Vijaya Bank for a period of two years.

Panse, who joined Bank of Maharashtra as probationary officer, has worked in almost all key segments of banking including recovery, credit, fund management, law, accounts, IT and business process re-engineering, said a press statement issued by Allahabad Bank.

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Bank of Baroda expects to set up 100th overseas branch soon

Bank of Baroda, with 96 branches abroad, will soon take the number to 100 in the near future, according to Executive Director P. Srinivas.

He was addressing customers here on Wednesday after inaugurating a regional office of the bank, the second in the State after Hyderabad. He said 60 branches in coastal districts from Srikakulam to Nellore would be under the jurisdiction of the regional office. The branches in the Telangana and Rayalaseema regions would be under the Hyderabad office.

He said the bank runs 3,988 branches in the country and its total business had touched the Rs 7,00,000-crore mark. He said the bank was expanding its branch network and had recruited 3,000 employees last year. Before April 1, 2013, 2,500 officers and 3,500 clerks would be recruited by the bank, he added.

Srinivas said global business accounted for 28 per cent of the total, which he expects to increase in the coming years. General Manager M.M. Reddy, in charge of the Karnakata-AP zone, said the Visakhapatnam regional office would play a vital role in the bank’s growth.

The coastal AP branches of the bank accounted for Rs 3,856.61 crore, with deposits being Rs 1497.83 crore and the rest advances. The bank had opened 10 branches last year in the region and ten more would be added this year. It had set up 29 ATMs in the region.

He said the bank is planning a regional office in Vijayawada.

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IRDA to finalise IPO norms for non-life insurers soon

Insurance regulator IRDA will soon finalise IPO norms for non-life insurance companies as well as regulations on amalgamation of life insurance companies.

"This year we have finalised the amalgamation of life and IPO of non-life. So these two will be made regulation soon. The insurance advisory council has already met… that is the penultimate step," said J. Hari Narayan, Chairman, IRDA, on the sidelines of CII’s 6th Health Insurance Summit 2012 here today.

"Then it goes to the board and then it is presented."

He also said that IRDA was in favour of an increase in foreign direct investment limit in insurance companies.

"Absolutely (I am in favour of 49 per cent). I do think unless we go for 49 per cent we will not have the kind of capital required to underpin the growth of insurance industry. This sector requires lot of money, so unless we enable inflow...," Hari Narayan said, when asked if he was in favour of a hike in FDI to 49 per cent.

If banks can have FDI limit of 74 per cent, asset management companies can have 100 per cent, there is no reason why it should only be 26 per cent for insurance companies. "We should increase that (FDI in insurance)."

Currently, FDI limit in insurance is capped at 26 per cent. Any hike in FDI limit requires legislative change and approval of Parliament.

srivats.kr@thehindu.co.in

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Convert savings on lower EMI into deposits, SBI urges customers

If you are a State Bank of India home loan customer then do not be surprised by branch officials trying to persuade you to channelise savings from the recent lowering of instalments into a recurring deposit.

The bank is drawing up plans to showcase the “lower equated monthly instalment – savings – investment” proposition to not only its existing customers but also prospective customers (including home loan customers of other banks/ housing finance companies).

The country’s largest bank has lowered the equated monthly instalments (EMIs) on home loans by Rs 15-19 across the board.

According to the revised EMI schedule, a customer with a Rs 20-lakh home loan of 20 years residual maturity will pay Rs 966 a lakh as EMI (against Rs 982 earlier). Thus, the customer saves Rs 320 in the overall monthly payout.

The bank wants this amount to flow into recurring deposits (RD) so that it receives a steady stream of long-term funds even as the depositor gets decent returns, said a senior official.

By routing the savings back into an RD every month, a customer will receive Rs 2,00,640 on maturity of a 20-year recurring deposit at 8.50 per cent interest (on the assumption that the initial 10-year RD is extended for another 10 years).

In order to attract home loan borrowers from other banks/housing finance companies (HFCs) into its fold, the bank will make a similar pitch.

SBI will seek to highlight the fact that its EMI at 19,320 for a Rs 20-lakh loan is about Rs 1,000 cheaper than the average EMI of other banks/ HFCs.

In the above case, if the Rs 1,000 saved is vested in an RD every month for 20 years at 8.50 per cent interest, then the customer will earn Rs 6,26,999 on maturity.

SBI charges 10 per cent and 10.15 per cent interest on home loans up to Rs 30 lakh and above Rs 30 lakh, respectively.

At a recent press meet, Chairman Pratip Chaudhuri observed that for most citizens who have taken home loans, the EMI payout is a very large part of family expenditure and at times, even larger than the food expenditure.

“The reduction is EMI by the bank will bring significant relief to the household budget,” he said.

As at June-end 2012, SBI had a home loan portfolio of Rs 1,05,383 crore (Rs 93,225 crore as at June-end 2011). Home loans up to Rs 30 lakh accounted for 82 per cent of the total home loans. Home loans accounted for 57 per cent of the retail portfolio of Rs 1,86,322 crore as at June-end 2012.

ramkumar.k@thehindu.co.in

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Apex Court reverses own verdict on cheque dishonour

The beneficiary of a cheque who chose not to prosecute the drawer after serving the first notice on him can do so after serving on him a notice the second and subsequent times, held the Supreme Court. In MSR Leathers v. Palaniappan and Another, the Court overturned its own verdict delivered in Sadanandan Bhadran’s case in 1998. In that case it had held that if the beneficiary of a cheque after serving notice on the defaulting drawer – within a month of notice of dishonour – to pay up within fifteen days, does not follow it up with a complaint to the magistrate within a month of lapse of the fifteen days’ time to pay up, he forfeits the right to file a complaint with the magistrate if his second and subsequent notices also remain unheeded.

The Apex Court wondered why in the earlier judgement it had not examined the doctrine of waiver of right to prosecute to condone his failure to prosecute hot on the heels of the first default. A beneficiary of cheque might waive his right to prosecute for a variety of reason including the possibility of the drawer landing funds on the second and subsequent occasions. Instead the Apex Court had in the earlier verdict chosen to press in the doctrine of absolution according to which when a person does not prosecute a person in respect of a non-cognizable offence he is deemed to have pardoned the defaulter. Taking a refreshing new look into the issue, the Court pointed out that a beneficiary cannot be presumed to have granted absolution but given more opportunities for the defaulter to pay up. Viewed in this light, the cause of action rose each time, the beneficiary served notice and gave time to pay up. In other words, it did not die with his failure to prosecute after the first notice as was held in the earlier judgement. In any case, the Court pointed out, the law has since been amended to vest the magistrate with the power to file a complaint within a month of failure to pay up within fifteen days of the notice which is a tacit statutory admission of the right to waive prosecution for the time being.

The Apex Court for good measure pointed out that constructive interpretation must be placed on statutes so that its objects are furthered and not stymied by narrow interpretations.

(The author is a New Delhi-based chartered accountant)

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HDFC Securities gets nod to distribute products of National Pension System

HDFC Securities said it has been granted permission to distribute National Pension System (NPS) products by sector regulator, the Pension Fund Regulatory Development Authority (PFRDA).

The brokerage firm, a subsidiary of the country’s second largest private sector lender HDFC Bank, has been appointed as a point of purchase for the products, it said in a statement issued here.

PFRDA allowed citizens to participate in the NPS in 2009 to help individuals plan and prepare for post-retirement life, which was restricted to Central Government employees since its inception.

It is available to all Indian citizens between 18 to 55 years of age. Subscribers contribute money periodically while returns on it are market determined.

HDFC Securities, which has 180 branches, said customers would be able to choose their own investment option as well as pension fund manager, and monitor their contribution and growth.

“NPS is an offering with one of the lowest fund administration charges and investment in this product could help customers build their post-retirement funds,” Managing Director and Chief Executive Aseem Dhru said.

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RBI rationalises categories of pre-paid payment cards

The Reserve Bank of India (RBI) rationalised the categories and value limit of pre-paid payment cards to three broad categories from five earlier.

The pre-paid cards, technically known as semi-closed pre-paid instruments (PPI) are convenient alternatives to cash and cheques. These are mainly issued by banks and Non-Banking Financial Companies (NBFCs) on payment of specified amount and are used for purchasing goods and services from limited outlets.

As per revised guidelines, the first category of cards will have cash limit of Rs 10,000 and the re-load should not exceed the said limit during a month. These cards can be issued minimum with details of the customer.

Secondly it said, for issuing cards of value of Rs 10,001 to Rs 50,000, officially valid documents will be required and these should be non-re-loadable in nature.

It further said for issuing cards up to value of Rs 50,000 full KYC details will be needed and these can be re-loadable in nature.

The RBI said these cards can only be issued in electronic form.

The RBI said non-banking entities issuing pre-paid cards are required to maintain the outstanding balance in an escrow account with any commercial bank and the account should be credited as and when the issuer sells such a card to the end-user.

To promote cashless transfer of funds, the central bank has also relaxed domestic money transfer norms and said the three categories of pre-paid payment cards will qualify for domestic money transfer.

Under the domestic money transfer facility amount up to Rs 10,000 can be transferred to beneficiaries not having a bank account subject to an overall monthly cap of Rs 25,000 per beneficiary.

Such facilities have been made to facilitate fund transfer, particularly to migrants, who face difficulties in want of proof of identity or address.

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Individuals may get tax relief over Rs 1-lakh cap

Taxpayers may get some relief over and above the current ceiling of Rs 1 lakh against various saving instruments if the Finance Ministry accepts the suggestions currently before it.

The Government is also mulling introducing a ‘grandfathering’ provision in existing life-insurance policies that are eligible for a tax break.

The ‘grandfathering provision’ means that all tax benefits given under a contract in a life insurance policy bought today under existing tax provisions will continue even after that particular tax provision is withdrawn or amended.

These are among eight issues related to direct and indirect taxes that the Finance Ministry has agreed to consider.

“I have asked the Department of Revenue and the CBDT (Central Board of Direct Taxes)/CBEC (Central Board of Excise and Customs) to complete examination of the above suggestions by October 10, so that appropriate decisions may be announced shortly there after,” Finance Minister P. Chidambaram announced.

Separate limit

On the specific issue of enhancing the total tax deduction limit, Chidambaram said, “The Department of Revenue will examine whether, in addition to NPS (New Pension Scheme), some insurance products as approved by IRDA may be included in the separate limit over and above the limit of Rs 1 lakh under Section 80(C) of the Income-Tax Act for the purpose of income-tax deduction on the premium paid.”

He also announced that the CBDT will examine whether existing policies can be ‘grandfathered’ whenever changes are made to direct tax laws so that the changes apply only to policies prospectively.

On the indirect tax side, the Minister directed the CBEC to take a view on service tax provisions for the life insurance sector.

Shishir.Sinha@thehindu.co.in

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HUDCO cuts lending rates

The Housing and Urban Development Corporation Limited (HUDCO)  said it had reduced lending rate by 25 basis points (bps) in its floating rate on most of its lendings on housing and urban infrastructure development projects.

With this reduction, the floating interest rates for Economically Weaker Sections and Lower Income Group housing categories would range from 8.25 per cent to 8.75 per cent, a HUDCO release said.

In respect of HUDCO Niwas, the individual lending scheme of HUDCO, the floating interest rates would henceforth be 10 per cent for loans up to Rs 25 lakh for housing, the release added.

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New South Indian Bank branches in Palakkad region

As part of taking banking services to common man and to expand its rural outreach (Meaningful Financial Inclusion), South Indian Bank has launched six more branches as well as five ATMs in the Palakkad region.

The newly opened branches are Engakkad, Kottayi, Palakkayam, Perumatty, Puthupariyaram, and Shornur.

Mar Jacob Manathodath (Palakkad Diocese) inaugurated the pension schemes NPS Lite & NPS on the inaugural function which was presided by V A Jopseph, MD & CEO of South Indian Bank.

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ICICI Prudential MF partners with Syndicate Bank

ICICI Prudential Mutual Fund has entered into a partnership with Syndicate Bank for distribution of its mutual fund schemes to strengthen its reach.

The bank will now be distributing the Fund’s products to its customers across India through its network of 2709 branches, it said in a statement.

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Union Bank, OBC revise deposit rates on FCNR accounts

Public sector lenders, Union Bank of India (UBI) and Oriental Bank of Commerce (OBC) revised their deposit rates on FCNR accounts (foreign currency non-deposit accounts) with maturity of one-five years from today.

As per the revised rates announced by Union Bank, the deposit rates have been revised downwards by 4-12 basis points on 1-5 year maturity in dollar-denominated accounts.

Similarly, rates have also been revised for FCNR accounts in the euro, pound, Australian and Canadian dollars among others.

This is the second revision of deposit rates by the bank on FCNR accounts after September.

Another Public Sector lender, Orinetal Bank of Commerce has also revised its deposit rates on FCNR accounts on one to five year maturities effective from today.

According to the bank, the rates have been revised by 1-12 basis points on the dollar denominated accounts.

Earlier, country’s largest lender-SBI and Central Bank of India had also revised rates effective from September.

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Allahabad Bank to focus more on farm credit

Allahabad Bank has launched a campaign called – “Agriculture Credit Disbursement Quarter October-December 2012.”

The campaign has been launched to give a boost to the bank’s priority sector and agriculture credit portfolio.

During the campaign, the bank aims to make available debt capital to farmers for their crop cultivation, farm mechanisation and allied activities. The branches have also been directed to extend credit for

Micro and Small Enterprises, with special stress on micro enterprises, said a press statement issued by the bank.

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HDFC Bank to speed up financial inclusion in Odisha

Promising to speed up the process of financial inclusion, mainly in rural areas of Odisha, HDFC Bank on Saturday announced its plan to increase the number of branches from 61 to 102 in the state by the year end.

“Now the bank has 61 branches in 25 districts of Odisha. The bank is going to open 11 more branches by October and would add 30 new branches by December, 2012,” Managing Director of HDFC Bank, Aditya Puri told reporters here.

With the opening of the 102 branches the leading private sector bank would have branches in all the 30 districts of the state, he said.

HDFC Bank has 60 per cent of its branches in rural and semi—urban areas, Puri said with the opening of more branches in rural belts, more than 75 per cent of the branches of the bank would be located in villages and semi—urban pockets.

In addition to deposit mobilisation, the bank is lending to all sections of people in Odisha and the focus was now on micro—financing and loans for the farm sector like crop loans.

Apart from two wheeler loans, car loans, commercial vehicle loans and gold loans, the thrust is also on loan for tractors and agriculture implements, Puri said adding the bank is going to further enhance priority sector lending in agri—based funding.

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Country lacks effective regulatory system, says IRDA chief

India does not have an effective system to regulate and manage its health care sector , said J. Hari Narayan, Chairman, Insurance Regulatory and Development Authority. He said he would be glad if this issue is considered by Parliament or State Governments.

Addressing a gathering at a forum on health insurance, organised here by the Consumers’ Association of India, he said the State Government-run health insurance schemes were very successful.

It will be good if the State Governments concerned could include those who are not part of the target group by collecting premium from those individuals, he said. It will work out cheaper for those individuals, as the insurance companies could pass on the benefit to them.

Elaborating on this, he said, every insurance company spends some money on consumer acquisition. If it is going to be a collective cover, the insurer can pass on the cost benefit to the consumer.

Though health insurance is now more widely accepted and has been growing in the last five to six years, it should penetrate the market further as a majority of spending on health is met out of an individual’s pocket. The health insurance sector grew by 33 per cent in the first half of the current financial year. Last year, it grew by 23 per cent.

However, out of the Rs 3 lakh crore total medical expenses, Rs 2 lakh crore came from individuals’ own money. As premiums are very low in India compared to most other countries, people must consider health insurance as a financing alternative to meet health contingencies, he said.

ravikumar.ramanujam@thehindu.co.in

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Despite rising NPAs, banks Q2 profit to grow 14.5%: Kotak

Banks are likely to report 14.5 per cent growth in their second quarter earnings, notwithstanding rising bad assets and debt recast, said a report by brokerage firm Kotak Institutional Equities.

The report, however, says the growth in the core net interest income component for banks will slow down to 13 per cent for the system, with state-run banks logging in at 9 per cent and private lenders at a much faster clip of 22 per cent.

The report also notes that a rise in treasury incomes will lead to an overall 11 per cent rise in non-interest income for the system, but the core fee income will be muted as the corporate activity remains dull.

The brokerage expects the net interest margins to remain under pressure.

The full impact of the base rate cuts of May 2012 will also start reflecting in the results, it notes.

On the critical question of asset quality, which has assumed importance due to the gloomy economic conditions, Kotak has a negative outlook, even though there have been some silver lining like the recent Rs 1.9 lakh crore SEB loan recast.

“Retail portfolios should see marginal rise in stress, however, the corporate portfolio, especially in the SME and mid-corporate segments are expected to report higher stress.

“Incrementally, we believe stress in the infrastructure value chain should begin to be reflected in the current quarter; exposure to several other segments like textiles, iron and steel has not yet provided respite,” says the report.

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ICICI Bank to offer reward points to SB accountholders

In a bid to stave off competition from the likes of Kotak Mahindra Bank, IndusInd Bank and YES Bank, ICICI Bank has unveiled a rewards programme for customers transacting through savings bank (SB) account.

The rewards programme comes at a time when the abovementioned banks are paying higher interest rates, ranging from 5.5-6 per cent on SB balance up to Rs 1 lakh and 6-7 per cent on balance over Rs 1 lakh.

All public sector banks and majority of the private sector banks, including ICICI Bank, HDFC Bank, and Axis Bank, have left their SB interest rate unchanged at 4 per cent. This is despite the Reserve Bank of India deregulating the SB interest rate last year.

Industry experts say India’s largest private sector bank, besides responding to the challenge posed by smaller rivals on the SB deposits mobilisation front, is possibly targeting multiple objectives through the rewards programme, called ‘MySavings Rewards’.

The bank may be seeking to get existing retail depositors to maintain higher balances, attract new ones, migrate transactions to alternate channels — Internet and mobile, give a thrust to e-commerce, and cross-sell loans to retail depositors.

Reward points

Retail customers of ICICI Bank will get reward points for various transactions including activating Internet banking, shopping online/ paying utility bills with Internet banking, and auto-debit from savings account towards equated monthly installments for home/ auto/ personal loan/ recurring deposit.

Further, customers will get points for activating mobile banking, shopping though mobile, consolidating family banking accounts, and activating demat account.

For example, a customer will get 100 points when he logs in to ICICI Bank’s Internet banking for the first time. The bank is offering one point for every Rs 100 spent online and 10 points every time a registered biller is paid using Internet banking.

Monthly Average Balance

Rolled out from September 1, ICICI Bank’s SB customers, maintaining monthly average balance of Rs 15,000 or more, will automatically earn reward points. This will be reflected in their SB statements from October onwards. These points can also be clubbed with points earned on credit card transactions.

The points can be redeemed by a customer by logging in to his internet banking account and clicking on the ‘redeem’ option. The customer can redeem his points from a wide range of lifestyle products to household items to travel to auto accessories.

Competition for SB deposits

The competition to mobilise low-cost SB deposits seems to have prompted ICICI Bank to throw down the gauntlet to its smaller rivals. It has extended the strategy used to market credit cards to SB accounts.

After Kotak Mahindra Bank increased the interest rate on SB deposits by 50 per cent last year, it clocked a robust year-on-year (y-o-y) growth of 67.5 per cent in these deposits from Rs 3,307 crore (June-end 2011) to Rs 5,540 crore (June-end 2012.

On a larger base, ICICI Bank’s SB deposits grew at a slower clip — 16.1 per cent y-o-y growth — from Rs 66,858 crore (June-end 2011) to Rs 77,923 crore (June-end 2012).

ramkumar.k@thehindu.co.in

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HDFC Bank joins hands with PUNGRAIN

HDFC bank joined hands with Punjab Grains Procurement Corporation Ltd (PUNGRAIN) to facilitate payment to its commission agents spread over 350 mandis in Punjab.

PUNGRAIN, in its initiative has decided to make payment to their commission agents through 'RuPay Debit card' and has developed the Kisan Arhtia (commission agents) information and Remittance Online Network (KAIRON) with the help of National Payment Corporation of India (NPCI).

For this project, HDFC Bank will install its Point of sales (POS) machines in over 350 mandis to facilitate the payment to commission agents dealing in agriculture products, a release said here today.

It said this initiative will facilitate faster payments to them and in turn will benefit farmers.

HDFC Bank, in order to facilitate a successful implementation of this project, organised a day's training session for nodal officers along with food inspectors of PUNGRAIN.



Source: EconomicTimes

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