In-principle nod for new bank licences will be valid longer

The RBI made a few concessions to aspirants intending to float banks. One, it extended the validity period of the in-principle approval to promoter/promoter groups for setting up a bank from 12 to 18 months. Two, it decided to grant the new entities more time to meet priority sector lending norms.

In its clarifications to queries on the Guidelines for New Bank Licences, the Reserve Bank of India said the extension is to ensure that the bank licence applicants had enough time to put together a wholly-owned Non-Operative Financial Holding Company (NOFHC) which, in turn, will float a bank.

A single resident promoter/promoter group has first to set up a wholly-owned NOFHC, which will hold the bank and other regulated financial services entities/companies in which the promoter group has ‘significant influence’ or ‘control’.

Public holding

At least 51 per cent of the voting equity shares of the NOFHC has to be held by companies in the promoter group.

Public holding in these companies should be no less than 51 per cent of their voting equity.

The newly set up banks will have time, ranging from 33 months to 37 months, from the grant of in-principle approval, to achieve the priority sector lending (to agriculture, micro and small enterprises, micro-credit, education, housing and weaker sections) target.

The central bank, however, did not grant any exemption in maintaining the cash reserve ratio (the slice of deposits banks have to park with the RBI) and the statutory liquidity ratio (a portion of deposits banks must park in Central and State government securities).

In order that promoter/promoter groups stay focussed on the bank’s growth, the RBI will not permit them to set up any new financial services entity within three years from the NOFHC’s date of commencement of business.

As lending activities must be conducted from inside the bank, the RBI said the activity of a housing finance company (HFC) promoted by a bank licence aspirant should be transferred to the bank under the NOFHC.

The financial sector regulated entity that holds the HFC substantially will also have to come under the NOFHC.

For non-banking finance companies (NBFC) setting up a bank through an NOFHC, the RBI may consider allowing the bank to take over and convert NBFC branches into bank branches only in the Tier 2 to Tier 6 centres.

In all, the central bank received 443 queries from 34 individuals/organisations regarding Guidelines for Licensing of New Banks in the Private Sector.

Last date

The receipt of applications for new bank licences closes on July 1.

Among the aspirants are Aditya Birla Financial Services, Reliance Capital, Bajaj Finance, Tata Capital, and Religare.

Source: thehindubusinessline

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BoB’s new home loan offer

Bank of Baroda (BoB) on Tuesday said new and existing customers can get home loans at the Base Rate of 10.25 per cent across all tenures and for any amount. The single rate of interest for all home loan customers is effective from June 1.

There will be no conversion charge for existing customers to get the benefit of the reduced rate of interest, the public sector bank said in a statement. As at March-end 2013, BoB’s home loans portfolio saw year-on-year growth of 13.5 per cent to Rs 16,045 crore. Home loans accounted for about 7 per cent of domestic advances of Rs 2,24,294 crore.

Source: thehindubusinessline

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IRDA may tighten norms for banks selling insurance

Banks may find the going tough in distributing insurance polices. The insurance regulator may require them to renew at least half the life insurance policies they sell, failing which they risk losing the licence to distribute insurance products.

The renewal requirement is one of the recommendations of a committee set up by the Insurance Regulatory and Development Authority (IRDA) in order to curb mis-selling.

In 2011, IRDA had ushered in a minimum policy renewal criteria for individual insurance agents. The regulator directed insurance companies to terminate the contracts of agents who fail to get at least half the policies sold by them renewed in the subsequent year.

“We have noticed some instances of forced selling of insurance products by banks while advancing loans to customers. Hence, we are looking at calculating loss ratio (the ratios of premiums paid to the claims settled) in respect of business procured by banks so as to assess the quality of the business,” said a senior regulatory official.

“One of the factors that affect persistency is the after-sale service provided to the policyholder. Currently, large number of policies are left without being serviced after the policy is sold, resulting in the policies getting lapsed,” the official added.

According to IRDA data, in fiscal 2012, life insurers had to pay Rs 71,208 crore on account of surrender (withdrawal) of policies, of which, LIC paid Rs 41,531 crore and private sector insurers, the balance.

IRDA set up a committee to review the entire insurance brokers’ regulations in March, after a Union Budget announcement allowing banks to become insurance brokers.

“In the committee’s report to the regulator, we have suggested that in line with the requirement for individual agents, the persistency ratio in the case of life insurance policies sold through the bancassurance route should also be 50 per cent to ensure that servicing of policies by agents/ banks is sustained,” said a senior official from a life insurance company.

IRDA is in the process of finalising bancassurance guidelines and is expected to come out with the final report by August this year.

deepa.nair@thehindu.co.in

Source: thehindubusinessline

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B.K. Batra appointed interim CMD of IDBI Bank

B.K. Batra has been given interim charge as the Chairman & Managing Director of IDBI Bank.

Batra, who is currently the Deputy Managing Director, has been given interim charge of the bank following R.M. Malla’s superannuation as CMD on May 31.

In a notice to the BSE, IDBI Bank said Batra will exercise the powers of CMD with the approval of the board of directors / Managing Committee of the Bank, as the case may be, till such time that a regular incumbent is appointed by the Government.

Source: thehindubusinessline

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Corp Bank donates school bus

Corporation Bank has donated a school bus to Navachethan Educational Trust in Mangalore.

A press release said here that Ajai Kumar, Chairman and Managing Director of the bank, presented the bus to V. Ravichandran, Trustee of Navachethan Educational Trust, in Mangalore recently.

Apart from this, the bank met the cost of construction of an auditorium-cum-hall for extracurricular activities at the school.

The release said the trust offers free education to students from economically backward families.

Source: thehindubusinessline

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