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Thursday, December 11, 2014

Falling bank rates make corporate fixed deposits attractive

With banks slashing deposit rates, savers could take comfort from the higher rates offered by companies such as HDFC, Shriram Transport, Mahindra Finance and Dewan Housing. The average spread, or gap, between bank and corporate deposits has widened about 90-100 basis points compared with the usual 50-70 bps. A depositor with slightly higher risk appetite can now earn interest rates of up to 10.50% with three-year maturity.

"Investors with a higher risk appetite can invest in fixed deposits issued by companies," said Sandeep Nayak, executive director & CEO, Centrum Broking. "The spread between a bank FD and a corporate fixed deposit has widened due to falling bank rates making it attractive for a discerning retail investor," he said.

Shriram Unnati Deposit offered by Shriram Transport Finance rated AA+ can earn you 10.50%, 9.75% and 9.25% interest rates with maturities of one, two and three years, respectively. Triple-A rated Dewan Housing, or DHFL, sells fixed deposit scheme christened Aashray Deposit Single at 9.75% with 14-month maturity.

India's largest lender State Bank of India is offering 8.50% with maturities ranging from one to five years. A few days ago, it cut deposit rates by 25 bps.

Mahindra & Mahindra Finance — triple-A rated nonbanking finance company — too offers 9.75% and 9.50% in their deposit schemes with 24 and 36 month maturities.

"A traditional saver in bank fixed deposits can optimise his returns by investing in company fixed deposits," said Suresh Sadagopan, founder of Ladder 7Financial Advisories.

"He can earmark a part of the debt asset allocation for it. But you have to have a slightly higher risk appetite." India's largest housing finance company, triple-A rated HDFC, sells deposit schemes at 9.40% with one-three year maturities, while HDFC Bank offers 8.75% for similar maturities but below Rs 1 crore.

Bank fixed deposits are normally meant for the highly conservative investor. Even after lenders reduced deposit rates, no major rate cuts happened in the corporate schemes and it is unlikely to happen anytime soon either.

"We will revise (reduce deposit) rates only when the Reserve Bank cuts the policy rate," said Umesh Revankar, managing director and CEO, Shriram Transport Finance Company. His company has never defaulted on repayment.

Source : Economic Times
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United Bank signs pact with Bajaj Allianz

United Bank of India has signed a memorandum of understanding (MoU) with Bajaj Allianz Life Insurance, wherein Bajaj Allianz will act as a channel partner for loan protection of the bank’s borrowers.

The MoU was entered into on December 9.

The MoU was signed in the presence of Ramchandra Pandit, Senior Vice-President, Bajaj Allianz Life Insurance Company Ltd, Sanjay Arya, Executive Director of the bank, and other senior executives.

Interestingly, the Kolkata-based lender will be the sixth public sector bank with which the private insurer has tied-up for loan protection of the bank’s borrowers.

Source : Thehindubusinessline
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SBI chief: Leave it to banks to decide on mergers

The Centre must leave it to the public sector banks themselves to decide on the consolidation candidates, SBI Chairperson Arundhati Bhattacharya has said.

“It is important to start conversations among banks as to who should merge with whom," she said at the Delhi Economics Conclave 2014 here on Thursday.

There is need for India to work towards 3-4 large banks through consolidation, she added.

This remark is in line with the earlier UPA regime’s policy stance of allowing banks on their own to come up with proposals for consolidation among themselves.

As on date, the Modi-led Government has no stated policy on consolidation of banks.

Indications are that upcoming Budget in February may spell out the new dispensation’s policy stance on bank consolidation and may even come up with some “big ticket” announcements on likely mergers.

Source : Thehindubusinessline
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Bank of Maharashtra cuts minimum lending rate to 10.25%

State—run Bank of Maharashtra today announced a cut of 0.15 percentage point in its minimum lending rate or base rate to 10.25 per cent, a move which will make its housing and auto loans cheaper.

“The bank has decided to revise the bank’s base rate from 10.40 per cent per annum to 10.25 per cent per annum with effect from December 15, 2014,” Bank of Maharashtra (BoM) said in a filing to the BSE.

BoM is the first bank that has lowered lending rates after RBI Governor Raghuram Rajan made a case for lowering lending rates by banks earlier this month.

“Some easing of monetary conditions has already taken place... However, these interest rate impulses have yet to be transmitted by banks into lower lending rates,” Rajan had said during the monetary policy review.

Helped by softening prices of food items, retail or consumer price index (CPI) based inflation declined to 5.52 per cent in October.

The wholesale price index (WPI) based inflation fell to 1.77 per cent during the month.

Shares of Bank of Maharashtra were trading at Rs. 43.20 per piece on the BSE, up 1.29 per cent from previous close.

Source : Thehindubusinessline
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RBI to review priority sector lending norms for foreign banks

The Reserve Bank of India (RBI) will soon be reviewing the priority sector lending norms for foreign banks; after which it will nudge them convert their Indian branches into wholly-owned subsidiaries, the Governor, Raghuram Rajan said here on Thursday.

Rajan was in the city to attend RBI board meeting.

According to him, the foreign banks have expressed (to the central bank) their concerns and the obligations they will have if they have to convert their branches into wholly-owned subsidiaries.

The primary concerns raised by these foreign banks have been on the priority sector lending and achieve the mandated norms.

“We are in the process of reviewing the priority sector norms. When that process is finished, after consultation with the Government, we will be able to communicate those norms. Once we do that, at that point we can nudge the foreign banks into adopting those structures,” he told reporters during a press conference.

Source : Thehindubusinessline
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Bharatiya Mahila Bank opens Coimbatore branch

Bharatiya Mahila Bank plans to close the current fiscal with a network of 80 branches.

The year-old bank, according to its Chairperson Usha Anathasubramanian, has started to take baby-steps.

Launched by the UPA Government on November 19, 2013, this 100 per cent Government-owned bank, started its operations with seven branches, added two more to take it to nine before March 31, 2014.

“This is the 36th branch of the bank and the second in the state of Tamil Nadu,” she said, inaugurating the Coimbatore branch at Ramnagar.

New branches

Mahila Bank plans to open a branch in Pune the day after, followed by branches in Bhopal, Haridwar, Jamshedpur and Nagpur.

In Tamil Nadu, the bank plans to establish its presence in Tiruchi and Madurai.

“We intend to double the branch network to 80 before March 2015. The pace of expansion is going to be aggressive,” Usha Anathasubramanian told BusinessLine.

About 20 of these (branches) would be in rural, unbanked pockets, she said.

Total business

In its first year of operation, which was just for four-and-half months (between mid-November 2013 to March 2014), the bank registered a total business of Rs. 190 crore.

Its business at present is around Rs. 870 crore. Usha Anathasubramanian is confident of reaching the business target of Rs. 1,800 crore before the close of the current fiscal. “This is our first full year of operation,” she said.

Source : Thehindubusinessline
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Monday, December 8, 2014

RBI Deputy Governor Khan proposes novel PPP model to drive financial inclusion agenda

India should adopt the model of "PPP (square)" for driving its financial inclusion agenda, the RBI Deputy Governor, H R Khan, has said.

Financial inclusion efforts should be tested against the 'Plan, Pursue and Pause' framework to ensure better outcomes, Khan said at the 'Inclusive Finance India Summit 2014' in the Capital on Monday.

There is need to "plan'' well, pursue what has been planned and ensure there is a "pause'' to see if it is working well.

An iteration of this "PPP'' could result in better results, Khan said.

This PPP model is different from the commonly known 'public private partnership' that the Government is looking to encourage in various economic activities.

Later, Tarun Chugh, Managing Director and Chief Executive Officer, PNB MetLife India Insurance, told BusinessLine that India's financial inclusion efforts are still at a "pilot" stage and more needs to be done on improving access to basic banking facilities, expanding mobile banking and increasing financial capability. .

Financial inclusion is just not about opening bank accounts but providing access to the breadth of financial products needed by all people, he said.

Source : Thehindubusinessline
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ICICI Bank caps free transactions at own ATMs at five

The country’s largest private sector lender ICICI Bank has announced a hike in its ATM charges for savings account holders from January 1.

Under the new method, the number of free transactions in a month is fixed at five using own ATMs, while it has been capped at three for other banks’ machines.

Customers can enjoy only five free transactions, including financial and non-financial, at the bank’s own automated teller machines (ATM), it said in a post on its website.

After exceeding the free transaction limits, customers will have to pay Rs. 20 per financial transaction excluding service tax and Rs. 8.50 for every non-financial transaction, it said.

For transactions at non-ICICI Bank ATMs, the number of free financial and non-financial transactions have been reduced to three per month at six metros of Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad, after which the customer will have to pay Rs. 20 for a financial transaction and Rs. 8.50 per non-financial transaction.

In case of usage in non-metro areas, a customer can enjoy five free transactions per month at non-ICICI Bank ATMs, after which the same charges apply, it said.

The issue of ATM usage has been a very contentious one due to the inter-connect charges a bank has to pay to the other. Additionally, the operating costs have also gone up, following a spate of incidents at the ATMs like the robbery at Bengaluru last year, which started the debate on transaction charges.

After consultations, the RBI last month started a system under which it allowed banks to charge from the fourth transaction onwards at other banks’ ATMs in metros, and also gave the liberty to banks to charge customers for the sixth transaction onwards at own machines.

“The ATM transaction is free to you but not free to the bank. It costs the bank Rs. 75 to Rs. 100 for those five transactions. The bank has to collect that amount from somewhere and it has to be from customers. But there are two distortions that it creates. First, not everybody is doing the same amount of transactions and (also) are we subsidising using of cash by freeing up ATMs?” RBI Governor Raghuram Rajan had said, in defence of the new move.

Many banks have already announced reviews in their ATM charges following the announcement.

Source : Thehindubusinessline
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Kotak Mahindra launches savings account of older customers

Kotak Mahindra Bank launched a savings account product for older customers aged over 55 years to offer priority service with discounted offerings.

Grand is a unique savings bank account, tailored exclusively for customers 55 years and above. Grand has been designed keeping in mind their need for hassle-free banking, financial independence and personal attention, the bank said in a statement.

“Grand offers priority service and first aid card which provides essential customer information and emergency contacts details. It also offers queue privileges at the branch. Further, customers will get a health card from Indian Health Organisation (IHO), offering up to 50 per cent discount on treatments, consultation and procedures. Customers also can avail special lifestyle offers from brands including Lenskart, Zicom, Makemytrip and eBay,” the statement said.

Grand customers will earn 6 per cent per annum on savings balance of over Rs. 1 lakh and 5 per cent on balances up to Rs. 1 lakh.

To earn higher return on their balances, they can sign up for the Kotak ActivMoney facility, which converts savings account balance above a certain amount into Term Deposits.

Grand has also been packed with additional features including up to 35 per cent discount on locker facility and 100 per cent waiver on annual maintenance charge (AMC) for the first year on a Demat Account.

Additionally, customers will get 100 per cent issuance charge waiver on best complimentary cards and 25 per cent issuance charge waiver on a travel card.

Customers can also opt for customised date for cash delivery at their home doing away with any effort on the part of the customer to reach out to the bank every now and then. Instead, the customer contact centre gets in touch with the customer on the pre-selected date to confirm and execute cash delivery.

Further, customers can place a request for a call back by simply sending a SMS, which will be responded to within 30 minutes. They can also transact using net banking and mobile banking.

Grand also enables customers to make bill payments by registering online or at Kotak Mahindra branches.

“We believe in serving our customers better by understanding their preferences, and delivering products and services that meet needs of all segments. Grand is a distinctive offering for customers 55 years and above whose needs and behavioural patterns are different from other customer segments,” said Shanti Ekambaram, President – Consumer Banking, Kotak Mahindra Bank.

Source : Thehindubusinessline
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‘Uber complying with RBI norms for payment system’

The Reserve Bank of India today said that the US-based controversial cab operator Uber is complying with the central bank norms with regard to payment systems.

“My understanding is that they are complying (with the norms),” RBI Deputy Governor H R Khan said when asked whether Uber’s payment system is fully compliant with the Indian norms.

The company has been in the news as its taxi driver is facing rape charges and is currently in police custody. Police has also issued notice to the Indian functionaries of Uber to join investigation in the case.

The company had run into regulatory hurdles with the Reserve Bank raising objections to its payment system as it did not include the authentication process. It was asked to comply with the regulatory norms.

Talking to reporters, Khan said “We had given time (to Uber) up to November 30 to come to wallet system...they wanted some extension. We said it is not possible... they have now fallen in line,” he said.

The company has started using the mobile wallet system.

“Quite a few customers have boarded on mobile wallet system and that is how it is going to work....I think they are now going to (be) more or less what we had told them..,” Khan added.

Source : Thehindubusinessline
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LIC agents to stage dharna in Mumbai on Wed

The LIC Agents’ Organisation of India will hold a massive dharna at Azad Maidan in Mumbai on Wednesday to present a charter of demands to the LIC management.

Agents have not agitated for a raise in their commission since 1956, PG Dileep, General-Secretary of the organisation, told BusinessLine.


This is despite the price of essential commodities and petroleum products having shot up many times over during this period.

“Even now we are not asking for a raise in the commission rate. Our main demand is that the existing commission on policies should not be reduced.”

Dileep said the very existence of agents was now under threat due to a decision to eliminate the agency system.

If an agent were to lose his job, the Government would not be able to provide him alternate employment because of the sheer numbers involved — 12 lakh.

‘Save LIC and protect agents’ is the slogan of the Association, Dileep said.


LIC's service model, represented by its agency force, was a globally acclaimed model.

But various regulations imposed by LIC over the last two decades have been directed at eliminating this very force.

About 17 lakh have been terminated during the last five years. Though recruitment has been attempted through various channels, the total number achieved last year was only 91,052.

If the LIC has successfully withstood competition from the private sector during the last 14 years, credit should go to the cooperation and hard work of the agents, Dileep said.

Multinationals and Indian corporates have realised that they can defeat LIC and eat into its business by destroying the agency force.


LIC record of claims settlement over the past 11 years was the best globally. While other private companies settled 48-80 per cent of the claims every year, LIC has settled 99 per cent.

It has been investing its funds in Government securities and bonds and extending long-term loans to public sector undertakings at low interest. After the entry of private insurance companies, a part of the funds was being invested in the share market.

An amount of Rs. 70,000 crore was lying with the Government without interest as sovereign guarantee.

The service tax on policies was also borne by the LIC. All these have resulted in low returns, affecting the bonus payout to policy-holders.


LIC was forced to purchase shares of companies and banks which were not performing well. It has dispensed with its conventional and other attractive policies with effect from January 1, 2014.

There was only one live policy till January 6. Now it has only nine policies against 56 policies during the same time last year.

Up to 80 per cent of the business was done during January-March. It was at this time that LIC has stopped a number of attractive policies.

About 38 crore people have been covered by these attractive policies and there was no justification in closing them.

Naturally, it would reflect negatively on the quantum of business done. Still, LIC commands 84.4 per cent of the insurance business. But it will need to face the threat of downfall from now on, Dileep said.

Source : Thehindubusinessline
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