Government approves Rs.12,517 cr capital infusion in PSBsJanuary 13th, 2013:The Union Cabinet cleared infusion of Rs.12,517 crore in about 10 Public Sector Banks (PSBs) during the current fiscal to boost their lending potential and also assist them in meeting the stricter capital adequacy norms under Basel-III.Besides this, the Cabinet also gave an in-principle approval for providing need-based recapitalization of banks till 2018-19 for ensuring compliance with the Basel-III capital adequacy norms.In previous years also, same kinds of measures were taken by the government when it infused about Rs.20,117 crore in PSBs during 2010-11 and poured in  another Rs.12,000 crore in 2011-12 to comply with the capital adequacy norms.Accordingly, keeping in mind the capital requirements in the coming years, the Cabinet gave an in-principle nod for need-based additional capital infusion in banks from 2013-14 to 2018 -19 to ensure compliance with Basel-III global banking norms aimed at minimizing financial risks.Implementation of Basel-III capital regulations increases requirement of core equity capital by banks due to higher capital ratios. The Basel-III capital ratios will be fully phased in as on March 31, 2018.

RBI establishes Working Group to review Banking Ombudsman SchemeJanuary 12th, 2013:Taking into consideration the suggestions by Committee on Customer Service in Banks (Damodaran Committee) relating to BankingOmbudsman Scheme 2006 and the Rajya Sabha Committee on Subordinate Legislation, Reserve Bank of India (RBI) has constituted a Working Group which will be headed by Suma Verma with an aim to review, update, and revise the Banking Ombudsman Scheme, 2006.The background of Banking Ombudsman Scheme. What sort of complaints doest this scheme handles?

Urjit Patel is the new deputy governor of RBIJanuary 6th, 2013:Urjit Patel succeeded Subir Gokarn to become new deputy governor at the Reserve Bank of India.Patel is PhD in economics from the Yale University and a non-resident senior fellow at the Brookings Institution, a US-based think-tank. He will have a 2-year term at the regulator.

SBI unveils MobiCash EasyJanuary 3rd, 2013 State Bank of India (SBI) has unveiled its mobile wallet namedState Bank MobiCash Easywhich provides facilities such as fund transfer, bill payment, balance inquiry, mini statement, mobile top-ups and DTH recharge etc.How does SBI’s MobiCash worksState Bank of India (SBI) has unveiled its mobile wallet namedState Bank MobiCash Easywhich provides facilities such as fund transfer, bill payment, balance inquiry, mini statement, mobile top-ups and DTH recharge etc.

How does SBI’s MobiCash works?:SBI is carrying out this plan in collaboration with a private service provider Oxigen which will do round-the-clock money transfer and other services. To avail the facility one can contact Oxigen outlets by sending SMS to 9870888888. After registration one can deposit money at the outlets and get his account recharged. The sum of money one deposits with the bank will be akin to money in one’s account. Once it is done, this money can be used to send remittances to any bank account, transfer funds to other wallets issued by SBI, simply by messaging. At present, money withdrawal is not allowed, and the customer is not required to fulfil the KYC (know your customer) norm. The facility is available to both, SBI’s customers as well as non-customers. SBI customers have an additional option of topping up the wallet using SBI’s mobile banking service. The service is currently available in Mumbai andDelhi only.

The service is aimed at migrant labourers who send money back home from SBI branches, the youth and those seeking to pay bills. It will also address the requirement of financial inclusion as it facilitates to extend financial services to un-banked population through the omnipresent mobile phones.

Fact Box: e-BRC (Bank Realization Certificate)June 8th, 2013:MoU inked b/w DGFT and Government of Delhi to use e-BRC (Bank Realization Certificate)An MoU was signed b/w the Directorate General of Foreign Trade (DGFT) and Commissioner (Trade and Taxes) and Government of NCT of Delhi for making use of electronic Bank Realization Certificate (e-BRC). With this, Delhi has become the second state to sign the MoU. The first state to sign this MoU was Maharashtra.

What is e-BRC?:e-BRC is electronic form of earlier physical Bank Realization Certificate. It was launched in 2012 by thethe Directorate General of Foreign Trade (DGFT) to reduce

transaction cost to exporters, who will not be required to make any request to bank for issuance of bank export and realisation certificate (BRC).

BRC is issued by a bank after realization of export proceeds in the country. It is an important document required for claiming benefits under various Foreign Trade Policy schemes. In addition, BRC data is used by VAT, Income Tax and Drawback departments.

Finance Ministry asks IBA to set up independent body to oversee CDR mechanismJune 8th, 2013

The Indian Banks’ Association (IBA) has been asked by the Finance Ministry to set up an independent body to oversee the Corporate Debt Restructuring (CDR) mechanism.The step has taken after witnessing a surge in the number of debt restructurings over the past two years.  Both the IBA and the finance ministry has expressed concern that banks and their clients are taking undue advantage of the CDR mechanism, deferring the issue of Non-Performing Assets’ (NPA) formation. Under CDR, there were 106 cases of restructured loans, of  Rs 76,470 crore, in 2012-13. This was a rise from 50 cases (exposure of Rs 39,600 crore) the previous year.

The Independent Body:The independent oversight mechanism will not have any government representative or any serving banker but some experts who will scrutinize from the correctness point of view whether the case referred is genuine.The committee will act as an advisory body which will help the banks examine a particular case and it will not be mandatory for a bank to go to the committee.The finance ministry has been asking banks to deal strictly with wilful defaulters and to become more aggressive on loan recovery.The Reserve Bank of India has also made the debt recast norm tougher. It has said all loans to be restructured after April 1, 2015, should be classified as NPA.

Fact Box: Indian Banks’ Association (IBA)June 7th, 2013:K R Kamath re-elected as IBA’s Chairman.K R Kamath, the chairman and managing director of Punjab National Bank (PNB), has been re-elected as the Chairman of the Indian Banks’ Association (IBA) for 2013-14 tenure.Indian Banks’ Association (IBA)Established on September 26, 1946.It is an association of Indian banks and financial institutions. It is based in Mumbai.Currently represents a total of 173 banking companies which are operating in India. 

Objective: Strengthening, development and coordination of the Indian banking. It also facilitates various member banks.

The Managing Committee of the IBA consists of a chairman, three deputy chairmen, one honorary secretary as well as 26 members.

IndusInd Bank ties up with American Express to launch credit card for affluent customersJune 2nd, 2013

IndusInd Bank has joined hands with American Express to unveil IndusInd Bank Iconia American Express Card for its rich customers.

Card Benefits

The card offers its customers reward points and lifestyle benefits such as golf, entertainment, travel and dining.

Subscribers of the card will get a reward of 1.5 point on weekdays and of 2 points on the weekends on every Rs 100 they spend. These points can then be redeemed for cash credit at full value, i.e, a rupee for each reward point and for partner air miles.

IndusInd Bank ventured into the credit card sector after acquiring Deutsche Bank’s loss making credit card business from its Indian operations in 2011.

RBI notifies restrictions on bank loans against GoldMay 31st, 2013

Taking further measures to curb the expanding Current Account Deficit (CAD) and forex outflow, the RBI has imposed restrictions on banks and NBFCs for providing loans against purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, units of gold ETF and units of gold Mutual Funds to discourage demands for gold. Banks have also been directed to ensure that the amount of loan to any customer against gold ornaments, gold jewellery and gold coins (weighing up to 50 grams) should be within the board approved limit.

However , Banks are allowed to grant of advances against specially minted gold coins sold by banks, there is a risk that some of these will weigh much more, thereby circumventing the RBI’s guidelines regarding restrictions on grant of advance against gold bullion.

Current Status: At present, banks are allowed to provide advances against gold ornaments and other jewellery and against specially minted gold coins sold by banks. However, no advances can be granted by banks for purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, units of gold exchange traded funds and units of gold mutual funds.

Why this measure?

India is one of the largest importers of gold. In the last few years, India has witnessed a sharp rise in the demand as well as in the prices of gold which has in turn led to bigger imports. As the imports are generally paid in dollars/ foreign currency, it has led to massive outflow of foreign exchange reserves leaving a huge CAD. CAD occurs when a country’s total imports of goods, services and transfers are greater than the country’s total export of goods, services and transfers. This situation makes a country a net debtor to the rest of the world. Very high CAD is detrimental to the outlook of the whole economy of the country.    Government has taken several steps recently, including raising import duty, to curb the inbound shipments of gold. RBI too had put restrictions on banks on gold imports.

SEBI to double charges for Algorithmic (Algo) tradingMay 23rd, 2013

Market regulator SEBI has announced that it will double the charges for orders based on Algorithms (algo) in stock exchanges from May 27, 2013.

What is Algo Trade?

Algorithmic (Algo) trading refers to orders generated by use of advanced mathematical models that involve automated execution of trade. It is mostly used by large institutional investors and has raised concerns that algo exposes small investors to possible systemic risks.

Charges on an algo trade vary among exchanges.

Why SEBI is increasing the charges on Algo trade?

Algo trading method is mostly used by large institutional investors and has raised concerns that algo exposes small investors to possible systemic risks.

The move to increase the algo trade charges is intended to disincentivise those having high order-to-trade ratio using algo. Brokers with repetitive instances of high daily order-to-trade ratio will face additional penalty in the form of suspension of their proprietary trading book.

Shashi Kant Sharma sworn-in new CAGMay 23rd, 2013

The President of India has appointed Shashi Kant Sharma, IAS, as Comptroller & Auditor General of India, in terms of Article 148 (1) of the Constitution of India. Sharma (61) is a 1976 batch Indian Administrative Service (IAS) officer of the Bihar cadre and was before serving as secretary in the Ministry of Defence.

Sharma succeeds Vinod Rai whose audit reports on 2G spectrum and coal block allocations during triggered a number of controversies and brought in the concept of presumptive loss in audit.

The CAG has tenure of 6 years, or till the incumbent is 65, whichever is earlier.

What is the controversy over appointment of Shashi Sharma as CAG ?

Mr. Prashant Bhushan (Aam Aadmi Party leader and a Supreme Courtlawyer) objected Sharma’s appointment as the CAG, terming it illegal and unconstitutional. Mr. Prashant Bhushan’s  laid the contention was that Sharma in the last 10 years held many sensitive positions in the defence ministry that dealt with procurements and his appointment as the CAG would mean a “conflict of interest” as he will be auditing defence deals in which he had a role as defence secretary. A public suit has also been filed in the Supreme Court challenging Sharma’s appointment as the CAG.

Finance Ministry appoints auditors without consulting RBIMay 22nd, 2013

Deviating from the earlier practice of consulting the RBI while appointing auditors for the same, the government has appointed auditors for the Reserve Bank of India after consulting with the Comptroller & Auditor General (CAG). As per government, this has been done to avoid conflict of interest.

The RBI and the finance ministry appeared to have some friction over many issues in recent months, particularly over the conduct of monetary policy with senior ministry officials often seemingly dissatisfied over the pace of interest rate cuts by the central bank. There is also a less high-profile conflict over dividends declared by RBI out of its profits. However, the government maintained that there is no relation of appointing auditors to dividends.

In the 2013-14 budget, the government has assumed 43,996 crore in dividends from the Reserve Bank of India and state-run banks, a sharp increase from 25,447 crore the year before. The government expects RBI to pay it more dividends.

What the Finance Ministry is asking RBI to do?

Fin Min wants RBI to pay the government more in dividends. It is also asking the RBI to interests to the banks on the CRR it keeps with itself. After RBI indicated its inability to pay interests, finance ministry has been reviewing RBI’s balance sheet over the past year. The ministry had suggested that RBI should pay 7% interest on the CRR.

As per ministry this step would help slash rates even if the central bank does not ease monetary policy. It had argued that major central banks either do not mandate a reserve ratio or pay interest on the mandatory reserves they ask banks to set aside.

How does the appointment of auditors take place under the existing mechanism?

Under the existing mechanism for the appointment auditors, the CAG provides a list of CA firms eligible for appointment as statutory central auditors. In case of RBI, two central auditors and four local auditors were being appointed by the finance ministry in consultation with RBI.

RBI directs banks to adhere to ‘Clean Note Policy’May 18th, 2013

The Reserve Bank of India, under its Clean Note Policy, has directed banks to eliminate stapling of note packets and issue only clean currency notes to the public.

What is Clean Note Policy?

Clean Note Policy is a policy being run by the RBI with an objective to give the citizens good quality currency notes and coins, while the soiled notes are withdrawn out of circulation. Under this policy Banks have been directed the following:

Stop stapling of note packets and instead secure note packets with paper bands.

Sort notes into re-issuables and non-issuables.

Issue only clean notes to public.

Stop writing of any kind on the watermark window of bank notes.

As per RBI, on an average, one out of five paper notes in circulation (over 20%) is disposed every year after getting soiled and the number of such soiled currency bills stood at over 13 billion units during the fiscal ended March 31, 2012. RBI will launch a pilot project for plastic or polymer currency notes with an aim to enhance the shelf-life of notes.

Fact Box: Inflation Indexed Bonds (IIBs)May 18th, 2013

RBI to launch Inflation Indexed Bonds in June 2013

As stipulated in the Budget 2013-14, the government, in consultation with the RBI, has decided to launch Inflation Indexed Bonds (IIBs) to wean away investors from the yellow metal (Gold) to paper-based savings instruments. This new investment instrument with provide an alternative for those who were in recent times going in for investment in gold as a hedge against inflation.

IIBs with a maturity period of 10 years will be launched each month by RBI with the objective of diverting household savings from gold into these hedged bonds up to Rs.15,000 crore this fiscal.

For appropriate price discovery and market development the IIBs will also be auctioned to institutional investors such as Pension Funds, Insurance, and Mutual Funds as it will create demand for IIBs and help in making them tradable in the secondary market.

What are IIBs?

Inflation-Indexed Bonds or IIBs are are bonds where the principal is indexed to inflation. They are thus designed to cut out the inflation risk of an investment. These bonds will be linked to the inflation index of the country (Wholesale Price Index or WPI) and serve as a better investment option as compared to physical assets like real estate and gold. Higher the inflation, higher the returns.

Why this step?

The step is being taken to de-motivate investments in gold as bulging imports of the yellow metal has been adversely affecting the country’s Current Account Deficit (CAD), which had

surged to a historic high of 6.7% in the third quarter of 2012-13. Last month, imports of gold and silver soared by 138% on an annual basis to $ 7.5 billion.

How would IIBs help?

As per RBI, IIBs would help in:

Boosting domestic savings and reversing the declining savings-to-GDP ratio.

Providing households and other investors a competitive option against gold and real estate. In the wake of rising inflation last year, there was considerable flow of investments from financial savings to safe-haven assets like gold that resulted into higher imports of the metal. This led to current account deficit or CAD widening to 4.9% of GDP at the end of September 2012.

Giving investors choice to use IIBs as good hedging instruments against inflation.

How will the Index ratio be determined?

The IR (index ratio) will be computed by dividing reference index for the settlement date by reference index for the issue date, and the final inflation data based on the Wholesale Price Index (WPI) will be used for providing inflation protection. Besides, in case of revision in the base year for WPI series, base splicing method would be used to construct a consistent series for indexation.

The conflict b/w International Olympic Committee (IOC) and the Indian Olympic Association (IOA) is expected to end soon with both the Indian representatives from the government and sports bodies reached an agreement in a meeting with IOC officials. The IOC has agreed to lift the ban on IOA once it holds fresh election as per the amended constitution of the IOA.

What is the issue?

The membership of the IOA was suspended in December 2012 owing to differences in election procedures of IOA administration body.  IOC wanted that election for top posts of IOA to be held as per Olympic Charter, which insists that organizing committees for each country remain autonomous and free of government influence. But India’s national sports code does not adhere to these requirements, and consequently, a New Delhi court ordered the IOA to hold an election as per government’s sports code instead of adhering to the IOC’s charter.

What is the solution reached?

The IOA has acquiesced to the demand of IOC to amend its constitution in line with the government’s Sports Code. Following this a fresh election will be held for top administrative posts of IOA.

Government to set up Financial Stability and Development Council (FSDC)May 15th, 2013

The Central Government is at consensus to establish Financial Stability & Development Council (FSDC) to strengthen and institutionalize the mechanism for maintaining financial Stability and Development.

What would be the role of FSDC?

FSDC will perform following role:

To engage in macro prudential supervision of the economy, including the functioning of large financial conglomerates and address inter-regulatory coordination issues.

To focus on financial literacy and financial inclusion.

To periodically look into issue relating to financial development.

Who would be the head of the Council?

The Council would have one Sub-Committee which would be headed byGovernor, RBI. The Secretariat of the Council would be in theDepartment of Economic Affairs, Ministry of Finance.

RBI eases rates, trims repo rate by 25bps to 7.25%May 4th, 2013

RBI reduced the Repo Rate (the rate at which RBI lends money to commercial banks), to 7.25% from 7.5% while keeping the CRR (Cash Reserve Ratio- the portion of deposits that banks require to maintain with RBI) unchanged at 4%.

Monetary Measures

Repo rate: reduction by 25 bps from 7.5% to 7.25%

Reverse repo rate: 6.25% (100 bps below repo rate)

MSF (Marginal Standing facility) rate: 8.25% (100 bps above repo rate)

Bank rate: 8.25%

Cash reserve ratio retained at 4% of NDTL (Net Demand and Time Liabilities)

Impact of repo rate cut:

Reduced cost of overnight borrowing for commercial banks from RBI.

Lead to reduced lending rates, helping in better macroeconomic sentiments.

RBI has invoked banks to pass the impact of above to end users as banks hold to factor the benefit.

Why a Need of reduction in repo rate ?

In order to continue to address risk towards growth.

Insistence by Government and industry to lower borrowing costs to spur economic growth, estimated to have slumped to 5% in the year ended March 31, 2013.

Guard against the risks of inflation pressures re-emerging and adversely affecting inflation expectations.

Manage liquidity to ensure adequate credit flow to the productive sectors of the economy.

Estimated GDP Growth at 5.7% for 2013-2014 – RBIMay 4th, 2013

The RBI’s has projected a GDP growth for 2013-14 at 5.7% as against finance ministry’s projection of 6.1%- 6.7%. Indian economy grew by 5% in 2012-2013 on account of poor performance of manufacturing,agriculture and services sector. RBI’s current assessment is that economic activity will remain subdued and will only show a modest pick-up in second half of 2013-14, subject to appropriate conditions in the later part of year.

Assumptions for calculating growth rate

Agricultural Sector: Normal monsoon and agricultural growth are expected to return to trend levels in second half of 2013-14.

Industrial & Service Sector: Growth outlook expected to be subdued primarily due to:

Decline in new investment

Existing projects stalled by bottlenecks and implementation gaps

Sluggish growth in services and exports driven by bleak global sentiments.

NABARD opens first Farmers’ Club in KargilApril 30th, 2013

Kargil got its first Farmers’Club, as NABARD inaugurated Trespone Farmer’s Club at Trespone TSG Block in the district.

What is Farmers’ Club (FCs) ?

Farmers’ Clubs (FCs) are grassroot level informal forums of farmers.

Such Clubs are organized by rural branches of banks with the support and financial assistance of NABARD for the mutual benefit of the banks concerned and the village farming community/rural people.

With the enhancement of the programme, other agencies like NGO, VAs, KVKs, SAUs etc. are also now included as agencies included in the formation and promotions of FCs.

Background:

The Farmers’ Clubs programme which was earlier known as “Vikas Volunteer Vahini (VVV) Programme” was launched by NABARD in 1982.

The programme was directed towards development in rural areas through credit, technology transfer, awareness and capacity building.

The “VVV Programme” was renamed as “Farmers’ Club Programme” in 2005 by revisiting its earlier mission.

What is the need of Farmers’ Clubs?

Around 60% of country’s population depends on agriculture which contributes18% to India’s GDP. The Tenth Five Year Plan and National Agriculture Policy documents envisage a growth level of 4% in Agriculture. However the growth of the sector has not been satisfactory with less than 2% growth in the last 50 years. To meet the targeted growth it is imperative improve productivity and reduce costs by improving efficiency. Keeping that in mind NABARD devised FCs strategyto provide package of initiatives for transfer of technology, improving input use efficiency, promoting investments in agriculture both in private and in public sectors and creating a favourable and conducive economic environment. The emerging needs in agriculture sector now are adoption of location specific skill and knowledge based technologies, promote greater value addition to agriculture produce, forge new partnerships between public institutions, technology users and the corporate sector, harness IT more effectively to realize financial sustainability and compete in the international market.

Who can form FCs?

All Institutional Agencies (Commercial Banks, Cooperative Banks and Regional Rural Banks) and all grassroot level organisations (NGOs, PRIs, State Agricultural Universities, KVKs, ATMA, Post Offices etc.) are eligible to form Farmers’ Clubs.

What are the functions of FCs?

The broad functions of the Farmers’ Clubs are:

Coordinate with banks to ensure credit flow among its members and forge better bank borrower relationship,

Organise minimum one meeting per month and depending upon the need, there would be 2-3 meetings per month. Non-members can also be invited to attend the meetings,

Interface with subject matter specialists in the various fields of agriculture and allied activities etc., extension personnel of Agriculture Universities, Development Departments and other related agencies for technical know how upgradation. For guest lectures, even experienced farmers who are non members from the village/ neighbouring villages could be invited,

Liaison with Corporate input suppliers to purchase bulk inputs on behalf of members,

Organise/facilitate joint activities like value addition, processing, collective purchase of inputs and farm produce marketing, etc.; for the benefit of members. They can also sponsor / organise SHGs,

Undertake socio-economic developmental activities like community works, education, health, environment and natural resource management etc.

Market rural produce and products

How a bank is benefitted by opening FCs?

FCs concept is a win-win situation for both the banker and the borrower. As per a study, the following benefits were accrued to a bank branch operating FCs:

Increase in deposits.

Increase in the credit flow and diversification of lending.

Generation of new business avenues.

Increase in the recoveries and decline in the non-performing assets.

Reduction in the transaction costs of financial institutions/ Banks.

Socio economic development of the village.

Besides these benefits to the banks, the Farmers’ Club has also been instrumental in certain social welfare measures like free eye check-up camp, Animal Health Care Camp, Mass vaccination camp, community works like road, check-dams, afforestation, etc.

Enhancement in bargaining power for bulk purchase of inputs and marketing of their produce.

How NABARD supports FCs?

NABARD’s policy support for Farmers’ Club Programme lays stress on linking technologies with farmers’ club members and also facilitating market access through the following mechanism:

Capacity building of members of Farmers’ Clubs including leadership training.

Linkage with technology/markets

Self Help Groups (SHGs)/Joint Liability Groups (JLGs) formation

Forming Federations of Farmers’ Clubs/Producers’ Groups/Companies

Financial Support from NABARD

NABARD also provides financial assistance of Rs.10,000/- per club per annum for a period of 3 years to all agencies irrespective of whether they are institutional or other agencies and also the region concerned.

What is the current status of FCs?

During 2009-10, 16,590 Farmers’ Clubs have been formed taking the cumulative number of farmers’ Clubs to 54,805 as on 31st March 2010.

RBI to start plastic money project on trial basisApril 20th, 2013

Deputy Governor, RBI, K. C. Chakrabarty held that the RBI is probable to commence the introduction of plastic notes in select parts of India on a trial basis and it would commence with the introduction of Rs.10 denomination and continue with other small denominations.

Plastic notes can withstand more wear-and-tear than their paper counterparts

Have a longer life than paper counterparts

Plastic notes are more difficult to fake and could therefore be a means of countering counterfeiting.

Important UpdatesApril 8th, 2013S. Gopalakrishnan new head of CII

S. Gopalakrishnan, Co-Founder Infosys elected as new President for Industry body Confederation of Indian Industry (CII) for 2013-14. S. Gopalakrishnan will replace Adi Godrej, Chairman of Godrej Group.

Krishna Kumar is new ED of Canara Bank

V. S. Krishna Kumar took charge as the ED (Executive Director) of Canara Bank with effect from April 4, 2013.

India and Singapore ink MoU on Air Services

India and Singapore inked a new Memorandum of Understanding (MoU) on bilateral air services. The MoU rationalizes the capacity entitlements of both India and Singapore in terms of seats per week in each direction with a route specific cap for Singapore on each route. The MoU increases by 10%, the capacity entitlement with India.

Reconstitution of Central Press Accreditation Committee

Central Press Accreditation Committee (CPAC), reconstituted by the Ministry of Information & Broadcasting.

Function of CPAC: To approve applications for accreditation from the media, both Indian as well as foreign.

Jammu and Kashmir Bank wins FE India’s Best Banks Award-2012-13

In recognition of its strong fundamentals and dynamic growth model, J & K Bank  won the prestigious FE India’s Best Banks Award for 2012-13.

Ranked as No. 1 in ‘Best Old Private Sector Bank’ category

3rd in the overall banking industry in terms of ‘Profitability’.

1st in terms of ‘Profitability’ in the category of ‘Old private sector banks’.

Fact Box: Caratometer ( Karatmeter )April 6th, 2013

Corporation Bank to use ‘caratometers’ in order to check purity of Gold pledged

Corporation Bank planning to use ‘cartometers’ in order to check the purity of Gold pledged.

Corporation Bank’s gold loan portfolio more than doubled to Rs 3,662 crore as of December 2012 from Rs 1,585 crore as at December 2011. To encourage boost agriculture lending, the Corporation bank has opened ‘gold loan shoppe’ at 7 places.

Karatmeter (also spelt as caratometer):

A scientific and non-destructive method for testing the purity of Gold.

 Internationally used device.

Used as a confirmatory test (after the assayer gives his report on the quality of gold), thus assuring the purity of gold pledged with the bank by borrowers.

Uses X-rays to give an exact reading of the purity of gold in about 3 minutes.

However, it only checks the purity of the gold on the top layer.

Most showrooms across India use it.

Other ways to determine the gold content include – melting Gold down, the touchstone method or XRF (x-ray fluorescence) method.

IRDA passes credit rating norm for choosing foreign reinsurersApril 5th, 2013

Insurance Regulatory and Development Authority (IRDA).

As per the IRDA (General Insurance – Reinsurance) Regulations 2013, Foreign reinsurers who have a credit rating of at least BBB from Standard & Poor’s Corp. or an equivalent rating by any other internationalagency for the past five years, can reinsure Indian insurers.

In the reinsurance framework, multiple insurance companies share the risk by purchasing insurance policies from other insurers in order to limit the total loss the original insurer would face in the case of a disaster.

What are the Objectives of this move by IRDA ?

Increase retention (the portion of risk which an insurer assumes for its own account).

IRDA was finding it difficult to track the audit trail of many transactions with regard to reinsurance placements and coinsurance.

There was a demand from the general insurers that a level playing field be created for foreign insurance companies and Indian reinsurers. This was because, as yet there have been no restrictions in place for the foreign firms.

KYC norms for self-help groups relaxed : RBIApril 1st, 2013

In order to address the difficulties faced by SHGs in complying withKnow Your Customer (KYC) norms while opening savings bank accounts and credit linking of their accounts, RBI has held that the banks can open savings account for the SHG even if ‘know your customer’ verification is completed for only the office bearers of the SHG. Thus, it has been decided to  simplify certain norms for SHGs.

Thus, it will not be mandatory for the banks to complete the KYC of all members of the SHG before opening a bank account, rather now, verification can be completed only for the office bearers of the SHG.

Also, as the banks would have already completed the KYC norms for the SHG while opening SHG’s bank account, there would be no need for a separate KYC verification while giving credit to the SHGs.

Take firm steps to recover loans of sick firms from affluent promoters: FM to BanksMarch 28th, 2013

Sending out warning to willful defaulters, Finance Minister P. Chidambaram asked banks to take bold steps against affluent promoters to recover loans from sick companies owned by them.

The warning comes in the backdrop of several entities, including Vijay Mallya’s Kingfisher Airlines, being unable to repay bank loans.

Gross NPAs of PSU banks have grown from Rs.71,080 crore as on March, 2011, to Rs.1.55 lakh crore as on December, 2012, of which corporate accounts constitute 53.68%.

Of this, about 172 corporate accounts are NPAs of more than Rs.100 crore at the end of December, 2012. The amount involved in such cases is to the tune of Rs.37,194 crore.

As many as 215 projects with an investment of Rs.7 lakh crore were now postponed and banks had distributed about Rs.54,000-crore in loans towards them.

RBI slashes repo rate by 25 bps, no change in CRRMarch 20th, 2013

The Reserve Bank of India (RBI) has cut down repo rate by 25 basis points from 7.75% to 7.5% with immediate effect.

As a result,

The reverse repo rate stands adjusted to 6.5%.

The marginal standing facility (MSF) rate and the Bank Rate adjusted to 8.5% .

The Cash Reserve Ratio (CRR) has been left unchanged at 4%.

As per the central bank, high Current Account Deficit (CAD) and inflationary pressure limit possibility of further relaxing of rates.

SEBI issues framework for colour coding, product labelling for mutual fundsMarch 20th, 2013

With the aim to inform investors with the amount of risk involved in various mutual funds scheme, market regulator- the Securities and Exchange Board of India (SEBI) has issued guidelines on ‘product labelling’ with colour coding for mutual funds.

The guidelines would be effective from July 1, 2013, for all existing and forthcoming schemes, Securities and Exchange Board of India (SEBI).

As per the norms:

The front page of initial offering application forms will carry product labels with details about the schemes.

The labels would have to be placed in common applications forms and advertisements.

Color and Risk 

Blue colour : Low risk

Yellow color : Medium risk

Brown color: High risk

Labels would include details about the nature of schemes “such as to create wealth or provide regular income in an indicative time horizon(short/ medium/ long term)”.

Mutual funds should give a brief about the investment objective in a single sentence followed by kind of product in which investor is investing(equity or debt).

Mutual funds would have to include a disclaimer that “investors should consult their financial advisers if they are not clear about the suitability of the product”.

Fact box: IFRSMarch 19th, 2013

Investors prefer accounting levels close to IFRS: Survey

Majority of investors want the government to keep national accounting standards as close to the international norms (called IFRS) as possible, says a survey conducted by the global accounting firm Ernst & Young.

What is IFRS ?

International Financial Reporting Standards (IFRS):

A set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.

IFRS are issued by the International Accounting Standards Board (IASB).

The rules to be followed by accountants to maintain books of accounts which is comparable, understandable, reliable and relevant as per the users internal or external.

What is the need of IFRS?Now, when huge number businesses are going global the international shareholding is also increasing. However, international investors face difficulties in understanding a company’s financial statements as companies in different countries follow different kinds of financial reporting standards like the US GAAP which is different from Canadian

GAAP. Hence, the need was felt to evolve such standards in the form of IFRS which can even out these disparities across international boundaries.

IFRS was started with an aim to synchronize accountingacross the European Union but the value of harmonization quickly made the concept attractive around the globe. IFRS are sometimes confused with International Accounting Standards (IAS), which are the older standards that IFRS replaced. (IAS were issued from 1973 to 2000).

How is IFRS being implemented in India?

India is also gradually trying to comply with IFRS.

Indian companies had been till now using the U.S. GAAP (Generally Accepted Principles of Accounting) for reporting financial statements.

As per RBI banks were to become IFRS-compliant for periods beginning on or after April 1, 2011. Companies are to comply with the new set of rules in a phased manner.

As per the plan IFRS proposed Roadmap for INDIA:Opening balance sheet as at April 1* using IFRS-converged accounting standards.

*If the financial year of a company commences n a date other than April 1, then the opening balance sheet needs to be prepared from the beginning of the new financial year of the company.

2011:

NSE – NIFTY 50 companies

BSE – Sensex 30 companies

Companies whose shares or other securities listed outside India

Companies listed or NOT having a net worth in excess of Rs 1,000 Crore <This excludes insurance companies, banks and non-banking companies (NBFCs)>

2012:

All Insurance Companies

2013:

Companies listed or Not, but having a net worth between Rs 500 Crores and Rs 1000 Crores <This excludes insurance companies, banks and non-banking companies (NBFCs)>

All Scheduled Commercial Banks

Urban Co-operative banks having a networth in excess of Rs 300 crores

NBFCs – Nifty 50 or Sensex 30

NBFCs listed or NOT, but having a networth more than 1,000 Crores

2014:

Listed companies having a networth less than Rs 500 Crores <This excludes insurance companies, banks and non-banking companies (NBFCs)>

Urban co-operative banks having a networth between Rs 200 to Rs 300 crores

NBFCs (all other Listed)NBFCs (Other Unlisted) haveing net worth between Rs 500 to Rs 1000 Crores.

Financial inclusion plan main criteria for getting new bank licences: RBIMarch 8th, 2013

The Reserve Bank of India (RBI) has said in its new banking license guidelines that the important criteria for processing the application would be the business model of the applicants and it should provide for financial inclusion.As per these guidelines, new banks are required to establish at least 25% of their branches in places with less than 10,000 population.As per the new norms, private corporates and public sector entities must have 10 years experience to be eligible to apply for new licence. The initial paid-up capital for new banks has been set at Rs 500 crore.

SEBI enables two-way fungibility of IDRsMarch 6th, 2013

Holders of Indian Depository Receipts (IDRs) will now have an option to convert it into shares of the issuing company. The Securities and Exchange Board of India (SEBI) has issued detailed guidelines which will allow shareholders to convert their depository receipts into equity shares of the issuer company and vice-versa.

The issuer could provide exchangeability to IDR holders by converting IDRs into underlying shares; or converting IDRs into underlying shares and selling the underlying shares in the foreign market where the shares of the issuer are listed and providing the sale proceeds to the IDR holders.

Existing IDR issuers can follow the new framework, and have to provide the option of redemption/conversion within three months from the date of completing a year of listing.

What are IDRs?

IDRs are generally instruments denominated in rupees and allow overseas companies to raise funds from the Indian market.

How this step would help India’s capital market?

This move of allowing for two-way fungibility of IDRs will encourage greater foreign participation in the Indian capital market. 

So far only the UK-based banking major Standard Chartered PLC was listed as an IDR.

Budget Box: Government to infuse Rs 14, 000 cr in PSU banks next fiscalMarch 3rd, 2013

In the Budget speech it has been announced that the government will infuse Rs 14,000 crore in public sector banks in next fiscal (2013-14).

Objective: To ensure that PSU Banks meet the Basel III regulations regarding capital adequacy.

Implementation of Basel III capital regulations envisages enhancing the requirement of core equity capital by banks due to higher capital ratios.The Basel III capital ratios will be fully phased in as on March 31, 2018.

The RBI has extended the date for implementing Basel III regulations by 3 months to April 1, 2013.

The Government had poured in about Rs 20,117 crore in public sector banks during 2010-11 and Rs 12,000 crore in 2011-12.

Budget Box: Banks can sell insurance products of multiple insurance firmsMarch 3rd, 2013

As per Budget 2013-14, banks will also act as brokers for selling insurance products of multiple companies.

More highlights on Insurance sector:

Insurance companies will be allowed to open branches in non-metropolitan cities without approval from the insurance regulator.

All towns with population above 10,000 will have one Life Insurance Corporation office and one public sector general insurance company’s office by 2014.

To expedite the settlement of 10 lakh motor third party claims before Tribunals/Courts, insurance companies will organise adalats to settle the claims.

Group insurance products will now be offered to groups such as self-help groups, domestic workers’ associations, among others.

There is a proposal to relax the eligibility conditions for life insurance policies issued on or after April 1, 2013 for persons suffering from disability or certain ailments by raising the permissible premium rate from 10% to 15% of the sum assured.

Insurance companies will be directly allowed to trade in debt market. It will mean some reduction in costs and may help deepen debt markets.

The decision to permit insurance companies to become trading members of debt stock exchanges will curtail the cost for insurers.

What is current situation?

Currently, banks can sell products of one life, one non-life and a standalone health insurer. The bancassurance guidelines are still under consideration of the Insurance Regulatory and Development Authority (IRDA). Reserve Bank of India (RBI) had recently shown concerns about banks becoming brokers.

Budget Box: Proposal to introduce IIBs ‘Inflation-Indexed Bonds’ to encourage savingsMarch 1st, 2013

The Budget 2013-14 has proposed to introduce Inflation-Indexed Bonds or IIBs with the aim to control rising Current Account Deficit, fiscal deficit and inflation. The move by the government has been lauded by the RBI saying that the step is in line with government’s commitment to lowering inflation.

What are IIBs?

Inflation-Indexed Bonds or IIBs are are bonds where the principal is indexed to inflation. They are thus designed to cut out the inflation risk of an investment. These bonds will be linked to the inflation index of the country (Wholesale Price Index or WPI) and serve as a better investment option as compared to physical assets like real estate and gold. Higher the inflation, higher the returns.

How would IIBs help?

As per RBI, IIBs would help in:

Boosting domestic savings and reversing the declining savings-to-GDP ratio.

Providing households and other investors a competitive option against gold and real estate. In the wake of rising inflation last year, there was considerable flow of investments from financial savings to safe-haven assets like gold that resulted into higher imports of the metal. This led to current account deficit or CAD widening to 4.9% of GDP at the end of September 2012.

Giving investors choice to use IIBs as good hedging instruments against inflation.

Budget Box: India to have first public sector Women’s BankMarch 1st, 2013

Bank for the women, by the women and to the women…

To create a level playing field for women in banking sector, an initial capital of Rs 1,000 crore has been committed in the current Budget for the establishment of India’s first public sector Women’s Bank by the end of 2013.

The proposed bank would lend mostly to women and women-run businesses, support self-help groups and women’s livelihood and predominantly employ women. As per RBI, the women’s bank would be set up as a PSB and would not require separate guidelines.

Currently, there are all-women banks in the co-operative sector. For example, the Self-Employed Women’s Association (SEWA) set up a women-only bank in 1974. The bank is owned by self-employed women as shareholders, and policies are formulated by their own elected board of women workers.

Fact Box: Rajat GuptaFebruary 28th, 2013Rajat Gupta has been ordered to pay $6.2 million forlegal expenses incurred by his former employer Goldman Sachs during his trial.

Rajat Gupta (64) is India-born former Goldman Sachs director who was sentenced to two year last year for insider trading.

In US, the banks by laws are required to pay the legal fees of their top Officers and Directors. Before, his trial, Mr. Rajat Gupta entered into a deal with Goldman Sachs that if Rajat Gupta is found guilty for insider trading, he will reimburse entire amount that the Goldman Sachs pays for legal fees incurred.

Who is Rajat Gupta and what is the case?

Rajat Kumar Gupta, is an Indian American Businessman. He was global head of McKinsey & Company, the management consulting firm from 1994 to 2003 and a business leader in India and the United States.

After his rise in McKinsey, he was known as the “First India-born CEO of a global corporation”.

Gupta also chaired as corporate chairman, board director or strategic advisor to a variety of large and notable organizations including Goldman Sachs, Procter and Gamble and American Airlines, and non-profits including The Gates Foundation, The Global Fund and the International Chamber of Commerce.

The case:

In 2007 when Gupta was Director of Goldman Sachs, he provided confidential information about the company’s investment plan and earning details, which are considered Non-Public information, to Raj Rajaratnam. He leaked the information of $ 5 billion investment which was

to be made by Berkshire Hathaway into Goldman Sachs.Rajaratnamtraded on the information and made profits. It was

alleged that Gupta also had some vested interest in Rajaratnam company- Galleon and he also got some benefits through that trading which is considered as Insider Trading- a corporate crime. It was also alleged that Gupta passed on non- public information about Procter & Gamble to Rajaratnam where he leaked info about company’s sale of its assets worth $ 3 billion and about its quarterly earnings which were not made public.

AmEx unveils ‘ezeClick’ serviceFebruary 24th, 2013

Credit card selling company American Express (also AmEx) has launched a service ‘ezeClick’ which will enable its customers to carry out online transactions without entering card details.

To avail the facility, the AmEx card members need to register just once, create their ezeClick ID and use it for all future online purchases across all participating merchants.

NTPL signs pact with banks for 1,000-MW projectFebruary 22nd, 2013

A consortium of banks which includes Bank of India, Indian Bank andCentral Bank of India has agreed to lend Rs. 937 crore for the 1,000-MW NTPL power project, a joint venture of the Neyveli Lignite Corporationand the Tamil Nadu Power Generation and Distribution Corporation.The project is being set up at Tuticorin in Tamil Nadu. The project would be taken up at an estimated cost of Rs. 4,909.54 crore.

The first unit of 500 MW is expected to start operating in December 2013 and the second unit with the similar capacity would begin operation in March 2014. The power generated from the project would be distributed among Tamil Nadu, Kerala, Karnataka and Puducherry.

Dishonoring of cheque given as security is not punishable: Supreme CourtFebruary 21st, 2013

The Apex Court has held that dishonoring of a cheque given as security is not liable to be visited with a penalty under Section 138.

It is generally thought that dishonoring of a cheque in any circumstances can attract penal action. However, the Negotiable Instruments Act itself contemplates the presumption of a cheque having been issued for consideration or discharge of debt being amenable to rebuttal.

Fact Box: Saxo BankFebruary 20th, 2013

Saxo Bank enters Indian market

Saxo Bank has announced its entry into the Indian market to provide trading platform for foreign equities.

About Saxo Bank:

An Online Danish investment bank.Founded:    1992Headquarters:    Copenhagen, Denmark

Chairman:

Kurt K. Larsen, Chairman

Vice Chairman:

Dennis Malamatinas

CEO:

Kim Fournais

Founder members: Lars Seier Christensen, Kim Fournais and Marc Hauschildt.

1992: Saxo was originally founded as a brokerage firm under the name ‘Midas Fondsmæglerselskab’.

2001: The company obtained a banking license and its name was later changed to “Saxo”.

Services offered:

Trading via an online platform SaxoTrader in Forex, Stocks, CFDs, Futures, Funds and Bonds.

Private Wealth Management services.

The bank provides online trading and investment across global financial markets.

Saxo Bank is well known internationally for its success in Internet brokerage and it has bagged number of awards for the same.

50% increase in Bad loans of listed BanksFebruary 19th, 2013

The bad loans or Non Performing Assets of listed banks swelled by 50% at Rs 30,840 crore in the first nine months of the current financial year ended December 31, 2012.

The net Non-Performing Assets (NPAs) of 40 listed banks surged to Rs 92,398 crore as on December 31, 2012, from Rs 61,558 crore as on March 31, 2012.

The net NPAs in State Bank of India, Punjab National Bank and Bank of Baroda rose by 60%, 70% and 118% respectively.

Fact Box: Priority sector lending (PSL)February 16th, 2013

Priority sector lending (PSL) by public sector banks to minorities to minorities surpassed 15% mark.

Priority sector lending by public sector banks to minorities has increased from 10.6% in 2007-08 to 15.01% in 2012-13 with a total lending of Rs 1,71,960.71 crore to minorities. Priority sector lending to minorities is one of the schemes covered under prime minister’s new 15 point programme for the welfare of minorities.

What is Priority Sector Lending?

Priority Sector Lending is an important role given by the Reserve Bank of India (RBI) to the banks for providing a specified portion of the bank lending to few specific sectors like agriculture or small scale industries. Basically this is meant for all round development of the economy apart from only focusing on the financial sector.

Are there minimum limits?

The limits are prescribed according to the ownership pattern of banks. While for local banks, both the public and private sectors have to lend 40 % of their net bank credit, or NBC, to the priority sector as defined by RBI, foreign banks have to lend 32% of their NBC to the priority sector.

Are there specific targets within the priority sector?

Domestic banks have to lend 18 % of NBC to agriculture and 10 % of the NBC has to be to the weaker section. However, foreign banks have to lend 10 % of NBC to the small-scale industries and 12 % of their NBC as export credit. However, for the balance, there are a vast number of sectors that banks can lend as priority sector. The Reserve Bank has a detailed note of what constitutes a priority sector, which also includes housing loans, education loans and loans to MFIs, among others.

What if a bank does not achieve priority sector lending targets?

Domestic banks having a shortfall in lending to priority sector/ agriculture are allocated amounts for contribution to the Rural InfrastructureDevelopment Fund ( RIDF ) established in NABARD. In case of foreign banks operating in India, which fail to achieve the priority sector lending target or sub-targets, an amount equivalent to the shortfall is required to be deposited with SIDBI for one year.

Equity investment limit for Insurance companies raised to 15 %February 15th, 2013

The Insurance Regulatory and Development Authority (IRDA) has raised the equity investment limit for the Insurance companies to 15% up from existing 10%.

The move follows the Finance Ministry pitching for raising the equity investment limit for insurance giant LIC to up to 30%.

With this permit Insurance companies will be allowed to increase their investments in equity in a given company from the present level of 10% to a higher level of 12% and 15% depending upon the size of the controlled fund of any given insurer.

The move would not have any adverse effect on the financialhealth of the insurer as the insurance companies control sizeable funds.

Four years back, IRDA had amended investment norms to forbid an insurer from holding more than a 10% stake in a company.

Other steps:

IRDA also approved the health insurance regulations to enable a more consumer-friendly system. It has referred the matter to insurance advisory committee to add more clarity onbancassurance regulation.

IRDA also gave nod to standard proposal form to record full details of a policyholder as per the KYC norms for sale of life insurance products.

RBI directs Co-op banks to not grant loans for gold purchaseFebruary 15th, 2013

The RBI has directed State and Central co-operative banks not to give loans for purchase of gold in any form to curb the considerable increase in its import in recent years.

Currently, these banks are allowed to grant loans against pledge of gold ornaments, but not permitted to grant any advance for purchase of gold in any form. They offer loans for various purposes against the security of gold/gold ornaments as part of their lending policy.

Banks to start loans recovery from KingfisherFebruary 15th, 2013

Troubled air carrier Kingfisher Airlines is at moribund point as its key lenders have decided to recall the loans given to the company. The consortium of 17 banks led by State Bank of India (SBI) has anexposure of Rs. 7,000 crore to the Kingfisher.

Banks had to consider this extreme measure as the airline’s management could not devise with any reliable revival plan. Its flying licence has been cancelled since January 1, 2013. It stopped flying since October 1, 2012, following a strike.

Government considers enhancing NABARD capital base to Rs 20,000 croreFebruary 14th, 2013

The government is cogitating to expand the capital base of India’s apex farm development bank National Bank for Agriculture and Rural Development (NABARD) to Rs 20,000 crore from existing Rs 5,000 crore.

The increase in authorised capital will augment the operations and broaden the activities of NABARD. Following these changes NABARD would be able to undertake short term lending operations and introduce new credit products.

Financial Institutions Syndicated Deal of the Year 2012 award goes to YES BankFebruary 11th, 2013

YES Bank has been awarded the Financial Institutions Syndicated Deal of the Year 2012 in its Asia Pacific Region. The award was given for $155 million loan syndicated by YES bank which was distributed across 9 different countries from 14 banks.

The award was given away by Asia Pacific Loan Market Association (APLMA), which is a leading trade association for syndicated loan market in this region.

Corporation Bank offers new variants of savings bank accounts: “SB Super” and “SB Signature”February 11th, 2013

‘SB Super’ and ‘SB Signature’ are the new variants of savings account launched by Corporation Bank.

Facilities with these accounts:

Both offer preferential loan processing by affixing ‘priority’ seal by the branch while forwarding loan applications.

Bundled demat and trading account including a waiver of annual maintenance charges for the first year.

Free NEFT, SMS banking, and 25 per cent concession in bank charges for gold coins,

Condition: A customer should maintain a minimum quarterly average balance (QAB) of Rs 15,000 for SB Super and Rs 1 lakh for SB Signature.

Government nominates C R Naseer Ahmed on the Board of Directors of Syndicate BankFebruary 11th, 2013

The Central Government has nominated Mr. C R Naseer Ahmed as part-time non-official director on the Board of Directors of the Bank for a period of three years from February 01, 2013 or until further orders, whichever is earlier.Source.

Dell ready to become private in $24 billion dealFebruary 11th, 2013

PC manufacturer Dell is ready to go private in a $24.4-billion buyout. The company which is facing slump will pay its stockholders $13.65 per share to leave the company on its own. The company will be sold to a group of investors that includes investment firm Silver Lake. Once this is done, DELL will stop trading on the NASDAQ.

Dell did rapid growth through the 1990s which brought its founderMichael Dell into one of the world’s richest people. Michael Dell, who owns nearly 16% stake in the company, will remain

the CEO after the sale closes. Dell’s sale is the highest-priced leveraged buyout of a technology company.

What is a “Leveraged buyout (LBO)”?

LBO = Acquisition of a company (or a part of a company or it can also be single asset like a real estate) using a substantial amount of borrowed money (bonds or loans /  debt) to meet the cost of acquisition.

The financial buyer (e.g. private equity fund) puts a small amount of equity (relative to the total purchase price) and utilizes leverage (debt or other non-equity sources of financing) to fund the rest of the amount that is paid to the seller.

LBOs can have many different forms such as Management Buy-out (MBO), Management Buy-in (MBI), secondary buyout, tertiary buyout, etc.

Can LBO be employed in public companies also?

YES. Though, mostly LBOs occur in private companies, but it can also be employed with public companies.

The +ves of Leveraged buyout::

In LBO transactions, financial buyers seek to generate high returns on the equity investments and use financial leverage (debt) to increase these potential returns.

Financial backers of Dell are of the view that it will be easier to engineer a turnaround without having to pander to the stock market’s fixation on whether the company’s earnings are growing from one quarter to the next.

Taking the company private will leave it without publicly traded shares to attract and reward talented workers or to help buy other companies.

The -ves of Leveraged buyout:

LBOs need companies to reserve some of their incoming cash to reduce the debt taken on as part of the process of going private.

The obligations mean Dell will have less money to invest in innovation and expansion of its business.

Equity holders – Risk arises due to significant financial leverage. Interest amount that has to be paid for the debt taken by the company are are "fixed costs" and thus they can in future force the company into default if they not paid.

Debt holders – The debt holders assume the risk of default compared with higher leverage as well, but as they have claims on the assets of the company, they are likely to realize a partial, if not full, return on their investments, even in bankruptcy.

What is “Management Buyout (MBO)”?

MBO is quite similar to a LBO, but the difference is that in an MBO the Management Team of the target company acquires the company instead of a financial sponsor as in case of a LBO.

Example: Mr. Ram is the sole owner of XYZ company. Mr. Ram is now 65 years old and is set to retire in coming months and exit the business. Now, the Higher Management Team at the company believes strongly that the company has good future ahead and so the Management people come together and they buy out the Mr. Ram’s (owner’s) equity in the company and assume control in the XYZ company.

Britain confers new powers to regulators to break up banksFebruary 11th, 2013

The UK government has given new powers to regulators which can now break up banks if they fail to protect their retail operations from their riskier investment arms.

The government is cautious keeping in mind the happenings of past when risky investments undermined banks’ stability in 2008, leading to taxpayer bailouts of two big UK banks. The new measure gives regulators the power to force a complete separation of a lender’s retail business from its investment banking.

Sharad Sharma becomes ED of Geojit BNP ParibasFebruary 9th, 2013

Sharad Sharma has been appointed as the Executive Director of Geojit BNP Paribas to oversee the company’s operations. Satish Menon, also the Executive Director, will be responsible for all business lines.

Things you should know about BNP Paribas and Geojit BNP Paribas

Logo: Geojit BNP Paribas:

BNP Paribas is a French global banking group, headquartered in Paris.

BNP Paribas was formed in 2000 via the merger of Banque Nationale de Paris (BNP) and Paribas in 2000.

Bloomberg and Forbes in 2012 ranked BNP Paribas as the 3rd largest bank in world on basis of the total assets held by the bank.

SBI Life Insurance is a Joint-Venture b/w SBI (74%) and BNP (26%) Paribas Assurance.

‘Geojit’ was a company started in 1987 by Mr. C. J. George and Mr. Ranajit Kanjilal. In 1994, it became a Public Limited Company named ‘Geojit Securities Ltd’.

In 2007, BNP Paribas took a stake majority stake in Geojit Securities Ltd. and consequently, evolved ‘Geojit BNP Paribas Financial Services Ltd.’

Kotak Mahindra Bank acquires Barclays India’s business loan portfolioFebruary 9th, 2013

Kotak Mahindra Bank has acquired the business loans portfolio from Barclays Bank plc India branch and Barclays Investment and Loan (India Ltd) for an undisclosed sum.

Aircel offers ‘Mobile Money’February 9th, 2013The Telecom operator Aircel has launched a new service called‘Mobile Money’ in collaboration with ICICI Bank and Visa to enable its customers transfer money, pay bills and withdraw cash by using only their mobile phones—without having to make a trip to the bank or an ATM.  It is similar to Vodafone’s M-Pesa service which first pioneered to great success in Africa.

The service will be initially rolled out in Tamil Nadu, specifically for the Chennai – Tirunelveli corridor – to help migrant labourers send back money to their villages.

How does it work?

A person who wishes to transfer money from A location to B destination will have to deposit the money with a correspondent in the A area, after which an SMS is sent to the recipient confirming the transaction details. The recipient has to merely go to a banking correspondent in their respective area (B) to retrieve the cash.

This plan will work even if both parties have no ICICI bank account, with the minimum amount needed to start an account being Rs. 100. The company will make money by charging commission ranging from 1.5 to 3% on each transaction.

Corporation Bank launches new variants of savings bank accountsFebruary 8th, 2013

Corporation Bank has rolled out two new types of savings accounts namely SB Super and SB Signature.

A customer should maintain a minimum Quarterly Average Balance (QAB) of Rs 15,000 for SB Super and Rs 1 lakh for SB Signature.

Customers having any of the two accounts will be offered preferential loan processing. Both accounts offer bundled demat and trading account including a waiver of annual maintenance charges for the first year. They also bring concessions and offers like free NEFT, SMS banking, and 25 % concession in bank charges for gold coins.

PNB buys 30% stake in MetLife IndiaFebruary 8th, 2013

Punjab National Bank which is India’s second-largest bank has acquired a 30% stake in the Indian subsidiary of the biggest US life insurer MetLife at an unrevealed amount.

Naseer Ahmed is the new Director of Syndicate BankFebruary 8th, 2013

C R Naseer Ahmed has been appointed as the Director of Syndicate Bank. The Government of India has nominated Ahmed as part-time non-official director on the Board of Directors of Syndicate Bank for a period of 3 years.

Minimize number of free cheque books issued to individuals: RBIFebruary 7th, 2013

The Reserve bank of India (RBI) has recommended in its discussion paper that the number of free cheque books given per year to individuals may be kept to a minimum and instead they should be encouraged to use electronic payments.

As per central bank’s recommendations:

Banks may levy moderate or steep charges on cheques issued beyond this minimum number.

In case of fresh loans, post-dated cheques (PDCs) should be completely stopped and repayments should be only through electronic payments, with suitable conditions for late payment and non-payments, which should be disclosed upfront.

Current PDCs should be converted to electronic payment mandates within a prescribed timeline.

Credit card dues should be paid electronically. In case cardholders make payments of dues using cheques, then the issuing banks may levy high convenience charge.

Banks may set some amount/value limit for cheques issued by individuals. Such charges may be higher than the charges levied on electronic payments of similar value.

Banks may levy a processing charge in case of individuals who have invested in shares/debentures/bonds and have not opted for receiving dividend/interest directly into their bank accounts, deposits the cheque into their bank account for collection.

Cheque collection boxes at public places should be discouraged and should be provided only at bank branches.

ICICI Bank ties with Aircel for Mobile MoneyFebruary 7th, 2013

India’s largest private sector bank, ICICI Bank has partnered with Aircel to launch a mobile banking service, ‘Mobile Money’.

With the help of this service the unbanked customers of these two companies will be able to transfer money securely and instantly through their mobile phones without getting connected to data services.

The service will work towards financial inclusion of those who face problems in transferring money due to absence of branches or ATMs closer to them by offering a range of financial services such as deposits and cash withdrawals, money transfer to third parties, self-reload of prepaid mobile credit, and various utility bill payments.

The service will be first launched in Tamil Nadu to specifically cater to the needs of migrant working population.

Union Cabinet gives nod to amendments to Regional Rural Banks (RRBs) Act, 1976February 6th, 2013

The Union Cabinet approved the amendments proposed in the Regional Rural Banks (RRBs) Act, 1976

Objective:

To enhance authorized and issued capital to strengthen their capital base.

The term of the non official directors appointed by the Central Government is proposed to be fixed not exceeding 2 years.

How these amendments will it help RRBs? These amendments are aimed at bringing financial stability in RRBs which will make then capable to play a larger role in financial inclusion and meet the credit requirements of rural areas and strengthen the Boards of RRBs.  

A brief account of RRBs Regional Rural Banks (RRBs) were set up under Regional Rural Banks Act, 1976 (the RRB Act) to build an alternative channel to the ‘cooperative credit structure and to ensure sufficient institutional credit for the rural and agriculture sector.

The ownership of RRBs is jointly with the Government of India, the concerned State government and sponsor banks, with the issued capital shared in the proportion of 50%, 15 % and 35%, respectively. As per provisions of the Regional Rural Banks Act, 1976 the authorized capital of each RRB is Rs. 5 crore and the issued capital is a maximum Rs. 1 crore.

SBI slashes base rate to 9.7%February 4th, 2013

India’s largest public sector bank, State Bank of India, has cut its base rate (minimum lending rate) marginally from current 9.75% to 9.70%.

The decision came following RBI cut its key policy rate and the cash reserve ratio by 25 basis points each. The effect of central bank’s move is also visible as HDFC bank has reduced interests on auto loan by up to 50 basis points without altering its base rate, which is currently at 9.70%. The interest rate on car loans has been cut by 25 basis points to the 10.50-11.50 % range.

After RBI announced cut, IDBI Bank was the first off the block to reduce base rate as well as its benchmark prime lending rate by 25 basis points each.

SEBI revises OFS mechanismFebruary 2nd, 2013

Market regulator, the Securities and Exchange Board of India (SEBI), has revised the Offer For Sale (OFS) mechanism as the deadline is approaching for the promoters of listed companies to offload their stake to meet the minimum public shareholding norm of 25 % by June 2013.

As per SEBI, the revised norms

The cumulative bid quantity will be made available online to the market throughout the trading session at specific intervals in respect of orders with 100 % upfront margin and separately in respect of orders placed without any upfront margin.

The indicative price shall be disclosed to the market throughout the trading session. This is also calculated based on all valid bid / orders.

Institutional investors have a choice to pay either upfront 100 % margin in cash or without margin. However, non-institutional investors have to pay 100% upfront margin in cash.

Orders with 100% margin paid upfront by institutional investors and non-institutional investors can be modified or cancelled at any time during trading hours.

Orders without paying upfront margin by institutional investors can’t be modified or cancelled except make upward revision in the price or quantity.

Institutional investors who placed orders / bids with 100% margin upfront, custodian confirmation would be within trading hours and settlement shall occur on T+1 (trading plus one day) and without upfront margin it will be on T+1 and settlement will be on T+2 as it is now followed in secondary market transactions.

SEBI has eliminated the extended half-an-hour time after trading hours given to the custodians.

RBI cuts repo rate and CRR, slashes growth forecast to 5.5%January 31st, 2013

The Reserve Bank of India (RBI) eased its tight monetary policy by slashing its key interest rates by 0.25% and released Rs 18,000 crore additional liquidity into the system to stimulate growth through reduced cost of borrowing.

RBI cut the Repo Rate by 0.25% to 7.75% and Cash Reserve Ratio (CRR) by similar margin to 4%.

The cut in repo rate is expected to bring down the borrowing rates individuals and corporate. The slash in CRR, which is the portion of deposits that banks have to keep with RBI, would enhance the availability of funds.

The RBI, however, has cut down the growth projections for the current financial year to 5.5% from its earlier estimate of 5.8%.

Exide Industries to acquire ING stake in Indian life insurance joint ventureJanuary 30th, 2013

Dutch banking and insurance group ING has decided to sell its 26% stake in an Indian insurance venture to local partner Exide Industries.

ING is in the process of selling all its Asian insurance and investment management operations. Exide would acquire ING’s 26 % percent in ING Vysya. It would also buy 24% from two other private Indian investors – Enam Group and Hemendra Kothari Group – for a total of about 5.5 billion rupees ($102 million).

Within the period of a year, ING is second company to exit Indian insurance market after New York Life sold its 26% stake in a life insurance joint venture with Max India to Japan’s MS&AD for about $530 million.

Why are these companies making exit from India?

Continue reading…

RBI revises norms for bulk depositsJanuary 29th, 2013

The Reserve Bank of India (RBI) has revised the rules for bulk deposits, offering differential interest rates, which would be applicable with effect from April 1, 2012. As per the revised rules:

Continue reading…

Canara Bank to launch e-Lounge servicesJanuary 28th, 2013

Canara Bank is about to unveil its e-Lounge services in Bangalore andDelhi.

What this service would offer?

e-Lounge will cater to the needs of corporate, IT and businessprofessionals. It would offer Services of ATM, cash deposit kiosk, check deposit kiosk, pass book update, internet banking terminal, online trading terminal, corporate web site terminal to offer latest information of bank’s services all under one roof.

The bank would launch first e-Lounge at Koramangala Branch, Bangalore.

‘Vision Life Income’ launched by Birla Sun Life InsuranceJanuary 26th, 2013

Birla Sun Life Insurance has launched its first participating plan ‘Vision Life Income’. It offers a perfect blend of income and financial protection for the customer’s family as it pays survival benefits every year from the end of the premium paying term till maturity and life insurance benefit. The plan offers guaranteed regular income for life post-premium paying term, a discount in premium on high sum assured and income-tax benefits.

Govt to infuse Rs 681 crore in UCO BankJanuary 26th, 2013

As part of government’s plan to infuse Rs 12,517 crore in around 10 state-owned banks by March, 2013, UCO Bank will be infused with Rs 681 crore.

The bank will issue equity shares on preferential basis in favour of Government of India for an amount aggregating to the tune of Rs 681 crore.

RBI panel suggests banks to encourage long-tenor FD schemes

January 26th, 2013

A Reserve Bank of India (RBI) committee which studied the feasibility of introducing more long-term fixed rate loan products by banks, made following suggestions:

Banks should popularize Fixed Deposit (FD) schemes with tenors of above 5 years as they are eligible for tax exemption. It would help banks in meeting their long-term funding requirements.

Besides plain vanilla fixed rate loan products, banks can offer fixed rate long-term loan products with periodic interest reset provision (say every 7-10 years). However, the resetting of interest rate should be in line with the regulatory guidelines on base rate.

Banks which have not fully exploited the sector of long-term bonds (minimum maturity of five years) to the infrastructuresector (minimum residual maturity of five years) could make use of the room available to issue more long-term bonds which would aid release resources for extending long-term fixed rate loan products.

Banks can consider offering longer-tenor fixed rate loans, say up to 30 years, which would help reduce the EMIs of borrowers.

Banks can also workout the option of take-out financing and can also explore promoting securitization market for better asset liability management.

Banks should charge pre-payment penalty on fixed rate loan products on the outstanding amount only.

25 RRBs merged into 10January 24th, 2013

Restructuring of RRBs by merging geographically contiguous RRBs sponsored by different banks within a state is in progress in order to consolidate RRBs segment. During the first 9 months of the current fiscal 25 such banks have been merged into 10. Now the number of RRBs stands at 67 till the first week of Jan 2013. RRBs have a network of about 16,000 branches spread across the rural and semi-urban centres of the country.

What is the aim of consolidation?

The consolidation of RRBs has been progressing since 2005 following the recommendation of a committee chaired by RBI Deputy Governor K C Chakrabarty which decided to recapitalize 40 selected RRBs in 21 states.

These mergers will boost the capital base of RRBs and improving efficiencies as well as optimizing the use of modern technology.

Where did these mergers take place?

States where the mergers took place are Bihar, Karnataka,Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh andUttarakhand.

The Centre’s shareholding in RRBs is 50%, while 35% and 15% are with the sponsor banks and state governments, respectively.

Central Government to infuse Rs 3,004 crore in SBIJanuary 24th, 2013

The Central Govt will infuse a capital of Rs. Rs 3,004 crore in State Bank of  India (SBI) as a part of capital infusion plan for the current fiscal.

The liquidity infusion will enable the bank to support national andinternational banking operations undertaken through its subsidiaries and associates.

The capital will be infused by way of preferential allotment of equity shares to the government.

In the last fiscal, SBI was infused with Rs 7,900 crore to increase its Tier-I capital.

After the capital infusion in March 2012, the government stake in SBI increased to 61.58 % from 59.4%.

The government had recently given nod to capital infusion of Rs 12,517 crore in around 10 state-owned banks by March, 2013.

PNB to get Rs 1,248 cr from Central GovtJanuary 24th, 2013

The Central Government will to infuse Rs 1,248 crore in Punjab National Bank (PNB) through preferential allotment of shares. The decision is part of recently approved capital infusion plan of Rs 12,517 crore in around 10 state-owned banks by March, 2013.

S S Mundra appointed as the new CMD of BoBJanuary 24th, 2013

S S Mundra has been appointed by the Government of India as theChairman and Managing Director  (CMD) of India’s second largest lender- Bank of Baroda. He is the former Executive Director of Union bank of India.

SBI to set up ‘by-invitation-only’ branches to serve Super-rich and NRIsJanuary 20th, 2013

India’s largest public sector bank, State Bank of India (SBI), along with its associates, plans to set up ‘by-invitation-only’ branches under the ‘Kohinoor’ brand in 20 cities to serve uber-rich customers and Non-Resident Indians (NRIs).

What would be so special with these branches?

These branches will be operational 24X7 and have amenities like lounges, conference rooms, personal business centres and cafeterias. The branches will offer all the banking products and services of SBI and its subsidiaries. The bank will assign personal banker to each client. Clients can either visit the branch or interact with staff over video chat for their banking needs. SBI had launched first such branch — Kohinoor Banjara — in Hyderabad in 2010. While the bank has not specified any minimum deposit requirement, it expects customers to have at least Rs 1 crore of deposits in the branch.

SBI had launched first such branch — Kohinoor Banjara — in Hyderabad in 2010.

Proceeds of NIF allowed to be used to fund bank recapitalization: CCEAJanuary 19th, 2013

In a move made to enhance disinvestment policy, the Cabinet Committee on Economic Affairs (CCEA) chaired by PM Dr. Manmohan Singh has permitted the National Investment Fund (NIF) to buy shares of public sector enterprises, including banks and insurance companies.

Now the fund will be use for subscribing to the shares being issued by the Central Public Sector Enterprise (CPSE) including Public Sector Banks (PSBs) and Public Sector Insurance Companies, on rights basis so as to ensure that 51% ownership of the government is not compromised.

National Investment Fund (NIF)

NIF was established in 2005 to channelize the proceeds generated through the sale of minority shareholding of CPSEs. The Fund would be maintained outside the Consolidated Fund of India.

For what purposes the fund is being used currently? Who manages the Fund?

Continue reading…

Axis Bank offers e-Gift Card serviceJanuary 19th, 2013Axis Bank has launched ‘Axis Bank e- Gift Card’which is an online version of physical plastic gift cards.

What does it offer?

The e-Gift card allows the customers to buy gift cards in an alternate way. The card carrying a particular value can be bought by using debit or credit card. This card can be gifted via email or SMS to the recipient who can use it to purchase anything online across categories like apparels, airline tickets, books etc. It also saves the sender from the puzzling situation of “what to buy for gift”. All purchase transactions shall be limited to sites that support verified by Visa and MasterCard secure code for two factor authentication.

RBI’s multiple roles create conflict: IMFJanuary 19th, 2013

As per International Monetary Fund (IMF) report, India, despite its recent successes in developing a stable financial system, its financial sector still faces up obstacles to its ability to support growth and stability.

As per report, which is part of IMF’s Financial Stability Assessment Programme (FSAP):

Continue reading…

World Bank cuts Global Growth estimates for 2013January 19th, 2013

World Bank sharply slashed the global growth outlook for 2013 to 2.4%from earlier estimate of 3%.

As per World Bank, major economies around the world are still facing hurdles towards recovery, despite improved conditions in financial markets. It also cut its forecast for developing countries, which last year grew at their slowest pace in a decade, to 5.5 % in 2013 from 5.9% in a June, 2012 forecast. The growth in these countries should slowly gather up, touching 5.7% in 2014 and 5.8% in 2015.

As per projections, growth in advanced economies should reach 1.3 % in 2013 dragged down by spending cuts, high unemployment and weak consumer and business confidence. It would touch 2% in 2014 and2.3% in 2015.

The Bank called on the developing countries to focus on internal productivity-enhancing policies to give growth a fillip.

RBI introduces Dollar- Rupee swap facilityJanuary 18th, 2013RBI has introduced a dollar-rupee swap facility.

Objective: To increase the flow of credit to the export sector to support incremental Pre-shipment export Credit in Foreign Currency (PCFC) by banks.

As per RBI, banks will have the option to avail rupee refinance to the extent of the swap with RBI under a special export credit refinance facility. The facility will be available to banks from January 21 till June 28, 2013, for a fixed tenor of three or six months.

The total limit for the banking system works out to $6.5 billion. Banks will be able to buy US dollars up to its eligible swap limit from RBI and at the same time sell the same amount of dollars forward as per the term of the swap, at the prevailing market rates for swaps of similar tenor. At the end of the swap term, the banks will exchange the dollars against the rupees with RBI.

RBI will decide upon the number of banks that can access the facility, the maximum amount of swap that RBI would contract with banks and the maximum limit each bank can do on a particular day after taking into account market conditions.

Banks to ask RBI to permit interest on current accountsJanuary 18th, 2013

In the run up to the RBI’s Monetary Policy Review, banks will ask the central bank to allow them to pay interest on current account deposits.

Currently, there is no interest given by banks on current accounts. Banks are of the view that providing interest on current account will generate more cash flow into the system which otherwise stays with the establishments. Current accounts make 9.85 % of total deposits with banks. Banks will also demand a slash in CRR as well as in repo rate.

R. K. Dubey assumed charge as CMD of Canara BankJanuary 16th, 2013

R.K. Dubey has been appointed as the Chairman and Managing Director of Canara Bank.

Deadline for Banks to comply with Basel-III relaxed, liquid asset definition made flexibleJanuary 16th, 2013

The Basel Committee has extended the deadline given to banks around the world to comply with Basel-III norms has been deferred for 4 more years to January 2019 against the previous deadline of January 2015. Basel-III sets global minimum standards for banks and proposes for minimum holding of cash and liquid assets by banks in order to make them financially sound against the possibility of another financial crisis to the scale of Lehman Brothers in 2008 and to avoid the situation where in the taxpayers have to bail out the cash-strapped banks. The definition of liquid assets has also been made flexible to include shares, retail mortgage-backed securities (RMBS) and lower-rated company bonds. However, the less liquid assets could be considered as buffer assets at a heavy discount to their value.

Why this extension?

The Banks around the world have complained of inability to meet the deadline as the guidelines could obstruct lending and damage economic growth. As per new norms, the banks have to phase in the compliance in 2015 and are expected to meet at least 60 % of the total buffer assets by then. They are required to meet 100% of the "liquidity coverage ratio" by January 2019 to survive an acute 30-day crisis. The new rules have put the buffer assets of world’s top 200 banks to 125 % from the current 105%, well above what is required for full compliance.

Three Pillars of Basel IIIApril 21st, 2011 The Basel III Guidelines are based upon 3 very important aspects which are called 3 pillars of the Basel II. These 3 pillars are as follows: Minimum Capital Requirement Supervisory review Process Market Discipline First Pillar: Minimum Capital Requirement The first pillar Minimum Capital Requirement has been discussed above. This mainly for total risk including the credit risk, market risk as well as Operational Risk . Second Pillar: Supervisory Review Process The second pillar i.e. Supervisory Review Process is basically intended to ensure that the banks have adequate capital to support all the risks associated in their businesses. In India , the RBI has issued the guidelines to the banks that they should have an internal supervisory process which is called ICAAP or Internal Capital Adequacy Assessment Process. With this tool the banks can assess the capital adequacy in relation to their risk profiles as well as adopt strategies for maintaining the capital levels. Apart from that, there is another process stipulated by RBI which is actually the Independent assessment of the ICAAP of the Banks. This is called SREP or Supervisory Review and Evaluation Process. The independent review and evaluation may suggest prudent measures and supervisory actions whatever is needed. ICAAP is conducted by Banks themselves and SREP is conducted RBI which is along with the RBI's Annual Financial Inspection (AFI) of the bank. Third Pillar: Market Discipline The idea of the third pillar is to complement the first and second pillar. This is basically a discipline followed by the bank such as disclosing its capital structure, tier-I and Tier –II Capital and approaches to assess the capital adequacy. In the above discussion, we could understand that the Basel II and forthcoming Basel III are basically guidelines which focus upon adequate capital in the banks and minimize

the risk to the customers or depositors. The idea is to make a sound financial system which not only helps the banks and but the entire economy of the country to maintain the trust and faith, as transparency in the business. The centerpieces are "Capital Adequacy" and "Risks"

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Allahabad Bank signs MoU with CIMSME to shore up priority sector lendingJanuary 16th, 2013

Allahabad Bank has inked an MoU with the Chamber of Indian Micro, Small and Medium Enterprises (CIMSME) to prop up its priority sector lending.

CIMSME communicates the interests of companies in MSME sector, with banks, financial institutions, concerned ministries and other organizations.

What is the agreement?

As per the pact, CIMSME would mobilize proposals from its members for consideration of the bank. Once the loan is approved, the organization would support the bank in follow-up and recovery of dues and provide early warning signals, if any.

How will it help?

The agreement will help speed up the process of disposal of loan proposals under MSME and help the bank collect quality proposals and enhance credit flow to the sector.

Raj Kumar Goyal is new ED of Central Bank of IndiaJanuary 16th, 2013

Raj Kumar Goyal has been appointed as the new Executive Director of Central Bank of India. Goyal comes in place of Rajeev Kishore Dubey, who has taken over the control of Canara Bank as its Chairman & Managing Director.

Corporation Bank unveils RuPay Aadhar cardJanuary 16th, 2013

Corporation Bank has launched Corp RuPay Aadhaar cardwhich has a primary aim to provide easy and smoothbanking services to the financially excluded and underprivileged sections of the society having Aadhaar number.

The card can be used at the conventional ATMs, micro ATMs or at the handheld machines used by business correspondents and at point-of-sale terminals at

merchant establishments.

Corporation Bank is an associate in the direct cash/benefit transfer scheme launched by the Government which will enable direct transfer of various social security benefits and subsidies straight into the accounts of the beneficiaries.

Money laundering, banking bills turn into law with President assentJanuary 15th, 2013

President Pranab Mukherjee gave assent to the three financial sectors reforms laws namely,

Prevention of Money Laundering (Amendment) Bill, Banking Laws (Amendment) Bill, Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2012.

The money laundering bill seeks to remove existing limit of Rs 5 lakh as fine under the Act. It proposes to make provision for attachment and confiscation of the proceeds of crime even if there is no conviction so long as it is proved that offence of money laundering has taken place, and property in question is involved in money-laundering.

Government approves Rs.12,517 cr capital infusion in PSBsJanuary 13th, 2013

The Union Cabinet cleared infusion of Rs.12,517 crore in about 10 Public Sector Banks (PSBs) during the current fiscal to boost their lending potential and also assist them in meeting the stricter capital adequacy norms under Basel-III.

Besides this, the Cabinet also gave an in-principle approval for providing need-based recapitalization of banks till 2018-19 for ensuring compliance with the Basel-III capital adequacy norms.

In previous years also, same kinds of measures were taken by the government when it infused about Rs.20,117 crore in PSBs during 2010-11 and poured in  another Rs.12,000 crore in 2011-12 to comply with the capital adequacy norms.

Accordingly, keeping in mind the capital requirements in the coming years, the Cabinet gave an in-principle nod for need-based additional capital infusion in banks from 2013-14 to 2018 -19 to ensure compliance with Basel-III global banking norms aimed at minimizing financial risks.

Implementation of Basel-III capital regulations increases requirement of core equity capital by banks due to higher capital ratios. The Basel-III capital ratios will be fully phased in as on March 31, 2018.

RBI establishes Working Group to review Banking Ombudsman SchemeJanuary 12th, 2013

Taking into consideration the suggestions by Committee on Customer Service in Banks (Damodaran Committee) relating to BankingOmbudsman Scheme 2006 and the Rajya Sabha Committee on Subordinate Legislation, Reserve Bank of India (RBI) has constituted a Working Group which will be headed by Suma Verma with an aim to review, update, and revise the Banking Ombudsman Scheme, 2006.

Urjit Patel is the new deputy governor of RBIJanuary 6th, 2013Urjit Patel succeeded Subir Gokarn to become new deputy governor at the Reserve Bank of India.

Patel is PhD in economics from the Yale University and a non-resident senior fellow at the Brookings Institution, a US-based think-tank. He will have a 2-year term at the regulator.

SBI unveils MobiCash EasyJanuary 3rd, 2013  State Bank of India (SBI) has unveiled its mobile wallet namedState Bank MobiCash Easywhich provides facilities such as fund transfer, bill payment, balance inquiry, mini statement, mobile top-ups and DTH recharge etc.

How does SBI’s MobiCash works?

SBI is carrying out this plan in collaboration with a private service provider Oxigen which will do round-the-clock money transfer and other services. To avail the facility one can contact Oxigen outlets by sending SMS to 9870888888. After registration one can deposit money at the outlets and get his account recharged. The sum of money one deposits with the bank will be akin to money in one’s account. Once it is done, this money can be used to send remittances to any bank account, transfer funds to other wallets issued by SBI, simply by messaging. At present, money withdrawal is not allowed, and the customer is not required to fulfil the KYC (know your customer) norm. The facility is available to both, SBI’s customers as well as non-customers. SBI customers have an additional option of topping up the wallet using SBI’s mobile banking service. The service is currently available in Mumbai andDelhi only.

The service is aimed at migrant labourers who send money back home from SBI branches, the youth and those seeking to pay bills. It will also address the requirement of financial inclusion as it facilitates to extend financial services to un-banked population through the omnipresent mobile phones.

Astra’s third launch also successful oneJanuary 1st, 2013

India achieved a third consecutive success in the launch of anti-aircraft air-to-air Astra missile, which was fired from a static launcher on the ground at Chandipur, Odisha.  Astra destroyed Lakshya, a pilotless target aircraft, successfully.

Future plans:

After three more ground-to-air launches in 2013, Astra will be fired from aircraft such as Sukhoi-30 MI, MiG-29 and the Light Combat Aircraft, Tejas. It can be launched from different altitudes and the distance at which it can kill an enemy aircraft depends on the altitude from which it is fired.

Investment slumps in textiles; “R-TUFS” scheme to promote investments in sectorJanuary 1st, 2013

In 2012, the textile and clothing industry in the country has made minimal investment in expansions and new projects.

In 2011, the Union Ministry of Textiles had announced the Restructured Technology Upgradation Fund Scheme (R-TUFS) with subsidy cap for each value adding segment, such as spinning, weaving and processing. The total subsidy amount provided for 2011-2012 was Rs. 1,972 crore. It was anticipated to leverage total investment of Rs. 46,900 crore.

The subsidy claimed was only Rs. 362 crore. Though 3,542 applications were received, proposing a total investment of Rs. 35,892 crore (April 2011 to November 2012), implementation of the projects are delayed.

What is R-TUFS?

It is a scheme introduced by Govt. of India, Ministry of Textiles, to channelize investments towards hitherto low investments segments to facilitate a balanced growth across the value chain.

Objectives of the Scheme:

Addressing the issues of fragmentation and promoting forward integration by providing 5% interest reimbursement for spinning units with matching capacity in weaving/knitting/processing/garmeting

Promoting investments in sector with low investment like processing

Technology upgradation in weaving by providing higher capital subsidy for establishment of new shuttle-less looms

Ensuring greater participation of SSI (Small Enterprises) units by increasing the limits under this category

“NCIPC” to implement a 5-Year Project for Cyber Security of Critical Sectors // Critical infrastructure protection (CIP) //December 30th, 2012

The central government has decided to establish five-year project for strengthening the overall cyber security structure of critical sectors of India. This move has come following increase in the number of incidents of cyber attacks as well as security threats. In 2011, India faced around 13000 cyber incidents.

Who will implement the Project?

It will be realized by National Critical Information Infrastructure   Protection Centre (NCIPC)

NCIIPC functions under the guidance of National Technical Research Organization (NTRO).NCIPC is the nodal agency which coordinates the cyber security operations related to critical infrastructures in India.NCIPC will set up sectoral Computer Emergency Response Teams (CERTs) and will also install sensors on critical systems for getting real-time information regarding cyber attack of any kind for preparing a quick response.NCIPC of India has been proposed. NCIPC will ensure critical infrastructure protection and critical ICT infrastructure protection in India.Sectors whose cyber security falls under NCIPC are:Energy (natural gas, coal, oil and power)Finance and banking Transportation (civil aviation and railways) Space Law enforcement Security Telecom Defense

What is “Critical infrastructure protection (CIP)” ?Critical infrastructure protection (CIP) is a concept that relates to the preparedness and response to serious incidents that involve the critical infrastructure of a region or nation.

Commission headed by “Justice Usha Mehra” to opine measures to make Delhi safe for women

December 30th, 2012In response to furor and protest against the incidence of the gang-rape of a 23-year-old woman in Delhi, the Union Cabinet set up a Commission of Inquiry which will be headed by the former Delhi High Court judge, Justice Usha Mehra. It will also suggest steps to make Delhi and the NCR safer for women. to identify lapses and fix responsibility for the incident.

The Justice Mehra Commission will be in addition to a three-member panel headed by the former Chief Justice of India, J.S. Verma. The committee will recommend amendments in law to provide for speedier trial and rigorous punishment in “aggravated sexual assault” cases amid demands for death penalty.

The Centre rejected control of the Delhi police to the Delhi government saying the responsibility of law and order in the capital should remain with the Union government. Chief Minister Sheila Dikshit had demanded greater authority over city police after alleging that police officers had interfered in the recording of statement of the victim.