Banking

S S Mundra assumes office as RBI deputy governor
July 31, 2014 No comments

S S Mundra (60) has taken charge as deputy governor Reserve Bank of India. As a deputy
governor of the central bank, he will be responsible for banking supervision, currency
management, financial stability and rural credit. The government has notified his appointment
for a period of 3 years.
The veteran banker had begun his career as a probationary officer, and served for a short time at
Union Bank of India, where he was executive director. In a rare move, he returned as the CMD
of his parent bank (Bank of Baroda) and was seen as a surprise choice for the prestigous
regulatory job. In fact, Mundra would have never been offered this post had it not been for K C
Chakrabartys decision to resign before the end of his tenure as RBI deputy governor.
Now, RBI has four deputy governors H R Khan, Urijit Patel, R Gandhi and S S Mundra.
RBI is planning to have one more deputy governor, but this will require a change in the rules of
RBI. Till the time the changes in rules are made, the RBI has suggested the Government to
appoint an Officer on Special Duty or Chief Operating Officer (COO) with the rank of a deputy
governor. Government is yet to take a call on any of these proposals put forward by the RBI.
Normally, an RBI deputy governor can be appointed for 5 years or till the age of 62,
whichever is earlier. To be eligible for the post, a candidate needs to be less than 60 years of
age while assuming charge.
RBI regresses to multiple price method for bond auctions
The RBI will revert to the Multiple Price method for bond auctions on August 1, 2014, a year
after it adopted the present method of Uniform Price.
On August 1, 2014, the central bank will auction a 10-year bond with a coupon rate of 8.40% for
a notified amount of Rs 9,000 crore using this method. Two more bond auctions for a total of Rs
5,000 crore will be conducted on the same day.
Bond auctions could be classified as either Uniform Price-based or Multiple Price-based.
In the Uniform Price-based, all successful bidders are required to pay for the allotted
quantity of securities at the same rate, the auction cut-off one, irrespective of what theyd
quoted.
In a Multiple price auction, the successful bidders are required to pay for the allotted
quantity at the respective price or yield at which they bid.
It was in June 2013 when RBI adopted the uniform price method, when bond yields were
volatile, with foreign institutional investors leaving the domestic markets amid a dwindling
currency. However, the macro fundamentals have improved since September2013, with the
rupee stabilizing after recovering most of the losses. A new government at the Centre has
reestablished hope among foreign investors. It is expected to speed up the opening to foreign
investment and control the fiscal deficit. The fiscal deficit for the current financial year is
targeted at 4.1% of GDP, as compared to 4.5% in 2013-14. The recent Union Budget set the
target at 3.6% for 2015-16 and 3% for 2016-17.
Using a different method RBI would also be able to observe how the market reacts to different
methods of auction.
RBI rejects Andhras request for farm loan waiver
The Reserve Bank of India (RBI) communicated the Andhra Pradesh government that there was
no case for considering its request for restructuring of agricultural loans in the state.
A refused to consider the request even before the state government could prepare clarifications
the apex bank had sought from it on crop yields for year 2013.
RBI, on its own, examined crop yields and bank savings patterns during the period the state
government said farmers were under stress. The central bank found no parameter that justified a
loan restructuring.
As per RBI, crop yields should be less than half the normal for banks to consider farm
loan relief. RBI found no evidence of a drop in crop yields to that level in areas declared as
calamity-hit by the Andhra Pradesh government. This conclusion was based on data generated by
state government bodies like the Directorate of Economics and Statistics.
RBI scrutinized the waiver request in detail since the government was trying to use rescheduled
loan payments as a proxy for its promise of farm loan waivers. Rescheduled farm loans were
routinely implemented by banks in the past.
Following the Cabinet meeting, CM N. Chandrababu Naidu announced his government would
waive over Rs 40,000 crore of loans at Rs 1.5 lakh per farming family and Rs 1 lakh per self-
help group.
Farm loans overdue in Andhra Pradesh are pegged by banks at Rs 87,000 crore. As per banks,
these dues surged after the Telugu Desam Party made loan waiver a manifesto promise in
the recently-concluded state elections.
RBI Chief has spoken to the Chief Election Commissioner on how to prevent political parties
from making such promises in future polls.
Registration certificates of six NBFCs cancelled by RBI
The Reserve Bank of India (RBI) has cancelled the certificate of registration of six Non-
Banking Financial Companies (NBFCs) based in Delhi. Now, these companies would not be
able to do business as non-banking financial institution.
These companies are:
1. GE Strategic Investments India (GESII)
2. Profound Exports Private Limited
3. Two Brothers Holding Limited
4. Swank Services Private Limited
5. Praxis Consulting and Information Services Private Limited
6. Credible Microfinance Ltd.
However, RBI has not disclosed the reason for the cancellation of registration of these firms.
RBI has the power to cancel the registration certificate of a NBFC under Section 45-IA(6) of the
Reserve Bank of India Act, 1934.
RBI to designated six bas as Systemically Important Banks
(SIBs)
The Reserve Bank of India will designate at least six banks as Systemically Important Banks
(SIBs), for the domestic financial market which will need to have higher capital than other banks
to prevent the financial system from collapsing in the event of a crisis. The central bank would
now work on identifying these banks which are too big to fail and would release a list of names
in August 2015.
As per experts, the list may include State Bank of India, Punjab National Bank, Citibank,
Standard Chartered Bank, ICICI Bank and HDFC Bank. Banks classified under SI B category
will have to set aside more capital per loan than their peers. Size, interconnectedness, lack of
readily available substitutes or financial institution infrastructure and complexity will
determine the systemic importance of banks as determined by Basel global standards. But, as per
RBI, in India, size would be given higher weightage than other factors.
Based on the category it is relegated, a bank will have has to set aside 0.2% to 0.8% of the loan
as capital buffer. In simpler terms, if a bank was setting aside Rs 1 earlier, it would now have to
set aside between Rs 1.20 and Rs 1.80. As per RBI, banks having a size beyond 2% of GDP will
be selected in the sample. However banks whose size is less than 2% of GDP may also face
rigorous norms. After the 2008 credit crisis, banking regulators across the globe are tightening
capital norms for banks and other key financial institutions.
S S Mundra to be fourth deputy governor of RBI
S S Mundra (60), Chairman and managing director of Bank of Baroda, is set to be appointed as
the fourth deputy governor of the Reserve Bank of India (RBI) after PM Narendra Modi
approved his appointment.
The veteran banker had begun his career as a probationary officer, and served for a short time at
Union Bank of India, where he was executive director. In a rare move, he returned as the CMD
of his parent bank (Bank of Baroda) and was seen as a surprise choice for the prestigous
regulatory job. In fact, Mundra would have never been offered this post had it not been for K C
Chakrabartys decision to resign before the end of his tenure as RBI deputy governor.
Currently, RBI has three deputy governors H R Khan, Urijit Patel and R Gandhi.
Banks barred from trading in bonds for infrastructure
lending: RBI
According to the Reserve Bank of India, banks will not be permitted to trade bonds issued by
other lenders for infrastructure lending that would be exempted from mandatory reserve
requirements under the new guidelines issued by the RBI.
The RBI recently allowed banks to issue bonds for infrastructure lending, but forbade them
from holding each others bonds. Now the central bank has clarified that the restrictions on
cross holding also applies to trading. The RBI wants these bonds for infrastructure lending
attract investors from outside the banking sector. The idea is funds to come from outside the
banking system.
Union Cabinet gives nod to 49% FDI in insurance sector
The Union Cabinet approved the proposal of increasing the Foreign Direct Investment (FDI)
limit in the insurance sector to 49% from the existing 26%. The move is in sync with the
proposal made by Finance Minister Arun Jaitley in his maiden Budget speech to raise the FDI
cap in insurance sector from 26% to 49%.
However, the management control of insurance firms will be with the Indian companies only.
The step to enhanced FDI limit is expected to benefit private sector insurance companies, which
require a huge amount of capital.
RBI issues draft guidelines for setting up small banks,
payment banks
The Reserve Bank of India (RBI) issued draft guidelines for setting up of small banks, which
will have a local feel and will provide small-ticket loans to farmers and businesses.
The apex bank also issued draft norms for establishing payment banks, which will provide
services to marginalized sections of society, including migrant labourers, for collecting deposits
and remitting funds.
The step from the apex bank comes close on the heels of Finance Minister Arun Jaitley
announcement in his Budget speech 2014-15 that RBI would create a framework for licensing
small banks and other differentiated banks. Differentiated banks like local area banks and
payment banks have been considered to meet credit and remittance needs of small businesses,
unorganized sector, low income households, farmers and migrant work force.
As per RBI guidelines:
The minimum capital requirement for such banks will be Rs 100 crore as against Rs 500
crore required for normal commercial banks.
Small Banks will provide a whole range of basic banking services such as deposits
and supply of credit, but their area of operation will be limited.
Payments Banks will provide very basic and limited number of products such as
acceptance of demand deposits and remittances of funds.
Payments banks will have an extensive network of access points mainly in remote areas,
either through their own branch network or through Business Correspondents (BCs) or
through networks provided by others.
Foreign investments in these new category banks would be as per the FDI policy.
RBI has allowed existing non-bank pre-payment instrument issuers, Non-Banking
Finance Companies (NBFCs), corporate BCs, mobile telephone companies, super-market
chains, firms, real sector cooperatives and public sector entities to apply for the license to
set up payments bank.
To set up small banks, resident individuals with 10 years of experience in banking and
finance, companies and Societies will be eligible as promoters.
Existing NBFCs, Micro Finance Institutions (MFIs), and Local Area Banks (LABs) can
also choose for conversion into small banks.
Local focus and the ability to serve smaller customers will be a key criterion in licensing the new
category of banks.
RBI relaxes CRR, SLR and PSL norms for banks issuing
infra bonds
With a view to promote infrastructure development and affordable housing, the Reserve Bank of
India (RBI), exempted long-term bonds from the mandatory regulatory norms such as the Cash
Reserve Ratio (CRR), the Statutory Liquidity Ratio (SLR) and Priority Sector Lending
(PSL) if the money raised is utilized for financing of such projects. The easing of norms comes
close on the heels of Finance Minister Arun Jaitleys budget speech in which he had said that
banks will be encouraged to provide long term loans to infrastructure sector with flexible
structuring to absorb potential adverse contingencies, sometimes called as the 5/25 structure.
As per RBI:
Banks issuing long-term bonds with a minimum maturity of 7 years to raise resources for
lending to i) long-term projects in infrastructure sub-sectors, and (ii) affordable housing
have been exempted from regulatory pre-emption, such as, the CRR, the SLR and
Priority Sector Lending (PSL). Banks are required to keep a portion of deposits as CRR
with the central bank and park certain portion in government securities known as SLR.
Banks may use the 5/25 structure under which bank may fix longer amortization
period for loans to projects in infrastructure and core industries sectors, suppose 25 years,
with periodic refinancing, say every 5 years.
The objective of these instructions is to extenuate the Asset-Liability Management
(ALM) problems faced by banks in providing project loans to infrastructure and core
industries sectors, and also to relax the raising of long term resources for project loans to
infrastructure and affordable housing sectors.
Banks should issue rupee denominated bonds in plain vanilla form without call or put
option with a fixed or floating rate of interest.
Affordable housing lending includes loans eligible under the priority sector, and loans up
to Rs.50 lakh to individuals for houses costing up to Rs.65 lakh located in the 6
metropolitan cities. For other areas, it includes loans of Rs.40 lakh for houses costing up
to Rs.50 lakh.
Realtors body CREDAI, appreciated the RBIs move to ease norms for banks to raise long-term
funds for financing affordable housing, saying this would lead to cheaper credit for such projects.
According to the RBI, while banks have been raising resources in a significantly, issuance of
long-term bonds for funding loans to infrastructure sector has not gathered momentum at all.
Infrastructure and core industries projects have long gestation periods and need large capital
investments.
India seeks to invest $1 trillion in infrastructure sector by 2017, half of which is expected to
come from the private sector.
Work on setting up Rural ATMs underway: RBI
July 15, 2014 1 Comment
Encouraged by the Reserve Bank .of India (RBI), banks are working on setting up Rural
ATMs for dispensing currency notes of smaller denominations. Banks have been encouraged to
find a solution for introducing rural ATMs.
Generally, in city or urban centric ATMs, they will give out high denomination notes (Rs 1,000
and Rs 500), whereas in rural areas, the demand of people is more of lesser denomination. So,
banks will have to find an appropriate technology solution for a different type of ATM to care
for the needs of the rural people. Banks are at present working on that and will hopefully they
will come forward to put ATMs in rural areas (with this new technology).
Rules of import of rough and polished diamonds eased: RBI
The Reserve Bank of India (RBI) gave relief to diamantaires in Mumbai and Surat as it relaxed
the rules of suppliers and buyers credit for importing rough, cut and polished diamonds to up
to 180 days from 90 days with immediate effect. In 2011, the RBI had decreased the import
payment credit limit for the Indian diamantaires from 120 days to 90 days. If the 90-day period
got lapsed, then the diamantaires were required to get permission from the RBI to make the
payment which further delayed the process. Also, currency variations during this period were
causing additional burden along with the interest cost for the diamond traders.
According to RBI notification, the Clean Credit i.e credit given by a foreign supplier to its
I ndian customer/buyer, without any letter of credit/letter of undertaking/fixed deposits from
any I ndian financial institution for import of rough, cut and polished diamond, may be
permitted for a period not exceeding 180 days from the date of shipment.
RBI undertakes swap of old gold with new one
With a view to standardize gold stock, the Reserve Bank of India has initiated an exercise to
swap old gold in its reserves with a new one. The apex bank has invited quotations from
nominated banks for swap with the objective to optimize the management of its reserves.
The nominated banks, including State Bank of India, would import gold on behalf of RBI and
then the yellow metal would be exchanged. Under this exercise, RBI would swap relatively
impure gold including some dating back pre-independence period from its Nagpur vault and get
the equivalent worth of purer gold. The operation would optimize the gold available with RBI
to global standards and the gold acquired would be delivered to its foreign custodian, the
Bank of England. The whole process would take place through book entry and without any cash
exchange.
As of June 27, RBI had a gold reserve of worth $20.79 billion while total forex reserve $315.77
billion. RBI is expected to pass on its old gold onto the local market through nominated banks
which would reduce the import of gold to that extent.
This would also help in boosting gold supply without straining the Current Account Deficit
(CAD), which has come under pressure due to surging crude oil prices due to turbulence in Iraq.
In order to curb rising CAD, the government had hiked import duties and RBI imposed
limitations on import of gold and also introduced various pre-conditions for inward shipments of
the yellow metal. Gold imports slashed 72% to $2.19 billion in May 2014 due to restrictions
imposed by the government on inward shipments of gold to reduce the CAD. Indias CAD,
which is the excess of forex outflows over inflows, reached a historic high of 4.8% of GDP in
2012-13, mainly owing to surging imports of petroleum products and gold. Too high CAD
strains the rupee, which in turn makes imports costly and adds to inflation.
Overseas investment norms for Indian corporate relaxed:
RBI
The Reserve Bank of India has eased norms for overseas investment by Indian corporates by
enhancing their borrowing limit. The apex bank has decided to reinstate the limit of Overseas
Direct Investments (ODI)/ Financial Commitment (FC) to be undertaken by an Indian Party
under the automatic route to the limit prevailing, as per the extant FEMA provisions, prior to
August 14, 2013. However, any financial commitment over $1 billion (or its equivalent) in a
financial year would require prior nod of the RBI even when the total FC of the Indian Party is
within the eligible limit under the automatic route (i.e., within 400% of the net worth as per the
last audited balance sheet).
In 2013, RBI had slashed the ODI limit to 100% of a companys net worth from 400% for all
firms. However, the limitation was not applicable on public sector companies like ONGC Videsh
and Oil India.
RBI permits NBFCs to work as Business Correspondents of
banks
June 24, 2014 No comments
With a view to achieve financial inclusion, the Reserve Bank of India has allowed Non-
Banking Finance Companies to operate as Business Correspondents (BCs) of banks, permitting
them to offer limited services. Banks will be allowed to work with non-deposit taking NBFCs as
BCs.
Until now, NBFCs were not allowed to function as BCs, which provide limited services on
behalf of banks in unbanked areas.
As per the apex bank, there should be a contractual arrangement between a bank and an NBFC-
ND to ensure that potential conflicts of interest are taken care of.
Banks must ensure that the NBFC-ND does not adopt restrictive practices such as
offering savings or remittance services only to its own customers or bundling of their services.
The RBI has removed the distance criteria for BCs to provide functional flexibility to banks.
The RBI took into account recommendations of Nachiket Mor Committee while reviewing the
existing guidelines on the appointment of BCs.
Provide information to SIT on black money: RBI directs
banks and FIs
The RBI has asked all Banks and Financial Institutions (FIs) to provide information and
documents sought by the Special Investigation Team (SIT) set up to uncover black money.
The new Government at Centre recently constituted an SIT under the chairmanship of
former Justice M.B. Shah in pursuance of a July 2011 Supreme Court judgment.
The Finance Ministry has informed that the government will write to Switzerland seeking details
of Indians with unaccounted money in Swiss banks.
As per the latest data published by Swiss National Bank, the volume of Indian money in various
Swiss banks swelled 43% during 2013 to almost Rs. 14,000 crore, including money held
directly by Indian clients and those through fiduciaries or wealth managers.
Switzerland has expressed its willingness to working together with the new government of India
in its fight against tax evasion.
Mayaram Committees definitions of FDI, FII accepted by
the Government of India
The Government of India has accepted the report of Mayaram Committee thereby accepting the
definitions of FII and FDI. The panel headed by Finance Secretary was set up to rationalize
the definitions of FII and FDI.
Some key points from Mayaram Committee Report:
Foreign investment of 10% or more in a listed company will now be treated as FDI.
An investor may be allowed to invest below 10% and this can be treated as FDI subject to
the condition that the FDI stake is raised to 10% or beyond within one year from the date
of the first purchase.
If the stake is not raised to 10% or above, then the investment can be treated as portfolio
investment.
Foreign Portfolio Investors include Foreign Institutional Investors (FIIs) and
Qualified Foreign Investors (QFIs).
Foreign investment in an unlisted company, irrespective of the threshold limit, may
be treated as FDI.
RBI uses OMOs to absorb excess rupee from the system
June 18, 2014 1 Comment
The Reserve Bank of India (RBI) conducted Open Market Operations (OMOs) to sell Rs
2,255 crore of government bonds between June 2 to June 6, 2014, to absorb excess rupee
liquidity it has injected into the system through dollar purchasing. As per market experts, the
apex bank may have also been trying to curb volatility in government securities through
these OMOs.
Some traders apprehend that if RBI continues the practice then bond prices may fall. Since the
beginning of the new financial year on April 1, 2014, these have been the RBIs largest sale of
government bonds through OMOs, a platform where the apex bank anonymously sells or buys
government securities in the secondary market.
The main motive behind the RBIs measure was probably the excess rupee liquidity in the
system.
The RBIs dollar buying has brought in rupee liquidity into the system, besides the central banks
routine term repo windows, where banks can borrow for a stipulated period like 4 to 28 days.
For instance, it did a 28-day term repo for Rs 20,000 crore on June 6, 2014. To neutralize its
impact, it has already begun selling in the rupee forwards market. During April 2014, the RBI
sold about $1 billion, taking the outstanding net forwards sales to $32.06 billion.
RBI mulling over Payment bank as recommended by
Nachiket Mor Panel
The Reserve Bank of India will soon come up with Indias first payments bank, which will
offer deposit and payment services but not provide loans.
This idea is in line with the recommendations made by the Nachiket Mor committee. The
central bank sees huge potential for financial inclusion with focus on remittances by involving
payment system product.
As per the RBI, while full-service banks require an entry capital of Rs.500 crore, payments banks
can start operations with a capital of just Rs.50 crore since all their money will be invested in
safe government securities.
They will be required to comply with all RBI guidelines for commercial banks.
According to the recommendations of Nachiket Mor committee:
Permission should be given to existing banks to create subsidiaries to operate payments
banks.
Payments banks may be created by converting prepaid payment issuers (PPIs). These
companies provide cards that customers can use to make payments with the money stored
in them. There are 27 PPIs in the country, including Itz Cash Card Ltd, Oxigen Services
(India) Pvt. Ltd and Airtel M Commerce Services Ltd.
Entry of payments banks made easier:
In order to expedite the process, the RBI will soon start its differentiated banking licence regime,
where the central bank issues licences to new banks to undertake specific banking operations.The
apex bank will also issue licences on a continuous basis to qualified aspirants instead of opening
the licensing window after long intervals.The payments bank route is important for India Post,
which failed to secure a banking licence. RBI Governor Raghuram Rajan said that India Post
could begin as a payments bank. All these efforts are being made to promote financial inclusion
in India, where more than half of the adult population still does not have access to banking
services.
The RBI first introduced a 3-year financial inclusion programme in April 2010 to promote
financial inclusion that witnessed banks opening outlets in 200,000 villages. Subsequently, it
launched the phase II of the programme for 2013-2016.
NABARD slashes refinance rates to promote investment in
agriculture
In a bid to encourage investments in agriculture, National Bank for Agriculture and Rural
Development (NABARD) has cut the rate of interest by 20 basis points (bps) on their long term
refinance facility to banks.
As per NABARD:
Rates of refinance will now be 9.50% for 5 years and above and 9.70% for 3-5 years
period.
Banks availing more than Rs.500 crore in a single drawl will further be incentivized by
10 bps.
Efficient agricultural technologies which enhance production & productivity will be
provided a further incentive of 50 basis points, a step taken to fight food inflation by
addressing the supply side constraint.
The 50 basis points rebate will also be available for supporting single purpose under area
development schemes, primarily to benefit small and marginal farmers.
This step will help the Cooperative Banks, RRBs and Commercial Banks in stemming the
declining trend of investment credit and will help in capital generation in agriculture.
KYC norms for opening of bank accounts simplified by RBI
Making opening a bank account less cumbersome than earlier, the RBI has said that accounts can
now be opened with just one address proof, permanent or local. This decision has been taken
keeping in mind the banking needs of migrant workers and employees with transferable jobs who
currently face cumbrous procedure to access banking services.
As per RBI:
From now onwards, customers may submit only one documentary proof of address
(either current or permanent) while opening a bank account or while undergoing periodic
update.
In case the address mentioned as per proof of address undergoes a change, fresh proof
of address may be submitted to the branch within a period of 6 months.
In cases where customer is not able to submit local proof of address, the bank may accept
a declaration of the local address on which all correspondence will be made by the bank
with the customer. Customers are not required to submit any proof for such address for
correspondence/local address. Bank may verify this address through positive
confirmation such as acknowledgment of receipt of letter, cheque books, ATM cards,
telephonic conversation.
If the address for correspondence undergoes a change, the customer may inform about the
new address to the bank within 2 weeks of such a change.
RBI increases CRR to 4% for non-scheduled UCBs
From July 12, 2014, non-scheduled Urban Co-operative Banks (UCBs) will have to keep
more of their deposits with the central bank as the Reserve Bank of India (RBI) has raised the
Cash Reserve Ratio (CRR) for these banks by 100 basis points to 4%. One basis point is equal
to one hundredth of a percentage. The step will bring non-scheduled UCBs on par with
scheduled primary UCBs. There are around 1,500 non-scheduled UCBs in India. To bring the
primary UCBs on equal ground with commercial banks, the central bank slashed the Statutory
Liquidity Ratio (SLR) requirement for them by 50 basis points to 22.50%.
SLR is that portion of a banks deposits which the lender needs to keep in the form of
gold, government bonds and securities. RBI has slashed the SLR requirement of banks to
22.5%.
CRR is that part of a banks deposits that it needs to maintain with RBI. This money
earns no interest. The current CRR level is 4%.
Never dispense with your debit/credit card PIN: RBI
Recently, the Reserve Bank of India (RBI) made it compulsory for debit and credit card holders
to key in the Personal Identification Number (PIN) while making transactions at retail outlets
across the country. While the guideline is followed to curb frauds, cardholders still have a lot of
doubt and fear about possible misuse of their cards. Many cases of fraud have happened as many
people reveal the recently-obtained PINs, either in good faith or out of ignorance. Earlier, it was
easier for fraudsters to create counterfeit cards with magnetic strips, or embed details on stolen
cards and misuse them. But now the number of such frauds is likely to decrease as several banks
have begun issuing of cards with embedded chips. Besides, if a cardholder enters the wrong PIN
three times, the card gets blocked for a day. Banks have also started to provide wireless swiping
machines Electronic Data Capture (EDC) machines.
RBIs advice to cardholders for a safer transaction:
While there are no norms against merchants seeking the PIN from customers, it is the
right of the customers to key in the PIN themselves.
Customers should go where the EDC machine is kept and key in the PIN on their own for
a safer transaction.
They should cover the keypad while keying in the PIN, both inside the ATM and while
using EDC machines.
Customers should register their mobile numbers with their banks to get an intimation of
the transaction as soon as the card is swiped.
Customers should keep changing their PIN every 3 months to prevent cyber fraud.
RBI is also collaborating with various banks to hold electronic banking awareness and
training (e-Baat) programmes.
ICICI Bank leaves behind HDFC Bank as biggest private
bank employer
ICICI Bank has overtaken its competitor HDFC in terms of employee number with addition of
over 10,000 jobs in the last fiscal. With this, ICICI has emerged as the biggest employer in the
private banking space with more than 72,000 employees.
Except HDFC, the employee strength of other five lenders ICICI Bank, Axis Bank, Kotak
Mahindra Bank, IndusInd Bank and Yes Bank has increased by over 20,000 in 2013-14. ICICI
Bank has also recorded higher total income and profits than HDFC Bank in the latest fiscal
year. The number of employees in HDFC Bank was 68,165 at the end of last fiscal, while the
same of ICICI Bank expanded by 10,161 to 72,226.
With the increase in staff strength, the staff expenses have also surged. But, at the same time,
the Productivity Ratios measured in terms of profit per employee and business per
employee have also improved for most of these banks. Even for HDFC Bank, regardless of the
reduction in its employee strength, profit per employee enhanced from Rs 10 lakh to Rs 12 lakh
in 2013-14, while business per employee was up at Rs 8.9 crore (compared to Rs 7.5 crore in
2012-13). For ICICI Bank, profit per employee has remained nearly unchanged at Rs 14 lakh,
while business per employee increased slightly to Rs 7.47 crore.
RBIs second Bi-Monthly Monetary Policy Statement, 2014-
15
Monetary and Liquidity Measures
On the basis of an assessment of the current and evolving macroeconomic situation, RBI has
been decided the following key rates:

RR (Reverse Repo Rate)
RRR (Reverse Repo Rate)
LAF (Liquidity Adjustment Facility)
CRR (Cash Reserve Ratio)
SLR (Statutory Liquidity Ratio)
NDTL (Net Demand and Time Liabilities)
ECR (Export Credit Refiance)
RBI tightens merger rules for NBFCs
May 31, 2014 No comments
According to Reserve Bank of India (RBI), Non-Banking Financial Companies (NBFCs) to take
its prior approval before buying shares of other NBFCs or for merger and acquisition with
another entity.
This rule will be applicable to both deposit taking and non-deposit accepting companies and any
infringement of it may cost the company its registration.
Prior written clearance of RBI would also be mandatory before approaching the Court or
Tribunal seeking order for mergers or amalgamations with other companies or NBFCs.
Performance ratings of Banks customer services to be made
public from 2015
From 2015, performance ratings of Banks on customer services will be put in public domain by
Banking Codes Standards Board of India (BCSBI).
BCSBI is rating banks on customer services on 5 parameters:
1. Information dissemination
2. Transparency
3. Customer-centricity
4. Grievance redressal system
5. Customer feedback.
BCSBI rated 48 banks for customer service of which only 5 scored high ratings; 25 were rated
above average; 17 average; and one below average. The ratings will be made public in 2015.
However, banks are not allowed to use these ratings to solicit business.
Code of Banks Commitment to Customers
The Code of Banks Commitment to Customers is a Code of Customer Rights, which sets
minimum standards of banking practices that member banks have to comply with when they deal
with individual customers. The Code provides protection to customers and explains the manner
in which banks are supposed to deal with customers in their day-to-day operations.
Banking Codes Standards Board of India (BCSBI)
The Reserve Bank of India established BCSBI in 2007 to ensure that the common consumer of
financial services from the banking industry gets what he/she has been promised. The Board
operates as an independent and autonomous body. Membership of BCSBI is voluntary and open
to scheduled banks.
RBI eases gold import to promote its export under its 20:80
formula
Star trading houses big importers and exporters has been permitted by the RBI to import gold
under its existing 20:80 scheme. Thus far, the facility was available to select banks only and
other big entities like star trading houses were forbidden from importing the yellow metal.
As per the extant rules, importers can buy gold, on a condition that 20% of it is exported as
finished products. In July 2013, the RBI had imposed severe restrictions on gold imports in order
to curb surging Current Account Deficit (CAD) and the declining rupee. The central bank had
tied imports with exports and prescribed a 20:80 formula.
As per the 20:80 scheme, an importer has to ensure that at least 20% of every lot of imported
gold is exclusively made available for exports as finished good and the balance for domestic use.
The RBI has also permitted banks to provide gold metal loans to domestic jewellery
manufacturers, out of the eligible domestic import quota of 80%.
Bharatiya Mahila Bank included in second schedule to RBI
Act 1934
Bharatiya Mahila Bank (BMB), Indias first all-women bank, has been included in the second
schedule to the RBI Act 1934.
With the inclusion in the second schedule or commercial bank category, the bank has become
eligible for loans from RBI on bank rate and also gets membership of clearing houses.
Furthermore, it assures that any activity of the bank would not adversely affect the interests of
depositors.
BMB has been in existence since November 2013 which began with a seed capital of Rs 1,000
crore. To focus on the banking needs of women and promote economic empowerment is one of
the main objectives of BMB.
At present, the loan portfolio of the BMB is about Rs 80-90 crore. It offers loan to girl child at a
concessional rate which is 1% lower than the normal rates.
All banks need to install talking ATMs from July 1, 2014:
RBI
As per the directions of the Reserve Bank of India (RBI), all banks will be required to make all
new ATMs installed from July 1, 2014 as talking ATMs with Braille keypads.
As per RBIs guidelines to all banks:
All new ATMs installed from July 1, 2014 should be talking ATMs with Braille
keypads.
Banks should lay down a roadmap for converting all existing ATMs as talking ATMs
with Braille keypads. The same may be reviewed from periodically by the Customer
Service Committee of the Board.
Banks should provide magnifying glasses in all bank branches for the use of persons with
low vision, whenever they need for performing banking transactions with ease. A notice
about the availability of magnifying glasses and other facilities available for persons with
disabilities should be displayed at a prominent place.
RBI permits banks to provide loans to exporters for up to 10
years
Banks have been allowed by the RBI to give loans with tenures of up to 10 years to exporters to
help them ensure capital flows to fulfil long-term contracts. As per current rules, banks are
allowed to provide loans for up to 1 year only.
RBI has permitted banks to allow exporters having a minimum of 3 years satisfactory track
record to get long-term export advance up to a maximum tenor of 10 years to be utilized for
execution of long-term supply contracts for export of goods.
This facility is available with certain caveats, including:-
1. An interest rate limit of 200 basis points above the London interbank offered rate (Libor),
a global benchmark.
2. Exporters getting loans of $ 100 million or above are required to report the transaction
immediately to the RBI.
3. There should be irrevocable supply orders in place.
4. The contract with the overseas party or buyer should be examined and must clearly
specify the nature, amount and delivery timelines of products over the years and the
penalty in case of non-performance or contract cancellation.
5. Export advances which are classified as non-performing assets as per RBI norms cant be
used to liquidate rupee loans.
6. Exporters should have the capacity, systems and processes in place to ensure that orders
over the duration of the tenure can be executed.
Pension Payment Order (PPO) to be given soon after
retirement to Central Govt employees
The Centre has decided to give Pension Payment Order (PPO) to all central government
employees at the time of retirement along with their other dues. This step has been taken to
check the delay in disbursal of pension. Currently, the scheme for payment of pensions to central
government civil pensioners is implemented through authorised banks. The scheme issued by the
Central Pension Accounting Office provides for an undertaking to be submitted by the retiring
government servant or pensioner to the pension disbursing bank before commencement of
pension.
It has been found that the first payment of pension after retirement gets delayed mainly
due to two reasons:-
1. Delay in receipt of intimation by the pensioner that pension papers have reached the
bank.
2. Delay on part of the pensioner in approaching the bank for submission of undertaking.
Now, the pensioner is not required to visit the bank to activate the first payment of pension. The
Ministry of Personnel has directed Office of Controller General of Accounts to instruct all Pay
and Accounts Offices and all pension disbursing banks to follow its directives. There are about
30 lakh Central government pensioners.
RBI to start managing Telanganas public debt from June 2,
2014
The Reserve Bank of India (RBI) and the newly created state Telangana have inked a pact
according to which the RBI shall carry on the general banking business of the Government of
Telangana, manage its rupee public debt and act as the sole agent for investment of
Governments funds. The agreement is consistent to the Andhra Pradesh Reorganisation Act,
2014.
The Andhra Pradesh Reorganisation Bill 2014, which received Parliaments approval February
20, 2014, got the Presidential assent in March 2014 and paved the way for the formation of 29
th

state of India by bifurcating Andhra Pradesh.
The remaining Andhra Pradesh will have 13 districts while Telangana will have 10 districts,
including Hyderabad city.
RBI to launch Plastic notes in 2015
As per Reserve Bank of India (RBI) Governor Raghuram Rajan, Plastic currency notes will
be launched in 2015 after field trial which is likely to be conducted in the latter half of 2014. The
pilot testing would be conducted in five cities- Kochi, Mysore, Jaipur, Bhubaneswar and
Shimla.
One billion plastic notes of Rs.10 denomination will be released in the field trial in these cities
chosen for their geographical and climatic diversity. Plastic currency notes have an average
life span of about 5 years and are difficult to counterfeit. Also, these notes are cleaner than
paper notes.
Bharti Airtel raises about $2 billion in Dual Currency Bond
sale
Indias largest telecom company Bharti Airtel raised around $2 billion in a dual currency
international bond sale. It is the largest debt issuance by a domestic company till date. Bharti
sold dual currency dollar and euro bonds to raise the money which will be used for repayment
and refinancing of existing foreign currency debt. It is a first dual currency issuance by an
Indian issuer and also largest fund raising exercise at a single time by an Indian issuer.
What are Dual Currency Bonds?
Dual Currency Bonds pay interest coupons in one currency and principal redemption for a fixed
sum in a second currency, often the dollar.
A company may prefer issuing a dual currency bond to hedge any foreign exchange flows from
its operations, or take a speculative view on currencies in order to get a lower cost of
capital. Investors generally get an above-market coupon, but run the risk that, in this example,
the dollar could plunge below the exchange rate used when the amount was fixed. Such bonds
are enticing to borrowers who operate in the redemption currency because they have no long-
term exchange rate risk.
Govt should reduce its shareholding in PSBs to below 50%:
RBI Committee
An RBI committee headed by former chairman of Axis Bank PJ Nayak has said in its report
that the government should bring down its stake in Public Sector Banks (PSBs) to below 50%.
Key Suggestions proposed by the RBI Panel:-
1) On existing Governance pattern of PSBs:
Criticizing the way in which the 26 PSBs are being currently governed, the panel blamed several
externally imposed constraints like dual regulation by the RBI and finance ministry and
external vigilance by agencies like the CVC and CAG for the distress of banks.
The government should reduce its stake in these banks to less than 50%, along with certain other
executive measures for the removal of these constraints.
The Centre should distance itself from the governance of banks and the Bank Nationalization
Acts of 1970 and 1980, along with the SBI Act and SBI Subsidiary Banks Act, be repealed as it
finds the selection process for directors is increasingly compromised.
2) On Governments powers in relation to the governance of banks
All banks should be incorporated under the Companies Act and a Bank Investment
Company (BIC) be set up to which the government transfers its holdings in banks. BIC should
be given power of governance of the banks. Until BIC becomes functional, a Bank Boards
Bureau comprising former senior bankers should advise all board appointments, including those
of chairmen and executive directors.
3) On existing Human Resource Policy in Banks
Change in human resource policy to encourage younger people joining top management. Private
sector banks should be provided a more level-playing field with the public sector counterparts.
4) On governance issues in private sector banks
Ownership constraints that could misalign the interests of shareholders with those of top
management must be removed. Allowing larger block shareholders generally enhances
governance.
5) On distressed banks
Distressed banks, private equity funds, including sovereign wealth funds, should be allowed to
take control of stakes of up to 40%.
6) On Evergreening of bad loans
Boards of banks need to be vigilant about the quality of the loans. The policy of private sector
banks can be considered which incentivises senior management on the basis of bank profitability,
and disburses the compensation through stock options. There is potential incentive to evergreen
assets in order that provisions do not make a dent in profitability.
In the case of evergreening, fines can be slapped through cancellations of unvested stock options
and claw-back of monetary bonuses on officers concerned and on whole-time directors, and that
the chairman of the audit committee be asked to step down from the board.
RBI permits foreign branches of banks to sell derivatives not
allowed in India
Foreign branches and overseas subsidiaries of Indian banks have been allowed by the RBI to sell
structured financial and derivative products in established financial centres even if these products
are not permitted in India. However, these products like Exchange Traded Funds (ETFs) and
Bond Derivatives are not allowed in the domestic market.
As per earlier norms, banks were not allowed to offer structured financial products through their
branches or subsidiaries outside India that are not specifically permitted in the domestic market.
This was the outcome of the review of an earlier December 2008 circular that made it mandatory
for banks to get prior approval of the RBI by rendering details of the products, including their
regulatory treatment prescribed by the host-country regulators.
RBI restricts companies from refinancing of rupee loans via
External Commercial Borrowings (ECB) route
RBI has barred Indian companies from raising money from subsidiaries of Indian banks overseas
via the External Commercial Borrowings (ECBs) to refinance their rupee loans. Thus, Indian
companies will not be allowed to raise ECB from overseas branches or subsidiaries of Indian
banks for the purpose of refinance/repayment of the rupee loans raised from the domestic
banking system.
In April 2014, the RBI also restrained the banks from issuing guarantees to offshore joint
ventures and subsidiaries of Indian companies to avail foreign currency loans to repay rupee
credit.
Earlier, Indian companies in manufacturing, infrastructure and hotel industries were permitted to
raise a maximum of $10 billion from this route. The maximum permissible ECB that could be
availed of by an individual company was 75% of the average annual export earnings realized
during the past 3 financial years.
Typically, an Indian companys overseas subsidiary approaches an Indian bank for a guarantee
or letter of credit to use it for availing loans from another bank there. Banks were permitted to
issue non-fund based credit to overseas subsidiaries of Indian companies up to 20% of
unimpaired capital of the bank.
The step by RBI has come close on the heels of warning the banks against issuing letter of credit
and guarantees to Indian companies overseas subsidiaries. It said that such non-fund based
credit was being used for purposes other than the business the company is involved.
The restrictions are applicable in cases like take-out financing, infrastructure financing and
spectrum allocation and other repayments. The direction were issued under sections 10(4) and
11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).
The ECB loans are much cheaper than the domestic loans and therefore companies use the
arbitrage available to their benefit.
54 Indian companies among Forbes Global 2000
In the latest released Forbes Global 2000 list, Mukesh Ambani-led Reliance Industries leads
the set of 54 Indian companies in the annual list of the worlds 2000 largest and most powerful
public companies. The top three positions of the list is occupied by the Chinese companies.
The Forbes Global 2000 is a comprehensive list of the worlds largest, most powerful public
companies, as measured by revenues, profits, assets and market value.
Some notable points from Forbes Global 2000:
Worlds top three biggest public companies and five of the top 10 are from China.
564 companies enlisted are from the US which marks its dominance as the country with
the most Global 2000 companies.
Japan follows the US with 225 companies in total.
India is home to 54 of the worlds biggest companies.
Reliance Industries, with a market value of $ 50.9 billion and $ 72.8 billion in sales,
ranked 135.
State Bank of India ranked 155 with a $ 23.6 billion market value.
Some other Indian companies making it to the list are: Oil and Natural Gas ranked 176,
ICICI Bank (304), Tata Motors (332), Indian Oil (416), HDFC Bank (422), Coal India (428),
Larsen & Toubro (500), Tata Consultancy Services (543), Bharti Airtel (625), Axis Bank (630),
Infosys (727), Bank of Baroda (801), Mahindra & Mahindra (803), ITC (830), Wipro (849),
Bharat Heavy Electricals (873), GAIL India (955), Tata Steel (983), Power Grid of India (1011),
Bharat Petroleum (1045), HCL Technologies (1153), Hindustan Petroleum (1211), Adani
Enterprises (1233), Kotak Mahindra Bank (1255), Sun Pharma Industries (1294), Steel Authority
of India (1329), Bajaj Auto (1499), Hero Motocorp (1912), Jindal Steel & Power (1955), Grasim
Industries (1981) and JSW Steel (1990).
RuPay, Indias indigenous card payment network launched
Rupay, Indias own payment gateway was launched to
compete with networks such as Visa and Mastercard. The indigenous network will work on
ATMs and merchant outlets and help in bringing down cash transactions.
The RuPay is a blend of two terms Rupee and Payment. It has been developed by the
National Payments Corporation of India (NPCI) and is being used by certain banks such as
ICICI, State Bank of India, Punjab National Bank, among others, for clearing and settlement.
The RuPay, which works on three channels ATMs, Point of Sales (PoS) and online sales, is
the seventh such payment gateway in the world. A variant of the pre-paid RuPay card would
be launched by IRCTC soon, which will help in booking railway tickets.
Benefits of RuPay platform:
Reduce the transaction cost
Support creation of more domestic products
Reach the unbanked sections
Reducing number of cash transactions
Availability at a cost much less than those of international cards
Do not charge penalty on pre-payment of floating loans:
RBI to Banks
The RBI gave relief to borrowers as it directed banks not to levy any penalty on individual
borrowers for pre-payment of floating loans. The central bank has barred banks from imposing
foreclosure charges or pre-payment penalties on all floating rate term loans sanctioned to
individual borrowers, with immediate effect.
Floating loan products include housing, corporate, vehicle and personal loans. Some banks are
charging pre-payment penalty of up to 2% of the outstanding loans.
In 2012, RBI had disallowed banks from charging foreclosure charges or pre-payment penalties
on home loans on floating interest rate basis. It is assumed that elimination of foreclosure
charges or prepayment penalty on home loans will bring down the discrimination between
existing and new borrowers and the competition among banks will result in better pricing of
home loans with the floating rate.
RBI allows minors over 10 years to operate bank accounts
As per the guidelines issued by the RBI, minors above 10 years of age have been allowed to
open and operate independently savings bank account and use other facilities like ATM and
cheque books. The central bank has taken this step with a view to promote financial inclusion
and bring uniformity in opening of such accounts in banks. Earlier, minors were allowed to open
fixed and savings deposit bank account with mothers as guardian.
As per the modified guidelines by RBI:
All minors can now open a savings/fixed/recurring bank deposit account through either
his/her natural guardian or legally appointed guardian.
The minors, who have attained 10 years of age, will be permitted to open and operate
savings bank accounts independently.
The banks can also decide on the minimum documents which are required for opening of
accounts by minors.
The minor would be required to confirm the balance in his/her account as he attains
majority.
If the account is operated by the natural/legal guardian, fresh operating instructions and
specimen signature of the minor will be obtained and kept on record for all operational
purposes.
Dont levy penalty if minimum balance is not maintained in
bank account: RBI to banks
The RBI has asked banks not to impose penalties on customers who dont maintain a minimum
balance in any dormant account as part of a consumer protection initiative. A number of banks,
including the State Bank of India, do not levy any penalty if the minimum balance is not
maintained in an inoperative savings account. In 2012, the RBI directed banks not to charge
customers for non-operation or activation of basic savings bank deposit accounts.
Rising NPAs is making public sector banks unfit for private
Provident Fund deposits
Surging Non-Performing Assets (NPAs) have rendered public sector banks such as State of India
(SBI), Punjab National Bank (PNB) and Canara Bank unfit to take deposits from non-
government Provident Funds (PF). As per the current rules governing investments by PFs, non-
government Provident Funds (PF) are barred from being deposited in a commercial bank in case
the NPAs of that bank exceed 2% of net advances. The Indian Banks Association (IBA) has
requested the Union Finance Ministry to relax the norms pertaining to deposits by non-
government provident funds and gratuity funds in scheduled commercial banks.
Conditions banks are required to meet for taking PFs deposits:
Continuous profitability for immediately preceeding three years
Maintain minimum capital adequacy of 9%
Have net NPAs of not more than 2% of net advances
Maintain minimum net worth of not less than Rs 200 crore
RBI releases Report of Umesh Bellur headed GIRO
Advisory Group
April 28, 2014 No comments
The Reserve Bank of India (RBI) released, on its website for public comments, the Report of the
GIRO (Government Internal Revenue Order) Advisory Group. GIRO Advisory Group
(GAG) was constituted by the RBI in October 2013, under the chairmanship of Prof. Umesh
Bellur, Indian Institute of Technology, Bombay to implement a national GIRO-based Indian
Bill Payment System.
The panel has recommended a mechanism for centralised bills payment system in India,
mainly by laying out 2 organisations:
1. Bharat Bill Payment Services (BBPS)
2. Bharat Bill Payment Operating Units (BBPOUs)
Bill Payments in India: Issues and challenges
What do Bill payments in India mainly comprise of?
Bill payments form a key portion of all retail payment transactions. Bills include utility services
such as school/university fees, examination fees, Government payments, pre-paid payment
instruments top-up, mobile phones recharge/top-up etc.
How are Bill payments at present done in India?
Currently, customers make bill payments at Bill Owners Customer Point (BOCP), cheque drop
boxes, bank branches, agent outlets, and via electronic modes. Options available include:
a. Direct payment to billers biller operated payment centres, Internet Banking / Payment
Gateway, ECS (Electronic Clearing Service).
b. Aggregators and Banks Internet Banking, Bill Presentments, Standing Instructions.
c. Bill Pay Agents Collection Points, Business Correspondents.
What are the shortcomings observed in the present scenario of bill collection/ payment
process in India?
1. Absence of Interoperability- Limited or no interoperability, thus each biller needs to
establish and supervise its own collection points (BOCPs.
2. Consumer preference for BOCP- A consumer prefers that BOCP where (s)he feels
comfortable by a direct payment and an instant printed receipt received for the payment.
Due to lack of visibility consumer usually do not trust agents networks.
3. Poor Accessibility- BOCPs are generally concentrated in urban centers and are not easily
accessible to people in rural/remote areas.
4. Lack of coordinated initiative- No industry-driven initiative as of yet to develop a
common interoperable system, which would bring about comfort of payment to users and
cost and functional efficiency to the Billers.
5. There is no common website from where all bills can be accessed and smoothly paid .
Why there is a need for a national GIRO-based Indian Bill Payment System?
Those people who have access to internet banking facility can pay their bills online, however
there are a huge number of consumers who dont have access to internet banking and thus they
cannot pay their bills online. Such consumers have to physically go at different places to pay
their different bills. Albeit, the ECS (Electronic Clearing Service) debit volume is growing in
India at the rate of 5% per annum and in 2012-13 it was Rs 176.50 Million, but, still this is very
small when compared with total billing volume in largely populated country like India. Most of
the consumers in India still pay their bills by physically visiting different customer outlets.
Therefore, there is a requirement for an interoperable, integrated bill payment system in India
which:-
Provides consumers a single point for their various bill payments
Near to place of work or residence
Enables payment of any bill at any place
Allow payments via any mode (cash, cheque, credit card, debit card, prepaid payment
instruments etc.)
Includes bank branches, post offices, business correspondents, retail agents of
aggregators, ATMs (Automated Teller Machine), etc.
Furnishes quick confirmation of payment made via SMS or a payment receipt
Provides facility of payment of bills via internet banking (if possible a single website),
mobile banking and IVRS (Interactive Voice Response System)
Is efficient and cost effectual substitute to the present systems
Motivates billers to switch over to the new system
Sets up billing standards in India
Increases consumer trust and experience
Reduces the expenditure that billers incur on collection of bills at their own collection
centres
The above issues and challenges can be resolved if we have a centralised infrastructure for bill
payments in India which brings about interoperability with an all India-standard.
What is the Model for pan-India centralised bill payment in India as suggested by
the Umesh Bellur headed GIRO Advisory Group?
The pan-India centralised bill payments infrastructure would have two types of entities:
1. Bharat Bill Payment System (BBPS)- Will set standards and conduct of centralised
payment, clearing and settlement process
2. Bharat Bill Payment Operating Units (BBPOUs)- Will act as operating unit(s)
The model would thus be a 2-tier structure with a single standard setting body (BBPS) with
payment and settlement functionalities/responsibilities and multiple operating entities
(BBPOUs).
Bharat Bill Payment System (BBPS)
A not-for-profit organization registered under the Companies Act 1956, like NPCI (National
Payments Corporation of India). It shall have a Steering Group constituting of representatives
from the participating BBPOUs and other stake holders.The Roles and Responsibilities of BBPS
include:
Setting Business standards and processes the BBPOUs, management of dispute
resolution, standards for information exchange.
Marketing and brand positioning of the pan-India Bharat Bill payments system
Accomplishing payment, clearing and settlement of the transactions executed at
several BBPOUs
Act as final dispute resolution escalation point
Set up a single website on behalf of the brand for online payment of bills
Bharat Bill Payment Operating Units (BBPOUs)
A forprofit company registered under the Companies Act 1956 and has obtained
requisite certification from BBPS for participating in the the centralised bill payments system.
Roles and Responsibilities of BBPOUs:-
Infrastructure development (including APIs as per standards set by BBPS).
Transaction handling
Handling customer grievance / disputes at first place
Provide Value-added services
Ensure confidentiality and privacy standards are in place
State Bank of India launches a Twitter Handle
State Bank of India has now launched a Twitter Handle. Earlier, SBI had launched its accounts
on Facebook and Youtube. The aim is to target a huge customer base as well as potential
customers. There will be all day round tweets about the SBIs products, services, new products
launched, banking related education to customers, etc.
By making Twitter handle, the bank anticipates this to associate itself in a better manner with the
tech-savvy youth.
Fitch affirms Indias BBB- ratings; outlook stable
Ratings agency Fitch affirmed following Ratings/ Outlook for India:
Indias Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs): BBB-
Indias senior unsecured foreign and local currency bonds: BBB-
Outlooks on the Long-Term IDRs: Stable
Indias Ceiling: BBB-
Short-Term Foreign Currency IDR: F3
Key Rating Drivers for India:
Relatively high real GDP growth (5-year avg is 6.7% compared to median of 3.2%
for other BBB rated peers)
Lost much of its dynamism
Fitch forecasts real GDP growth to rise from 4.7% in FY14 to 5.5% in FY15 and 6.0% in
FY16
Due to the on-going parliamentary elections, course of the Indian economy is timid
General Government budget deficit of the Centre and the States combined (7.3% of GDP)
much higher than median for other BBB category peers
Indias standards of governance and business environment are comparatively weak and
tighten its investment potential
Inflation is high at a 5-year avg of 10.2% compared with median of 4.2% for other BBB
peers
External position is strong, owing to high level of Forex of USD 304 billion (6.1 months
of current account receipts cover compared to median of 4.8 months for other BBB
rated peers) and low net external debt of (4.4% of GDP compared to median of 9.2% for
other BBB rated peers). This renders a thick cushion in case of regenerated pressures on
the rupee and other asset markets
Indian economy is less developed than investment grade peers in many terms
Indias avg per capita income (2013 figures) remains low at USD 1,543 compared with
median of USD10,778 for other BBB rated peers
UN HDI (Human Development Index) relatively low compared with other BBB rated
peers
Owing to rising NPAs (4.2% of total assets in September 2013), the Profitability and
capital position of the banking sector will likely continue under pressure, particularly for
PSBS (Public Sector Banks)
HDFC Banks blood donation drive sets Guinness World
Record
HDFC Bank, the second largest private bank of India, has created a new Guinness World Record
by its annual blood donation drive it organised in December 2013. This has been recognised as
the largest blood donation drive in a single day ever across the world.
On December 6, 2013, at 709 locations all over India, 1,115 blood donation camps were put up
where 61,902 people participated. This is the 7th year of campaign run by HDFC Bank.
World Bank to double its lending to developing nations
As part of its efforts to end extreme poverty by 2030, the World Bank Group declared that it will
almost double yearly lending capacity to emerging nations like Brazil, China, India, etc. from
USD 15 billion to USD 28 billion. In next decade, the WB it would be increasing its lending
capacity by USD 100 billion to USD 300 billion for middle income nations.
IBRD (International Bank for Reconstruction and Development) has increased its single
borrower limit by $2.5 billion for Brazil, China, Indonesia, India, and Mexico.
Air India seeks bridge loan of $500 million
Air India is in quest of a Bridge Loan of up to $500 Mn to take delivery of 4 Boeing 787
Dreamliner aircrafts between May and November 2014 from an on-going order. For this, Air
India has invited offers from banks to arrange the bridge financing for a period of 6-12 months.
Air India is offering the aircraft as security and will pay back the loan following its conclusion of
a sale and lease-back arrangement.
What is a Bridge Loan?
Bridge Loan (also called Bridge Finance, Bridging Loan, or Gap Financing) is a short-term
(usually less than a year) loan taken to cover the period between the expiry of one loan and the
beginning of another loan. Bridge loan is arranged mostly to accomplished a purchase (viz. a
new house, aircrafts) before the borrower gets payment from a sale (of the old house, old
aircraft), or before a long-term loan is made accessible upon completion of its requirements.
Bridge loans are normally more costly than normal financing, to pay off for the extra risk. The
lender also may demand cross-collateralization and a lower loan-to-value ratio. On the other
hand Bridge Loans are generally arranged rapidly with comparatively little documentation.
RBI liberalizes hedging limit for investors up to $250,000
RBI has liberalized hedging limit for domestic investors to $250,000 from $100,000 on the basis
of a simple declaration without any prerequisite of further documentation.
RBI has now allowed all resident individuals, firms and companies, who have actual or
anticipated foreign exchange exposures to book foreign exchange forward contracts up to
$250,000 on the grounds of a mere declaration without any prerequisite of further
documentation.
The RBI stated that the services being currently provided for SMEs (Small and Medium
Enterprises) which are having an exposure to foreign exchange risk, shall remain unchanged.
RBI accepts P. Vijaya Bhaskar Committees
recommendations relating to Financial Benchmarks; asks
establishing an independent body for recommending
benchmark foreign exchange rate
RBI has accepted the P. Vijaya Bhaskar Committees recommendations relating to Financial
Benchmarks. RBI has asked for establishing an independent body for recommending benchmark
foreign exchange rate in order to avoid any potential manipulation by the bankers.
The Bhaskar Committee had suggested I ndian money and currency markets should move their
benchmarks towards transaction-based from poll-based in an attempt to comb out
manipulation.
In 2013, RBI had appointed a committee under the chairmanship of P Vijaya Bhaskar, Executive
Director of RBI, as it wanted to avoid issues caused by the manipulation of London Interbank
Offered Rate (LIOBOR) and exchange rates all over Europe.
RBI has suggested FIMMDA (Fixed Income Money Market and Derivatives Association of
India) and FEDAI (Foreign Exchange Dealers Association of India) to act as administrators to
the Indian rupee, interest rate, and foreign exchange benchmarks, respectively. In order to defeat
any potential conflicts of interest in the benchmark fixing procedure originating from the present
governance structure of the FIMMDA and FEDAI (which are industry nodal agencies), RBI has
suggested that an independent body, either individually or conjointly, may be formed by the
FIMMDA and FEDAI for administration of the benchmarks.
Some key measures that are anticipated to beef up the governance model for benchmark
submission:-
1. The benchmark submitters have to essentially take part in the polling process and abide
by several provisions specified in the code of conduct
2. The benchmark submitters have to introduce place an efficient conflict of interest policy
helping identification of potential and genuine conflicts of interest
3. The benchmark submitters also have to lay down an effective whistle-blowing policy to
help early detection of any potential misconduct in benchmark data presentations
4. Benchmark submissions are subject to periodic internal audit and, where appropriate, to
external audit
5. Submissions by way of written communications or via full-bodied contribution devices
which leave an audit trail. This is done in order to do away with possibilities of errors
Why was P. Vijaya Bhaskar Committee constituted by the RBI?
World over, financial benchmarks viz. LIBOR, EURIBOR, TIBOR, MIBOR (Mumbai Interbank
Offered Rate), etc. are primarily used for pricing, valuation and settlement purposes in financial
contracts. Now since, the aggregate volume of financial contracts which are valued via these
Financial benchmarks is very huge, therefore these benchmarks need to be highly reliable as they
play a vital role in stability of any countrys financial system.
But, late global developments with respect to manipulation of various key global
benchmark rates, viz. LIBOR, EURIBOR, TIBOR, etc. have raised questions about the
reliability of these financial benchmark rates, in particular who governs them and how
they are governed.
Thus, world over, various international standard setting bodies, national regulators, central
banks, and self regulatory market bodies have reexamined the subsisting benchmark determining
process and have come out with wide-ranging reform measures and governing principles for
enhancing the robustness and reliability of these crucial financial benchmarks.
The Challenges undertaken by the Vijaya Bhaskar Committee on Financial Benchmarks:
1. Study all key financial benchmarks in India, in reference to evaluating their present
significance/utilization.
2. Propose changes, if any, for addition of new benchmarks or elimination of some of the
existent benchmarks.
3. Study international experience in dealing with problems concerning benchmarks and
learn lessons there from them which applicable to Indian context.
4. Analyse the governance mechanisms within the organizations calculating the benchmarks
with a view to evaluating conflicts of interest, if any, and propose measures for removing
such conflicts and increasing transparency.
5. Analyse the need for regulators participation in calculation of benchmarks.
6. Propose worthy mechanisms for handling with transition issues coming up out of legacy
contracts in the case of markets changing to a fresh benchmark.
7. Suggest a system of supervisory oversight with regard to institutions caught up in
calculating /broadcasting the benchmarks.
8. Analyse and suggest on any other associated issues.
Board of Financial Supervision (BFS) clears proposal that
RBI will conduct an independent audit of big corporates
declared fraudulent by banks
Following a sequence of investigations by the banks themselves in high-profile cases viz. Deccan
Chronicle, Kingfisher Airlines, etc. which yielded very little, the RBI has now decided to itself
investigate such high-profile fraud cases. The Board of Financial Supervision (BFS), chaired
by RBI governor Raghuram Rajan, has cleared a proposal that RBI itself will now conduct an
independent forensic audit of corporates who have taken loan of more than Rs 1,000 Crore and
are declared fraudulent by banks.
Why RBI has taken this decision to itself and independently audit high profile fraud cases?
In past few years, there has been a huge rise in the number of cases of bad loans. The Gross
NPAs (Non-Performing Assets) bad loans prior to making provisions, for year 2013 stood at
Rs 24,3210 Crores, up by 35% (Y-o-Y) Year on Year basis. Not only this, the number of cases
referred to the CDR (Corporate Debt Restructuring) has also gone high in near past.
In order to curb rise in such NPA (Non-Performing Assets), the RBI has come with strong
measures to ascertain that banks in India dont brush off bad loans under the carpet.
Besides, the number of cases referred to the corporate debt restructuring (CDR) cell has also
risen sharply in recent months.
Will an Independent forensic audit by the RBI put a check on the rise in stressed assets in
the banking system?
The findings from independent forensic audit will allow RBI to formulate policies that will assist
it keep a close watch on the creditor-borrower relationship, and promptly step in when theres an
abuse in the banking system.
What is Board of Financial Supervision (BFS)? What are the Functions of Board of
Financial Supervision (BFS)?
The Financial Supervision functions are carried out by the Reserve Bank of India under the
guidance of the Board for Financial Supervision (BFS). Board for Financial Supervision
(BFS) is chaired by the Governor of Reserve Bank.
The chairman is supported by the 4 co-opted directors as members for a 2 year term. There is a
Vice chairman of the board who is one of the Deputy Governors of the Bank. The Board meets
typically every month. The chairman is supported by the 4 co-opted directors as members for a
2 year term. There is a Vice chairman of the board who is one of the Deputy Governors of the
Bank. The Board meet s typically every month.
Some typical functions of Board of Financial Supervision (BFS) are:
1. Restructuring of the system of bank inspections
2. Introduction of off-site surveillance,
3. Strengthening of the role of statutory auditors and
4. Strengthening of the internal defenses of supervised institutions.
RBI raises Rs 20,000 Crores in record auction; Indias
biggest debt auction ever
RBI fully sold the Rs 200 billion ($3.31 billion) worth of Government bonds on Thursday April
17, 2014, executing the Indias biggest-ever auction. Speculations ran in market that Life
Insurance Corporation had bought a major portion of the debt at the auction. On Thursday April
17, 2014, the Benchmark bond yield ended down 11 basis points at 8.85%, the biggest single-
day fall since 20 January, 2014.
This was Indias biggest debt auction ever.
What are Government Bonds?
Government bonds or Dated securities are long term Government securities with original
maturity of one year or more. These are tradable instruments issued by the Central Government
or the State Governments.
The Short term Government securities are called Treasury bills (maturities of less than one
year). In India, the Central Government issues both, Treasury Bills and Bonds (Dated Securities)
while the State Governments issue only Bonds (Dated Securities). The State Govt Bonds are
called the State Development Loans (SDLs). Practically, Government securities carry no risk of
default and, for this reason, are called risk-free gilt-edged instruments.
How are the Government Securities issued?
Government securities are issued via Auctions conducted by the Reserve Bank of India.
Auctions are conducted on the electronic platform called the Negotiated Dealing System
(NDS) Auction platform.
What are the different types of auctions used for issue of securities?
Previous to introduction of Auctions as the process of issuance, the interest rates were
administratively fixed by the Government. With the introduction of auctions, the Rate of Interest
(Coupon Rate) gets fixed via a market based Price Discovery Process.
An auction may be:
a) Yield based Auction- Conducted when a new Government security is issued
b) Price based Auction- Conducted when Government of India re-issues securities issued
earlier.
SBI launches Tab banking facilities for Savings a/c, Housing
Loan and e-KYC
For the convenience of its customers, SBI has launched 3 digital banking facilities. These are:
1) TAB Banking for Savings a/c Opening Savings a/c at Customers door step using tablet PC
provided to the Banks Sales Staff (who visit the Customers home). These a/c opening details
and docs collected by the banks sales staff will be loaded on the CBS (Core Banking Solution)
and the a/c number will be sent to the customer via SMS/e-mail.
2) TAB Banking for Home Loan In-principle approval for the home loan at customers door
step using tablet PC provided to the Banks Home Loan Sales Team which will capture on the
tablet KYC details and details. The sales team officer will advise the customer about the
approximate housing loan amount eligible and the EMI amount.
The applicant gets in-principle sanction for the wished-for Housing Loan via email while the
actual loan will be processed afterwards subject to usual formalities.
3) e-KYC Generates e-KYC (Know Your Customer) identity document. Fingerprints of the
customer will be captured and sent to UIDAI (Unique Identification Authority of India) for
authentication of identity and address proof. On successful authentication from UIDAI, the e-
KYC service will act in response to display demographic details like [Name, year/date of birth,
Gender, Address, Phone, email (if available)] and photograph.
These facilities will offer ease and time saving to the customer for opening accounts with SBI bank.
World Bank projects 5.7% growth for India in 2014-15
The World Bank has projected an economic growth rate of 5.7% in 2014-15 for India. World
Bank projected an acceleration of growth (factor costs) in FY 2014 to 4.8%, further increase to
5.7% in FY 2015
Rationale: This growth rate was projected by the World Bank owing to enduringly more
competitive exchange rate and advancement towards sanction of crucial investment projects.
The International Monetary Fund (IMF) had earlier forecast that Indian economy would
recover from 4.4% growth in 2013 to 5.4% in 2014. IMF had also quoted export competitiveness
as grounds for potential growth revival.
The World Bank held that in India the trouble is the banking sectors growing exposure to
company debt. The concern is that this could finally impact the governments finances via its
possession of state banks and the call for to shore up stressed but systemically important banks.
Negative zone IIP may pull the Indian economy downwards
Indian industry appears to be thwarted with the most recent reports as IIP in negative zone may
pull down the Indian economy. Reports of the manufacturing sector performing poorly appear to
have outraged the industry.
In February 2014, the low consumption remained to haul the manufacturing. As per the CSO
(Central Statistics Office) IIP (Index of Industrial Production) for February 2014 was around
1.9% lower than the February 2013. Reports hint that 13 out of 22 industry groups coming under
manufacturing sector underwent negative growth.
RBI panel headed by Anand Sinha releases Draft Report on
Pricing of Credit; suggests Indian Banks Base Rate (IBBR)
RBI panel headed by RBI Deputy Governor Anand Sinha has recommended bringing a
benchmark floating interest rate, especially for home loans. Panel also suggested Indian Banks
Base Rate (IBBR).
Objective: To inspect the matters linked to inequity in pricing of credit and suggest measures for
transparent and suitable pricing of credit under a floating rate regime.
Why there is a need for change in current credit pricing framework?
Notwithstanding the policy attempts to bring transparency and candour to the credit pricing
framework, there have been certain concerns from the customer service perspective. These
chiefly refer to the downward stickiness of the interest rates, prejudiced handling of old
borrowers vis--vis fresh borrowers, arbitrary modifications in spreads, etc.
Recommendations:
Key recommendations made by the Working Group headed by RBI Deputy Governor Anand
Sinha are:
1. Banks should be able to prove to the RBI the rationale of their pricing policy i.e. how the bank
decided the pricing of a banking product.
2. Banks, peculiarly those whose weighted average maturity of deposits is on the lower side should
move towards calculating the Base Rate on the basis of incremental cost of funds. More
transparency in pricing, less customer complaints, better asset liability management at banks.
The Bank boards should make certain that the use of a different methodology in calculating cost
of funds should not doesnt leads to any discrimination amidst borrowers, especially between
old and fresh customers.
3. Banks should have a Board sanctioned policy delimiting components which are utilized to decide
the spread like specific operating cost, credit risk premium and tenor premium, competition,
business strategy and customer relationship.
4. Bank Board should make certain that any price differentiation is coherent with banks credit
pricing policy factoring Risk Adjusted Return on Capital (RAROC).
5. The internal policy of the Bank should explain the rationale for the spread.
6. Except in cases where the credit profile of a customer goes down, the spread charged to an
existing customer cannot be raised without properly communicating to the customer at the
time of contract. The same information should be properly exhibited by the banks via notices/
website.
7. There may be interest rate reset periodicity for the Floating rate loan covenant.
8. A sunset clause for Benchmark Prime Lending Rate (BPLR) contracts should be there in order
that all the contracts thenceforth are linked to the Base Rate. Banks should ascertain that if any
of its customer shifts from BPLR linked loans to Base Rate loans are (s)he should not be
charged any extra interest rate or any processing fee.
9. Indian Banks Base Rate (IBBR): The RBI panel asked Indian Banks Association (IBA) to develop
IBBR, a fresh benchmark for floating interest rate products, which may be compared and
released by IBA on a periodical basis. In the beginning, IBBR may be used for home loans. IBBR
should comply with the standards benchmarks set by the Committee on Financial
Benchmarks. Banks may extend floating rate products linked to the Base Rate, IBBR or any other
floating rate benchmark, ascertaining that at the time of sanction, the lending rates should be
equal to or above the Base Rate of bank.
10. Bring in more transparency in banking which enables comparability amongst banks and
informed decision making by customers.
11. If there is a pre-payment made by a customer, then any gain of interest reduction on the
principal should be given on the day the money is obtained by the bank without holding off for
the next EMI cycle date to effect the credit.
12. RBI and Banks should both bestow financial education to customer.
13. At the point of getting into a contract, the Options of with exit and sans exit should be
given to Customers in case of Retail loans.
14. The industry association, IBA, should:
o Build up case studies and illustrations of best practices for customer service;
o Carry on studies to discover areas of best market conduct practices for betterment;
o Train industry representatives
15. In Banks the grievances redressal systems should be quick in responding to customers
demands and the Banks not putting in place enough measures should be penalized by the RBI.
RBI caps Ways and Means Advances limit for the
Government at Rs 35,000 Cr. per week for the first half of
FY 2015
RBI has set the upper limit for the WMA (Ways and Means Advances) for the central
government at Rs 35,000 crore per week for the first half of the FY 2015. If the government
utilises 75% of WMA limit, RBI may further activate fresh flotation of market loans. The second
half limit will be fixed in September 2014. If the prevailing circumstances demand, there exists
flexibility with the RBI to revise the limits at any time after discussions with government.
Interest rate on WMA/ overdraft: 2% above the repo rate
Minimum balance required to be maintained by the government with the Reserve Bank:
On Fridays: Not be less than Rs 100 crore
On the date of closure of governments financial year: Not be less than Rs 100 crore on
On June 30 (closure of the annual accounts of the RBI): Not be less than Rs 100 crore on
Other Days: Not less than Rs 10 crore
Duration:
For Central Government: 10 consecutive working days i.e. Overdrafts beyond 10 consecutive
working days will not be allowed.
What is WMA (Ways and Means Advances) and how this facility is utilized?
Via an agreement under Section 21A of the Reserve Bank of India Act, 1934, the RBI acts as a
banker to various State Governments in India. At present all Indian States (except Jammu &
Kashmir and Sikkim) have entered into such agreements with the RBI in order to
undertake general banking business in India (including payments, receipts, collection, remittance
of money, management of public debt and issue of new loans). Jammu & Kashmir and
Sikkim have entered into agreements with the RBI, ONLY for the limited purpose of
managing their public debt.
The various States maintain a minimum reserve balance with the RBI. But these minimum
balances are not fixed; these minimum balances depend upon the economy of the state and its
budget.
Thus, RBI has with it an account balance for each state and RBI conducts ordinary banking
business for the state without any remuneration. Since RBI doesnt asks for any remuneration
from States, RBI is doesnt have any obligation to pay any interest on such balances. RBI keeps
on advising the States about their daily cash balance at the close of each working day.
Now, there are times when these balances maintained by States with RBI have a temporary
mismatch in the cash-flow of receipts and payments of the State Governments.
To meet these temporary mismatches, Under Section 17(5) of RBI Act, 1934, the RBI provides
Ways and Means Advances (WMA) to the States in order to assist them to overcome these
temporary mismatches in the cash flow of their receipts and payments. Thus, WMA is a
mechanism used by RBI under its credit policy. It is a temporary in character and used to bridge
any gap arising from short periods between expenditure and receipt of the State
Governments. WMA are not a source of finance but are meant to provide provide a
cushion to the States, so that they can carry on their necessary activities in spite of
mismatches on fiscal transactions.
Time Period of WMA facility: Maximum 90 days i.e. WMA is repayable in each case not later
than 3 months from the date of making the advance.
Note:
i) Section 17(5) of RBI Act allows RBI to make WMA both to the Central and State
Governments.
ii) I n a period of natural calamity or disaster, ad hoc WMA limits are granted to the States to
facilitate transactions in government accounts.

What are the various types of WMA (Ways and Means Advances)?
There are 2 types of WMA i) Normal and ii) Special
1. Normal WMA: These are Unsecured Advances i.e. Clean Advances. In this arrangement, a State
Government provides no securities. Normal WMA facility is based on the States latest three
years average of revenue receipts and capital expenditure.
2. Special WMA: These are Secured advances. In this arrangement, a State Government takes
WMA facility by pledging Government of India dated securities and Treasury Bills held by the
State Governments with. The operative limit for special WMA for a State is subject to its
holdings of Central Government dated securities upto a maximum of limit sanctioned. State
Governments are permitted Special WMA to the extent of around 85% to 90% of the market
value of their holdings of Government of India dated securities and Treasury Bills after providing
for margins against price risk, with a higher margin for securities of residual maturity in excess of
10 years.
What is an Overdraft Facility? What is Maximum duration of an Overdraft Facility?
Any amount drawn by a State in excess of WMA is called an overdraft.
Maximum Duration of Overdraft:
For Central Government: 10 consecutive working days
For a State: 14 consecutive working days and 36 working days in a quarter.
RBI grants In-Principle banking licenses to IDFC and
Bandhan
RBI has granted in-principle banking licences to Infrastructure Development Finance
Company (IDFC) and microfinance lender Bandhan Financial Services Ltd. The declaration was
made by RBI after nod from the Election Commission. RBI had sought a go-ahead from the
Election Commission prior to declaring the awardees, as the model code of conduct is in place in
the run up to the elections. These are the first licences to be awarded by RBI since 2003-04.
RBI constituted Bimal Jalan panel scrutinized the applications for new bank licences. The
exercise took a long time (around four years) as there was a debate over the issue: whether
corporate houses and entities with exposure to real estate should be given licences. 25
applicants, including Reliance Capital, Aditya Birla Nuvo, L&T Finance, etc. were amongst the
applicants who were left disappointed with the decision by RBI.
Prior to this in-principal approval, India has 27 public sector banks, 22 private sector banks and
56 RRBs (Regional Rural Banks).
What is the in-principle approval by RBI?
The in-principle approval by RBI is valid for ONLY 18 months. During this 18 month-
period IDFC and Bandhan Financial Services Ltd will have to meet all RBI rules and guidelines
in order to secure a permanent licence to start banking activities.
Timeline:
1994: Private Sector allowed to set up banks; 9 licenses issued
2004: Two more Bank Licenses issued (YES Bank got one and Kotak Mahindra Bank was allowed
to convert itself into a bank from a finance company).
2011: FY-2011 Budget mentioned the need for more licenses in private sector
2011: (August) Draft Guidelines issued
2013: (February) Final Guidelines issued
2013: (July) RBI invites applications; 25 aspirants apply
2014: (April) RBI issues in-principle licenses to 2 applicants (Infrastructure Development Finance
Company (IDFC) and microfinance lender Bandhan Financial Services Ltd.)
ndias forex reserves near $300 billion mark
March 31, 2014 No comments
Indias foreign exchange reserves continued their rally for the fourth straight week, increased by
$1.35 billion to 298.64 billion dollar on a surge in currency assets even though the reserve
position with the IMF slid heavily.
As per the data released by Reserve Bank of India( RBI)
Gold reserves remained unchanged at $ 20.978 billion.
Foreign currency assets (FCAs), a major part of the overall reserves, rose $1.58 billion to
$ 271.40 billion.
FCAs expressed in dollar terms, include the effect of appreciation/depreciation of the
non-US currencies viz. the euro, pound and yen held in its reserves.
The special drawing rights were down by $ 16.9 million to % 4.462 billion, while the
countrys reserve position with the IMF was down by a whopping $ 214.7 million to
$1.801 billion.
MoF: Indias external debt at $426 billion in December, 2013
As per the quarterly report of Ministry of Finance (MoF), Indias external debt was at $ 426
billion including the governments debt of $ 76.4 billion in December 2013. The total external
debt of $ 426 billion showed an increase of $ 21.1 billion over the March-end level.
Reasons for increase of Indias external debt during the period were
Due to long-term debt particularly NRI deposits.
A sharp increase in NRI deposits reflected the impact of fresh FCNR(B) deposits
mobilised under the swap scheme during September-November 2013.
Excerpts of the quarterly report of Ministry of Finance (MoF) on December 2013 figures
Long term debt: $333.3 billion showed an increase of 8.1 % over March, 2013 level.
Short-term debt: Declined by 4.1 % to $92.7 billion.
Government (Sovereign) external debt: $76.4 billion, (17.9 % of total external debt)
The share of US dollar denominated debt was the highest in external debt stock and stood
at 63.6%, followed by debt denominated in Indian rupee (19.4 %), SDR (7.1 %),
Japanese yen (5.0 %) and Euro (3.1 %).
The debt has remained within manageable limits as indicated by the external debt to GDP
ratio of 23.3 %, vis-a-vis 21.8 % at end-March 2013 and debt service ratio of 5.9 % in
2012-13.
Indias foreign exchange reserves provided 69 % cover to the total external debt as of
December end, against 72.1 % as of March-end 2013.
Indias external debt has remained within manageable limits due to prudent external debt
management policy of the Government of India.
Note: The external debt management policy continues to focus on monitoring long and short-
term debt, raising sovereign loans on concessional terms with longer maturities, regulating
external commercial borrowings through end-use, all-in-cost and maturity restrictions, and
rationalising interest rates on Non-Resident Indian deposits.
Parthasarathi Shome panel for tax administration reform
set up
In a bid to bring more credibility among tax payers and to streamline income tax procedures, the
Union Government has set up a Tax Administration Reform Commission (TARC) comprising
officials from public and private sector agencies.
About Tax Administration Reform Commission (TARC)
Chairman: Dr. Parthasarathi Shome.
Focus: On the rules and features and structural reforms in tax administration.
Members: Former chairmen of two tax boards, Former Chief Financial Officer from IT service
provider Tata Consultancy Services and an Ex-Vice President for Taxation from the Murugappa
Group.
Purpose: To bring in more transparency in the tax department and in the collection of taxes as a
certain amount of distrust emerged between the tax department and the tax payers.
Bharatiya Mahila Bank sets up branch in Bihar
The Bharatiya Mahila Bank (BMB) set up its first branch in Patna, Bihar. The bank would cater
to financial inclusion of women of all segments from Self-Help Groups to lower middle class
women to High Networth Individuals with a basket of products to ensure inclusive and
sustainable growth.
About BMBs first branch in Patna
Tied-up with New India Assurance Company Ltd- For providing general insurance
products, this would cater to needs of women at bottom of the pyramid, working women
and also for their families.
Would empower women and broaden their social base of development for equitable
growth.
Would conduct programmes on financial literacy, skill development and training for
women to enable them to get jobs and enter business ventures.
About Bharatiya Mahila Bank (BMB)
Indias first all-women public sector bank.
Objective: Focus on the banking needs of the women and promote economic
empowerment. It will also address the gender related issues and will be helpful in
financial inclusion.
Headquarters:Delhi.
CMD: Usha Ananthasubramanian.
Note: The BMB has planned to increase the number of branches to 25 by the end of 2014.
Kisan Card launched by Axis bank to facilitate easy
agriculture lending to farmers through ATMs.
The private lender bank, Axis Bank launched an electronic Kisan
Card on the RuPay platform, through which a farmer can withdraw up to Rs. 1 lakh per day
from Automated Teller Machines ( ATMs)
Purpose: To facilitate easy agriculture lending to farmers through ATMs.
Electronic Kisan Card
Will be offer to agrarian customers on their cash credit crop loan accounts.
Helpful for them to reduce the interest burden as the interest payments start after
withdrawal of the money.
Provides queue free, 247 disbursement facility for farmers.
Allows them to use their loan limit by withdrawing cash up to Rs 1 Lakh per day, in
the required quantum, as and when required, thereby reducing their interest burden and
negating the risk of carrying higher volumes of cash.
India Rating: Extended Basel III deadline to ease pressure
on banks
As per the rating agency, India Ratings (formerly Fitch), the putting off of Basel III by the
Reserve Bank of India (RBI) till March 2019 would ease pressure on banks. There were
industry-wide concerns about the potential stress on asset quality and consequential impact on
performance and profitability of banks. Thus, the apex bank extended deadline for banks to
implement Basel III capital norms up to March 31, 2019, instead of March 31, 2018.
Though, capital injection would remain a priority for banks through the rest of this
decade, as the total capital required during the migration to Basel III has only gone up
due to addition of an extra year.
The governments commitment to maintain its majority shareholding in public sector
banks assures them of steady equity injections.
Now, the budgeted amount of Rs 11,200 crore is higher than the new requirement of
under Rs 10 billion equity by PSU banks in FY15, injecting the full amount will help
reduce capital pressures in subsequent years.
It can also help meet part of any shortfall in the hybrid tier 1 requirement of Rs 13,400
crore now estimated for FY15.
The revised norms have also tightened the loss absorption features of hybrid capital by
eliminating the temporary write-down feature in both hybrid tier 1 and tier 2 instruments.
These instruments can be either permanently written down or converted into equity that
improves the quality of capital by increasing any potential loss that investors may face.
Note: Basel series of norms refer to a broad supervisory standards formulated by Basel
Committee on Banking Supervision (BCBS) to ensure that financial institutions have enough
capital on account to meet obligations and absorb unexpected losses.
Universal Account Number (UAN)- will be provided by
EPFO from Oct 2014
The Employees Provident Fund Organization (EPFO) will provide permanent account numbers
to its over five crore subscribers from October, 2014.
EPFO is a statutory body of the Government of India under the Ministry of Labour and
Employment. It administers a compulsory contributory Provident Fund Scheme, Pension
Scheme and an Insurance Scheme. (Headquarters: New Delhi).
Permanent or Universal Account Number (UAN)
Purpose: To provide great relief to those workers in organized sector who frequently
change jobs, particularly, in the construction sector.
Will facilitate subscribers to avoid filing Provident Fund (PF) account transfer claims on
changing jobs.
Subscriber would not be issued new PF account number on joining new employer.
The UAN would be one account number which would be allotted to a subscriber for
various schemes run by the EPFO for his or her entire service period with different
employers.
The roadmap for implementing the UAN programme will be prepared by Centre for
Development of Advanced Computing (C-DAC).
Benefit: UAN will help to reduce the workload of the EPFO to a great extent as it
receives over 12 lakh claims for transfer of PF account on changing of jobs by its
subscribers.
Note: The C-DAC is the premier research and development organization under the Union
Ministry of Communications & Information Technology for carrying out R&D in IT, Electronics
and associated areas.
Soon, Kotak Mahindra Bank link current accounts to
Twitter
The private lender bank, Kotak Mahindra launched a new current account product that will
enable the account holders to undertake 21 services viz. cheque book requisitioning, checking
last few transactions, etc, and using their Twitter accounts.
For the activity of listed service, the bank customers have to use the dedicated hashtags
(#).
The account christened Jifi, also involves a host of loyalty-based reward points accrued
from merchant transactions carried out using the account, referrals made and sharing and
commenting of tweets/updates.
The reward points, classified as transactional and social, can be redeemed for discounts
with select online merchants or also transfered to friends.
The account can be opened by a self-invite either via Facebook or an e-mail, the bank said,
adding that existing account holders can also get a new account opened.
Note: The bank has integrated all their systems with their core banking software and can
seamlessly throw up the required result into the account holders Twitter handle as a direct
message.
RBI simplified foreign portfolio investment norms
The Reserve Bank of India (RBI) simplified foreign portfolio investment norms by putting in
place an easier registration process and operating framework to attract inflows.
The portfolio investor registered in reference to SEBI guidelines is known by Registered
Foreign Portfolio Investor (RFPI).
Registered Foreign Portfolio Investor (RFPI)
Purchase and sell shares and convertible debentures of Indian companies through a
registered broker on recognized stock exchanges in India as well as purchase shares and
convertible debentures, which are offered to public in terms of relevant SEBI guidelines,
it said.
Also acquire shares or convertible debentures in any bid for, or acquisition of, securities
in response to an offer for disinvestment of shares made by the Central Government or
any State government.
Would be eligible to invest in government securities and corporate debt, subject to limits
specified by the RBI and SEBI from time to time.
All investments made by that FII/QFI in line with the regulations prior to registration as
RFPI shall continue to be valid and taken into account for computation of aggregate limit.
Might offer cash or foreign sovereign securities with AAA rating or corporate bonds
or domestic government securities, as collateral to the recognized stock exchanges for
their transactions in cash as well as derivative segment of the market.
Note: The existing portfolio investor class viz. Foreign Institutional Investor (FII) and
Qualified Foreign Investor (QFI) registered with SEBI included under RFPI.
Bank of India (BoI) launched Instant Money Transfer (IMT)
scheme
The Bank of India (BoI) launched an Instant Money Transfer (IMT) scheme and became the
first state-run lender to allow withdrawal of funds to individuals from its ATMs without an
account in the bank. In other words, the IMT scheme allows customers to withdraw cash
without using either debt card or credit card at BoIs IMT-enabled ATMs.
Mechanism of Instant Money Transfer (IMT) scheme
Initiation by Sender for IMT: By providing receivers mobile number, four digits
sender code, the IMT amount and authorises the transaction from either banks ATM or
banks internet banking.
The sender provides receivers name, address and mobile number to the bank either on
SMS or Internet banking.
The receiver receives the notification of IMT on his mobile phone, along with a four-
digit SMS Pin.
The sender separately communicates the four-digit sender code to the receiver.
After getting these two pieces of information, one from the sender and the other on SMS,
the receiver walks into the banks nearest IMT-enabled ATM and withdraws cash by
punching in the mobile number, sender code, and SMS Pin.
The receiver would receives partial details for cash withdrawal on his/ her mobile phone
and partial details by customer.
The sender will be charged of IMT fee of Rs 25 for every IMT transaction, he or she
issues to a receiver or beneficiary.
Monthly withdrawal limit prescribed for IMT transaction: Rs.25,000 for receiver,
and per transaction limit of Rs.10,000.
Instant Money Transfer (IMT)
An innovative domestic money remittance facility.
Purpose: To extend the services across banks branches, so that the IMT sent from the
account-holder of one bank, can be withdrawn from other bank ATM.
Allows the customer to send money to a receiver only by using the receivers mobile
number through the banks ATM and retail internet banking facility.
The receiver can withdraw money from a Bank of Indias ATM without using a card.
The facility can be initiated by the banks customer over banks ATM and retail
Internet banking.
Can also be cancelled by the sender before its expiry and withdrawal.
From the date of issue, valid for 14 days only. After 14 days the transaction expires and
the sender is credited back with the IMT amount.
Aditya Puri committee recommendation: Give customers a
free copy of credit profile
As per the Aditya Puri committee recommendations, customers should be given a free copy of
their credit profile as it would help in promoting financial discipline among loan seekers.
Excerpts of the recommendations made by Puri committee
Headed by Aditya Puri (Chairman of HDFC Bank).
Recently submitted report of the Committee to recommend Data Format for
Furnishing of Credit Information to Credit Information Companies (CICs) to RBI.
On issues relating to credit information viz. increasing its coverage, format of reports
and best practices to be followed by credit institutions, Credit Information Companies
(CICs) and the RBI.
Provide customers with a free copy of their Credit Information Reports (CIRs) that would
help to create awareness about the need to have credit discipline, enable customers to
correct their behaviour and improve their score well before they plan to avail fresh credit
of any kind.
Help to detect identity theft at an early stage.
Low usage of credit information by member institutions and other specified users needs
to be addressed by requiring CICs to populate their databases with requisite credit
information so that enquiries by specified users yield desired information
Reduce the information asymmetry between lenders and borrowers and provides a fillip
to the growth of credit especially among the disadvantaged sections of society.
Use common data formats and a common data quality index that could assist credit
institutions in determining the gaps in data.
CICs should have a common classification of credit scores so they are easier to
understand and interpret.
RBI: Unclaimed bank money to be used for depositors
education
The Reserve Bank of India (RBI) has decided to utilize unclaimed bank deposits that are
estimated at Rs. 3,650 crore for education and awareness of depositors. The apex bank has
announced the Depositor Education and Awareness Fund Scheme, 2014 for this purpose.
What are unclaimed bank deposits that to be credited for fund?
The amounts to be credited to the Fund shall be the credit balance in any deposit account
maintained with banks which have not been operated upon for ten years or more, or
any amount remaining unclaimed for ten years or more.
Deposit accounts viz. savings bank deposit accounts, fixed or term deposit accounts,
recurring deposit accounts and current deposit accounts.
Any amount payable in foreign currency under an instrument or a transaction that has
remained unclaimed for 10 years or more.
In case of demand from a customer or depositor whose unclaimed amount/deposit had
been transferred to the fund, banks shall repay the customer/depositor, along with
interest if applicable.
Note: RBI stated that the fund would be utilized for promotion of depositors interest by
imparting necessary education and awareness about the banking sector.
Govt. sold 9% stake in Axis Bank via SUUTI & raised Rs.
5500 crore
The Central Government sold 42.26 million shares or 9 % of Axis Banks share capital through a
trust fund, Specified Undertaking of the Unit Trust of India (SUUTI), by a block deal in a
price range of Rs.1,313-1,341 per share.
Purpose: To garner over Rs.5, 500 crore through the sale of 4.2 crore shares or 9 % stake.
The SUUTI hold 20.72 % stake in the bank, offloaded 9 % shareholding through multiple
block deals (i.e. largely took place on the Bombay Stock Exchange) and raised around Rs
5,603 crore by selling Axis Bank stake at Rs 1,334 a share.
After this stake sale, SUUTI will have a lock-in period of six-month, which means
SUUTI cant sell stake in Axis Bank for six months after this block deal.
Bankers for the deal: J P Morgan, Citigroup Global Markets and JM Financial.
Block deal: A trade with a minimum quantity of 5 lakh shares or minimum value of Rs.5 crore
executed through a single transaction on this separate window of the stock exchange.
Outcome of Axis Bank stake sale held through SUUTI
The government raised Rs.5,557 crore i.e. nearly doubles the budgeted amount of Rs
3,000 crore.
LIC has emerged as the single largest investor picking up over 85 lakh shares for an
estimated 1,116 crore.
Other major buyers of the shares viz. Citigroup Global Markets Mauritius, Goldman
Sachs Singapore, etc.
The stake sale in Axis Bank was a part of divestment programme of the government in FY14. It
is second biggest divestment in FY14 by government after IOC stake sale on March 14, 2014.
The government garnered Rs 5,340 crore by selling 5 % stake each in IOC to ONGC and Oil
India at Rs 220 a share through off-market transaction.
Note: Axis Bank is the third largest private sector bank of India in which Government of India
holds 20.7 % share by assets. The share sale is part of the governments campaign to raise
revenues and meet its revised fiscal deficit target of 4.6 % of Gross Domestic Product (GDP)
in the financial year ending on March 31, 2014.
RBI Deputy Governor KC Chakrabarty gave early
resignation
Dr. Kamalesh Chandra Chakrabarty (62), the Deputy Governor of RBI, resigned from the
post against his scheduled term end, due to his personal reasons. His term was scheduled to end
on June 30, 2014.
Mr. Chaktabarty is also the Chairman of the Bharatiya Reserve Bank Note Mudran and
also heads the Advisory Committee of College of Agricultural Banking (CAB).
About Mr. KC Chakrabarty
First RBI top official to quit before retirement in the last two decades.
Appointed as RBI Deputy Governor for a three-year term on June 15, 2009 and was
subsequently given a two-year extension. His extended term was to come to end on June
15, 2014.
Known for his strong views on use of Cash Reserve Ratio (CRR) as a tool for monetary
management, was involved in verbal duel last year with the then SBI Chairman Pratip
Chaudhuri, who wanted its abolition.
Current portfolio at RBI: Secretarys Department, Department of Banking
Supervision, Financial Stability Unit, Human Resource Management Department,
Rajbhasha Department, Department of Currency Management, Deposit Insurance and
Credit Guarantee Corporation, Customer Service Department and the Rural Planning and
Credit Department.
RBIs nominee on the Financial Stability Board. (FSB- a global body established to
develop and promote implementation of effective regulatory, supervisory and other
financial sector policies).
Previous jobs: Worked in Bank of Baroda, Chairman of the Indian Bank and then
Punjab National Bank before being appointed as Deputy Governor of RBI.
RBI extended 80:20 scheme to import gold to five private
banks
The Reserve Bank of India (RBI) extended the 80:20 schemes to import gold to five private
banks.
Under RBI 80:20 scheme
Banks have been allowed to import gold:HDFC Bank, Axis Bank, Kotak Mahindra
Bank, IndusInd Bank and Yes Bank.
Objective: To make easy on inward consignment of the gold.
Nominated agencies could import gold with a condition that 80% kept for domestic use
and 20% of the consignment will be exported.
Does not require any simplification of exports of gold in the past three years by these
private banks.
These five private banks can import gold within prescribed limits.
Allowed more banks to import gold and it will raise consignments up to 40 tonnes per
month 70 tonnes per month India used to send.
Previously, only 6 banks and 3 state-run trading agencies were allowed to import gold provided
that each had simplified export of gold in past 3 years. .
Note: After oil import, Gold import is the 2nd biggest import that had pushed the current account
deficit (CAD) to a record high in the last year.
US FDIC sued 16 world largest banks for manipulating
LIBOR rates
The US regulator, Federal Deposit Insurance Corporation (FDIC) filed a law-suit on 16
worlds largest banks, as these global financial institutions are accuse of conspiring to
manipulate the LIBOR interest rate.
The US regulator stated that the manipulation caused substantial losses to 38 US banks that were
shut down due to insolvency during and after the 2008 financial crisis.
These global financial institutions broke certain swap contracts and separately planed to
rig the LIBOR rate to which the contracts were signed.
Banks that have been sued in setting the daily Libor rate: Bank of America, Citigroup
and JPMorgan Chase of the United States, Germanys Deutsche Bank and WestLB,
Britains HSBC, Barclays and Lloyds banks, Japans Norinchukin Bank and Bank of
TokyoMitsubishi, Credit Suisse and UBS of Switzerland, Royal Bank of Scotland,
Royal Bank of Canada, and Rabobank of the Netherlands.
About LIBOR (London Interbank Offered Rate) interest rate
The rate at which banks in London lend money to each other for the short-term in a
particular currency. In other words, its an interest rate at which banks can borrow funds,
in marketable size, from other banks in the London interbank market.
Worlds most widely used benchmark for short-term interest rates.
A new Libor rate is calculated every morning by financial data firm Thomson Reuters
based on interest rates provided by members of the British Bankers Association.
Note: FDIC is an independent agency created by the U.S. Congress to maintain stability and
public confidence in the nations financial system by insuring deposits, examining and
supervising financial institutions for safety and soundness and consumer protection and
managing receiverships. (Headquarters:Washington, D.C.).
RBI cautioned banks to protect ATMs and systems as
Windows XP support ends on April 8, 2014
The Reserve Bank of India (RBI) has cautioned banks to take immediate steps to implement
appropriate systems and controls if their systems and ATMs are still working on Windows XP,
as Microsoft will stop issuing updates and patches for bugs in its Windows XP operating system
(OS) from April 8, 2014.
If the updates and patches for bugs are stopped, then the probability of attacks on systems based
on Windows XP OS may increase and it may be difficult to defend such attacks in the absence of
Microsoft support.
Potential risks users will face as staying with Windows XP after April 8, 2014
After the deadline, Microsoft will no longer provide security updates or technical support for
Windows XP then the potential risks users face are
Security: Without critical Windows XP security updates, our PC may become vulnerable to
harmful viruses, spyware, and other malicious software which can steal or damage our business
data and information.
Lack of Independent Software Vendor (ISV) Support: Many software vendors will no longer
support their products running on Windows XP as they are unable to receive Windows XP
updates. For example, the new Office takes advantage of the modern Windows and will not run
on Windows XP.
Hardware Manufacturer support: Most PC hardware manufacturers will stop supporting
Windows XP on existing and new hardware. This will also mean that drivers required to run
Windows XP on new hardware may not be available.
Note: The customers and partners will have to migrate to a modern operating system viz.
Windows 8.1 to receive regular security updates to protect their computer from malicious
attacks. It will enhance security, broad device choice for a mobile workforce, higher user
productivity, and a lower total cost of ownership through improved management capabilities.
RBI hiked trade related remittance limit from Rs.2 lakh to
Rs.5 lakh per transaction
The Reserve Bank of India (RBI) hiked the trade related remittance limit from Rs.2 lakh to
Rs.5 lakh per transaction with immediate effect and also increased the number of transaction
handled by exchange houses. The hike in per transaction is on the review of the permitted
transactions under the Rupee Drawing Arrangements (RDAs). These changes have been
included in the Memorandum of Instructions for Opening and Maintenance of Rupee/ Foreign
Currency Vostro Accounts of Non-resident Exchange Houses.
Note: Vostro account (also known as a loro account) is one in which the domestic bank acts as
custodian or manages the account of a foreign counterpart.
SBI Life Insurance to appeal against the order of IRDA to
refund Rs.275 crore
The Private sector life insurer, SBI Life Insurance would appeal against the order of Insurance
Regulatory and Development Authority (IRDA) to refund Rs.275 crore to the policy holders of
Dhanaraksha Plus Limited Premium Paying Term (LPPT), a group insurance policy.
Why IRDA directed SBI Life Insurance to refund Rs.275.29 crore to policy holders within six
months?
The insurance regulator, IRDA charged SBI Life of violation of various norms by mis-selling
the policy and payment of higher commission to agents. The order was issued after an enquiry
that disclosed SBI Life Insurance was charging the second year premium along with the first
year premium on its Dhanaraksha Plus Limited Premium Paying Term (LPPT).
IRDA spotted that 99.99 % of the total premium procured under the LPPT product was sourced
by corporate agents of the life insurer belonging to SBI Group. The insurer has paid 40 % of first
year premium as first year commission and 7.5 % of second years premium as second year
commission.
Though, the single premium version of product been offered to the policy holders, the actual
commission payable would have been only 2 %.
Thus, it can be concluded that the large scale sale of LPPT as single premium payment policy has
only facilitated higher commission payments to insurance intermediaries involved who are
predominantly SBI and its associate banks.
It relates to polices issued during FY9, FY10 and FY11.
Thus, IRDA directed SBI Life Insurance to refund Rs.275.29 crore to policy holders within six
months, as the amount was collected from them in violation of norms.
Note: SBI Life Insurance is a joint venture between countrys biggest lender, State Bank of India
(SBI) and BNP Paribas Cardif.

Cricketer Shikhar Dhawan: Canara Banks Brand
ambassador
The public sector lender, Canara Bank announced cricketer Shikhar
Dhawan as its brand ambassador.
Objective: To gear up for the next phase of banking with a special focus on the countrys youth.
Canara Bank is not the first public sector lender to name a cricketer as its brand ambassador. For
example- Cricketer Rahul Dravid has been Bank of Barodas brand ambassador since 2005.
ICICI Bank launched portable POS machines
The private sector lender, ICICI Bank launched portable
hand-held machines (or portable POS machines) to avoid inconvenience around entering secret
PIN number for card transactions in hotels.
The ICICI Merchant Services is an alliance between ICICI Bank and electronic commerce and
payment services company First Data.
Plan: To replace 25,000 machines located in the hospitality sector enterprises with the portable
hand-held machines.
Function of portable machine: A customer will be presented the
machine at the table in order to authorize a transaction rather than the current practice of going to
the cash counter where the Point-Of-Sale (POS) machines are generally kept.
Note: As per the new PIN rule, the Reserve Bank of India (RBI) has asked for the secret PIN to
be entered for all card payments at merchant establishments. To prevent fraud and enhance
security, Businesses viz. fuel stations, hotels, hospitals and restaurants would have to buy the
portable, GPRS-enabled devices to offer convenience to clients.
China launched a trial programme for private firms to set
up banks
For the first time, the China Banking Regulatory Commission (CBRC) approved a trial program
to establish five privately owned banks as the government seeks to ease restrictions on the state-
controlled banking industry and also move to liberalize deposit rates in the next two years, as
regulators grapple with the rising pressure on the banking sector from a newly booming online
finance industry.
The first batch of the five banks will be opened in the cities of Tianjin, Shanghai,
Zhejiang Province and Guangdong Province as a pilot project.
Ten private companies viz. Internet giants Alibaba and Tencent have been selected to
take part in the preparation work for setting up the banks.
Each of the banks will be co-sponsored by at least two private capital providers
The banks will operate independently and will assume responsibility for risks and
losses as well as profits.
The private banks will need to have adequate net capital, a specific business strategy and
a mechanism to prevent risks from spreading and to protect depositors interests.
Financial services of private banks will be oriented towards small and micro businesses
as well as residential communities.
No timetable has been given for when they need to be operationally ready.
Note: Alibaba Group is one of the biggest e-commerce companies and Tencent Holdings Ltd is
Chinas most popular online games provider.
12th Meeting of the FSDC Sub-Committee at New Delhi: Set
up a High Powered Inter Regulatory Committee to explore
ways to comply with Basel-III capital norms
At the 12th sub-committee meeting of the Financial Stability and Development Council (FSDC),
headed by RBI Governor Raghuram Rajan, held at New Delhi, it was decided to set up a High
Powered Inter Regulatory Committee to explore ways of enabling banks to meet these
requirements.
Objective: To find ways for the banking sector to comply with Basel-III capital norms.
Discussions during the 12th Meeting of the FSDC Sub-Committee:
The implementation of non-legislative recommendations of FSLRC and setting up of a
repository for investors with a single view of all financial asset classes.
The ways for setting up an effective resolution regime for the financial sector. Issues of
greater harmonisation of regulations across sectors for similar activities were also taken
up.
The report of the working group on Resolution Regimes in India, chaired by RBI
Deputy Governor Anand Sinha and Economic Affairs Secretary Arvind Mayaram.
Listed below is the present structure of FSDC along with its Sub-committee and various
Working Groups/Technical Groups constituted under the aegis of the Sub-committee:
1) Financial Stability and Development Council (FSDC):
Apex-level body constituted by government of India
Idea to constitute such a super regulatory body was first given by Raghuram Rajan
Committee in 2008
Objective(s) of Financial Stability and Development Council (FSDC):
Financial Stability
Financial Sector Development
Inter-Regulatory Coordination
Financial Literacy
Financial Inclusion
Macro prudential supervision of the economy including the functioning of large financial
conglomerates
Coordinating Indias international interface with financial sector bodies like the Financial
Action Task Force (FATF), Financial Stability Board (FSB)and any such body as may be
decided by the Finance Minister from time to time.
Composition of Financial Stability and Development Council (FSDC):
Chairperson: The Union Finance Minister of India
Other Members:
Governor Reserve Bank of India (RBl),
Finance Secretary and/ or Secretary, Department of Economic Affairs (DEA),
Secretary, Department of Financial Services (DFS),
Chief Economic Advisor, Ministry of Finance,
Chairman, Securities and Exchange Board of India (SEBI),
Chairman, Insurance Regulatory and Development Authority (IRDA),
Chairman Pension Fund Regulatory and Development Authority (PFRDA),
Joint Secretary (Capital Markets), DEA, will be the Secretary of the Council,
**The Chairperson may invite any person whose presence is deemed necessary for any of its
meeting(s).
2) Financial Stability and Development Council (FSDC) Sub-Committee:
The FSDC Sub-committee has also been set up under the chairmanship of Governor,
RBI. It meets more often than the full Council. All the members of the FSDC are also the
members of the Sub-committee. Additionally, all four Deputy Governors of the RBI are
also members of the Sub Committee.
Executive Director, RBI (in charge of financial Stability) is the Member Secretary, while
the Financial Stability Unit (FSU) of RBI is the Secretariat for the Sub-committee.
3) Working Groups/Technical Groups under FSDC Sub-Committee:
3.1) Inter regulatory technical group (IR-TG): For inter-regulatory coordination
among the financial sector regulators. The Group is headed by ED in charge of Financial
Stability, RBI and members being ED/CGM level officers of the other regulators.
3.2) Technical Group on financial inclusion and financial literacy: Chaired by DG,
RBI in charge of financial stability and has representatives from all regulators (at the
level of ED/CGM) as well as from DEA and DFS (at the level of Joint Secretary).
3.3) Inter regulatory forum for monitoring financial conglomerates (IRF-
FC): Headed by the Deputy Governor, RBI (in-Charge of the Department of
Banking Supervision) and other Members are senior representatives of all the
sectoral regulators at the level of Executive Directors (RBI, SEBI, IRDA and PFRDA).
3.4) Early Warning Group: To coordinate the response of GOI/Regulators in the time
of a crisis situation. It is chaired by DG, RBI in-charge of Financial Markets Department.
It has Joint Secretary level representative from DEA & DFS as members. It is represented
by Member/ED level officers from financial sector regulators.
3.5) Working Group on resolution regime for financial institutions: To examine the
existing resolution regime/ framework for the entire financial sector as a whole and
identify the current gaps in the national resolution regime/ framework vis--vis the FSB
Key Attributes. With this background, the Group would recommend changes in the legal
framework to facilitate the required resolution regime including cross border
resolution. Was constituted in January 2013 under the Co-Chairmanship of Shri Anand
Sinha, DG, RBI, and Secretary (DEA). The Financial sector regulators at the level of
Executive Director/General Manager/Joint Director/Principal Legal Adviser are members
of this group.
4) Macro Financial and Monitoring Group (MFMG): Chaired the Chief Economic Adviser. It
has representation from all the Departments of the Ministry of Finance. It aims at keeping track
of the macroeconomic and financial developments, identifying vulnerabilities, and providing
early warning signals.
RBI extends date of exchanging pre-2005 notes to Jan 1,
2015
The Reserve Bank of India (RBI) granted an additional nine months for the public to exchange
currency notes printed before 2005, including Rs. 500 and Rs. 1,000 denominations, and set a
deadline of January 1, 2015. The apex bank stated that the public can continue to freely use
these notes for any transaction and people can unhesitatingly receive these notes in payment, as
all such notes continue to remain legal tender.
RBI has advised banks to facilitate the exchange of these notes for full value and without
causing any inconvenience to the public.
Post-2005 notes have added security features and help in curbing the menace of fake
currency.
At present, currency notes are issued in denominations of Rs 5, Rs 10, Rs 20, Rs 50, Rs
100, Rs 500 and Rs 1,000.
Note: Earlier, RBI stated that after March 31, 2014, it will completely withdraw all bank notes
from circulation issued prior to 2005 and from April 1, 2014, the public will be required to
approach banks for exchanging these notes.
Govt. okayed Rs 1,000 minimum monthly pension under
EPS-95
The Union Government approved the proposal to ensure Rs 1,000 minimum monthly pension
under a scheme of retirement fund body EPFO. The government would provide an additional
amount of around Rs 1,217 crore to ensure the minimum pension of Rs 1,000 starting 2014-15.
The decision to provide the entitlement under Employees Pension Scheme-95, run by the
Employees Provident Fund Organization, was taken by the Union Cabinet in its meeting
held in New Delhi.
Benefit of this scheme: With immediate effect. approx 28 lakh pensioners including five
lakh widows will get benefit. (There are 44 lakh pensioners).
Note: Pensioners will get the benefit with effect from April 1, 2014.
Indias first post office savings bank ATM inaugurated in
Chennai
The Union Finance Minister P. Chidambaram inaugurated the Indias first post office savings
bank ATM at the Head Post Office in Thyagaraya Nagar, Chennai.
About Post office savings bank ATM
The ATM would run on a trial basis for six months.
Objective: To make the department technology-oriented.
Part of an Information Technology (IT) modernization project of the Department of
Posts.
Rs 4,909 crore had been allocated for the IT modernisation of Department of Posts in the
interim budget for 2014-15.
Note: By March 31, 2014, a total of 700 more post offices will be covered and all 26,840 post
offices will be functional under CBS in another two years.
India and ADB inked an agreement to improve key road
connectivity in Chhattisgarh
The Government of India (GoI) and Asian Development Bank (ADB) signed an agreement for a
$300 million loan to help improve road connectivity along key corridors in the State of
Chhattisgarh.
Objective: To improve more than 900 kilometers of State roads, in line with the
Chhattisgarh Road Master Plan, involving up gradation of roads sections and
strengthening culverts and bridges.
The loan will be funded from ADBs ordinary capital resources. It has a principal
repayment period of 20 years, and annual interest set in accordance with ADBs LIBOR-
based lending facility.
The Government of Chhattisgarh will provide counterpart finance of about $128 million to cover
the estimated total project cost of $428 million.
ICICI Bank launched branch on wheels in Odisha
ICICI Bank Ltd. launched Branch on Wheels in Odisha as part their financial inclusion plans
to provide banking services in remote villages in the state which are devoid of banking facilities.
ICICI Bank is the first private sector bank to launch Mobile Branch with ATM
About Branch on Wheels mobile branch with an ATM.
First-of-its-kind initiative by any private sector bank in India.
Objective: To provide basic banking services to the remote unbanked villages in the
state.
The branch would be operated on a van. It will be stationed at specific timings of the day
in pre-identified, unbanked villages at specified locations.
Would be equipped with a GPS tracking system, laptops with 3G connections, LED TV,
a safe, a printer, public announcement system, an UV Lamp that detects forged cheques,
a note counting-cum-authentication machine that identifies fake currency notes and a
unique low-weight ATM.
Offers a wide range of banking products and services viz. savings accounts, loans, cash
deposit/withdrawal, account balance enquiries, statement printing and funds
transfer/DD/PO collections, among others.
Note: Odisha is the third state where ICICI Bank has expanded its Branch on Wheels network
after Maharashtra in September 2013 and Chhatisgarh in February 2014.
M-Pesa launched in Odisha
Telecom major, Vodafone India and ICICI Bank announced the launch of mobile commerce
initiative called M-Pesa service in Odisha.
About M-Pesa service
A mobile money transfer and payment service that allows customers to transfer money to any
mobile phone, remit money to any bank account, make utility payments, recharge of mobile,
DTH payment and earn interest on deposits.
Empowers the un-banked and under-banked sections of the population gain access to financial
services through the mobile phone.
This service will now be available across 202 Tehsils, 24 Districts through 1350 specially trained
authorized agents including 73 Vodafone exclusive stores in Odisha.
Apart from Odisha, M-Pesa has been rolled out in Delhi, Mumbai, West Bengal, Punjab, UP
East, UP West, Bihar, Jharkhand, Rajasthan, Gujarat, Maharashtra, Goa, Assam & North East
and Haryana. It will be made available across the country in a phased manner.
Ms Lakshmi Swaminathan : Became first Indian President
of Administrative Tribunal of the Asian Development Bank
(ADB)
February 27, 2014 1 Comment
Ms. Lakshmi Swaminathan became the first Indian to become president of Administrative
Tribunal of the Asian Development Bank (ADB) for three years. Ms. Swaminathan is the
seventh president of the Tribunal. At present, she is a member of the Panel of Arbitrators of
several public sector undertakings and NSE.
About Administrative Tribunal of Asian Development Bank (ADB)
Establish: 1991, as an external mechanism to review personnel decisions by Management.
Composition: Consists of five judges, who are all nationals of member countries of ADB.
The Tribunal elected Judge Ms. Lakshmi Swaminathan as President and Professor Roy Lewis as
Vice-President on the occasion of the 35th session held in Manila.
e-wallet Scheme launched by IRCTC
February 27, 2014 No comments
The Indian Railways Catering and Tourism Corporation (IRCTC) launched e-Wallet Schemeto
make payment process fast and to reduce transaction failures due to bank payment related
problems. (IRCTC is a public sector undertaking of the Ministry of Railways). At present, one
has to make the payment for the fare of the ticket, while booking e-ticket, through Credit card,
Debit card or Net banking.
e-Wallet Scheme
A rolling deposit scheme wherein the customers will have an account with the IRCTC and
deposit money to be used in future for booking e-tickets from its website (www.irctc.co.in).
Names of all passengers booked on a fully wait-listed e-ticket are dropped at the time of
preparation of reservation charts and fare is refunded automatically.
In case of ticket cancellation, the due refund will be credited to the e-Wallet account next day.
Available for PAN verified users only.
There is no difference between e-tickets booked through e-wallet scheme or those booked
through other payment options available on the website.
Click here for e-Wallet User Guide: eWALLET User Guide
Goverment directs banks: Dont publish pics of education
loan defaulters
The Union Government has directed banks not to publish photographs of education loan
defaulters in newspapers. The banks have been adopting name-and-shame policy to force
borrowers to pay up defaulted loans, but the step by the government may act as a shield for the
youth.
When the Bombay High Court refused to stop publication of photographs of a defaulter firm,
saying it was in larger public interest and in its ruling prompted banks to even publish names of
some education loan defaulters, then the Government of India (GoI) officially stated on the
public identification of defaulters that the same yardstick cannot be applied to all cases.
Note: The directive comes at a time when in the interim budget, the government declared an
interest subsidy scheme on unpaid education loans. The government would provide interest
subsidy on outstanding education loans sanctioned before March 2009. The move will cost the
exchequer Rs 2,600 crore. Most students are not wilful defaulters. A large section where loans
have gone bad is mostly because of unemployment.
Interim Union Budget 2014-15
The Union Finance Minister P. Chidambaram presented the Interim Budget 2014-15 in the Lok
Sabha with an estimated plan expenditure of Rs. 5,55,322 crore and non-plan expenditure of Rs.
12,07,892 crore. Excise duty on cars, two-wheelers, SUVs and capital goods and consumer
durables has been slashed to boost the manufacturing and growth. There is no change in income
tax rates.
Important points of the Union Budget 2014-15
Focus: On manufacturing and manufacturing exports.
Fiscal deficit for FY14 to be contained at 4.6% of GDP; FY15 target at 4.1 %
FY14 Current Account Deficit seen at $45 bn.
FY14 Q3 & Q4 GDP growth to be at least 5.2%.
Agriculture credit will cross $ 45 billion against $41 billion in 2012-13.
Food grain production estimated at 263 million tons in 2013-14
Proposed a venture capital fund with an initial capital of Rs. 200 crore to promote
entrepreneurship among scheduled castes and scheduled tribes.
No change has been introduced under the tax laws but a change has been introduced for the
indirect taxes.
Budgetary support to railways increased from Rs 26,000 crore to Rs 29,000 crore 2014-15.
Ministry-wise allocations for flagship schemes:
Rs.82, 200 crore rural development, Rs.67, 398 crore for human resource development, Rs.33,
725 crore for health and family welfare, Rs.21, 000 crore for women and child development,
Rs.15, 260 crore drinking water and sanitation.
Food subsidy will be Rs 1, 15,000 crore for implementation of National Food Security Act.
One -rank-one-pension scheme for defense personnel from 2015.
Defense allocation increased by 10% to Rs 2.24 lakh crore.
To strengthen the capacity of Central Armed Police Forces by modernization and providing
state-of-the-art equipment and technology, the government has allocated Rs. 11009 crore.
To formulate and promote the scheme of community radio station, the government sanctioned
a fund of Rs.100 crore.
For the Social Justice Ministry, Rs. 6730 crore has been sanctioned.
For the Panchayati Raj Ministry, Rs.7000 crore has been sanctioned.
For food, fertilizer and fuel subsidy, Rs. 246397 crore has been allocated.
To stimulate growth, the government has slashed excise duty to 10% from 12%.
Foreign exchange reserves up by $15 billion.
Rs 2,600 crore for education loan moratorium, to benefit 9 lakh borrowers for loans taken
before March 31, 2009.
A ten point agenda has been created by Mr. Chidambaram to make India the third largest
economy after US and China.
Two projects sanctioned under Nirbhaya Fund of which the original was of Rs.1000 crore that
was non-lapsable and another Rs. 1000 crore has been granted.
3 more industrial corridors Chennai-Bangalore, Bangalore-Mumbai, Amritsar-Kolkata under
various stages of implementation.
Govt. committed to Aadhaar-based LPG transfer but scheme on hold temporarily.
BSE launched Institutional Trading Platform (ITP) on SME
The Bombay Stock Exchange (BSE) launched an Institutional
Trading Platform (ITP) to help Small and Medium Enterprises (SMEs) and start-up
companies to list on the bourses without an Initial Public Offer (IPO). BSE Ltd set up the BSE
SME Platform as per the rules and regulations laid down by SEBI.
BSE SME Institutional Trading Platform (ITP)
Facilitate capital raising by small and medium enterprises including start-up companies which
are in their early stages of growth .
Will provide easier entry and exit options for investors viz. angel investors, venture capital
funds, and private equity equity players.
Over 46 companies are listed in the SME category.
Offers an entrepreneur and investor friendly environment, which enables the listing of SMEs
from the unorganized sector scattered throughout India, into a regulated and organized sector.
Will enable SMEs to raise money without having to go through the extensive IPO process.
Tax benefits to long term Investors.
With an advanced trading platform and better services launch of ITP on BSE SME will complete
the products which are valuable to investors and companies.
The Eligibility Criteria for the company desirous of listing are as follows:
Regulatory Criteria:
The company, its promoter, group company or director does not appear in the willful defaulters
list of Reserve Bank of India as maintained by Credit Information Bureau (India) Limited (CIBIL).
There is no winding up petition against the company that has been admitted by a competent
court.
The company, group companies or subsidiaries have not been referred to the Board for
Industrial and Financial Reconstruction within a period of five years prior to the date of
application for listing.
No regulatory action has been taken against the company, its promoter or director, by the
Board, Reserve Bank of India, Insurance Regulatory and Development Authority or Ministry of
Corporate Affairs within a period of five years prior to the date of application for listing.
Financial Criteria:
The paid up capital of the company has not exceeded 25 crore rupees in any of the previous
financial years.
The company has at least one full years audited financial statements, for the immediately
preceding financial year at the time of making listing application.
The company has not completed a period of more than 10 years after incorporation and its
revenues have not exceeded 100 crore rupees in any of the previous financial years
At least one of the following criteria:
1. At least one alternative investment fund, venture capital fund or other category of
investors/lenders approved by the Board has invested a minimum amount of 50 lakh rupees in
equity shares of the company.
2. At least one angel investor who is a member of an association/group of angel investors which
fulfils the criteria laid down by the recognized stock exchange, has invested a minimum amount
of 50 lakh rupees in the equity shares of the company through such association/group.
3. The company has received finance from a scheduled bank for its project financing or working
capital requirements and a period of 3 years has elapsed from the date of such financing and the
funds so received have been fully utilized.
4. A registered merchant banker has exercised due diligence and has invested not less than 50 lakh
rupees in equity shares of the company which shall be locked in for a period of three years from
the date of listing.
5. A qualified institutional buyer has invested not less than 50 lakh rupees in the equity shares of
the company which shall be locked in for a period of three years from the date of listing.
6. A specialized international multilateral agency or domestic agency or a public financial
institution as defined under section 4 A of the Companies Act, 1956 has invested in the equity
capital of the company.
Note: SEBI has made the provision in ICDR guideline by introducing Chapter XC whereby
listing on the Exchange made possible without bringing Initial Public Offer (IPO).
RBI imposed restrictions on intra-group investment by
banks
In a bid to mitigate the financial risk from concentration of business, the Reserve Bank of India
(RBI) imposed curbs on banks investing in their group companies.
Objective of ITEs measures: To ensure that banks maintain arms length relationship in
dealings with their own group entities, meet minimum requirements with respect to group risk
management and group-wide oversight, and adhere to prudential limits on intra-group exposures.
As per the RBIs guidelines on management of Intra-Group Transactions and Exposures (ITEs)
Banks are allowed to invest 5% of their paid-up capital in the case of non-financial companies
and unregulated financial services companies. The limit is 10 % for regulated financial services
companies.
Fixed an aggregate group exposure limit for intra-group transactions at 20% for all financial
and non-financial entities taken together and limited 10% for non-financial and unregulated
entities.
Banks should ensure they have systems and controls in place to identify, monitor, manage and
review exposures arising from intra-group transactions.
Banks must also ensure transactions in low-quality assets with group entities arent carried out
to hide losses or window-dress balance sheets.
If the intra-group exposure, either at the single entity level or at the aggregate level, exceeds
prudential limits, it should be reported at the earliest in the prescribed returns along with the
reasons for the breach.
In such situations, banks cannot undertake any further intra-group exposure (at the entity or
aggregate level, as the case may be) until it is brought down to within the limit.
Banks should submit data on intra-group exposures to the RBI (Department of Banking
Supervision, Central Office), from the quarter ending December 31, 2014.
By March 31, 2016, banks will have to reduce their intra-group exposure that exceeds the
prescribed limit. At that time, the additional exposure would be deducted from the banks
common equity Tier-I capital. The apex bank might impose a penalty for frequent breaches of
the prescribed limits.
The guidelines will become effective from October 1, 2014.
Note: As per existing norms, a bank can take single borrower exposure upto 25% of bank total
capital and upto 55% for group exposure.
Mr. Jatinder Bir Singh: Appointed as a new CMD of Punjab
and Sind Bank
Mr. Jatinder Bir Singh appointed new Chairman and Managing
Director of Punjab and Sind Bank (PSB). He succeeded Mr. D.P. Singh. Previously, Mr. Singh
was an Additional Secretary in the Ministry of Water Resources. He is 1983-batch IAS officer of
Assam-Meghalaya cadre.
RBI allowed FIIs to purchase 30% shares in Dabur
The Reserve Bank of India (RBI) allowed Foreign Institutional Investors (FIIs) to purchase
shares in Dabur India up to 30% of the firms paid up capital.
FIIs have been allowed to buy more shares in Dabur India as the company has passed a special
resolution to increase the limit for purchase of its equity shares and convertible debentures by
FIIs.
As indicated by the data available on the Bombay Stock Exchange (BSE), FIIs held 19.94% shares
in Dabur India as of quarter ended December 2013.
Under the Portfolio Investment Scheme (PIS), Foreign Institutional Investors (FIIs), Non-
Resident Indians (NRIs), Persons of Indian Origin (PIOs) are allowed to invest in the primary
and secondary capital markets in India. They can acquire shares/debentures of Indian companies
through the stock exchanges.
Note: The ceilings on FIIs/ NRIs)/ PIOs) investments in Indian companies are monitored by RBI
on a daily basis. For effective monitoring of foreign investment ceiling limits, the RBI has fixed
cut-off points that are 2% points lower than the actual ceilings.
RBI released draft Report on Enabling PKI in Payment
System Applications
The Reserve Bank of India (RBI) released draft report on enabling Public Key Infrastructure
(PKI) in payment system applications. Public Key Infrastructure enabled electronic payment
systems that has been introduced by the RBI are RTGS, NEFT, CBLO, FOREX Clearing,
Government Securities Clearing and Cheque Truncation System (CTS).
Objective: To ensure a safe, secure, efficient, robust and sound payment system in the country.
Highlights of the draft Report on Enabling Public Key Infrastructure (PKI) in Payment
System Applications
The various PKI-enabled electronic payments systems introduced by RBI viz. RTGS, NEFT, CBLO,
Forex Clearing, Government Securities Clearing, and Cheque Truncation System (CTS), etc.
In volume terms, PKI-enabled electronic payments systems contributed 25.1% whereas these
systems contributed 93.7% share to the total number of payment transactions carried out in the
year 2012-13.
Non-PKI enabled payment systems contributed 75% in volume terms but only 6.3 % in value
terms in the year 2012-13.
Of the non-PKI enabled payment systems, MICR Clearing and non-MICR clearing contributed
37% and 10% in volume terms and 69% and 25% in value terms.
In order to ensure a safe, secure payment system in the country and to ensure legal compliance,
digital technology, such as PKI may be used.
The banks may carry out in phases PKI implementation for authentication and transaction
verification. (Payment systems are subjected to various financial risks, viz. credit risk, liquidity
risk, systemic risk, operational risk, legal risk).
The issuing bank will need to convert the older credit or debit cards with the magstrip into
EMV chip and pin enabled ones.
With reference to internet banking applications, the report recommends that customers should
be informed of risks, existing security measures and also given a choice of different methods of
authentication to be able to select a system that matches their security requirements.
All Banks Internet banking applications should mandatory create authentication environment
for password-based two-factor authentication as well as PKI-based system for authentication
and transaction verification in online banking transaction.
The validity period for the certificates may be increased from 3 to 5 years for the digital
signature certificate (DSCs).
RBI has kept suggestions in the report open for public comment till February 28, 2014.
Note: The Public Key Infrastructure (PKI) is a set of hardware and software that enables users
of internet to securely and privately exchange data and money by using a pair of public and
private cryptographic passwords.
Chip-and-PIN cards
With an aim to minimize frauds, RBI has mandated that
Banks must adopt Aadhaar as additional authentication or move to EMV (Euro pay
MasterCard Visa) chip and pin technology to ensure security in card-based payment
transactions.
The apex bank made it mandatory for debit card holders to punch in their PIN numbers every
time they use the card. The PIN functions as another layer of security for the debit card which
reduces the chances of fraud. While using it at PoS, merchants will first swipe the cards at a PIN
enabled PoS terminal and punch in the transaction amount. That will be followed by customers
punching their PINs to complete the transaction.
What are Chip-and-Pin cards?
A chip-and-PIN card is a plastic card of standard size. It has two chips a) An embedded chip b)
A traditional magnetic strip. In order to accomplish a transaction, a customer has to punch in
his/her PIN number. In case the card gets stolen or lost, it is very difficult to copy the card due
to presence of the embedded microchip.
Objective: The overall system of the card designed in order to make it more difficult for
criminals to cash in on credit card fraud.
What information is stored on the chip?
Information is stored on the embedded chip, which is needed for authentication purpose during a
transaction. This information on the embedded chip is of the same nature as stored in todays
magnetic stripe. The chip is safe as there is no personal information about customers a/c stored
on the embedded chip.

NACH-ready payments services hub for India, launched
by Polaris Financial Technology
Polaris Financial Technology announced the launch of its NACH-ready India payments
solution. With the emergence of NACH, a high rate of adoption is anticipated to make it
imperative for banks to have a strategic roadmap for the adoption of NACH. This would include
product innovation, operational reconstructs and cutting edge technology adoption.
NACH-ready India Payments solution

Web-based solution to facilitate inter-bank, high volume electronic transactions that are
repetitive and periodic in nature.
Facilitates centralized mandate management, direct debits and bulk payments processing.
Standard features: cross-border transactions and host-to-host connectivity, etc.
Compliant with major payment systems in the country viz. National Automated Clearing House
(NACH), Next- Generation Real Time Gross Settlement (NGRTGS) and National Electronic Funds
Transfer System (NEFT).
Capable of achieving Straight Through Processing (STP) rates of over 97% across high volume
and high care payments through business rules driven data validation and enrichment.
Operational risks can be reduced by around 20%-25% using a configurable Exceptions
Management Framework which offers complete audit and control.
Polaris Financial Technology Ltd.

A Global leader in Financial Technology for Banking,
Insurance and other Financial Services. Founded in 1993.
Headquarters: Chennai, Tamil Nadu. Its iGTB division is the worlds first complete Global
Transaction Banking platform, used by the worlds top transaction banks.
Services offered: financial technology products, legacy modernization services and consultant
of core banking, corporate banking, wealth & asset management and insurance.
National Automated Clearing House (NACH)

The National Payments Corporation of India (NPCI) has implemented NACH for banks,
financial institutions, corporate and government to facilitate inter-bank, high volume, electronic
transactions which are repetitive and periodic in nature.
Web-based solution: A centralized system that will provide a national footprint and is expected
to cover the entire core banking enabled bank branches spread across the geography of the
country irrespective of the location of the bank branch.
Objective: To provide a single set of rules (operating and business), open standards and best
industry practices for electronic transactions which are common across all the Participants,
Service Providers and Users, etc.
Provides a robust, secure and scalable platform to the participants with both transaction and file
based transaction processing capabilities.
Facilitates the member banks to design their own products and also addresses specific needs of
the banks & corporates including a refined Mandate Management System (MMS) and an online
Dispute Management System (DMS) coupled with strong information exchange and customized
MIS capabilities.
Supports Financial Inclusion measures initiated by Government, Government Agencies and
Banks by providing support to Aadhaar based transactions.
Used for making bulk transactions towards distribution of subsidies, dividends, interest, salary,
pension, etc. and also for bulk transactions towards collection of payments pertaining to
telephone, electricity, water, loans, investments in mutual funds, insurance premium, etc.
Govt. allows FIIs, NRIs to invest in insurance sector
The Union Government has allowed 26% foreign investment in insurance sector in activities
related to insurance viz. broking, Third Party Administrators (TPAs) and surveyors and
permitted Foreign Institutional Investors (FIIs) and Non-Resident Indians (NRIs) to also invest in
insurers within the stipulated cap.
The Department of Industrial Policy and Promotion (DIPP) stated that in case of insurance,
the 26% cap will include FDI and investments from FIIs and NRIs.
(Earlier, only FDI under the automatic route was allowed in insurance companies.)
Apart from insurance companies, the relaxation would apply to insurance brokers, third-party
administrators (TPAs), surveyors and loss assessors. All of this investment can be made under
the automatic route.
Insurance brokers are entities which for remuneration arrange insurance contracts with insurers
or reinsurers on behalf of their clients.
The TPAs help in facilitating health insurance on behalf of insurers.
Surveyors and loss assessors provide technical services to the insurance companies.
All these entities are required to obtain a licence from the Insurance Regulatory and
Development Authority (IRDA) for undertaking specific activities.
The Arvind Mayaram Committee on definition of FII and FDI, in its draft report,
recommended composite caps whereby FDI, FII and NRI investments would form part of the
total cap on foreign investments.
Note: The Insurance Act, 1938 does not stipulate any FDI limits for insurance intermediaries or
TPAs, but sector regulator IRDA has restricted it to 26%.
Muthoot Finance launched its first White-Label ATM
Indian gold loan company, Muthoot Finance Ltd became
the first and only Non-Banking Finance Company (NBFC) to have obtained license for
setting-up WLAs in India. The Muthoot Group launched its first White-Label ATM at its
corporate office in New Delhi and has plans to invest Rs 300 crore in the next three years. The
rollout will be mainly in tier-3 and tier-4 cities.
Goal: To set-up 9,000 WLAs over three years 1,000 in the first year, 2,000 in the second year
and 6,000 in the third.
Partner of Muthoot Finance to set up WLAs: FIS Payment Solutions Services.
Sponsor Bank for WLAs venture: Federal Bank.
The ATMs will be user-friendly, even to the differently-abled equipped with Bio-metric thumb
& voice-recognition.
The other entities that are offering White label ATMs:
Prizm Payment Services, a unit of Hitachi of Japan set up its first White Label ATM Money Spot
ATM at Chendre village in Alibaug Taluk, Raigad district of Maharashtra on January, 2014;
Tata Communications Payment Solutions launched the Indias first ever network of white label
ATMs called Indicash in June 2013 at Chandrapada in Thane district of Maharashtra.
What are White label ATMs?
ATMs set up and run by non-banking entities are called White Label ATMs (WLAs).
Customers from any bank can deposit or withdraw money from such ATMs. They will provide
ATM services to customers of all banks. In June 2012, the Reserve Bank of India (RBI) has
permitted non-banking companies to set up ATMs, referred to as WLAs, to increase the
penetration of the facility across the country.
Objective of permitting non-banks to operate WLAs: To enhance the penetration of the
machines in semi-urban and rural areas, where bank-run ATMs are a few or none. The move is
in line to the governments objective of achieving financial inclusion.
Excerpts of the RBIs policy to set up & operate White label ATMs:
Non-bank entities would be permitted to set up WLAs in India, after obtaining authorisation
from RBI under the Payment and Settlement Systems (PSS) Act 2007.
As per the Payment and Settlement Systems Act 2007, the non bank entities should have
a minimum net worth of Rs 100 crore & have to apply to RBI for seeking approval.
Every WLA operator is required to tie up with a sponsor bank, which takes care of cash
operations, dispute resolution and regulatory reporting aspects.
Being non-bank owned ATMs, the guidelines on five free transactions in a month for using
other bank ATMs would not be applicable for transactions affected on the WLAs.
WLA operators can also earn extra revenue through advertisements and value-added services.
Further, it allows autonomy of operators on deciding locations and creating their own brand
with fixed annual targets mandated by RBI.
White-label ATMs accepts only cards issued by banks and does not accept cash deposits.
Justice B.N.Srikrishna Committee recommendations to be
reviewed by a 9-member IRDA panel
The Insurance Regulatory and Development Authority (IRDA) set up a 9-member panle to
review the 14 non-legislative recommendations made by the Financial Sector Legislative
Reforms Commission (FSLRC).
The role of panel is to:
Examine the extant legislative and regulatory framework in compliance 14 Non-Legislative
Recommendations (NLRs).
Identify the gaps and possible improvements in the extant framework vis-a-vis the 14 NLR.
Suggest changes or modifications to the extant framework in compliance with the 14 NLR.
About Financial Sector Legislative Reforms Commission (FSLRC) report:
Headed by former Justice B.N.Srikrishna
Contains 12 key proposals and these do not require legislative changes.
The financial sector regulators will take serious action with high penalties on violators and time
bound investigations that would act as deterrents and improve consumer protection.
The proposals that called for penalties discourage the future violations as a multiple of the
illegitimate gain of violations.
Regulators should also put in place internal manuals on conducting investigations. The
investigating officer would be kept different from the officer who would decide the penalty for
the crime.
New Maharashtra law for recovery of bad loans
Maharashtra government appointed a committee to bring a legislation that will improve the
recovery of loans given as part of government schemes. The proposed legislation will create a
mechanism for forceful recoveries of loans given under government schemes. It will not be
applicable to agricultural and other loans.
What are Non performing Assets (NPA)?
Any asset, including a leased asset, becomes a non performing when it ceases to generate income
for the bank are called Non Performing Assets or Bad loans. As per RBI guidelines, NPA is
defined as under:
Non performing asset (NPA) is a loan or an advance where:
Interest and/ or installment of principal remain overdue for a period of more than 90 days in
respect of a term loan.
The account remains out of order in respect of an Overdraft/Cash Credit (OD/CC).
The bill remains overdue for a period of more than 90 days in the case of bills purchased and
discounted.
The installment of principal or interest there on remains overdue for two crop seasons for short
duration crops.
The installment of principal or interest there on remains overdue for one crop season for long
duration crops.
The amount of liquidity facility remains outstanding for more than 90 days, in respect of a
securitization transaction undertaken in terms of guidelines on securitization dated February 1,
2006.
In respect of derivative transactions, the overdue receivables representing positive mark-to-
market value of a derivative contract, if these remain unpaid for a period of 90 days from the
specified due date for payment.
Net NPA = Gross NPA (Balance in Interest Suspense account + DICGC/ECGC claims
received and held pending adjustment + Part payment received and kept in suspense account +
Total provisions held).
Indian Rupee to be legal tender in Zimbabwe
The Reserve Bank of Zimbabwe approved domestic trading in the
Chinese Yuan (CYN), Indian Rupee (INR), Japanese Yen (JPY) and Australian Dollar (AUD)
and soon these currencies will become legal tender.
The central bank of Zimbabwe advised the exporters and the general transacting public that in
addition to open accounts denominated in Botswana Pula, British Sterling Pound, Euro, South
African Rand, United States Dollar, individuals and corporate can also open accounts
denominated in the Australian Dollar (AUD), Chinese Yuan (CYN), Indian Rupee (INR) and
Japanese Yen (JPY).
Till now, Zimbabwe accepted the US dollar and the South African rand as the main legal tender,
which helped the country to stabilize the economy after world-record inflation threw it into a
tailspin. The addition of four Asian currencies to the international currencies stands to nine
which are circulating in the country.
Note: Zimbabwe was forced to abandon its own currency in 2009 amid chronic hyper-inflation
and a deep economic crisis and introduced a basket of foreign currencies dominated by the US
dollar.
Govt. launched India Inclusive Innovation Fund (I.I.I.F.)
January 31, 2014 No comments
The National Innovation Council (NIC), in partnership with the Ministry of Micro, Small and
Medium Enterprises (MSME), launched the India Inclusive Innovation Fund (IIIF). IIIF is an
impact investment fund that will invest in ventures catering to the countrys poor. It is an
autonomous Rs. 500-crore fund, with the Union Government contributing 20 %. The balance
will come from public sector banks, financial institutions, insurance companies,
multilateral/bilateral development agencies, Indian & global corporates.
About India Inclusive Innovation Fund (I.I.I.F.)
Objective: To expand the corpus to Rs 5,000 crores over the next 24 months and to provide
modest financial returns, while ensuring significant social impact to the community.
Focus on: healthcare, food and nutrition, agriculture, education, energy, financial inclusion,
environment, technology as an enable.
Will be registered under SEBIs Alternative Investment Fund Category I guidelines with an initial
corpus of Rs 500 crore, with the Ministry of MSME committing to 20% (Rs 100 crore) and the
balance being given by banks, insurance companies, overseas financial and development
institutions.
Help to create a new class of capital or venture capital to set up and scale entrepreneurial skills
and innovation in the firms delivering goods and service to the poorest of the country.
Combined innovation and the dynamism of enterprise to solve the problems of citizens at the
base of the economic pyramid in India.
The Fund will invest in innovative ventures that are scalable, sustainable and profitable.
It will address social needs of less privileged citizens in areas viz. healthcare, food, nutrition,
agriculture, education / skill development, energy, financial inclusion, water, sanitation,
employment generation, etc.
PAN Application procedure Changed from February 3, 2014
The procedure for PAN allotment process will undergo a change with effect from February 3,
2014.
Applicants for Permanent Account Numbers (PAN) will have to produce original documents of
proof of identity, address and date of birth for verification at the time of applying.
Copies of proof of identity, address and date of birth attached with PAN application forms will
be checked against their original documents when applications are submitted at PAN facilitation
centres.
Original documents shall not be retained by the PAN Facilitation Centres and will be returned
back to the applicant after verification.
An applicant can obtain a PAN card by paying a fee of Rs 85, plus service tax, in cash at the
facilitation centre.
Note: PAN is a 10-digit alphanumeric number issued in the form of a laminated card by the
Income Tax department to any person or entity applying for it or to whom the department has
allotted a number without an application.
India Post to install 3000 ATMs,1.35 lakh mirco-ATMs by
Sept 15, 2014
In a bid to start a commercial banking, India Post has drawn a plan to install approx 3,000 ATMs
and 1.35 lakh micro-ATMs at the post offices across the country for savings account holders by
September 2015. On this plan, India Post worked with software giant Infosys.
Via interoperability, India Post will join the National Financial Switch, which will benefit India
Post account holders to transact at the banks ATMs and vice versa.
The micro ATMs will be handheld devices to be operated at the post office level while the ATM
will be similar to the one operated by any commercial bank.
The ATMs can be used only by 26 crore savings account-holders who save with the postal
department. Though, its rough idea that within six months of the launch, India Post will get the
interoperability permission from the Reserve Bank of India(RBI).
The postal department has 1.55 lakh post offices and more than 90 % are in villages, offers the
savings account to people across the country and pays an interest of 4 % per annum for such
deposits. The account offers cheque facility at present.
Postal savings are worth around Rs 6.05 trillion, which is half the savings in the largest lender SBI
and more than double that of the largest private sector lender ICICI Bank.
About India Post
Founded: April 1, 1774
Headquarters: New Delhi, Delhi.
Director General: Smt. Padmini Gopinath
The Department of Posts comes under the Ministry of Communications and Information
Technology.
Highest post office in the world: Hikkim, Himachal Pradesh(4,700 m).
Primary Function: To collect, process, transmit and deliver the mails.
Offers Money Remittance Services: Money Order, Electronic Money Order, Instant Money
Order, etc.
Offers Premium Products: Speed Post, Business Post, Greeting Post, etc.
Offers Financial services: National Savings Certificates, the Public Provident Fund, savings-
bank accounts, monthly-income plans, senior-citizens savings plans, time-deposit accounts, etc.
Padma Awards 2014
President Pranab Mukherjee announced the names of Recipients of this years Padma awards.
He approved conferment of 127 Padma Awards including one duo case (counted as one). Padma
Awards, the countrys highest civilian awards, are conferred in three Categories viz. Padma
Vibhushan, Padma Bhushan and Padma Shri. The list comprises two Padma Vibhushan, 24
Padma Bhushan and 101 Padma Shri Awardees.
2014 Padma Vibhushan Awards :
These are awarded for exceptional and distinguished service. This year both the awardees were
from Maharashtra:
1. Dr. Raghunath A. Mashelkar for Science and Engineering
2. Shri B.K.S. Iyengar for Yoga
2014 Padma Bhushan Awards:
These are awarded for distinguished service of high order:
1. Prof. Gulam Mohammed Sheikh, Art Painting, Gujarat
2. Begum Parveen Sultana, Art Classical Singing, Maharashtra
3. Shri T.H. Vinayakram, Art Ghatam Artist, Tamil Nadu
4. Shri Kamala Haasan, Art-Cinema, Tamil Nadu
5. Justice Dalveer Bhandari, Public Affairs, Delhi
6. Prof. Padmanabhan Balaram, Science and Engineering, Karnataka
7. Prof. Jyeshtharaj Joshi, Science and Engineering, Maharashtra
8. Dr. Madappa Mahadevappa, Science and Engineering, Karnataka
9. Dr. Thirumalachari Ramasami, Science and Engineering, Delhi
10. Dr. Vinod Prakash Sharma, Science and Engineering, Delhi
11. Dr. Radhakrishnan Koppillil, Science and Engineering, Karnataka
12. Dr. Mrityunjay Athreya, Literature and Education, Delhi
13. Ms. Anita Desai, Literature and Education, Delhi
14. Dr. Dhirubhai Thaker, Literature and Education, Gujarat
15. Shri Vairamuthu Ramasamy Thevar, Literature and Education, Tamil Nadu
16. Shri Ruskin Bond, Literature and Education, Uttarakhand
17. Shri Pullela Gopichand, Sports Badminton, Andhra Pradesh
18. Shri Leander Paes, Sports Tennis, Maharashtra
19. Shri Vijayendra Nath Kaul, Civil Service, Delhi
20. Late Justice Jagdish Sharan Verma, Public Affairs, Uttar Pradesh #
21. Late Dr. Anumolu Ramakrishna, Science and Engineering, Andhra Pradesh #
22. Prof. Anisuzzaman, Literature and Education, Bangladesh*
23. Prof. Lloyd I. Rudolph and Prof. Susanne H. Rudolph, Literature and Education, USA*$
24. Dr. (Smt.) Neelam Kler, Medicine Neonatology, Delhi

2014 Padma Shri Awards:
These are awarded for distinguished service in any field:
1. Shri Mohammad Ali Baig, Art Theatre, Andhra Pradesh
2. Ms. Nayana Apte Joshi, Art, Maharashtra
3. Shri Musafir Ram Bhardwaj, Art Instrumental Music Pauna Manjha, Himachal Pradesh
4. Ms. Sabitri Chatterjee, Art Film, West Bengal
5. Prof. Biman Bihari Das, Art Sculptor, Delhi
6. Shri Sunil Das, Art Painting, West Bengal
7. Smt. Elam Endira Devi, Art Manipuri Dance, Manipur
8. Shri Vijay Ghate, Art Instrumental Music Tabla, Maharashtra
9. Smt Rani Karnaa, Art Kathak, West Bengal
10. Shri Bansi Kaul, Art Theatre, Jammu & Kashmir
11. Ustad Moinuddin Khan, Art Instrumental Music Sarangi Player, Rajasthan
12. Ms. Geeta Mahalik, Art Odishi Dance, Delhi
13. Shri Paresh Maity, Art Painting, Delhi
14. Shri Ram Mohan, Art Film Animation, Maharashtra
15. Shri Sudarsan Pattnaik, Art Sand Artist, Orissa
16. Shri Paresh Rawal, Art Cinema and Theatre, Maharashtra
17. Shri Wendell Augustine Rodricks, Art Fashion Designing, Goa
18. Prof. Kalamandalam Sathyabhama, Art Mohini Attam, Kerala
19. Shri Anuj (Ramanuj) Sharma, Art Performing Art, Chhattisgarh
20. Shri Santosh Sivan, Art Film, Tamil Nadu
21. Ms. Supriya Devi, Art-Bengali Cinema, West Bengal
22. Ms. Sooni Taraporevala, Art- Script Writing, Maharashtra
23. Ms. Vidya Balan, Art-Cinema, Maharashtra
24. Smt. Durga Jain, Social Work, Maharashtra
25. Dr. Rama Rao Anumolu, Social Work, Andhra Pradesh
26. Dr. Brahm Dutt, Social Work, Haryana
27. Shri Mukul Chandra Goswami, Social Work, Assam
28. Shri J.L. Kaul, Social Work, Delhi
29. Shri Mathurbhai Madhabhai Savani, Social Work, Gujarat
30. Shri Tashi Tondup, Public Affairs, Jammu and Kashmir
31. Dr. Hasmukh Chamanlal Shah, Public Affairs, Gujarat
32. Shri Sekhar Basu, Science and Engineering, Maharashtra
33. Shri Madhavan Chandradathan, Science and Engineering, Kerala
34. Prof. Sushanta Kumar Dattagupta, Science and Engineering, West Bengal
35. Dr. Ravi Bhushan Grover, Science and Engineering, Maharashtra
36. Prof. Eluvathingal Devassy Jemmis, Science and Engineering, Karnataka
37. Shri Ramkrishna V. Hosur, Science and Engineering, Maharashtra
38. Dr. Ajay Kumar Parida, Science and Engineering, Tamil Nadu
39. Dr. Malapaka Yajneswara and Satyanarayana Prasad, Science and Engineering, Andhra Pradesh
40. Shri Kiran Kumar Alur Seelin, Science and Engineering, Gujarat
41. Dr. Brahma Singh, Science and Engineering, Delhi
42. Prof. Vinod Kumar Singh, Science and Engineering, Madhya Pradesh
43. Dr. Govindan Sundararajan, Science and Engineering, Andhra Pradesh
44. Ramaswamy R. Iyer, Science and Engineering, Delhi
45. Dr. Jayanta Kumar Ghosh, Science and Engineering, West Bengal
46. Shri Ravi Kumar Narra, Trade and Industry, Andhra Pradesh
47. Shri Rajesh Saraiya, Trade and Industry, Maharashtra
48. Ms. Mallika Srinivasan, Trade and Industry, Tamil Nadu
49. Shri Pratap Govindrao Pawar, Trade and Industry, Maharashtra
50. Dr. Kiritkumar Mansukhlal Acharya, Medicine Dermatology, Gujarat
51. Dr. Balram Bhargava, Medicine Cardiology, Uttar Pradesh
52. Prof. (Dr.) Indra Chakravarty, Medicine Health & Hygiene, West Bengal
53. Dr. Ramakant Krishnaji Deshpande, Medicine Oncology, Maharashtra
54. Prof. (Dr.) Pawan Raj Goyal, Medicine Chest Disease, Haryana
55. Prof. Amod Gupta, Medicine Opthalmology, Haryana
56. Prof. (Dr.) Daya Kishore Hazra, Medicine, Uttar Pradesh
57. Prof. (Dr.) Thenumgal Poulose Jacob, Medicine Vascular Surgery, Tamil Nadu
58. Prof. (Dr.) Shashank R. Joshi, Medicine Endocrinology, Maharashtra
59. Prof. Hakim Syed Khaleefathullah, Medicine Unani Medicine, Tamil Nadu
60. Dr. Milind Vasant Kirtane, Medicine ENT Surgeory, Maharashtra
61. Dr. Lalit Kumar, Medicine oncology, Delhi
62. Dr. Mohan Mishra, Medicine, Bihar
63. Dr. M. Subhadra Nair, Medicine Gynecology, Kerala
64. Dr. Ashok Panagariya, Medicine Neurology, Rajasthan
65. Dr. Narendra Kumar Pandey, Medicine Surgery, Haryana
66. Dr. Sunil Pradhan, Medicine Neurology, Uttar Pradesh
67. Dr. Ashok Rajgopal, Medicine Orthopaedics, Delhi
68. Dr. Kamini A. Rao, Medicine Reproductive Medicine, Karnataka
69. Dr. Sarbeswar Sahariah, Medicine Surgery, Andhra Pradesh
70. Prof. Om Prakash Upadhyaya, Medicine, Punjab
71. Prof. (Dr.) Mahesh Verma, Medicine Dental Science, Delhi
72. Dr. J.S. Titiyal, Medicine- Opthalmology, Delhi
73. Dr. Nitish Naik, Medicine- Cardiology, Delhi
74. Dr. Surbrat Kumar Acharya, Medicine- Gastroenterology, Delhi
75. Dr. Rajesh Kumar Grover, Medicine-Oncology, Delhi
76. Dr. Naheed Abidi, Literature and Education, Uttar Pradesh
77. Prof. Ashok Chakradhar, Literature and Education, Delhi
78. Shri Chhakchhuak Chhuanvawra, Literature and Education, Mizoram
79. Shri Keki N. Daruwalla, Literature and Education, Delhi
80. Prof. Ganesh Narayandas Devi, Literature and Education, Gujarat
81. Prof. Kolakaluri Enoch, Literature and Education, Andhra Pradesh
82. Prof. (Dr.) Ved Kumari Ghai, Literature and Education, Jammu and Kashmir
83. Smt. Manorama Jafa, Literature and Education, Delhi
84. Prof. Rehana Khatoon, Literature and Education, Delhi
85. Dr. Waikhom Gojen Meeitei, Literature and Education, Manipur
86. Shri Vishnu Narayanan Namboothiri, Literature and Education, Kerala
87. Prof. Dinesh Singh, Literature and Education, Delhi
88. Dr. (Mrs.) P. Kilemsungla, Literature and Education, Nagaland
89. Ms. Anjum Chopra, Sports Cricket, Delhi
90. Ms. Sunil Dabas, Sports Kabbadi, Haryana
91. Shri Love Raj Singh Dharmshaktu, Sports Mountaineering, Delhi
92. Ms. Dipika Rebecca Pallikal, Sports Squash, Tamil Nadu
93. Shri H. Boniface Prabhu, Sports Wheelchair Tennis, Karnataka
94. Shri Yuvraj Singh, Sports Cricket, Haryana
95. Smt. Mamta Sodha, Sports Mountaineering, Haryana
96. Ms Parveen Talha, Civil Service, Uttar Pradesh
97. Late Dr. Narendra Achyut Dabholkar, Social Work, Maharashtra#
98. Shri Ashok Kumar Mago, Trade and Industry, USA*
99. Dr. Siddharth Mukherjee, Medicine-Oncology, USA*
100. Dr. Vamsi Mootha, Medicine Biomedical Research, USA*
101. Dr. Sengaku Mayeda, Literature and Education, Japan*

The Padma Awards are conferred by the President of India at a function held at
Rashtrapati Bhawan around March/ April every year.
Note: * indicates awardees in the category of Foreigners / NRIs/ PIOs.
# indicates awardees in the posthumous category.
$ indicates one duo case. (treated as one award.)
UoC became the first public university in the world to accept
Bitcoin in tuition fees
The University of Cumbria in northwest England became the first public university in the world
to accept the online currency Bitcoin as payment for fees. The acceptance of Bitcoin will initially
be limited to the two programmes that address complementary currencies.
These are the Certificate of Achievement in Sustainable Exchange, which will be taught from the
universitys London campus in July 2014, and the Postgraduate Certificate in Sustainable
Leadership, which will be taught from its Lake District campus, in June 2014.
Both courses are run by the new Institute for Leadership and Sustainability (IFLAS).
The university uses the system Bitpay to process any payments. Bitpay is a US-based company
that enables thousands of merchants to accept Bitcoin.
Due to the risk of currency volatility, the university advised students against purchasing Bitcoin
in order to pay their fees. They should only use this facility if they already have bitcoin, or can
receive bitcoin donations in order to pay their fees. The acceptance of Bitcoin by university is for
trial basis.
What is Bitcoin?
Bitcoin is an online currency and payment system which enables the international transmission
of funds. It is a distributed peer-to-peer digital currency that functions without the inter-
mediation of any central authority. Bitcoin is also called a cryptocurrency since it is
decentralized and uses cryptography to prevent double-spending, a significant challenge inherent
to digital currencies.
RBI reviewed norms on restructuring of advances by NBFCs
The Reserve Bank of India (RBI) issued norms for loans restructured by Non-Banking Finance
Companies (NBFCs), to create a level-playing field between NBFCs and other commercial
banks. The new norms are based on the recommendations of the Mahapatra committee. Till
now, there were no specific guidelines laying down the rules of restructuring for NBFCs.
Guidelines of new norms
Provide more flexibility to NBFCs to deal with their stressed loans but make it mandatory for
them to set aside a substantial amount of provisions to cover restructured loans.
NBFCs, like banks, will have to set aside a 5% provision against restructured loans. For existing
stock, the provisions will go up to 5% in a phased manner by March 2017.
Presently, a majority of the NBFCs are not allowed to accept public deposits and most of their
funding needs are met by borrowing from commercial banks.
An infrastructure loan given by an NBFC will become a Non-Performing Asset (NPA), if the
project fails to take off commercially within two years from the original date of commencement
of commercial operations (DCCO), unless it is restructured and becomes eligible for classification
as a standard asset.
If the loan is given to a non-infra project, it will become an NPA if the borrower fails to
commence commercial operations within one year from the original DCCO, even if it is regular
as per record of recovery, unless the loan is restructured.
NBFCs will have to make a provisioning of 0.25% of the loan amount for such loans.
For commercial real estate loans, an extension of DCCO will not be considered as restructuring if
the revised DCCO falls within a period of one year from the original date of commercial
commencement. Such loans will be treated as standard assets without attracting higher
provisioning.
RBI likely to hold interest rates steady while announcing the
monetary policy on January 28, 2014
Reserve Bank of India (RBI) will probably hold interest rates steady while announcing the
monetary policy on January 28, 2014.
On January 28, 2014 the Reserve Bank of India (RBI) will release the third quarter review of
monetary policy for the fiscal 2013-14 and the experts seem to be in consensus with regard to
the possibility of RBI holding monetary policy rates.
Dr. Raghuram Rajan will present the fourth credit policy since he took over as the Governor of
the RBI in September 2013. In his first two policies, he has raised the repo rate twice each by 25
basis points. But, in the third policy, he kept policy rates unchanged.
The current repo rate stands at 7.75 %.
The Wholesale Price Index (WPI) inflation stood to its five months low at 6.16 % in December
2013.
While the inflation was 7.52 % in November 2013, it stood at 7.31 % in the corresponding month
last year (December 2012). Though, still inflation is above the comfort zone of RBI (around 5 %).
Similarly, due to the lower food prices, the consumer price index (CPI) inflation declined to 9.87
% in December when compared to a figure of 11.16 % in November 2013. The food inflation fell
sharply to 13.7 % from 19.9 percent in November 2013. Although the retail inflation (measured
by CPI) has eased a bit yet it is still hovering near the double digit mark.
RBI: Currency notes issued before 2005 to be withdrawn
from circulation
The Reserve Bank of India (RBI) has decided to withdraw all currency notes issued prior to
2005, including Rs 500 and Rs 1,000 denominations. As per the RBI, pre-2005 notes can be
identified easily as these notes do not have the year of printing mentioned on them. The year
of printing in a small font is visible at the middle of the bottom row in notes issued after 2005.
After March 31, 2014, RBI will completely withdraw all bank notes from circulation issued prior
to 2005. From April 1, 2014, the public will be required to approach banks for exchanging these
notes. The facility will be open in all banks till further notice.
As per the apex bank, from July 1, the non-customers who want to exchange more than 10 pieces
of Rs.500 and Rs.1, 000 notes will have to provide proof of identity and residence to the bank
branch in which she/he wants to exchange the notes.
However, there is no need to panic as the central bank has assured that these notes will continue
to be legal tender even after March 2014, though people are advised to initiate the process of
exchanging notes at bank branches as per their convenience.
At present, currency notes in denominations of Rs 5, Rs 10, Rs 20, Rs 50, Rs 100, Rs 500 and Rs
1,000 are issued.
Why RBI has decided to withdraw pre-2005 currency notes?
The key reason is security. As per RBI, pre-2005 notes have fewer security features as compared
to newer currency notes. The more the security features on a currency, the lesser will be the
chances of its counterfeiting.
Reasons for withdrawing pre-2005 notes from circulation:
1. Security - pre-2005 notes have fewer security features as compared to 2005 and post-2005
notes. Thus, lesser will be the chances of its counterfeiting newer currency notes. Most fake
currency notes being pumped in Indian economy were copies of pre-2005 notes.
2. Flushing out black money - The spillover effect of the RBIs decision will be to flush out black
money. Money has value only as long as it is a medium of exchange and store of value. It loses
its value when it ceases to be a medium of exchange.
3. A disincentive for cash hoarders With the RBIs announcement, currency hoarders will be left
with no option but to liquidate their unaccounted holdings by spending or exchanging them.
Thus, this is a well thought out exercise by the RBI to capture the money flows into the system
and also help flush out counterfeit notes.
4. International standard practice - It is an international standard practice to remove old series
notes.
Will all notes before 2005 stop being a legal tender/ money after April 1, 2014?
No. The pre-2005 currency notes will remain as legal tender (thus, valid for all monetary
transactions) till any further notice by RBI regarding this. However, it is expected that some day
in the future, RBI may declassify pre-2005 currency notes as legal tender.
How can one exchange pre-2005 currency notes?
One c an simply walk into any banks branch in India and exchange these notes over the counter.
Also, RBI would be coming out with a detailed procedure that banks in India will have to follow
in this regard.
One can deposit the pre-2005 currency notes into his/ her bank account at bank branches or via
the ATMs and then they will be automatically replaced.
For how long can one exchange the pre-2005 currency notes?
The pre-2005 currency notes can be exchanged even now, however, the special drive to
exchange the pre-2005 currency notes with new notes will start by banks in India from April 1,
2014.
Has RBI set any limit on the number of pre-2005 currency notes that can be exchanged?
There is no such set limits by RBI in this regard as of yet. However, the standard norms in
dealing with cash- like the requirement of PAN Card by an individual for any cash transaction of
above Rs 50,000 will apply. Any transaction by above Rs 10 lakh will be reported to the
Financial Intelligence Unit (FIU) under the Prevention of Money Laundering Act. If one has 20-
30 pre-2005 currency notes or even more, they can be changed over the counter.
Does one needs any documents for exchanging the pre-2005 currency notes with the new ones?
From July 1, 2014, any person who comes to a bank for exchanging more than 10 pieces of Rs.
500 and Rs. 1,000 notes will have to produce a proof of identity and residence to the bank . If
(s)he is an account holder of the bank, there is no need of any such proof. RBI will be soon
coming out with a detailed procedure in this regard.
The standard norms in dealing with cash- like the requirement of PAN Card by an individual for
any cash transaction of above Rs 50,000 will apply. Any transaction by above Rs 10 lakh will be
reported to the Financial Intelligence Unit (FIU) under the Prevention of Money Laundering Act.
If one has 20-30 pre-2005 currency notes or even more, they can be changed over the counter.
If one finds that the pre-2005 currency note that one wants to exchange is a fake note, what will
happen?
If such a case happens then the Banks will follow regular RBI guidelines i.e. if there are 5 or
more fake notes in one transaction, an FIR has to be lodged.
How to identify pre-2005 currency notes?
All notes printed since 2005 have the year of printing in the middle of the bottom strip on the
reverse side (the side that doesnt have the Gandhiji pic). All pre-2005 notes can be identified
easily as these notes do not have the year of printing mentioned on them.
A Rs 500/- Currency note issued after 2005 (With year of Printing)

A pre-2005 Rs 500/- Bank Note (Without year of Printing)

Note: The RBI had gone in for demonetization only once in 1978 when notes of Rs. 1000, Rs.
5000 and Rs. 10,000 were withdrawn. Afterwards, in 1980 a complete new set of notes were
brought followed by October 1987 when a new note a 500 was introduced.
LICs stake in Axis Bank crosses 10%
The stake of countrys largest life insurer Life Insurance Corporation of India (LIC) in Axis
Bank crossed 10% after it picked up the private lenders shares through open market
transactions.
LIC is one of the promoters in Axis Bank, bought 52.07 lakh shares or over 1 % of paid-up capital
worth Rs 625.64 crore between September 2013 and January 21, 2014.
With this acquisition, LICs stake in the private lender rose to 10.44% from 9.33 %. The total
number of shares of Axis Bank with LIC have risen to 4.9 crore.
Shares of Axis Bank trading at Rs 1,184.85 per unit down 0.36 % over their previous close on the
BSE.
Specified Undertaking of UTI (SUUTI), one of the promoters of Axis Bank, has appointed three
merchant bankers for sale of its stake in the bank.
The merchant bankers selected for the stake sale: J P Morgan, Citigroup Global Markets and JM
Financial Consultants.
The promoters of the Axis bank: SUUTI, General Insurance Corporation, New India Assurance
and National Insurance Company.
Note: SUUTI, formed in 2003 is an offshoot of former UTI, holds 23.58% in the countrys third
largest private sector lender Axis Bank.
Urjit R Patel Committee suggests adoption of new CPI for
Anchoring Monetary Policy
The Expert Committee to Revise and Strengthen the Monetary Policy Framework, headed
by RBI Deputy Governor Urjit R Patel submitted its report to RBI Governor Dr.
Raghuram Rajan.
Recommendations of the Urjit R Patel committee:
RBI should adopt the new Consumer Price Index (CPI) for anchoring the monetary policy.
Set the inflation target at 4% with a band of +/- 2% around it.
Monetary policy decision making should be vested in a Monetary Policy Committee (MPC) that
should be headed by the Governor.
The two schemes- Dependence on Market Stabilisation Scheme (MSS) and Cash Management
Bills (CMBs) may be discontinue and the government debt and cash management must be
taken over by the governments Debt Management Office.
All fixed income financial products should be treated on par with the bank deposits for the
purposes of taxation and TDS.
Detachment of Open Market Operations (OMOs) from the fiscal operations and instead linked
solely to the liquidity management. OMOs should not be used for managing yields on
government on government securities.
Main objective of the committee was to recommend what needs to be done to revise and
strengthen the current monetary policy framework with a view to making it transparent and
predictable.
Dexter: A virus in the Indian Online Banking System
detected by CERT
The Computer Emergency Response Team (CERT-India) detected a black private
information stealing virus in the Indian online banking transactions space.
The virus is especially more threatening for the users of credit cards who make payments at the
shopping counters.
The virus named Dexter, black POS, memory dump and grabber can acquire 7 false names
when infecting a system and once it is successful in breaking the security protocols of a Point of
Sale (POS) terminal, it steals confidential data like card holders name, account number,
expiration date, CVV code and other discretionary information which could lead to financially
compromising and phishing attacks on the card at a later stage.
Recently, RBI has made it mandatory for debit card holders to punch in their PIN numbers every
time they use the card to minimize frauds. The order was passed following the spread of Dexter
virus of Trojan Family which was detected at the Point of Sale (POS).
About Indian Computer Emergency Response Team (CERT-In)
Formed: 19 January 2004.
Headquarters:New Delhi.
Nodal department under Ministry of Communications and Information Technology.
Objective: To protect Indian cyberspace and software infrastructure against destructive and
hacking activities.
Issue guidelines, advisories, vulnerability notes and whitepapers regarding to information
security practices, procedures, prevention, response and reporting of cyber security incidents.
WEF 2014: Swiss banks devise new cash strategies to lure
rich clients
The 44
th
World Economic Forum (WEF) annual meeting at Davos, Switzerland from January
22 to 25, 2014.
The event sets the key priorities and challenges for the world to tackle in 2014.
Theme: The Reshaping of the World: Consequences for Society, Politics and Business.
Objective: To develop the insights, initiatives and actions necessary to respond to current and
emerging challenges.
Approx 40 heads of state or government among more than 2,500 global leaders from over 100
countries are attending the WEF viz. UK, Australia, Japan, Iran, India, Israel, Brazil, Italy,
Mauritius, Republic of Korea , etc.
From India a 125-member delegation including senior ministers and top corporate leaders are
attending the meeting.
During the summit, in addition to economic issues and hardcore business talks, problems in
Syria, Irans possible return to global diplomatic tables, future of euro zone are expected to hog
the limelight.
The Swiss bank has put up innovative ideas to attract rich clients from India and other countries
by providing services like cash courier as well as by offering large metal vaults to store currency
notes, gold, artworks and other valuables. Also, on the platter is advice to put money in virtual
currencies, especially in the wake of Bitcoin ATMs becoming operational in Zurich.
The World Economic Forum is an independent international organization committed to
improving the state of the world by engaging business, political, academic and other leaders of
society to shape global, regional and industry agendas.
P.J.Nayak Committee set up by RBI to review governance of
bank boards
The Reserve Bank of India (RBI) set up an 8 -member panel to review governance of board of
banks and examine fit and proper criteria for directors, including their tenure. The Committee
will be chaired by former Axis Bank Chairman P J Nayak.
The panel will:
Review the regulatory compliance requirements of banks boards in India, and estimate that
what could be intellectual and where requirements needed to be raised.
Analyze representation on bank boards to see whether the boards have appropriate mix of
capabilities and necessary independence to govern the institution.
Investigate possible conflicts of interest in board representation, including among owner
representatives and regulators.
Examine the working of bank boards, including whether adequate time is devoted to issues of
strategy, growth, governance and risk management.
Review central bank regulatory guidelines on bank ownership, ownership concentration and
representation in the board.
The panel is set to examine board compensation guidelines, and any other issue relevant to the
functioning of bank boards and the governance they exercise. The Committee is expected to
submit its report within three months from the date of its first meeting.
Mr. Anand Sinha, Deputy Governor of RBI retired
RBIs Deputy Governor Dr. Anand Sinha, who was looking after the new
bank licence process, retired. The procedure for granting licences to the private sector is yet to be
completed.
Dr. Sinha was in charge of the Department of Banking operations and Development (DBoD)
Was also handling the long process of inviting and selecting applicants for new bank licences.
It is believed that Dr. Sinha will be appointed as an adviser to the apex bank for a period of 3
months so that his expertise can be utilised for short-listing of applicants for bank licences.
His portfolio has been allocated to other 3 Deputy Governors K C Chakrabarty, H R Khan and
Urjit Patel., till his successor is appointed.
Note: A deputy governor in RBI can be appointed for a maximum of 5 years or till the age of
62, whichever is earlier.
Bimal Jalan panel on new bank licences to meet on Feb 10,
2014
The Bimal Jalan panel which is scrutinizing applications for new bank licences will hold a
meeting on February 10, 2014.
Which are the entities in the race for bank licences?
Initially, 26 entities expressed interest in entering the banking field. But, Tata Sons, the holding
company of the Tata group, withdrew its application in November 2013 leaving 25 players.
Public sector units: India Post and IFCI, Private sector: Anil Ambani group, Aditya Birla, Bajaj
Finance, Muthoot Finance, Religare Enterprises, etc have applied for the licences.
The last two entities to get banking licences from RBI in 2003-04 : Kotak Mahindra Bank and
Yes Bank.
At present, India has 27 public sector banks, 22 private sector banks and 56 regional rural banks.
RBIs Guidelines for New Bank Licenses:
The RBI issued guidelines for licensing of new banks on February 22, 2013 and issued
clarifications in June 2013.
The business model of the applicant would be an important criterion for processing the
application and the model should provide for financial inclusion.
Bank should have 49% caps on foreign holding in new banks.
New banks are required to establish at least 25% of their branches in places with less than
10,000 populations.
Existing NBFCs, if considered eligible, may be permitted to promote new banks or convert
themselves into banks.
Private corporate and public sector entities must have 10 years experience to be eligible to
apply for new license. The initial paid-up capital for new banks has been set at Rs 500 crore.
Note: Mr. Bimal Jalan, former Reserve Bank of India (RBI) governor, heads the panel on new
bank licenses.
nsurance broking model to be compulsory for banks soon:
IRDA
Soon, the Insurance Regulatory and Development Authority (IRDA) may make the broking
model for banks compulsory if significant traction is not achieved in Insurance penetration.
Data from the IRDA shows that at present, India stands much below the global average of 6.5 %
(of GDP) in insurance spread at 3.96 %.
As per IRDA, the decision with regard to making broker model for banks rather than agent
model will be taken if agent model does not see considerable traction in the next two to three
months.
The banks are selling insurance products to their customers only. Thus, they must act as brokers
to represent multiple insurance and give the best option to the customer rather than seek to sell
a particular companys product(s).
As an insurance broker, a bank is liable to consumers, with respect to an insurance policy, unlike
a corporate agent. The liability could be high as a bank will sell the products of multiple insurers.
Note: On the subject of broking model for banks, in November 2013, the RBI had decided to
permit banks to undertake insurance broking business departmentally through draft guidelines.
And then in December 2013, the Finance Ministry in a circular asked public sector banks to take
up insurance broking by January-end in view of the meager insurance penetration levels in the
country, especially in rural areas.
Federal Bank to hire 3,000 employees over next three years
The private sector bank, Federal Bank plans to recruit about 3,000 employees and add 300
branches in the next three years.
As per Federal Bank Managing Director and CEO, Shyam Srinivasan, in the last three years,
340 branches were added across the country and they intend to add 80-100 branches every year.
Currently, the bank has about 10,126 employees.
About Federal Bank
Headquarters: Aluva, Kochi, Kerala
Chairman: Prof Abraham Koshy
Its a private sector bank, offers a facility through which devotees can provide offerings to
temples, churches and mosques through their federal bank accounts.
Tied up with white label ATM facilities of Tata group, Muthoot Finance and Bank Tech.
The banks technology product Fed book, which enables a customer to view transactions for
the past several years, was a big hit with customers.
RBI permits foreign buyers to invest in South Indian Bank
The Reserve Bank of India (RBI) has given its permission to foreign investors to buy shares in
South Indian Bank. The restrictions placed on the purchase of shares of the South India Bank are
withdrawn with immediate effect. At this point, equity shares of South Indian Bank can be
purchased through primary market and stock exchanges.
Why RBI permitted foreign investors to buy shares in South Indian Bank?
Under the existing FDI policy, the foreign share holding through Foreign Institutional Investors
(FIIs), Non-Resident Indians ( NRIs), Persons of Indian Origin (PIOs), Foreign Direct
Investment (FDI), American Depository Receipt(ADR), Global Depository Receipts (GDR) in
the South Indian Bank have gone below the prescribed threshold caution limit. For this reason,
RBI has allowed foreign buyers to invest in South Indian Bank.
Under the Portfolio Investment Scheme (PIS) - FIIs, NRIs and PIOs are allowed to invest in
the primary and secondary capital markets in India. They can acquire shares/debentures of Indian
companies through the stock exchanges.
Note: The ceilings on FIIs/ NRIs)/ PIOs) investments in Indian companies are monitored by RBI
on a daily basis. For effective monitoring of foreign investment ceiling limits, the RBI has fixed
cut-off points that are 2% points lower than the actual ceilings.
GOLDHEDGE: NCDEX launched gold contract for hedgers

The National Commodity Derivatives Exchange (NCDEX) launched an innovative gold
contract GOLDHEDGE that will give a transparent and straightforward price benchmark of
the yellow metal to the consumer.
The contract, GOLDHEDGE, is available for trading from Jan 16, 2014.
The unit of trading for GOLDHEDGE is one kg, with a ticket size of Re 1. The duration of the
contract is for 1-4 months.
It is a new way to discover the price of gold in India. It is innovative and it is the right benchmark
for the Indian market where gold touches every household and every pocket.
It will mimic the international prices without considering other charges such as customs duty,
local taxes and premiums.
The one-kg gold hedge contract provides a transparent platform for investors with exposure to
the international markets. The final settlement prices is arrived at after taking into account the
gold price in dollar terms, rupee value against dollar and the conversion ratio.
While the contract is cash settled, a participant can still take the benefit of intention matching
where both buyer and seller agree on physical delivery of gold bars. With no compulsion to give
or take delivery of gold bars, an investor can ignore the landed cost of the precious metal, local
taxes and the premium being charged by sellers due to short supply in the domestic market.
This contract is the perfect solution to the distortion in prices created by fluctuating demand-
supply conditions, and takes forward the RBIs mission of finalization of gold to reduce the
burden of imports on the current account deficit.
Iran seeks permission to open multiple bank accounts in
India
Iran has requested the Ministry of Finance and the Reserve Bank of India
(RBI) to allow it to open accounts in multiple banks to facilitate better non-oil trade between the
two nations.
As per Irans Ambassador Gholam Reza Ansari, Iran is looking at diversifying its economic
relations with India through joint ventures, investments and technology transfer. It wants to
strengthen relations with India by having multiple bank accounts to boost non-oil trade.
For this, it has a proposal to build north-south rail corridor in Iran which would boost
trade in the region.
The UCO Bank account is for oil transactions and there is a need for multiple channels,
as the trade relations between the two nations extend beyond oil.
For all oil imports from Iran since July 2011, India has been paying 55 % of the amount
in Euros through Ankara-based Halkbank. The remaining money is being remitted in
rupees in Kolkata-based UCO Bank.
Note: Presently, only UCO Bank facilitates oil related transactions with Iran.
RBI inks a pact with Bank of Japan for raising BSA to $ 50
billion
The Reserve Bank of India (RBI) and Bank of Japan (BOJ) signed an agreement to enhance the
maximum amount of the Bilateral Swap Arrangement (BSA) between the two countries to $50
billion. The agreement signed by RBI Governor Raghuram Rajan and BOJ Governor
Haruhiko Kuroda. The BSA shall be effective until December 3, 2015.
With this agreement, the current BSA, effective for 3 years from 2012 to 2015, has been
raised from the original size of $15 billion.
Outcome: The expansion of the BSA will contribute to the stability of global financial
markets including emerging economies.
Aim of BSA: To address possible short-term liquidity difficulties and supplement the
existing international financial arrangements and is one of the efforts in strengthening
mutual cooperation between India and Japan.
Suresh Mathur Committee: IRDS sets up panel to study FDI
in insurance intermediaries & TPA
The insurance sector regulator, Insurance Regulatory and Development Authority (IRDA) set up
a 10-member committee to study the options of allowing 100 % Foreign Direct Investment (FDI)
in insurance intermediaries, Third-Party Administrators (TPA), surveyors and loss assessors.
The 10-member committee :
Headed by: IRDA Senior Joint Director, Suresh Mathur and has officials from the
regulator, insurance council, insurance companies as well as brokers and will submit its
report in three months.
Objective: To study whether there is a case for raising the FDI limit in insurance entities
(other than insurance companies) and if yes, to what extent. To study the options of
allowing 100 % Foreign Direct Investment (FDI) in insurance intermediaries, Third-
Party Administrators (TPA), surveyors and loss assessors.
Current Status: the FDI limit for these entities is 26 % in line with the limit stipulated
for insurance companies.
The committee will also look at the implications of modifying the limit on the industry and the
international practices.
NABARD slashes refinance rate by 0.20% to boost farm
investment
National Bank for Agriculture and Rural Development (NABARD) reduced refinance rate
for banks and other lending agencies by 0.20 % to promote rural credit and rural infrastructure.
Revised rates: The revised rate of interest on refinance for a period of five years for
commercial, state cooperative, regional rural and primary urban cooperative banks will be
9.70%, down from 9.90%. The new rates are effective from January 7.
Relaxation:
If banks draw refinance of Rs. 500 crore and more in a single drawl, they will be allowed
additional reduction of 0.10% and will make effective rate 9.60 %.
For State Cooperative Agriculture and Rural Development Banks (SCRDBs), a 10 basis
point reduction is allowed for a single drawl of Rs. 200 crore and above.
These measures are expected to give a boost to banks for extending investment credit and
creation of much-needed warehousing infrastructure for agricultural commodities in the country.
FM: Plan to open 10,000 bank branches a year from next
fiscal
The Union Finance Minister P. Chidambaram stated that in order to take the banking services to
rural areas, the Centre has revised its target upwards to opening 10,000 new bank branches a year
from the next financial year.
Thus, an additional 55,000 new jobs would be created. Originally, there was a target to open
7,000 bank branches a year. The country has witnessed huge growth in the banking industry in
the last decade during the UPA regime.
RBI: Gold loan finance companies can now give loans up to
75% of the market value of the gold
The Reserve Bank of India (RBI) has eased the norms for extending loans against gold jewellery
as collateral. It has decided to raise the Loan-To-Value (LTV) cap for loans against the
collateral of gold jewellery to 75 % from the present limit of 60% with immediate effect. This
means that gold loan companies in India viz. Muthoot Finance, Manappuram Finance, etc can
lend up to 75% of the value of gold jewellery deposited with them as guarantee.
The salient features related to RBIs move to raise Loan-To-Value (LTV):-
Only intrinsic value of gold to be used to determine the loan value.
Non-Banking Finance Companies (NBFCs) will have to certify on purity of gold, which will be
used to determine the maximum permissible loan and the reserve price for auction.
The firms can add suitable cautions to protect themselves against disputes on redemption.
Mandatory ownership verification to be done in cases where the gold jewellery pledged is more
than 20gm, through a suitable document explaining how the ownership was determined.
Firms have to conduct auction in the same town or taluk, in which the branch that had extended
the loan is located.
Disbursement of loans of Rs 1 lakh and above must be done through cheques.
No cash transactions in CIS : SEBI move to check
laundering
The market regulator, Securities and Exchange Board of India (SEBI) made it compulsory for all
investments into Collective Investment Scheme (CIS) funds to be made through banking
channels, and not in cash, to prevent any money laundering activities through such schemes.
As per the regulations of SEBI
Money payable towards subscription of units of CIS shall be paid through cheque or demand
draft or through any other banking channel, but not by cash.
For launching any such scheme, a person needs to make an application for registration as a
Collective Investment Management Company (CIMC) provided that any scheme which is
otherwise regulated or prohibited under any other law will not be deemed to be a CIS.
The CIMC will enter into an agreement with a depository for dematerialisation of the units of
the scheme proposed to be issued. It will follow with Know Your Client guidelines.
The new norms are known as the Securities and Exchange Board of India (Collective
Investment Schemes) (Amendment) Regulations, 2014. These will help to improve
transparency in fund-garnering activities through CIS activities and will make it easier to identify
the source of funds and real investors involved in such schemes.
Get rid of SLR, end loan waivers: RBI committee
A high-level panel of the Reserve Bank of India (RBI) has suggested that the central bank
should gradually abolish the Statutory Liquidity Ratio (SLR), the portion of deposits that
banks must compulsorily keep in government securities.
At present, SLR is at 23% while most banks keep it around 27% as state-backed bonds often
provide attractive rates at low risk.
As per the Committee on Comprehensive Financial Services for Small Businesses and Low-
Income Households, headed by Nachiket Mor (former executive director ICICI Bank):
SLR should be gradually abolished
A Separate category of banks should be created to cater to low-income households with a
minimum entry capital requirement of Rs. 50 crore 1/10
th
of the currently mandatory Rs. 500
crore.
Banks should provide facilities for withdrawal, payment and deposit within 15 minutes walking
distance anywhere in the country.
All Indians above 18 to have a full-service, safe, and secure electronic bank account by 2016.
The priority sector lending cap should be increased from the current 40% to 50%.
Interest subsidies and loan waivers should be abolished.
What is SLR?
Apart from keeping a portion of deposits with the RBI as cash (CRR), banks are also required to
maintain a minimum percentage of their net demand and time liabilities with them at the end of
every business day, in the form of gold, cash, government bonds or other approved securities.
This minimum percentage is called Statutory Liquidity Ratio.
Example: If you deposit Rs. 100/- in bank, CRR being 9% and SLR being 11%, then bank can
use 100-9-11= Rs. 80/- for giving loan or for investment purpose.
SLR is the requirement imposed by the regulator on commercial banks that compels them to
invest a percentage (currently 23%) of their Net Time and Demand Liabilities (NDTL) in
approved government securities. Through this, today, 23% all the resources deposits and
borrowings mobilised by commercial banks are invested in government securities.
The Narasimham Committee I (1991) had recommended scaling down SLR from a high of
38.5 per cent to 25 per cent and the RBI moved in a calibrated fashion in that direction. SLR is at
23 per cent with effect from August 11, 2012. A reference book, popularly known in the
teaching-academic circle as Datt & Sundharam Indian Economy by Gaurav Datt and
Ashwani Mahajan mentions as follows: There is now a demand to abolish SLR
altogether.
Purpose/ Objective of SLR
SLR is aimed at serving three purposes:
(i) it is an instrument of credit control;
(ii) it works as a cushion against the possibility of bank failures; and
(iii) it is a conduit for financing government deficits. Out of these, SLR has been serving
overwhelmingly the third purpose.
As a credit control instrument, it is relatively blunt and being used rather infrequently. Between
October 25, 1997 and August 11, 2012 SLR has been changed only five times from 25% to 23%.
As far as its function as a cushion against bank failures is concerned, it is practically meaningless
because weak commercial banks are not allowed to fail by the Government/RBI which is guided
by the too-big-to-fail doctrine while resolving bank failures.
Therefore, one may conclude that the biggest casualty of abolition of SLR would be government
borrowing programmes which are of gigantic size every year. So the basic question is who will
subscribe to such borrowings? The answer will determine the fate of the banking structure, post-
SLR abolition.
What do the supporters of SLR abolition say?
Abolition of SLR would dramatically free up nearly a quarter of deposits for industrial and
consumer loans and possibly lower interest rates. As per some experts, reducing SLR on a
gradual basis would be healthy for the financial sector and this would allow banks to direct their
resources to a more productive use.
CRISIL Inclusix- Financial Inclusion Index rises 2.7 % in
2012
The Credit Rating Information Services of India Limited (CRISIL) stated that financial
inclusion gained momentum in India with a significant rise in new savings accounts, increase in
agriculture credit accounts and expansion of bank branches in deeper geographies.
Indias overall CRISIL Inclusix score has risen by 2.7% in financial year 2012 (the highest
annual increase since 2009)
Key points of CRISIL Inclusix, the financial inclusion index:
Based on data (March 31, 2012) provided by the Reserve Bank of India. The index measures
financial inclusion up to the level of each of the 638 districts in India.
Agricultural credit accounts increased by 11.1%, which is the most since fiscal 2009.
The number of bank branches in the bottom 100 districts increased by 6%, faster than the all-
India growth of 5.6%.
New deposit accounts in three regions north, south and east, contributed 42% to the rise in
CRISIL Inclusix.
The overall Inclusix score remained relatively low at 42.8 on a scale of 100, the score reflects
under-penetration of formal banking in the country.
Just one in two Indians has a bank savings account and one in seven approach to bank credit.
There are wide disparities in access to financial services, too. While Indias six largest cities have
10% of Indias bank branches, the bottom 50 districts have merely 2% of bank branches.
Note: To speed up inclusion, financial services need to flow beyond the south and the large
cities. The policy makers will have to incentivise expansion of banking services in the districts
that have low CRISIL Inclusix scores through an increase in branch network and partnerships
with other players.
RBI eases gold dore import norms; allows refineries to
import 15% of their annual requirements in first two
months
In consultation with the Government of India, the Reserve Bank of India (RBI) partially eased
restrictions on import of gold dore after taking into account representations from refiners. As per
the new norms -
Refineries are allowed to import dore up to 15% of their gross average feasible quantity based
on their license entitlement in the first two months for making this available to the exporters on
First in First out (FIFO) basis. Following to this, the quantum of gold dore to be imported should
be determined lot-wise on the basis of export performance.
Before the next import, not more than 80% should be allowed to be sold domestically.
The dore so imported shall be refined and shall be released based on FIFO basis following 20:80
principle.
The imports will be allowed only up to 5 times the quantum for which proof of export has been
submitted.
Note: In August, the RBI had imposed curbs on gold imports and linked it with exports.
Consequently, 20% of every lot of gold imported had to be exclusively made available for
exports and the balance for domestic use.
What is Gold Dore?
Gold dor (pronounced gold doh-rey) is a bar of semi-purified gold (e.g. bullion). After being
mined, the first stage in the purification process of the gold ore produces a cast bar (gold dore)
that is approximately 90% gold. The other 10% is mostly metals like silver and copper.
RBI: Banks to continue accepting scribbled notes
The Reserve Bank of India (RBI) stated that banks will continue to accept currency notes with
anything written on them and it has not issued any such instructions regarding discontinuity of
scribed notes.
Nevertheless, the central bank reiterated that writing or scribbling on banknotes works against its
clean note policy and sought co-operation from public, institutions and others in keeping the
banknotes clean by not writing anything on them.
Note: This announcement came on the wake of rumours that RBI issued a notification that from
January 1, 2014, banks will not accept bank notes with scribbling.
RBI extends deadline to issue inflation-indexed bonds
The Reserve Bank of India (RBI) extended the time for issuance of Inflation Indexed National
Savings Securities Cumulative (IINSS-C) bonds (or inflation linked bonds) by three months
to March 31, 2014, from December 31, 2013. The issuance can be closed earlier than March 31,
2014 with a prior notice.
Why RBI extended the deadline to issue inflation-indexed bonds?
The operational guidelines (internal to banks) for selling these certificates at the branch level are
still in the works.
Secondly, it will take time to create awareness among customers in relation to inflation linked
bonds.
Inflation linked bonds
The limit for investment per applicant per annum: Rs 5,000 Rs 5 lakh.
Eligibility for subscription: Individuals, Hindu Undivided Family, charitable institutions and
universities.
The interest rate on these bonds would be linked to the Consumer Price Index (CPI).
The interest rate would comprise two parts a fixed rate of 1.5% per annum and inflation rate
based on CPI with a lag of three months. It would be compounded on the principal on half-
yearly basis and paid at the time of maturity.
For senior citizens (65 years and above of age), early repurchase will be allowed after one year
from date of issue and other investors can redeem them after three years but with penalty of 50
per cent of the last coupon paid.
RBI will act as a central depository, as these securities will be issued in the form of Bonds Ledger
Account (BLA) and held with RBI.
Distribution or sale of bonds would be through banks: SBI, nationalized banks and three private
banks HDFC Bank, ICICI Bank and Axis Bank and Stock Holding Corporation of India.
Note: Inflation linked bonds are launched as instruments that will protect savings from inflation,
especially the savings of the poor and middle classes.
RBI: political instability after LS elections will hit economy
The Reserve Bank of India (RBI) cautioned that any political instability after the Lok Sabha
elections in 2014 will drag the besieged economy further down, except there is a stable new
government at the centre. On the release of the 8
th
edition of the RBIs Financial Stability Report
2013, RBI Governor Raghuram Rajan stated that any political instability after general elections
will lead to erode investors confidence in the economy. A stable new government would be
positive for the economy.
Excerpts of the 8
th
edition of the RBIs Financial Stability Report 2013
The gross Non-Performing Assets (NPAs) in the system will rise to Rs. 2.29 lakh crore by
September 2014 from Rs. 1.67 lakh crore in September 2013.
External sector risks have been considerably reduced and the effect of the tapering on the
economy is expected to be limited and short-lived.
The delay in the tapering of the $85 billion-a-month bond buyback programme by the US Fed till
January 2014, has given the country time to replenish the forex reserves and rein in the high
current account gap.
Realignment of global growth as well as high inflation differential between advanced economies
(AEs) and Emerging Markets and Developing Economies (EMDEs) is a potential source of
exchange rate volatility and may result in volatile cross-border flows with every reprising of risk.
Corporate performance continues to be weighed down by boom period expansions and excess
capacities, amid shifting asset composition towards financial investments.
Five sectors infrastructure, iron and steel, textiles, aviation and mining together contribute 24
per cent of total advances of Scheduled Commercial Banks (SCBs) and account approx 53 % of
their total stressed advances.
House prices and outstanding loans for housing by housing finance companies have grown
relatively faster during the last few years.
Inadequate social security coverage in India against a backdrop of changing demographics will
pose challenges for expanding the pension system given the fiscal constraints. The National
Pension System (NPS) created to serve Government employees and private sector workers.
Note: RBI publishes Financial Stability Report (FSR) in every six months. Its purpose is to
create awareness about the vulnerabilities in the financial system and to inform about the
resilience to stress of the financial institutions and to generally serve as a health check on the
financial system.
Mr. Pradeep Kumar: New MD (Corporate Banking) of SBI
The Countrys biggest lender, State Bank of India (SBI) appointed Mr. P.Pradeep Kumar as its
Managing Director and group executive in charge of corporate banking. The seat was lying
vacant as of Ms. Arundhati Bhattarcharya became the Chairman of SBI in October 2013.
Previously, Mr. Kumar was the deputy managing director and group executive of the corporate
banking group of SBI, which looks after corporate accounts and project finance of the bank. The
other three managing directors are K Krishna Kumar (national banking), Hemant Contractor
(global banking) and A Vishwanathan (subsidiaries and associates).
Note: The top management at SBI consists of a chairman, four managing directors, over a dozen
deputy managing directors and about 35 chief general managers.
PNB opens first hi-tech branch of Punjab in Kharar
December 31, 2013 No comments
Punjab National Bank (PNB) which is Indias second-largest bank opened its first hi-tech branch
at Kharar, Punjab.
Salient features of the first hi-tech branch
The self-services system of the branch would provide all services to all the customers from 7am
to 11pm daily.
This would be done through automated machines for cash deposit, cheque deposit, cash
withdrawal and passbook updating machine.
To educate and aware the customers about the hi-tech systems and their usage, a special
counter has been established at the bank branch.
In order to ensure foolproof security of its ATMs, the bank has adopted these securities measure,
which are under e-surveillance system.
Cabinet approves raising foreign investment to 62% in Axis
Bank
December 29, 2013 No comments
The Cabinet Committee on Economic Affairs (CCEA) has given nod to the proposal of Axis
Bank for hiking foreign investment from 49% to 62% entailing an inflow of about Rs 7,250
crore. It will be subject to the aggregate foreign institutional investors holding not exceeding
49% of the paid up equity share capital of the bank.
What would be the effect of the hike in foreign investment in Axis Bank?
As a result of the inflow and increase in stake by foreign investors, the bank will turn into
foreign-owned, whereby every future investment in seven subsidiaries will be governed by the
FDI (Foreign Direct Investment). According to the FDI policy, downstream investment by an
Indian company, which is not owned and/or controlled by a resident entity/ies into another
Indian company would be in accordance or compliance with the relevant sectoral conditions on
entry route. The banks seven subsidiaries are Axis Capitals, Axis Finance Pvt Ltd, Axis Private
Equity ltd, Axis Trustee Services Ltd, Axis Asset Management Company, Axis Mutual Fund
Trustee Ltd and Axis UK Ltd.

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S S Mundra assumes office as RBI deputy governor

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