GENERAL AWARENESS BRIEFLY

IMPORTANT DAYS

21 September:

International Day of Peace

22 September: World Rhino Day

27 September: World Tourism Day

29 September: World Heart Day

30 September: International Translation Day

1 October: International Day of Older Persons

1 October: World Vegetarian Day

2 October: International Day of Non-Violence

2 October: National Anti-Drug Addiction Day

First Monday of October (5 October 2015): World Habitat Day

8 October: Indian Air Force Day

8 October: World Singht Day

9 October: World Post Day

9 October: World Egg Day

11 October: International Day of the Girl Child

16 October: World Food Day

17 October: International Day for the Eradication of Poverty

20 October: World Statistics Day

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PART B

Brickwork’s report on GSDP of states

            The Brickworks Ratings released the findings of its fourth edition of a nationwide, multi-state research analyzing finances of all the states recently.

Highlights

·       Maharashtra is the biggest economy within India at 16.87 lakh cr in terms of gross state domestic product (GSDP).

·       The state is followed by Tamil Nadu and Uttar Pradesh.

·       Maharashtra’s GSDP has grown by 11.69 per cent for the financial year ended Mar 31, 2015 and it earns approximately 70 per cent of its total receipts through tax revenues – the highest among the bigger states – followed by Gujarat and Tamil Nadu.

·       Karnataka leads in the growth of services sector.

·       Meanwhile, at a national level, India’s GDP growth rate at 7.3 per cent in 2015 exceeded that of China, which grew at 6.9 per cent.

·       The three fastest-growing states were Bihar at 17.06 per cent, MP (16.86 per cent) and Goa (16.43 per cent).

·       The laggards were Telangana at 5.3 per cent, Punjab (10.16 per cent), Rajasthan (11 per cent).

Mid-year economic review

            India slashed its full-year economic growth forecast on 18 Dec, weighed down by weak global demand and a drought that has created risks for farm output, but reiterated its commitment to narrow the fiscal deficit to an eight-year low.

            India is now expected to grow 7-7.5 per cent in the fiscal year ending in Mar 2016, the finance ministry said in its mid-year economic review, down from an estimate of 8.1-8.5 per cent announced in Feb. The downgrade came after the economy grew 7.2 per cent in the first half of the 2015-16 fiscal year.

            Still, if it meets the govt’s estimate, India will remain the world’s fastest-growing major economy as China’s GDP is struggling to maintain the near-7 per cent pace promised by its leaders. Slowing demand for Indian merchandise in overseas markets has hit growth as exports, that account for about a fifth of India’s $2-tn economy, have tumbled for the past 12 months.

India 97^th on Forbes’ list

            India has been ranked a low 97^th out of 144 nations, behind Kazakhstan and Ghana, on Forbes’ annual list of the best countries for doing business in 2015, scoring poorly on metrics like trade and monetary freedom and tackling challenges like corruption and violence.

            Denmark topped the list of the 144 nations on the Best Countries of Business in 2015 list by Forbes. The US has dropped four spots to number 22. The US is the financial capital of the world and its largest economy at USD 17.4 tn (China is second at USD 10.4 tn), but it scores poorly on monetary freedom and bureaucracy/red tape.

            India is ranked 97^th on the list, with Forbes saying that while the country is developing into an open-market economy, traces of its ‘past autarkic policies remain’.

India 4^th in black money outflows

            According to the annual report released by Global Financial Integrity (GFI), a Washington-based research and advisory organization, India ranks fourth in black money outflows with a whopping USD 51 bn siphoned out of the country per annum between 2004 and 2013. Notably India’s defence budget is less than USD 50 bn.

            China tops the list with USD 139 bn average outflow of illicit finances per annum, followed by Russia (USD 104 bn per annum) and Mexico (USD 52.8 bn per annum).

            Titled ‘Illicit Financial Flows from Developing Countries: 2004-2013’, the study shows that illicit financial flows first surpassed USD 1 tn in 2011 and have grown to USD 1.1 tn in 2013, marking a dramatic increase from 2004, when illicit outflows totaled just USD 465.3 bn.

Delhi’s per capita income highest in country

            Delhi recorded the highest per capita income among all states in the country at 2,40,849 during financial year 2014-15. According to the Delhi govt’s Delhi Statistical Hand Book, 2015, released on 9 Dec, Delhi’s per capita income in 2014-15 rose 13.5 per cent from 2.12 lakh in the previous year.

            Puducherry recorded the second highest per capita income in the country at 1,75,006, followed by Haryana at 1,47,076 during 2014-15.

            According to the survey, the gross state domestic product (GSDP) of Delhi, at current prices, in 2014-15 has increased to over 4.51 lakh cr.

Page No. 21

Books & Authors

·       The 51-Day War: Ruin and Resistance in Gaza – Max Blumenthal

·       Shell-Shocked: On the Ground under Israel’s Gaza Assault – Mohammed Omer

·       Muslim Cosmopolitanism in the Age of Empire – Seema Alavi

·       Artefacts of History: Archaeology, Historiography and Indian Pasts – Sudeshna Guha

·       Bread Beauty Revolution – Khwaja Ahmad Abbas

·       Rungli Rungliot – Rumer Godden

·       Rebooting India: Realising a Billion Aspirations – Nandan Nilekani & Viral Shah

·       Summer Requiem – Vikram Seth

·       A Career of Evil – Robert Galbraith

·       The Turn of the Tortoise: The Challenge and Promise of India’s Future – TN Ninan

·       The Island of Lost Girls – Manjula Padmanabhan

·       Two Years, Eight Months and Twenty eight Nights: A Novel – Salman Rushdie

·       Gita Press and the Making of Hindu India – Akshaya Mukul

·       The Outsider: My Life Intrigue – Frederick Forsyth

·       The Audacious Ascetic: What the Bin Laden Tapes Reveal about Al-Qaida – Flagg Miller

·       To the Brink and Back: India’s 1991 Story – Jairam Ramesh

·       India Reloaded: Inside India’s Resurgent Consumer Market – Dheeraj Sinha

·       On My Terms: Grassroots to the Corridors of Power – Sharad Pawar

·       Red Maize – Danesh Rana

·       Nation at Play: A History of Sport in India – Ronojoy Sen

·       The Water Spirit and Other Stories – Imran Hussein

·       India-Myanmar Relations: Changing Contours – Rajiv Bhatia

·       Until the Lions: Echoes from the Mahabharata – Karthika Nair

·       Why India is not a Great Power (Yet) – Bharat Karnad

·       No Direction Rome – Kaushik Basu

·       An Upstart in Government: Journeys of Change and Learning – Arun Maira

Abbreviations

·       AMRUT: Atal Mission for Rejuvenation and Urban Transformation

·       BBPS: Bharat Bill Payment System

·       BIS: Bureau of Indian Standards

·       BPLR: Benchmark Prime Lending Rate

·       COP: Conference of Parties

·       CSO: Central Statistics Office

·       DIPP: Department of Industrial Policy and Promotion

·       DPDS: Direct Payment Deficiency System

·       ECC: Environment Compensation Charge

·       FPI: Foreign Portfolio Investors

·       GIAN: Global Initiative of Academic Networks

·       GNI: Gross National Income

·       GSDP: Gross State Domestic Product

·       GVA: Gross Value Added

·       IAF: India Aspiration Fund

·       INDCs: Intended Nationally Determined Contributions

·       LAF: Liquidity Adjustment Facility

·       MCLR: Marginal Cost of Funds-Based Lending Rate

·       MSF: Marginal Standing Facility

·       MSP: Minimum Support Prices

·       NCDs: Non-Convertible Debentures

·       NGT: National Green Tribunal

·       NPCI: National Payments Corporation of India

·       NPS: National Pension System

·       OMO: Open Market Operations

·       PSL: Priority Sector Lending

·       RNR: Revenue Neutral Rate

·       SETU: Self-Employment and Talent Unitilisation

·       SIDBI: Small Industries Development Bank of India

·       TREDS: Trade Receivables Discounting System

·       UNDP: United Nations Development Programme

·       VoIP: Voice over Internet Protocol

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PART   C

RBI grants in-principle approval to three applicants for setting up TReDs: RBI on 24 November 2015 granted in-principle approval to three applicants to set up and operate Trade Receivables Discounting System (TReDs).  The three organizations have been asked to set and operate TReDs in accordance to the Guidelines issued on 3 December 2014 under the Payment and Settlement System (PSS) Act 2007.  Organization to which –in-principle approval was granted are

·       NSE Strategic Investment Corporation Limited (NSICL) and Small Industries Development Bank of India (SIDBI), Mumbai.

·       Axis Bank Limited Mumbai

·       Mynd Solutions Pvt.Ltd., Guragon, Haryana

The in-principle approval granted will be valid for a period of 6 months, during which time the applicants have to comply with the requirements under the Guidelines and fulfil the other conditions as may be stipulated by the Reserve Bank.  On being satisfied that the applicants have complied with the requisite conditions laid down by its as part of in-principle, approval, the RBI would consider granting to them a Certificate of Authorisation for commencement of the business of TReDs.

RBI mulls swapping debt for equity:  Deputy Governor S.S. Mundra, on 8 December 2015, said that the RBI is looking into Strategic debt restricting (SDR), it introduced in June 2015, to help lenders manage stressed assets.  Strategic debt restructuring (SDR) aims to allow banks to take majority ownership of troubled firms and look for new owners.  It allows banks to clarify the non-performing assets (NPAs) in question as standard, rather than bad, during the 18-month process.

The gross NPA of public sector banks to 6.03 per cent as of June 2015, from 5.20 per cent in March 2015.

RBI releases final guidelines of marginal cost of funds methodology to calculate interest rates.  The RBI, on 17^th December 2015, released the final guidelines on computing interest rates on advances based on the Marginal Cost of Funds Methodology.  The guidelines will come into effect from 1 April 2016.  The new methodology is aimed at bringing uniformity among BRs of banks so that they will be more sensitive to any changes in policy of the RBI  like Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR), etc., This new methodology will help improve the transmission of policy rates into the lending rates of banks.

Highlights of the RBI Guidelines

·       All rupee loans sanctioned and credit limits will be priced with reference to the Marginal Cost of Funds based lending Rate (MCLR) which will be the internal benchmark for such purposes.

·       The MCLR will be a tenor linked internal benchmark.

·       Actual lending rates will be determined by adding the components of spread to the MCLR

·       Banks will review and publish their MCLR of different maturities every month on a pre-announced date.

·       Banks may specify interest reset dates on their floating rate loans.  They will have option to offer loans with reset dates linked either to date of sanction of the loan or to the date of review of MCLR.

·       The periodicity of reset shall be one year or lower

·       The MCLR prevailing on the day loan is sanctioned will be applicable till the next date, irrespective of the changes in the benchmark during the interim period.

·       Existing loans and credit limits linked to the Base Rate may continue till repayment or renewal, as the case may be.  Existing borrowers will also have the option to move to the MCLR linked loan.

·       Banks will continue to review and publish Base Rate as hitherto.

RBI liable to disclose information about banks under RTI Act: Supreme Court:  The Supreme Court on 16 December 2015 held that the RBI is liable to disclose information about the banks and financial institutions for their action against the loan defaulters including industries under the Right to Information (RTI) Act, 2005.  The bench made the remark while dismissing pleas filed by RBI and other private and nationalised banks against the Central Information Commission’s (CIC) order to SBI and other banks for disclosure of information under the RTI Act.  The Section 2(F) of the RTI Act 2005 clearly provides that the inspection reports, documents, etc., fall under the purview of information which is obtained by the public authority (RBI) from a private body (Banks and financial institutions).

Highlights of SC Observation

·       The apex court clarified that RBI cannot withhold information under the “guise” of confidence or trust with financial institutions and is accountable to provide information sought by general public.

·       The Court further ruled that RBI has statutory duty to uphold public interest and not the interest, of individual banks.  It has no legal duty to maximize the benefit of any public sector or private sector bank, and thus there is no relationship of trust between them.

·       It also added that RBI does not place itself in a fiduciary relationship with the financial institutions as the reports of inspections, statements of bank and information related to business obtained by the RBI are not under pretext confidence or trust.

·       RTI Act under Section 2(f) clearly provides that the inspection reports, documents etc., fall under the purview of `information’ which is obtained by the Public authority (RBI) from a private body.

Banks’ SLR under HTM category to come down to 20.5% by March 2017:

The RBI, on 10 December 2015, said that the statutory liquidity ratio (SLR) of banks will come down 0.25 per cent every quarter, from 21.5 per cent of their deposits now to 20.50 per cent in the March 2017 quarter.  The reduction in SLR means that for Rs.100 incremental deposit that banks mobilize, they will need to invest Rs.20.50 in SLR assets from the quarter beginning January 2017, against Rs.21.50 now, Simply put, they will have Rs.1 more for lending.

Highlights of RBI Notification on SLR under HTM Category

·       In a single regulation issued to commercial banks, Primary (Urban) Co-operative Banks and State and Central Co-operative Banks, the RBI said the SLR will come down to 21.25 per cent from April 2, 2016; 21 per cent from July 9, 2016; 20.75 per cent from October 1, 2016; and 20.50 per cent from January 7, 2017.

·       The RBI also decided to concurrently align the ceiling on SLR holdings under the Held-To-Maturity (HTM) category with the mandatory SLR.  The securities acquired by the banks with the intention of holding them till maturity are classified as HTM.

Investments in HTM category

·       Currently, banks are permitted to hold investments under the HTM category in excess of the limit of 25 per cent of their total investments, provided the excess comprises only SLR securities and the total SLR securities held under the total SLR securities held under the HTM category does not make up more than 22 per cent of deposits.

·       The ceiling on SLR securities under HTM will be reduced from 22 per cent to 21.50 per cent with effect from the fortnight beginning January 9, 2016.  Thereafter, both the SLR and the HTM ceiling will be brought down by 0.25 per cent every quarter till March 31, 2017.

What is SLR?

SLR is the portion of deposits that banks have to necessarily maintain in assets, such as cash, gold valued at a price not exceeding the current market price dated securities and treasury bills issued by the Government of India and State development loans of State Governments.

RBI permits foreign portfolio investors to buy defaulted bonds:

The RBI, on 26 November 2015, permitted the Foreign Portfolio Investors (FPI) to buy fully or partly defaulted bonds in the repayment of principal on maturity or principal instalment in the case of amortising bond.  The permission was given as part of the drive to promote investments by FPIs in corporate bonds.  The RBI granted the permission to the FPIsunder sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999.  As part of it following changes were made to Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000.

RBI announces revises priority sector lending norms for regional rural banks:

The RBI, on 3 December 2015, announced revised Priority Sector Lending (PSL)norms for Regional Rural Banks (RRBs).  Among other things, the PSL target was increased to 75 percent of total outstanding from the existing 60 percent.  The revised target will be effective from 1 January 2016.  The PSL norms have been revised considering the growing significance of RRBs in pursuit of financial inclusion agenda.  As on March 2015, there were 56 RRBs operating in the country with a network of 20059 branches.  They cover 644 notified districts in 26 states and the Union Territory of Puducherry.

Key features of revised PSL Norms:

·       Medium enterprises, social infrastructure and renewable energy were included under PSL category.

·       Agri-Loans: Loans to individual farmers, for the purpose of PSL, was increased to 50 lakh rupees from the present 10 lakh rupees against pledge/ hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months.

·       Aggregate limit loan was doubled to 2 crore rupees per borrower in the case of loans, among others to corporate farmers, farmers’ producers organizations/ companies of individual farmers, farmers partnership firms/ co-operatives engaged in agriculture and allied activities.

·       Housing Loans: The RBI has lowered the quantum of loans that will qualify as PSL.  Against the earlier limit of 25 lakh rupees, loans to individuals up to 20 lakh rupees only are considered as PSL as per revised guidelines.  Housing loans to banks’ own employees will be excluded from this limit.

RBI praises West Bengal’s effort to mobilise higher revenue:

RBI, the lender of the last resort, on 11 December 2015, expressed satisfaction over West Bengal’s ability to grow own revenue even as the state is facing severe stress with its outstanding debt rising every year.  West Bengal is carrying a burden of Rs.2.74 lakh crore of outstanding debt.  The state is in a virtual debt trap as it is forced to borrow to service debt and pay salary and pension to state government employees.

RBI inks information exchange pact with UK financial body:

The Reserve Bank, on 2 December 2015, signed an agreement with the UK’s Prudential Regulation Authority and Financial Conduct Authority for supervisory co-operation and exchange of information.  The central bank had entered into anMoU for supervisory co-operation with the Financial Services Authority (FSA) of the UK in July 2012.  Subsequently, as part of comprehensive reforms implemented in UK financial services regulation, the functions exercised by FSA were transferred to PRA, FCA and Bank of England.

RBI dismisses rumours, says rupee notes with writing are legal:

Dismissing rumours on social media, the Reserve Bank on 14 December 2015 said all notes including those with scribbles on them will continue to be legal.  The RBI had to make announcement after one of the topics trending on WhatsAppclaimed that at the end of the year notes with writing will not be accepted.

RBI buys bonds worth Rs.10,000crore through OMO: 

The RBI, on 7 December 2015, bought Rs.10,000crore of bonds from the secondary market as part of its open market operations (OMO).  The total amount offered by participants in the auction for four bonds was Rs.54,413.30crore.  But the central bank accepted no offer for a bond maturing in 2030.  In the auction, the central bank bought bonds maturity is in 2018, 2019 and 2024 for a cut off yield of 7.5006 per cent, 7.6602 per cent and 7.9152 per cent respectively.  This was the first OMO purchase operation this financial year even as the central bank had sold Rs.8,270 crore through OMO sales in July.

Open Market Operation:

·       An open market operation (OMO) is an activity by a central bank  to give (or take) liquidity in its currency to (or from) a bank a group of banks.

·       The central bank can either buy or sell government bonds in the open or, which is now mostly the preferred solution, error into a repo or secured lending transaction with a commercial bank; the central bank gives the money as a deposit for a defined period and synchronously takes an eligible asset as collateral.

·       The usual aim of open market operations is – asides from supplying commercial banks with liquidity and sometimes taking surplus liquidity from commercial banks – to manipulate the short-term interest rate and the supply of base money or contracting the money supply.

·       This involves meeting the demand of base money at the target interest rate by buying and selling government securities, or other financial instruments.

·       Monetary targets, such as inflation, interest rates, or exchange rates, are used to guide this implementation.

Unlisted companies had larger share of FDI equity in FY15: RBI: The Reserve Bank, on 11 December 2015, said unlisted companies had a larger share of foreign direct investment (FDI)equity capital at Rs.3,46,090 crore at face value as compared to listed companies at Rs.11,700 crore in 2014-15.  The share of non-financial companies in total foreign equity participation was much larger at Rs.3,02,950crore at face value  as compared with financial companies at Rs.54,840/- crore.  RBI released data related to the Census on Foreign Liabilities and Assets of Indian Direct Investment Companies for 2014-15.

Highlights of Census on FLA of Indian DICs for 2014-15

·       The annual census on foreign liabilities and assets (FLA)  covers the Indian companies which submit information on their overseas liabilities and assets arising on account of foreign direct investment (FDI) in the country, their overseas direct investment (ODI) and other investments.

·       In the 2014-15 round of FLA census, 17,642 companies reported, of which 16242 companies had FDI/ODI in their balance sheet in March 2015.

·       Equity participation had a much larger share at 94.1 per cent than debt in total inward FDI, which stood at Rs.19,62,970crore at market value in March 2015 at Rs.15,06,260 crore a year ago.

Rs.1 crorecirculation up, 50 paise losing demand: RTI:

As per the reply from Reserve Bank of India to a query by RTI activist Subhash Chandra Agarwalon 1 December 2015, the circulation of coins of various denominations like Rs.1 Rs.2 Rs.5 and Rs.10 has gone up in the country in last few years, while the 50 paise coin is losing visibility.  The RBI reply revealed that:

·       The share of Rs.1 coins in the market in last five years has gone up from 29, 10 per cent (of total share of coins) in March 2011 to 42.10 per cent in March 2015.

·       The 50-paise coins in the market in last five year has gone up from 29.10 per cent (of total share of coins) in March 2011 to 42.10 per cent in March 2015.

·       The 50-paise coins, though not seen in much circulation of late, constituted 14.90 per cent of total coin production in the fiscal-year 2014-15.

·       Rs.10 coins constituted a small 2.80 per cent (of total coin share), while  Rs.2 coin had a significant share  of 27.30 per cent  in 2014-15.

RBI relaxes foreign borrowing norms:

The RBI, on 30 November 2015, released the revised framework for external commercial borrowings (ECBs) and allowed Indian companies to raised rupee resources from overseas from overseas lenders without incurring currency risks.  RBI said that the revised framework consists of fewer restrictions on end-uses, higher all-in-cost ceiling for long-term foreign currency borrowings as the extended term makes repayments more sustainable and minimize rollover risks for borrowers.  It also includes a more liberal approach for rupee-denominated ECBs where the currency risk is borne by the lender.

Revised Framework of ECBs

·       RBI has expanded the list of overseas lenders to include long-term lenders like sovereign wealth funds, pension funds, insurance companies and also indicated that only a small negative list of end-use requirements are applicable to long-term ECBs and rupee denominated ECBs.  The new norms will be effective 1 April 2016.

·       The limit for small value ECBs with a minimum average maturity (MAM) of 3 years has been raised to $50 million from the existing $20 million.  The central bank has also aligned the list of infrastructure entities eligible for ECB with the Harmonized List of the Government of India.

·       The revised ECB framework consists of three tracks.  Track I comprises medium term foreign currency denominated ECB with MAM of 10 years and track 3 comprises Rupee denominated ECB with MAM of 3/5 years.

·       For ECBs in foreign currency, the central bank raised the limit for small value ECBs with minimum average maturity of three years to $50 million from the existing $20 million.  For ECBs of more than $50 million, the minimum maturity period should be five years.

·       The all in cost for such ECHs has been reduced 50 basis points from what was allowed earlier.  For long term ECBs though, the all in cost is 50 basis points higher.  For rupee denominated ECBs, the rate will be commensurate with the prevailing market conditions.

·       For long-term ECB though, the all-in cost is 50 basis points higher.   For rupee – denominated ECB, the rate will be commensurate with the prevailing market conditions.

·       A transitional period up to March 31, 2016 has been allowed to ECBs contracted till the commencement of the revised framework and in respect of special schemes which will end by March 31, 2016.

·       Apart from usual lenders like banks, such rupee resources can now be borrowed from sovereign wealth funds, pension funds and insurance companies, according to the final guidelines.  The liberal approach, with fewer restrictions on end uses and higher all-in-cost ceiling will help for long-term foreign currency borrowings as the extended term makes repayments more sustainable and minimizes roll-over risks for the borrower.

RBI aims to complete cleaning up of banks’ book my March 2007:

RBI, on 12 December 2015, said it is closely monitoring banks’ sticky asset scene as it aims to complete the cleaning up act by March 2017.  The gross NPA of the public sector banks rose to 6.03 per cent as of June 2015 from 5.20 per cent in March 2015.

RBI’s 5.25 scheme

·       It has introduced the 5.25 scheme, the strategic debt restricting (SDR) option and allowed taking over of a distressed company by an external agency in order to help banks struggling with rising nonperforming assets.

·       The 5.25 scheme allows lenders to refinance long term projects every five years.  Under the SDR mechanism, banks can take over defaulting companies, exchanging debt for equity, and for 18 months, the account will not be classified as NPAs.

·       RBI done annual financial inspection on every bank’s loan books and has found divergent practices by banks in recognizing sticky loans.

RBI lets IDFC Bank into Second Schedule list:

The Reserve Bank, on 10 December 2015, said that IDFC Bank Ltd had been included in the Second Schedule of the RBI Act 1934.  Earlier, on 1 October 2015, IDFC Bank started its formal banking services.  The bank, with a focus on technology, has started operations in corporate and wholesale banking, rural banking and treasury verticals.

RBI lists 150 truant corporate borrowers, tells banks to clean up balance sheet:

The Reserve Bank of India, on 9 December 2015, announced to have identified 150 truant corporate borrowers whose accounts banks have been told not to sweep under the carpet.  The instruction came within days of RBI governor RaghuramRajansetting a deadline of March 31, 2017, for banks to clean up their balance sheet with stressed loans crossing double digit in most banks.

Data compiled by ETIG shows bad loans have jumped sharply to Rs.3.11 lakh crore in 2014-15 from Rs.92,515crore in 2010-2011.

RBI opens door for banking M&As, allows individuals to own more than 10% in banks:

RBI, in December 2015 threw open the doors for mergers and acquisitions in the banking industry by signalling that it is open to persons owning more than 10 percent stake in a bank. For the first time in decades the central bank said that it could permit promoters, or investors to own more than 10 per cent if the applicant meets certain conditions including if “it is in public interest’ and in the ‘desirability of diversified ownership’.

RBI to NFS banks: Ensure mobile banking registration at ATMs: 

The RBI, on 17 December 2015, said that all banks participating in the National Financial Switch (NFS)  should do the needed changes and enable capability in customer registration for mobile banking at all their ATMs latest by end-March. NFS was conceptualized and developed to enable inter-connection of all bank ATMs.

National Financial Switch

National Financial Switch (NFS) is the largest network of shared automated teller machines (ATMs) in India.  It was designed, developed and deployed by the Institute for Development and Research in Banking Technology (IDRBT) in 2004, with the goal of inter-connecting the ATMs in the country and facilitating convenience banking for the average Indian.

It was launched by the IDRBT on 27 August 2004, connecting the ATMs of three banks, Corporation Bank, Bank of Baroda and ICICI Bank.

NFS which is the largest domestic ATM network in the country member banks has been in the fore front in providing inter bank ATM services to maximum customers.

It is run by the National Payments Corporation of India (NPCI).

RBI holds policy rate steady at 6.75%:

In the Fifth Bi-monthly Monetary Policy Statement, 2015-16, released on 1 December 2015, the Reserve Bank of India held its repo rate steady at 6.75%, having cut the policy rate by as much as 75 basis points in three tranches earlier in 2015.  Repo, or repurchase, is the rate at which the central bank lends money to commercial banks.

Fifth Bi-monthly Monetary Policy Statement, 2015-16

Monetary and Liquidity Measures

On the basis of an assessment of the current and evolving macroeconomic situation, RBI decided to:

·       Keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.75 per cent.

·       keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL);

·       continue to provide liquidity under overnight repos at 0.25 per cent of bank wise NDTL at the LAF repo rate and liquidity under 14-day term repos as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and

·       continuewith daily variable rate repos and reverse repos to smooth liquidity.

Consequently, the reverse repo rate under the LAF will remain unchanged at 5.75 per cent, and the marginal facility (MSF) rate and the Bank Rate at 7.75 per cent.

Assessment

·       India’s economic growth continues to lag behind the expected curve.  For the quarter ended September 2015, India’s GDP grew at 7.4%, bumped up by a manufacturing boost.

·       Other economic data has also been lackadaisical; Core sector growth came in at 3.2% for the month of October, unchanged from the previous quarter and down steeply from 9% in 2014.

·       The Index of Industrial Production in September grew at a slower-than expected pace of 3.6%, held back by slower expansion in the mining sector.

·       But retail inflation, which the RBI uses as a key variable to decide on interest rate policy, has also been inching up; it grew to 5% in October from 4.4% in September, largely due to a 33.5% jump in the price of pulses, a staple in most parts of the country, a below-average monsoon that has created large pockets of drought, and despite a global decline in commodities prices.  However, it remained within the RBI’s target of 6% by January 2016.

·       The creeping rise in the Consumer Price Index, used to measure retail inflation, also made it less likely that the central bank would consider a policy rate cut at this time of the year.

RBI clears way for `vulture’ funds:

The RBI, on 26 November 2015, said that it would allow foreign portfolio investors (FPIs) to invest in bonds that are in default, partly or fully, if the residual maturity is at least three years.  This means banks which have given loans to companies in stress can clean their balance sheet by selling these stressed assets.  The buyers of these bonds, usually foreign “vulture funds” looking for distressed assets worldwide, can buy these at a steep discount and then put a lot of pressure on companies to perform.

Excluding financial companies, the BSE 500 entities together have Rs.27 lakh crore of debt in their books.

These default category or “D-bonds” in market parlance are the lowest form of what are termed “junk bonds”.  These are usually available at a very sleep discount.

Globally, the distressed debt market is huge.  In the US alone, it is estimated at not below $300 billion.  In India, though, there is no such specific market.

RBI introduces cross-currency futures norms:

·       The RBI, on 10 December 2015, issued guidelines for introduction of cross currency futures and exchange traded cross-currency option contracts in the currency pairs of Euro-US Dollar, Pound Sterling-US Dollar and US Dollar-Japanese Yen.  The central bank has also introduced exchange traded option contracts in the currency pairs of Euro-Rupee, Pound-Rupee and Japanese Yen-Rupee in addition to the existing Dollar-Rupee pair.  As per the RBI notification.

·       Market participants residents and foreign portfolio investors have been allowed to take position in the cross currency contracts wthout having to estabilish underlying exposure subject to the position limits as prescribed by the exchanges.

·       Authorised Dealer Category-I bank trading members may undertake trading in all permitted exchange traded currency derivatives within their Net Open Position Limit (NOPL) subject to limits stipulated by the exchanges.

·       This is subject to the condition that any synthetic USD-INR position created using a combination of exchange traded FCY-INR and cross currency contracts shall have to be within the position limit prescribed by the exchange for the USD-INR contract.

RBI necessitates prior approval for acquiring stake in private banks:

·       The RBI, in November 2015, issued revised directions necessitating prior approval for acquisition of shares or voting rights in private sector banks.  As per the revised directions, a person intending to acquire shares, compulsorily convertible debentures/ bonds, voting rights, convert optionally convertible debentures/ bonds of 5% or more in a private sector bank will have to apply to the RBI for obtaining prior approval.  As per the RBI directions,

·       An existing major shareholder, who already has the approval of the RBI to have a major shareholding in a bank, will not be required to obtain prior approval for fresh incremental acquisition of shares or voting rights of the concerned bank if the proposed aggregate holding is up to 10%.

·       However, the major shareholder will have to furnish details of the source of funds for such incremental acquisition and obtain `no objection’ from the bank concerned before such incremental acquisition.

Yes Bank announces to mobilize 5 billion US dollars for climate action by 2020:

Yes Bank Limited on 8 December 2015 announced to mobilize 5 billion US dollars from 2015 to 2020 for climate action through lending, investing and raising capital towards mitigation, adaption and resilience.  The announcement was made on the occasion of COP 21 climate summit in Paris.  Furthermore to achieve holistic impact and aid India’s target of meeting its Intended Nationally Determined Contributions (INDCs), the bank committed to achieve the following by 2020.

Yes Bank and Steps to check Climate change

·       The need for climate finance is steadily increasing in India, which is demonstrated by India’s target to achieve 175 GW Renewable Energy by 2022.

·       Yes Bank’s commitment to climate action is significant as it is the youngest Indian private sector bank in operation and holds the only Greenfield banking license awarded by RBI in the last 17 years.

·       In September 2014 at the UN Climate Summit, YES Bank committed to target funding 500 MW clean energy annually which it has already overachieved. Yes Bank also issued green bonds worth 1315 crore rupees to fund eligible green projects in countries including Bangladesh and Sri Lanka. 

·       Yes Bank is India’s fifth largest private sector  Bank with a pan India presence across all 29 states and 7 Union Territories of India.  It is headquartered in the Lower Parel Innovation District (LPID) of Mumbai.

DBS opens new subsidiary in India:

DBS Bank, Singapore’s largest lender by assets, has opened a new wholly owned subsidiary in India called DBS Asia Hub 2 Pvt. Ltd., which will provide “technology – related”  services to the bankinggroup.  The new subsidiary called Asia Hub 2 Pvt.Ltd. was established in Hyderabad on 19 December 2015 with an initial capital of Rs.70.5 crore.

It decided to focus on the affordable housing segment, in the run-up to converting itself into a wholly-owned subsidiary (WOS).  At the moment, the lender typically locuses on the higher end of the segment but it now looking at either acquiring an affordable housing portfolio or a tie-up with another lender that caters to the segment.

FM ArunJaitley asks banks to grant loans on `mission mode’ in rain-ravaged TN:

Union Finance Minister ArunJaitley, on 20 December 2015, asked bankers to go “almost a mission mode”   to extend soft loans to people in the flood affected districts of Tamil Nadu even as Chief Minister J Jayalalithaaurged him to release Rs.2000 crores for sustaining renconstruction efforts.  Chennai, Kancheepuram, Tiruvalluvar and Cuddalore districts were ravaged in the recent floods.

Hitachi keen to partner Postal Department for payments Bank:

Communications and IT Minister Ravi Shankar Prasad, on 16 December 2015, said that Japan-based Hitachi is keen to partner with Postal Department for payments bank solutions.  Hitachi payment services offer banking solutions related to ATM, point of sale (POS) cash and deposit machines and card management solutions to all leading banks of the country.

Banks  open over 19 crore accounts under PM NarendraModi’s Jan DhanYojana:

As per a Finance Ministry statement, released on 15 December 2015, banks have opened 19.21 crore accounts under the government’s ambitious financial inclusion scheme PradhanMantri Jan DhanYojana with deposit of more than Rs.26,819crore.  The ministry said RuPay cards have been issued to 16.51 crore customers and that two lakh accounts are opened every day.

Highlights of Finance Ministry data on accounts under PMJDV

The PMJDV DhanYojana (PMJDY), which also entails a life insurance cover of Rs.30,000 and an accident insurance cover of Rs.1 lakh, had benefited several subscribers as 1,336 claims of life cover and 333 claims of accident insurance cover have been paid till November 2015.

Zero balance accounts in PMJDY have declined from 76 per cent in September 2014 to 36.5 per cent in November 2015.

Under the PradhanMantri Mudra Yojana (PMMY), banks have disbursed Rs.45,938.28crore as on November 2015 which has  benefited 66 lakh borrowers.

The government has set a target of Rs.1.22 lakh crore for loans to be given by banks to promote new entrepreneurs under PMMY which will seek to “fund the unfunded”.  The government last year launched three social security programmes – the PradhanMantriSurakshaBimaYojana (PMSBY), the  PradhanMantriJeevanJyotiBimaYojana (PMJJBY) and the Atal Pension Yojana (APY) – to bring the excluded under the fold of formal financial services.

In India, 80% of women don’t have bank accounts: UNDP report:

As per the report released by the United Nations Development Program (UNDP)  on 14 December 2015, the Human Development Index (HDI)  rank of Bangladesh and Pakistan was 142 and 147, respectively.  India has made improvements in life expectancy at birth which has increased to 68 years in 2014 from 67.6 in the previous year and 53.9 years in 1980.  Gross National Income (GNI)  per capita was $5,497 in 2014, up from $5,180 in 2013 and $,1,255 in 1980.  India’s GNI per capita increased  by about 338% between  1980 and 2014.

Highlights of UNDP Report

·       According to the UNDP report, the expected years of schooling is stagnant at 11.7 years since 2011.  Also, mean years of schooling at 5.4 years has not changed since 2010.  Notably, over half of India’s total employed are working poor, according to the international poverty line (PPP $2 per day).

·       The country does not fare well on the gender index either, Unpaid work, predominantly performed by women, is estimated at 39% of GDP, Women’s workforce participation has also declined from 35% in 1990 to 27% 2013.

·       The Gender Inequality Index reflects gender-based inequalities in three dimensions-reproductive health, empowerment, and economic activity.  India ranks 130 out of 155 countries with a value of 0.563.

·       For every 1,00,000 live births, 190 women die from pregnancy related causes; and the adolescent birth rate is 32.8 births per 1,000 women of ages 15-19.  Female participation in the labour market is 27% compared to 79.9% for men.  In comparison, Bangladesh and Pakistan are ranked at 111 and 121, respectively, on this index.

·       The report recommends government address the imbalance between paid and unpaid work for women – with women performing three times more unpaid (domestic and voluntary) work than men.  It also sought focus on the growing bulge of unskilled youth accompanied by high existing youth unemployment rates that could pose a daunting policy challenge in the near future, if not provided skills and work opportunities.  In India, over 10% of youth are unemployed.

Bank mergers have to be focused and strategic: Mundra:

Reserve Bank Deputy Governor S.S Mundra, on December 2015, supported consolidation in the banking sector but said it has to be a focused exercise.  He said merger should be done if it results into geographical integration, giving banks a wide geographical spread and enhances their product range, among others.  There are 27 public sector banks, including State Bank of India’s five associate banks, in the country.  Talks have been going on for long for merging SBI’s subsidiaries with the parent bank.

·       SBI first merged State Bank of Saurashtra with itself in 2008.

·       Two years later in 2010, State Bank of Indore was merged with SBI

·       The country’s largest lender has five associated banks – State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad.

Google’s Anandan to join HDFC Bank Board as director:

Newly launched private sector HDFC Bank, in December 2015, appointed internet company Google’s RajanAnandan as an independent director on the bank’s board, subject to RBI and shareholder approval.  Anandan is vice president and managing director of Google in South East Asia and India.  He will be the ninth director on HDFC’s bank’s board.

·       HDFC Bank started operations on October 1, 2015, with 23 branches across India, after receiving the RBI nod in 2014.

Bank Board Bureau likely to be set up for creating holding company model:

The finance ministry was, in December 2015, reported to kick-start the process of setting up the proposed Bank Board Bureau (BBB), the first step towards a holding company structure for state-run banks.  A search committee, which includes the Reserve Bank of India governor, will shortlist six candidates and a chairman for the part-time body which will take over the selection process for public sector banks and also discuss their business strategies.

SFIO probes 11 companies in relation to Rs.6000-cr Bank of Baroda fores irregularities:

Serious Fraud Investigation Office (SFIO), on 8 December 2015, launched probe against 11 companies, including an entity named Dabang Marketing and Trading Pvt.Ltd., for alleged involvement in the estimated Rs.6,000crore suspicious forex transactions at a Bank of Baroda branch.

·       The Corporate Affairs Ministry has ordered investigation under Section 212(1)(c) of the Companies Act, 2013 into the affairs of 11 companies which are allegedly involved in suspicious foreign exchange transactions.

·       Section 212 of the Companies Act pertains to investigation by SFIO.

Amendment allows cheque bounce cases to be filed where it is presented:

The RajyaSabha, on 7 December 2015, passed the Negotiable instruments (Amendment) Bill allowing cheque bounce cases to be filed at the place where the cheque is presented for clearance and not the place of issue, a change that is expected to go a long way in improving legal recourse in such cases.  The amendments overturn a Supreme Court ruling which said the cases have to be initiated where the cheque-issuing branch was located.

Yes Bank wind ‘Bank of the year’ award in UK:

India’s fifth largest private sector bank Yes Bank, in December 2015, bagged the prestigious `Bank of the Year’ award as it plans overseas expansion.  `The Banker’ magazine’s annual “Banker Bank of the Year Awards” are widely regarded as the Oscard for the banking industry.

HSBC to wind up private banking business in India:

British bank HSBC on 25 November 2015 said that it will shut down its private banking business in India, an announcement that came amid an ongoing investigation by India’s tax department against individuals who had unaccounted foreign currency accounts in the bank’s Swiss branch.  The move is a direct fallout of the information leak by former HSBC staffer HerveFalcianiin 2008 which included names of 1,195 Indians who had evaded taxes in the country to stash it in the bank’s Swiss branches.

SBI to float subsidiary to manage its properties:

Country’s largest lender SBI was, in November 2015, reported to be finalizing plans to set up a subsidiary for managing its large portfolio of real estate properties and those taken on lease or rent.  Some of the big properties of the bank included SamriddhiBhavan in Kolkata, the birthplace of the bank, which also house the Local Head Office (LHO) of the Bengal circle.

·       Others prominent ones included the Bengal circle’s CGM bungalow at Shakespeare Sarani in Kolkata, chairman’s bungalow and corporate office in Mumbai.

Union Bank ties up with Maharashtra for OTC tax collection:

State-run Union Bank of India, on 26 November 2015, tied up with Maharashtra for over the counter (OTC) collection of taxes and receipts.  The bank has integrated its core banking with the Maharashtra virtual treasury, GRAS (Government Receipt Accounting System), to facilitate OTC tax collection, which will provide one more mode of payment for convenience of tax payers and the state.

Maximum 4 expats in each Indian branch: RBI to foreign banks:

The RBI, on 26 November 2015, said that a foreign bank can deploy a maximum a four expatriates for each branch opened in India and not more than six expatriates for their Head Office functions.

HDFC Bank launches Sonic Branding:

Country’s second largest private sector bank, HDFC Bank, in November 2015, became the first Indian Bank to launch Sonic branding (Musical Logo).  The branding will be used across multiple touch points like ATMs, phone banking, mobile banking and the bank’s website.  The sonic branding will help the bank to create distinct brand imagery and recall among various stakeholders.

The bank will soon tie up with telecom operators to make its musical logo or MOGO available as caller tunes and ringtones to customers.

Finance Ministry identifies five banks requiring special focus to arrest NPAs:

The finance ministry, in November 2015, identified five banks – Bank of India, IDBI, Indian Overseas Bank, Bank of Maharashtra, UCO Bank, and United Bank of India – which require special focus to arrest their bad loans.  As per the finance ministry data, the slippages in these banks continue to be higher than the reduction and there has been an increase impaired assets.

Standard Chartered reopens Japan desk in Chennai:

With deepening of trade ties between New Delhi and Tokyo, British bank standard Chartered, in November 2015, reopened a desk dedicated to cater to banking requirements of Japanese companies in Chennai.  The desk will provide service like cash management, and products on financial markets, debt capital markets, employee banking services.

ICRA lowers NPA estimated as stressed asset formation slows:

Credit rating agency ICRA, on 23 November 2015, lowered its estimated gross NPA for march 2016 to 5%-5.5% from 5.3%-5.9% noting a moderation in the new stressed asset formation in 2015.  However, it said that the so called 5/25 restructuring scheme has also masked the rise in bed loans.

ICRA also commented on the `Uday scheme’ announced by the government earlier in November 2015 under which the union government allowed state governments, which own the discoms, to take over 75% of the debt as of September 30, 2015 and pay back lenders by selling bonds.

Axis Bank enters Bangladesh, opens rep office in Dhaka:

Extending its overseas footprint, Axis Bank, on 22 November 2015, opened a representative office in Dhaka, capital city of Bangladesh.  Dhaka operations, primarily focused to promote the trade finance business, will further strengthen the bank’s presence in Asia, he said.

SBI declares Vijay Mallya `wilful defaulter’, Enforcement Directorate to probe money laundering:

State Bank of India – the largest lender to defunct airline Kingfisher – declared the carrier, its promoter Vijay Mallya and United Breweries Holdings as “wilful defaulters” in November 2015.  The move came even as the Enforecement Directorate (ED) is set to launch a money laundering probe against Mallya and Kingfisher Airlines.  It is alleged that a major chunk of loans to the tune of Rs.4,000 crore extended to Kingfisher by nationalised banks, which are now under CBI probe, were diverted to tax havens such as Cayman Island and Mauritius.

Banks refuse Finance Ministry’s request to reduce interchange fee:

Banks, in December 2015, decided to turn a deaf ear to finance ministry’s request to reduce the interchange fee, the amount one bank charges another if its consumer uses the automated teller machine (ATM) of the non-home bank, to single digits.  Currently, the fee is Rs.15 per financial transaction.  This has been recommended to be revised to Rs.16.50, plus service tax.  This is a fee the customer’s bank pays to the one that maintains the ATM. Banks can decide to pass on the customer or might take the call of absorbing the charges.

Yes Bank signs pacts worth $265 million with US companies for SME lending:

Private sector lender Yes Bank, on 1 December 2015, signed loan agreements with Overseas Private Investment Corporation (OPIC), the US government;s Development Finance Institution, for debt financing of $245 million to increase lending to micro, small and medium enterprises (MSMEs) in India.  US-based Wells Fargo Bank will act as sponsor and co-lender to the project, providing a loan of $20 million, bringing the total facility amount to $265 million.

5 mechant bankers to assist in CIL stake sale:

The finance ministry’s disinvestment department, in November 2015, shortlisted five merchant bankers – JM Financial, SBI Capital, ICICI Securities, Axis Capital and Kotak Mahindra Capital – to assist it in the roadshow and the sale of 10 per cent stake in Coal India.  This would be the first big public sector undertaking (PSU) disinvestment to be managed by only Indian Investment bankers.

Credit Suisse sets up centre of excellence in country:

After Barclays, City Bank, and Deutsche Bank, Swiss banking group Credit Suisse, in November 2015, announced setting up of its first centre of excellence (CoE) in India at Pune.  The centre will employee more than 2,600 staff providing financial accounting, technology and investment banking operations support to the bank in more than 50 countries around the globe.  This is their third centre of excellence globally after Poland and North Carolina in the US.

IRCTC ties-up with Paytm for e-catering payment:

Indian Railway Catering and Tourism Corporation (IRCTC), on 16 December 2015, tied-up with mobile commerce platform Paytm to offer an additional payment gateway for food ordered through itse-catering facility.

IDRBT to develop framework for digital banking solutions:

The Institute for Development and Research in Banking Technology (IDRBT), in December 2015, outlined its plans to launch a Digital Banking versatile by incorporating new channels of payments.  Research in this area has enabled banks to develop their own data warehouses for customer relationship management (CRM) initiatives.

RBI grants in-principle approval to NPCI to function as the central unit for Bharat Bill payment Systems:

The Reserve Bank of India on 24 November 2015 decided to grant in principle approval to the National Payments Corporation of India (NPCI) to function as the Bharat Bill Payment Central Unit (BBPCU) in Bharat Bill Payment System (BBPS).  The BBPS is in integrated bill payment system which will function as a tiered structure for operating the bill payment system in the country with a single brand image providing convenience of anytime anywhere bill payment to customers.

The present scope of BBPS will include utility bill payments, such as, electricity, water, gas, telephone and Direct-to-Home (DTH).

Brown-label ATMs to be history soon:

Tata communications Payment Solutions that runs the Indicash brand of white-label ATMs as well as brown-label cash vending machines, in November 2015, said that the era of bank-run ATMs will soon be history as the Industry has almost fully moved to third-party run operations mode.  The Tata Group enjoys over 60 per cent market share in the white-label ATM space with over 7,000 machines installed in 20 states, while its brown-label machines count over 13,000 as of now.  At present, there are 11,000 white-label machines installed by the three operators who got permission from the Reserve Bank to run such machines two years ago.

Differences: White-label ATMs are those run by companies like Tata Communications, Muthoot Finance and Prism Payment Services and are available for any bank, while brown-label machines are those owned and branded by banks, but could be operated and maintained by third party operators like the Tata company.

Axis Bank to offer electronic signature facility to its customers:

Private sector lender Axis Bank, in December 2015, partnered with a digital security company, e-Mudhra to facilitate digital signature facility to its customers.  The new service will facilitate aAadhaar holder to digitally sign a document within seconds.  The government had launched “e-sign” services early in 2015 as part of its digital India campaign.

eSign

·       `eSign’ will help bank customers to get a digital signature certificate; sign documents, application forms and submit these digitally signed documents to the bank in a secure online manner, at the click of a button.

·       “eSign will be integrated with a host of Bank’s products and will help in quicker, more efficient and secure processing of customer requests.

ATMs being installed in 1.25 lakh post-offices:

JayantSinha in LS: The government informed the LokSabha on 18 December 2015 that work is on to install ATMs and micro ATMs at over 1.25 lakh offices across the country to help people living in far-flung areas to withdraw money.

Iris-based authentication system for banking transactions to minimize password-related frauds:

National Payments Corporation of India (NPCI), for the first time in the country, is planning to introduce an iris-based authentication system, a move that should help millions to transact bank accounts without any pin or one-time password.  This form of biometric authentication will also reduce the chances of password-related frauds, which can at times, drain money from one’s account without someone’s knowledge.

Electronic major Samsung is in the process of manufacturing high-resolution cameras, which will read eye retina to recognize before confirming payments to ecommerce companies, radio cabs or cash withdrawal from ATMs as the product evolves with new features including Aadhaarcard linkages.

Aadhaar cards already have iris impressions of its applicants, which will be matched at the time of payment confirmation, when the mechanism becomes fully operational.

NPCI is leading the initiative for which it has tied up with Bengaluru based NovoPay, which is an information technology solution provider, assisting the indigenous entity to develop the platform.

Currently, there are four options to authenticate our banking transactions password or pin, finger print, one-time password and the traditional signature.

Axis Bank launches country’s first `display variant’ debit card:

Country’s third largest private sector lender Axis Bank, on 2 December 2015, launched a `display variant’ debit card which does away with the hassles of generating one time password (OTP) over SMS while transacting.  The card, which is being made available for high-value  NRE customers, has an embedded EMV chip, a display screen and a touch sensitive button which helps generating the OTP on the card itself.  It is the first lender in the country to offer the facility.

SBI’s new debit cards to have EMV chip & pin security:

Country’s largest lender SBI recently announced to issue EMV chip and pin based debit cards to its new customers to ensure enhanced secure transactions.  EMV chip and pin feature protects against skimming and card transaction frauds.  All SBI  customers opening accounts with the bank hence forth will receive this EMV chip and pin-based debit cards.  Existing customers can also request for upgrading their card by visiting their home branch against payment of nominal fee.

                

·       With this, SBI has become the first large bank to issue 100 per cent EMV cards compliant with RBI’s directive on Security and Risk Mitigation Measures for Card Present and Electronic Payment Transactions.

PayUbiz’s new tech ‘One Tap’ to enable faster commerce transactions:

PayUbiz, in December 2015, launched One Tap, a technology for ecommerce companies that reduces the time taken for online purchases by more than half, aiming to facilitate transactions valued at Rs.50,000 crore by the end of the next financial year.  The patent-pending technology allows customers to make online purchases without having to repeatedly key in card details, CVV numbers and one-time passcodes.

Nucleus launches digital payment solution `Payse’:

Financial technology solutions provider Nucleus Software, on 2 December 2015, launched its offline digital cash solution `Payse’ that allows users to conduct transactions using digital currency.  The solution comprises of three parts – PaySe processing system (a platform that digitises cash); PalmATM (a bank teller app that allows smartphones to perform functions of an ATM including the ability to withdraw and deposit) and `Purse’ (a device to carry digital  money).

Transfer money internationally using social media:

Xpress Money’s new service `XOPO’ a money transfer app, will enable users to transfer money internationally, over social channels like Facebook, Twitter, Whatsapp and Wechat.  The money transfer experience will be as simple as communicating through social network, claims the company.

·       XOPO is the world’s first services to enable users to send, request for and receive money-across borders – through social medial networks and messaging channels.

Tata Sons Picks China’s ICBC for banking solutions:

Tata Sons, on 2 December 2015, formed a long-term partnership with the world’s largest lenderindustrial& Commercial Bank of China (ICBC) and declared it would be a strategic banking partner.  As per the alliance, ICBC would provide Tata Group with financing products,  global cash management, consulting, international, trade finance business, investment banking, foreign exchange, derivatives trading, and other global financial services.

Tata Motors listed as only Indian firm on top 50 global R & D spenders:

Tata Motors on 20 December 2015 made it to the Top 50 in the annual Industrial R & D Investment Scoreboard for 2015.  Prepared by the European Commission, the annual Industrial R & D Investment Scoreboard for 2015 was topped by the German automaker Volkswagen.  In the top five R & D spenders, Volkswagen was followed by Samsung, Microsoft, Intel and Novartis.

Jeff Williams appointed as Chief Operating Officer of Apple Inc:

Jeff Williams was on 18 December 2015 appointed as the Chief Operating Officer (COO) of Apple Inc.  The post of COO of the company had been lying vacant  since Tim Cook’s ascension to position of Chief Executive Officer of Apple Inc in 2011.

Tata Starbucks appoints SumiGhosh as Chief Executive Officer:

Tata Starbucks on 17 December 2015 announced the appointment of SumiGhosh as its Chief Executive Officer (CEO) with effect from 1^st January 2016.

The announcement came after AvaniDavda resigned from the position of CEO of the Seattle-based coffee chain.

Alibaba agrees to buy 112-year old newspaper South China Morning Post of Hong Kong:

Alibaba Group Holding Ltd., on 11 December 2015, agreed to buy the 112-year old English newspaper South China Morning Post (SCMP) for an undisclosed amount.  The agreement included acquisition  of SCMP Group’s other  media assets, such as licenses  to the Hong Kong editions of Esquire, Elle, Cosmopolitan and Harper’s Bazaar.  The acquisition of the Hong Kong’s flagship English-language newspaper is the most politically sensitive acquisition by the e-commerce giant to date.

Hetero becomes first Indian company to receive DGCT’s approval for hepatitis C drug:

Hyderabad-based Hetero Drugs on 8 December 2015 announced  that it received the approval of Drug Controller General of India (DCGI) to launch fixed dose combination thereapyLedipavir-Sofosbuvir.  The product will be available under the brand name Ledisof in India.  With this approval, Heterto became the first company in the country to get approval from DGCI to launch hepatitis C medicines.

Tata Trusts partners with US based Khan Academy for free online educations:

Tata Trusts and Khan Academy on 6 December 2015 announced a five-year, not-for-profit partnership to enable free online education for the Indian market.  The partnership will adapt and build on Khan Academy’s existing resources and tools to serve the specific needs of the Indian learner.  It was founded by educator Salman Khan to provide a free, world-class education for anyone, anywhere in 2006.

Aricent ties-up with Nasscom Foundation to launch Aricent Employability Programme.

Aricent, a US-based product engineering firm, on 1 December 2015 tied-up with Nasscom Foundation to launch Aricent Employability Programme.  This Programme is CSR initiative to create employability opportunities for 2500 engineering graduates.  The programme will be offered to under graduate students across Karnataka, Tamilnadu, Delhi NCR and Rajasthan.

IIFCL appointed as interim investment adviser of NIIF:

State – owned IIFCL was, on 18 December 2015, appointed as interim investment adviser of the National Investment and Infra Fund (NIIF).  In July 2015, the Cabinet had approved creation of NIIF, a sort of sovereign fund, for development of infrastructure projects, including the stalled ones.  The Fund,  set up as a company or a trust with an expected initial corpus of Rs.40,000 crore, is created as a Fund of Funds (Category II Alternate Investment Fund) with a proposed series of funds.

·       IIFCL is a wholly-owned Government of India company set up in 2006 to provide long-term finance to viable infrastructure projects through the Scheme for Financing Viable Infrastructure Projects through a Special Purpose Vehicle called India Infrastructure Finance Company Ltd., (IIFCL).

Canbank Venture Capital Fund to launch a new Rs.650 crore fund:

Canbank Venture Capital, Fund, on 16 December 2015, announced to launch a new fund or Rs.650 crore, which is the sixth fund to be launched by it.  Canbank Venture Capital Fund is a wholly owned by Canara Bank and is India’s only Public Sector Bank sponsored venture fund.

NSE’s group company IISL launches indices on Tata, Birla, Mahindra Groups:

India Index Services & Products Ltd. (IISL), a subsidiary of National Stock Exchange (NSE), on 16 December 2015 launched indices on 3 corporate groups in India namely – Tata, Birla and Mahindra groups.  The three indices are called as – Nifty Tata Group Index, Nifty Aditya Birla Group Index and Nifty Mahindra Group Index.  The base date of these indices is 1 April 2015 and base value is 1000.  They will be maintained by IISL and calculated on an end-of-day basis.

New IISL Indices

·       Nifty Tata Group Index:  It consists of 25 companies across 12 sectors.  The market capitalization of this index is about 751160 crore rupees which is 7.83 percent of the total market capitalization of companies listed on NSE.

·       Additional series of Tata Group namely Nifty Tata Group 25 percent Cap based on free market capitalization with 10 constituents capped at 25 percent was also launched.

·       Nifty Aditya Birla Group Index:  It consists of 8 companies across 7 sectors.  The market capitalization of this index is about 208170 crore rupees which is 217 percent of the total market capitalization of companies listed on NSE.

·       Nifty Mahindra Group Index: It consists of 7 companies across 6 sectors.  The market capitalization of this index is about 164580 crore rupees which is 1.71 percent of the total market capitalization of companies listed on NSE.

BSE introduces new group “W”:

Leading stock exchange BSE started classifying warrants issued by companies into a separate group, called `W’ with effect from 4 December 2015.  Currently, all types of warrants are traded under `F’ Group. The move followed after BSE (formerely known as Bombay Stock Exchange) launched three new sub-groups- XC, XD and XT – for companies listed exclusively on its platform in November 2015.  The new sub-segments by the stock exchange are based on companies specific characteristics such as low to moderate market capitalization and lower contribution to the overall trading turnover.

BSE Groupings

·       Currently, the securities traded on BSE’s equity segment have been classified into `A’, `B’, `T’ and `Z’ groups on certain qualitative and quantitative parameters, for guidance and benefit of the investors.

·       The `F’ group represents fixed income securities, while T group represents securities which are settled on a trade – to – trade basis as a surveillance measure.  Trading in government securities by the retail investors is done under the `G’ group.

·       Besides, the `Z’ group includes companies which have failed to comply with its listing requirements and failed to resolve investor complaints, among others.

·       In a separate circular, BSE, on 7 December 2015, introduced a new facility to enter orders in specialized contracts of Straddle and Pairs options in the currency derivatives segment.

·       Straddle and Paired option contracts will allow a trader to take positions across two different option contracts belonging to the same underlying asset and same expiry by entering a single order.

Government says safeguards in place to prevent misuse of P-Notes:

In a written reply to the LokSabha on 18 December 2015, Minister of State for Finance JayantSinha said that the government has put in place several safeguards to prevent misuse of Participatory Notes, or P-Notes, and there is no information with the Securities and Exchange Board of India (Sebi) wherein entities or investors in the country are using the route of and investing black money through it.

Foreign Portfolio Investors (FPIs) are prohibited from issuing PNs to Resident Indians/ Non-Resident Indians (NRIs) and they are also required to give an undertaking to this effect.

PNs can be issued only by those entities which are regulated by the relevant regulatory authority in the countries of their incorporation which comply with KYC (Know Your Client) norms.

PNs are subscribed by regulated entities with the objectives to take exposure in India securities even if they are not registered as FPI.

Business Responsibility Reports Must for Top 500 Listed Companies:

Sebi, on 30 November 2015, said that Top 500 listed companies will now be required to prepare annual business responsibility reports covering their activities related to environment, stakeholder relationships, governance and other areas.  At present, top 100 listed firms are required to prepare their annual business responsibility reports.

Muthoot Finance starts money transfer service between India and Nepal:

Muthoot Finance Ltd., the flagship company of Muthoot Group, on 16 December 2015, launched money remittance services between India and Nepal.  Prabhu Bank Ltd., a leading bank in Nepal with 112 branches and 7000 outlets, will facilitate the process of money transfer.

With this facility, Muthoot Finance claims to be the first NBFC company to extend money transfer services from India to another country.

Chennai Floods:  Sundaram BNP Paribas offers special loan scheme:

To benefit customers affected by unprecedented heavy rainfall, Sundaram BNP Paribas Home Finance, in December 2015, offered housing loans up to Rs.10 lakh at a fixed interest rate of 8.50 per cent per annum.

SKS Microfinance becomes the first MFI to lend at sub-20% interest rate:

SKS Microfinance, on 27 November 2015, slashed lending rate by 100 basis points to 19.75%, becoming the first micro lender to charge sub 20% interest rate.

SEBI

SEBI signs MoU with Bangladesh Securities and Exchange Commission on bilateral Co-operation:

The Securities and Exchange Board of India (Sebi) on 22 November 2015 signed MoU with the Bangladesh Securities and Exchange Commission (BSEC) on bilateral co-operation and technical assistance.  The MoU was signed by UK Sinha, Chairman, SEBI and Dr M KhairulHossain, Chairman, BSEC at Dhaka, Bangladesh. This MoU will further facilitate training and technical assistance program between the two jurisdictions.

Sebi’s success rate in  SAT appeals hits record high of 90%.

Capital markets regulator Sebi, on 18 December 2015, said its success rate on appeals filed before the Securities Appellate Tribunal (SAT) against its orders have reached a record high level of 90 per cent.

Sebi attaches PACL’s assets over Rs.60,000crore refund failure:

Sebi on 14 December 2015 attached the assets of PACL, its promoters and directors for failing to refund about Rs.60,000crore that the company had been raising illegally from five crore investors since 1997.  PACL’s illegal fund mop-up is the biggest collective investment scheme (CIS) in the country that has come under the Sebi scanner.

Sebi develops online system for commodity brokers registration:

Sebi, in December 2015, announced an online mechanism for registration of commodity derivatives brokers as members of such exchanges.  Sebi began regulating commodities derivatives market earlier in 2015 after the merger of the erstwhile FMC (Forward Markets Commission) with it.

As per  theSebi norms, if an entity was already registered as a member with any of the commodity derivatives exchanges before the FMC merger, then it could apply for registration with Sebi through the exchange concerned within three months from September 28, 2015 – the date of merger.

New members can also apply through the commodity derivatives exchanges, which are required to verify and forward the application to Sebi along with its recommendation through the online module.

Data acquisition equipment have been installed and connectivity was established with major national commodity derivatives exchanges – NCDEX and MCX – thereby integrating trading data with IMSS (Integrated Market Surveillance System) and DWBIS (Data Warehousing and Business Intelligence System)  surveillance systems of Sebi.

Sebi asks commodity bourses for detailed monthly report:

To keep a close vigil on the commodities market, Sebi on 9 December 2015 asked commodity bourses to submit elaborate monthly reports with details such as trading volumes, investor complaints and corporate governance aspects.  Commodities markets have come under the regulatory ambit of Sebi following the merger of FMC with the capital markets regulator in September 2015.

Sebi-Circular on Monthly reporting by Commodity Bourses:

·       Sebi and commodity derivative exchanges would have to submit a monthly report in a prescribed format from April 2015 onwards. The report has to reach Sebi by seventh of the succeeding month.

·       They would now also be required to disclose details about the composition of their governing board and important decisions taken, among others.

·       They will have to provide detailed status pertaining to implementation of directions issued by Sebi from time to time.

·       Under the format, commodity bourses would have to provide information about the number of trading days, total value as well as volume of trade, total number of contracts traded for agri and non agri commodities, number of contracts available for trading and movement of the indices.

·       They need to disclose about trading terminals like total number of trading terminals set up across the country and abroad.

·       Settlement shortages for each segment, penalty imposed by it and non-collection of margins, among others, too would need to be disclosed on monthly basis.

·       Besides, they have been asked to provide information with regard to defaulter along with disciplinary action taken against its members.

·       Sebi has also directed them to furnish details about the number of members inspected during a particular month.

·       In the monthly report, commodity exchanges will have to give latest information about corpus maintained in their settlement guarantee funds.

·       Further, they need to inform about complaints received against brokers, complaints referred by Sebi, among others.

Sebi asks DPs to convert eligible demat accounts into BSDA:

To facilitate individuals avail the benefits of BSDA, Sebi on 11 December 2015, asked depository participants (DPs) to convert all such eligible demat accounts into BSDA unless such Beneficial Owners (BOs) specifically opt to continue to avail the facility of a regular demat account.  It said that DPs would assess the eligibility of the BOs at the end of the current billing cycle and convert eligible demataccountsinto BSDA. DPs are those who act as intermediaries between depositories and investors.

·       The regular also asked depositories – NSDL and CDSL – to make amendments to the relevant bye-laws, rules and regulations for the implementation of the directions.

·       In 2012, markets regulator Sebi and announced no-frills or basic trading accounts for retail individual investors with no charges applicable for holdings up to Rs.50,000.

·       The investors can hold securities worth up to Rs. Two lakh in these no-frills accounts, BSDA, but the charges are capped at a maximum of Rs.100 a year for funds exceeding Rs.50,000.

·       All individuals, who have only one demat account and have accounts where the person is not the first holder, are eligible for BSDA.

·       Investors can hold stocks, mutual funds and other securities in these accounts.

Sebi proposes new norms for green bonds:

To help generate low cost funds for renewable energy ventures. Sebi on 30 November 2015 proposed new norms for issuance and listing of green bonds.  These are in line with the requirements as provided in Green Bond Principles as recommended by International Capital Market Association.  The issuance and listing of green bonds in India does not require any amendment to the Sebi (Issue and Listing of Debt Securities) Regulations.

·       Besides, Sebi has approved a proposal to issue public consultation on introduction of “Primary Market Debt Offering through private placement on electronic Book”.

·       It is proposed that such an electronic book may be created by entities to be named as Electronic Book Providers (EBPs).

·       The entities such as stock exchanges, depositories and merchant bankers with net worth above Rs.100 crore may apply to Sebi for setting up EBPs.

Sebi Proposes New Norms for Issurance of Convertible Securities:

Suggesting a new set of norms for issuance of compulsorily convertible securities, Sebi on I December 2015 proposed allowing existing investors to sell such instruments to the public besides limiting their tenure to five years.  In the discussion paper on “Review of framework for public issuance of Convertible Securities, Sebi proposed to explicity permit the existing holders of convertible securities to sell their securities to public.  Presently, existing shareholders are permitted to sell their shares to public but there is no specific mention about convertible securities.

Sebi Norms for Issuance of Convertible Securities:

Sebi has said that tenure of convertible securities issued to public by an existing listed entity can be a maximum of five years.  Currently, there is no specific provision for tenure of convertible securities issued to public, except for financing of a group company where the maximum tenure is 18 months.

Sebi has suggested same tenure for unlisted company desirous of making a public issue of compulsory convertible securities as well as for Optionally Convertible Debentures (OCDs) and Optionally Convertible Preference Shares (OCPs).

In case an unlisted company is desirous of making a public issue of compulsory convertible securities, Sebi has proposed such firms will have to comply with all the requirements as prescribed under Sebi (Issue of Capital and Disclosure Requirements) Regulations in this regard.

Further, the listing of such securities is proposed to be done on Institutional Trading Platform (ITP).

Sebi has proposed that optionally convertible debentures and optionally convertible preference shares can be treated as debt.

Sebi Sets Norms for Listing of Stock Exchanges:

The Sebion 30 November 2015 said exchanges and depositories would need to meet a minimum public shareholding of 51 per cent and also ensure shareholders were “fit and proper”, a criterion based on their financial solvency and police record.

Sebi asks listed firms to give exit route to dissenting investors:

In a board meeting on 30 November 2015, Sebi said that companies will have to give an exit option to shareholders if the money raised through a public issue is not utilized for the reason stated in the offer document.  The market regulator also removed hurdles for listing of stock exchanges, allowed interoperability between multiple clearing corporations, permitted an electronic platform for primary debt issuances among others.

The Board approved the proposal to initiate public consultation process regarding exit opportunity to dissenting shareholders under Companies Act, 2013 in case of change in objects or varying the term of contracts referred to in the prospectus.

Section 13(8) of the Companies Act says that a company left with unutilized funds after raising money from the public cannot change the objects stated in the prospectus unless a special resolution is passed and the promoters offer dissenting shareholders a way out.

Sebi issues format for financial results disclosure:

Capital markets regulator Sebi,  on 27  November 2015, issued a format for companies, which have listed their debt securities and non-cumulative redeemable preference shares on the exchanges, for disclosing financial results.  The listed companies need to submit the half yearly financial results, year-to-date figures details for the current fiscal along with comparative figures for the year ago period.  All figures should be in lakh.

·       Under the format, firms will have to disclose about net sales, net profit, expenditures, exceptional items, paid-up capital, earnings per share, among others.

·       Apart from these disclosure, banks and NBFCs will have to make submission about non-performing assets (NPA) and capital adequacy ratios.

Sebi to refund disgorged funds to investors in IPO irregularities:

Sebi, in December 2015, announced to distribute among eligible investors the funds it had collected through disgorgement orders in cases of IPO irregularities – a move that will benefit as many as 4.63 lakh investors.  The total amount to be distributed is Rs.18.06 crore, which includes Rs.7.35 crore recovered by Sebi through exercise of its newly-conferred recovery powers.

·       A committee was set up under the Chairmanship of justice D P Wadhwa, a former Supreme Court Judge, which recommended the procedure of identification of persons who have been deprived in the said IPOs and the manner in which reallocation of shares to such persons should take place.

·       As per the recommendations of Wadhwa Committee, 12.75 lakh persons were identified as eligible investors for distribution.

Sebi issues norms to govern outsourcing by depositories:

To safeguard capital markets from outside risks, Sebi on 9 December 2015 issued a new set ofguidelines governing outsourcing by depositories.  The new norms will ensure depositories do not outsource their core and critical activity to third parties as they need to put in place robust monitoring on a real-time basis.  The depositories have been directed to implement the new guidelines within three months.  The two depositories registered with capital market regulator Sebi are NSDL and CDSL.

Sebi Norms on Outsourcing by Depositories:

The core activity of depositories is not limited to processing of applications for admission of depository participants (DPs), issuers and registrar and transfer agents (RTAs), facilitating issuers/ RTAs to executive corporate actions and monitoring and redressal of investor grievances.

Norms for Crowdfunding, Mutual Fund Sale Through E-Commerce Soon:

Sebi, in December 2015, announced to soon put in place norms to help entrepreneurs raise funds through `crowfunding’, while discussions are also underway to allow sale of mutual funds through e-commerce platforms.

Sebi had constituted committee, headed by Infosys co-founder N R Narayana Murthy, to suggest ways for raising funds through crowfunding.

Crowdfunding typically involves young entrepreneurs and small  groups of people raising funds for their ventures through various  online platforms involving individuals and organizations.

Sebi is also actively working towards making it possible for mutual funds (MF) to sell their schemes on e-commerce platforms.

Sebi has set up a committee under another Infosys co-founder NandanNilekani to suggest ways for boosting MF industry.

Sebi relaxes penal provision for Deemed Public Offers:

Sebi, on 30 November 2015, said that unlisted companies raising funds through securities without having a public offer document will be exempt from penal action if they provide a refund option along with 15 per cent interest rate at the time of issuance.  The relaxation will be applicable to entities that have raised funds by issuing securities to more than 49 persons, but up to 200 individuals in a financial year.

INSURANCE SECTOR

LIC employees agree for 15% salary like, 5-days week:

The management of Life Insurance Corporation (LIC) and the unions representing around 1 lakh employees of the insurance behemoth, in November 2015, agreed on a 15 percent wage hike, which will be effective from August, 2012.

The new wage package does not cap an increase in the basic salary unlike in the case of bank employees, who also sealed a wage hike package in May 2015 with a similar hike.  Bank employees can have their basic pay revised upwards only to the tune of 2 per cent per annum.

In the pact, the management also agreed to a five-day week for alternative Saturdays for LIC employees on the lines of their peers in the banking industry.

The new pact offers a 15 per cent hike in salary, which includes a 13.5 per cent increase in the basic pay and a 1.5 per cent raise in allowances like HRA, CCA (city compensation allowance) and daily commuting allowance.

Keen to regulate private superannuation schemes, PFRDA tells Finance Ministry: 

The Pension Fund Regulatory and Development Authority (PFRDA), on 16 December 2015, told Finance Ministry regarding its keenness to regulate private superannuation schemes.  Under the PFRDA Act, the pension regulator is responsible for promoting the pension industry and protecting consumers by supervising pension funds.  At present, it is responsible only for regulating the National Pension System (NPS) and the Atal Pension Yojana (APY).

AegonReligare Life Insurance Company is renamed:

AegonReligare Life Insurance Company was recently renamed Aegon Life Insurance Company, following Religare’s exit from the joint venture.

IIB launches ROHINI to ease in efficiencies in claim settlements: 

The Insurance Information Bureau (IIB) of India in December 2015, launched a registry of 32,651 unique hospitals called the Registry of Hospitals in Network of Insurance (ROHINI) to ease inefficiencies in claim settlements.  IIB has collaborated with GSI India, promoted by the Ministry of Commerce, in providing hospitals a 13-digit globally unique ID and Geo code based on their address.

Features of ROHINI

·       The Hospital Self Service Portal will allow hospital to register and edit information on it.  It will provide an electronic exchange of medical records between hospitals and insurance companies to ensure faster claims processing.  For consumers, the registry will help in providing a database of hospitals and medical records.

·       The portal will facilitate national, state and regional-level analytical reporting on healthcare such as geography-based trends, patterns of disease occurrence and cost patterns, which will help determine standardized treatment costs.

Enrolment in Jan Suraksha scheme touches 123 million:

·       According to data on the Jan Surakshawebsite, public sector banks have sold the highest number of enrolments.  State Bank of India has the highest share with 22.2 million enrolments, followed by Punjab National Bank with 8.7 million enrolments.

·       Andhra Bank, Bank of Baroda, Canara Bank and Bank of India have about six million enrolments each.

Health Insurance TPA of India to be launched soon:

As per news reports of December 2015, the Health Insurance TPA of India Ltd., which has been set up by public sector non-life insurance companies, to manage their health claims is all set to go live.  Once it is operational, a portion of claims (8-10 per cent) that are now being handled by external third party administrators (TPAs) would move to the new body.  This TPA will help in reducing the turnaround times.

Size of terror risk insurance pool to touch Rs 1,800 crore:

As per news reports of 7 December 2015, the size of Indian Market Terrorism Risk Insurance Pool, currently at Rs.1,500crore, could go up to Rs1,800 crore due to recent rise in global terror incidents.  The pool was formed as an initiative by non-life insurance companies in India in April 2002, after terrorism cover was withdrawn by international reinsurers in the aftermath of the 9/11 attack.

IRDAI

IRDAI asks Life insurers to disclose investment return details in ads:

Insurance Regulatory and Development Authority (Irdai) on 23 November 2015, directed life insurers in the country to mandatorily detail guaranteed and non-guaranteed benefits on investments in their advertisements.  As per its norms, it is mandated that all insurance products should provide the prospective policy holder a customized benefit illustration, depicting the guaranteed and non-guaranteed benefits at gross investment returns of 4% and 8% respectively.

Use-and-file method for life products may take time:

As per recent news reports, the implementation of use-and-file products in the life insurance sector is likely to take some more time.  Although the insurance regulator has allowed such products that can be sold directly for the general insurance sector, this method of getting product approval might take some more time for the life segment.

Use-and-file-and-use Methods:

·       Use-and-file and file-and-use are two methods employed by the Insurance Regulatory and Development Authority of India (Irdai) to approve insurance products before they can hit the market.

·       While a use-and-file product can be sold directly in the market by giving a declaration to the regulator, in the latter’s case pricing and structure of the product has to be filed with Irdai before it is sold.

·       Irdai Chairman T S Vijayan had said recently that use-and-file would be first implemented for simple products in the general insurance industry.  This would be the first step to implement the working group report on the file-and-use (F & U) guidelines.

·       If use –and-file comes into play, a product is first launched in the market and then a declaration is sent to the regulator giving out finer details of the product and its pricing.

·       This would mean products hitting the market early and available within a faster turnaround time between market research and the product being sold for customers.

Irdai tweaks norms for insurance marketing firms:

Irdai, on 10 December 2015, said insurance marketing firms can procedure products from two insurers each from the life, general and health categories, giving due intimation to the regulator Insurance marketing firms solicit and procure insurance as well as financial products.  These firms employ licensed personnel who are authorised to sell and distribute insurance marketing firm has to be at least Rs. 10 lakh.

IRDAI Rules on Insurance Marketing Firms:

·       According to Irdai, insurance marketing firms should  take adequate steps for redressal of client of grievances within 15 days of a complaint has been made.  These firms can’t undertake multi-level marketing.  Registration of such a firm is valid for three years.  In case Irdai suspends or cancels registration , the firm cannot solicit new insurance business.

·       However, it can continue to service existing customers for six months within which suitable arrangements have to be made.  In such cases, it can rope in another insurance marketing firm to operate in that jurisdiction.

·       An insurance marketing firm will have a financial service executive and an insurance sales person.  The former is an individual employed by the firm, holding a valid license issued by respective financial regulators to market mutual funds, pension products, etc., The latter will have a certificate issued by Irdai to sell insurance products.

Insurers can’t invest in risky bonds:  Irdai:

Irdai, on 27 November 2015, said it had no plans to allow insurers to invest in additional Tier-1 capital bonds given the  risk associated with these instruments.  These bonds have a provision called `loss absorbency’ clause, which means if there is some stress or loss, the particular bank can write off such investments or convert them into equity.