It’s always better to lock in funds at current rates to benefit out of the falling interest rates, says Sunil Dhawan At a time when RBI is cutting policy rates thus pushing banks to reduce their base rate which subsequently brings down the fixed deposit rates, there comes the news about bank offering a high interest rate on select deposits. Axis Bank, India’s third largest private sector bank has launched “Fixed Deposit Plus”, a Fixed Deposit scheme which offers a higher rate of return on their fixed deposit compared to regular fixed deposit rates. Few months back, RBI had allowed banks to offer differential treatment to their deposits based on whether they can be withdrawn. If deposits are not allowed to be withdrawn by deposit holders, banks may offer higher rate compared to those deposits which can be prematurely withdrawn. Features: The minimum amount of deposit has been kept at Rs 15 lakh and the duration of the deposit has been kept in between 1 year to less than 2 years. There is, however, no premature withdrawal faculty and amount gets locked –up till maturity. The interest rate on such deposit is 0.1 per cent higher than regular deposits. AXIS Bank currently offers 8.2 per cent on deposits of 1 year to less than 2 years, hence on Fixed Deposit Plus, the rate would be 8.3 per cent. One may open a short term deposit of say 6 months. Interest can be had on monthly or quarterly basis. Presently in banking industry, differential interest rate is offered for deposits based on the amount of deposit. Different banks have their own limits. Few may offer a specific rate for amount up to Rs 1 crore, while others may put it at Rs 3 crore or Rs 5 crore. However, all such deposits can be withdrawn prematurely. On premature withdrawals, there could be a penalty imposed by bank. In case of premature withdrawal, banks typically charge penalty by considering interest rate of 1 percent below the rate prevailing as on the date of deposit. What to do: The interest rates are on the way down. It’s always better to lock in funds at current rates to benefit out of the falling interest rates. Axis bank offer may well see other banks launching similar product with maybe better deal. Such differential interest rate deposits helps in case an investor has surplus funds to be deployed for a short duration of say 3-6-7 months. While most banks would be offering similar rates on shorter duration, getting a marginal higher rate helps. However, make sure you don’t need those funds before that date as premature withdrawal is strictly not allowed.
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India is drawing up a comprehensive package to help state-run banks, Minister of State for Finance Minister Jayant Sinha said on Wednesday, as part of efforts to nurse them back to health and improve the flow of credit to industry. State lenders, which dominate India's banking system, were hit hard by a surge in bad loans after a slowdown in economic growth following the 2008 global financial crisis. Stress tests carried out by the Reserve Bank of India (RBI) showed that gross non-performing assets (NPAs) as a ratio of total loans could rise to 4.8 percent by September from 4.6 percent in March, before dipping to 4.7 percent by March 2016. The last week blamed rising bad loans for making lenders reluctant to pass on cuts in interest rates to borrowers and approve new loans. "NPAs are simply a symptom of the underlying issues that need to be resolved," Sinha told a gathering of private equity investors. "We are preparing a comprehensive package which we will bring out shortly." As part of the package, New Delhi is trying to improve corporate governance and strengthen management at state-run banks, Sinha said. It is also overhauling annual targets for public sector lenders to increase the focus on efficiency. The government has also agreed to inject about $3 billion into the banks this fiscal year and could double that amount next year to shore up their capital. But private analysts reckon the banks need much more. Ratings agency Fitch estimates Indian lenders need more than $200 billion to prepare for the full implementation of new international capital adequacy rules in the next four years. Sinha said he would meet banks over the next two days in Bangalore to fine-tune their capital-raising plans. "We are trying to understand exactly what's their capital requirement going to be in the next one to three years," he said. "We are there to support and provide them the capital." (Reuters)
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Infosys, a global leader in consulting, technology, outsourcing and next-generation services, has announced the launch of the Finacle SME Enable to help banks enhance support and service for their small and medium business enterprise (SME) customers. The first-of-its-kind, mobile-based financial and business management solution is exclusively designed to help SMEs not only experience banking services on the move, but also manage their business operations efficiently. SME Enable is a unified application for both banking and non-banking services aimed at helping SMEs run their businesses efficiently and will provide a bank’s SME customers real-time access to their account information and relevant financial management tools to manage their day-to-day business operations in a self-service mode.Michael Reh, Senior Vice President and Global Head, Finacle, Infosys: “SMEs today constitute a significant share of gross domestic product (GDP). Convenient banking services as well as agile and cost-efficient operations are key growth drivers for this segment. Banks have a great opportunity to gain a loyal customer base in this segment by providing relevant digital banking solutions, along with an integrated support for their business needs. Finacle SME Enable fits right into this niche and can be a game changer for banks.”The solution will enable SMEs to grow their businesses through a host of features such as enterprise setup, automated banking transactions in supply chain, credit management, social connect, integrated alerts/analytical tools for financial management, and channels to seek expert advice. Integration of the Infosys TradeEdge, a cloud-based retail trade platform, with SME Enable will help SME clients obtain complete visibility into their inventories and sales transactions, along with seamless integration of banking services.For SME customers, this solution will enable a high degree of self-service and efficiency. For a bank, this will mean a significant reduction in time and effort required to serve their SME customers, while gaining an opportunity to build deeper relationships
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Deutsche Bank's co-chief executive Anshu Jain may have "knowingly made inaccurate statements" to Germany's Bundesbank during investigations into manipulation of the inter-bank rate setting process, the Financial Times reported online, citing a confidential report from German regulator BaFin. BaFin declined to comment. Deutsche Bank told Reuters it disputed the allegation that Anshu Jain misled the Bundesbank. Earlier this month, a source told Reuters that Germany's financial watchdog Bafin heavily criticised Deutsche Bank in its report investigating attempts to manipulate inter-bank interest rates such as Libor. The German regulator has been investigating Deutsche Bank and the role it played during the financial crisis when a global inter-bank lending rate mechanism was being manipulated. BaFin recommends that Deutsche Bank should face "special banking supervisory measures" as a result, the Financial Times reported, quoting the BaFin report. Jain, who resigned his position as CEO effective June 30, is accused of having "knowingly made inaccurate statements" in a 2012 interview with the German central bank, the Financial Times said. Germany's central bank, which is known as the Bundesbank, could not be reached for comment. Jain is alleged to have told the central bank he had no knowledge of rumours of possible rigging in 2008, but contemporaneous e-mails about a meeting on the subject were forwarded to him at the time, the Financial Times said. Deutsche Bank on Friday said, "The BaFin report confirms our findings that no present or former member of Deutsche Bank's Management Board or Group Executive Committee instructed employees to manipulate intra-bank offered rates (IBOR) submissions or was aware of any attempted manipulations prior to June 2011 when certain misconduct first came to light during the Bank's investigation of this matter." In a statement, Deutsche Bank said, "Mr Jain disputes as baseless the allegation that he misled the Bundesbank in his 2012 interview. He understood Bundesbank’s question about when he first learned of rumours of possible IBOR rigging to mean rigging at Deutsche Bank itself which he learned of in 2011, not rigging in the marketplace which was publicly reported on in 2008." Deutsche further said that report also addresses concerns about control related issues, a number of which have since been rectified and others of which the bank was still working to improve. "As we have not yet responded to the BaFin report as part of the regulatory process, we believe it would be inappropriate to comment further publicly at this time," Deutsche Bank said. From the report, the Financial Times quotes BaFin's lead banking supervisor who is quoted Frauke Menke, lead banking supervisory as saying, "I have been astonished to learn [...] that the suggestion is that the audit by BaFin supposedly resulted in clearing the senior management of DB, especially Mr Jain, and that supposedly no banking supervisory measures are expected," Menke was quoted as saying in the report. "I expressly want to point out that this is not correct," the Financial Times said, quoting Menke in the report. (Reuters)
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The emerging market BRICS nations will have their own development bank by the end of the year, South Africa said. "The New Development Bank is expected to be operational by end of 2015," the South African finance ministry said in a statement that announced the nomination of South African banker Leslie Maasdorp as vice president of the bank and parliamentary ratification of two treaties concerning the lender. The BRICS nations - Brazil, Russia, India, China and South Africa - which represent 40 per cent of the world's population and a quarter of its economic output, decided in 2013 to create their own development bank to step up lending for the infrastructure projects needed to close the gap with the industrialised world. The bank, which will be headquartered in Shanghai, is expected to have up to $100 billion in capital. The New Development Bank, also known as the BRICS Bank, is one of two international development banks that China is promoting as an alternative to western institutions such as the World Bank. The inaugural meeting of the board of governors of the New Development Bank will be held in the Russian city of Ufa on July 7 to confirm the appointment of the management of the lender. Maasdorp, who heads up southern African operations for Bank of America Merrill Lynch, was formerly an advisor to the current head of South Africa's central bank, Tito Mboweni, and supervised the government's privatisation programme from 1999 to 2002. China's Vice Finance Minister Shi Yaobin said Beijing would inject $10 billion into the bank once the Chinese parliament has ratified the agreement. Russia and India had ratified the agreements in April. China has pledged to contribute a total of $41 billion to the New Development Bank, giving it the largest voting right at 39.5 per cent. (Agencies)
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China will hold over a quarter of the votes in the new Asian Infrastructure Investment Bank (AIIB), its finance ministry said on Monday, giving it a veto in some key decisions despite Beijing insisting it will not have such powers. Delegates from 57 countries gathered in Beijing to witness the signing of the articles of agreement for the Chinese-led development bank, which is expected to rival institutions such as the World Bank and the Asian Development Bank. Fifty countries signed the agreement, the ministry said in a statement on its website, amongst them Iran, Australia, Georgia and Britain. Seven - Denmark, Kuwait, Malaysia, Philippines, Holland and South Africa and Thailand - refrained from signing as they had not yet won domestic approval and are likely to do so later in the year. The ministry said China would have 26.06 percent of the voting rights in the bank. This would effectively give the country a veto on votes requiring a "super majority", which need to be approved by 75 percent of votes and two-thirds of all member countries. A super majority vote is needed to choose the president of the bank, provide funding outside the region and allocating the bank's income, among other decisions. The United States, which initially cautioned nations against joining the AIIB, has expressed concern over how much influence China will wield in the new institution. China has maintained it will not have veto powers, unlike the World Bank where Washington has a limited veto. Xinhua news agency quoted China's vice finance minister Shi Yaobin as saying that China did not seek a veto in the bank, describing its stake and voting share in the initial stage as a "natural result" of current rules. The ministry added that the initial stakes and voting rights of China and other founding members would be gradually diluted as other members joined. Foreign Policy WinThe AIIB, first proposed by President Xi Jinping less than two years ago, has become one of China's biggest foreign policy successes. Despite the opposition of Washington, almost all major U.S. allies - Australia, Britain, German, Italy, the Philippines and South Korea - have joined. The major holdouts in the bank are Japan, the United States and Canada. "This proposal was designed to meet Asia's infrastructure development and promote Asia's connectivity and also deepen regional cooperation for the sake of development," Xi told delegates at the signing ceremony. "In a relatively short period of time we have been able to reach agreement on the articles of agreement of the AIIB...This testifies to the solemn commitment of all the AIIB's countries to setting up the bank." The bank is slated to start operations by the end of the year. It will be headquartered in Beijing and English will be the working language. Like the World Bank and the Asian Development Bank, the bank's officers will get tax-free salaries. China's finance ministry said China would be the bank's biggest shareholder by subscribed capital with a 30.34 percent stake, followed by India, Russia, Germany and South Korea. The AIIB's authorized capital will be $100 billion. Countries defined as "within the region" will hold a 75 percent stake in the bank, the ministry said. Johann Schneider-Ammann, head of the federal department of economic affairs, education and research for Switzerland, called the AIIB a "necessary supplement" to other multilateral development banks and stressed the need for compliance to international standards in terms of transparency and governance. "I am thus glad to know that it is the AIIB's declared objective to position itself as a responsible player among the multilateral development banks," he said, seated next to Xi. (Reuters)
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With banks lowering base rate, if you want to lower your EMI, you need to contact your banker and submit revised ECS mandate, says Sunil Dhawan
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Reserve Bank Governor Raghuram Rajan has said macroeconomic fundamentals of the country have improved over the past two years and emerging market economies like India are better placed to face any eventuality. In the same breath, he cautioned against more volatility, given conflicting action by the developed world. After the "taper tantrums" starting mid-May 2013, when the Fed hinted at reversing its easy money policy, "a combination of global factors and concerted domestic policy decisions" have helped the country, Rajan said in the foreword to the Financial Stability Report 2015 (FSR) released by RBI today. "The macro-economic fundamentals have improved and we have also been able to build buffers to fight any future uncertainty," he said, stressing that "we need to be vigilant". "With back-to-back quantitative easing by other major central banks, alongside the possible tightening by the Fed, what we have seen might be only one of a series of such 'tantrums' that the global markets are likely to witness." Rajan has repeatedly called for policy co-ordination at global forums, saying policies in the developed world driven by domestic needs can adversely impact other developing countries in an inter-connected world. Reiterating the need for a consensus here, Rajan said: "There is a need to be vigilant about the spillovers (of the Fed ending the near-zero interest rate regime)... For India, what matters is reducing inefficiencies as also improvements in non-price competitiveness." He also underscored the need for promoting "healthy innovation while ensuring financial stability". The vision for the overall regulatory framework envisages a "balanced, predictable, institution-neutral, ownership-neutral and technology-neutral" regime, he said. FSR is published by a sub-committee of the Financial Stability & Development Council headed by the RBI Governor. The sub-committee has representation from the heads of other regulators like Sebi, IRDAI, FMC and PFRDA, apart from the Chief Economic Advisor and the Finance Secretary, among others.(PTI)
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The IRDAI makes it mandatory for insurers and the TPAs to ensure that every discount received or agreed to be received from the hospital are passed on to the policyholder, explains Sunil DhawanA regulatory move that actually helps consumers in getting a discount is although a rare event but always a welcome move. Health insurance policyholders are set for a sweet surprise as Insurance Regulatory and Development Authority of India (IRDAI) has directed all insurance companies and Third Party Administrators (TPA’s) to ensure that if there are any discounts obtained from the hospitals, they need to be passed on to the policyholders. The new rule: Insurance companies and the TPA’s have an agreement with hospitals on the rack rates of treatment cost of all specific ailments. When a hospital raises a bill, there can be a discount offered on the same which goes hidden from the bill. IRDAI has asked insurer and TPA’s to appropriately identify and apportion the discount to the health insurance policy (on cashless or on reimbursement basis). How discounts work: The hospital bill will now on reflect the discount being offered, if there is one. Say, the sum insured of a health policy is for Rs 1 lakh and the gross bill amount is Rs 1 lakh i.e. excluding the discount. If there is an agreed discount of 10 percent, the insurer would end up paying (if its cashless payment for policyholder) Rs 90,000 to the hospital. Importantly, see how you as a policyholder gain. Instead of Rs 1 lakh (entire sum insured) being utilized, Rs 10,000 of your coverage remains unused. In case, the hospital bill is more than the sum insured, IRDAI has asked to initially adjust the amount of discount from the bill amount and then present the same to the insurer or policyholder to pay. Say, in the above case, if bill raised is to the tune of Rs 1.20 lakh. In that case, policyholder would have to pay extra Rs 20,000 from own pocket as sum insured is till Rs1 lakh. However, now discount has to be adjusted and extra payment will be restricted to Rs 10,000. Gains for policyholder: As a policyholder, one stands to gain on three counts: One, the sum insured to the extent of the discount remains available for the policyholder for future use, and secondly, in case the bill is exceeding the sum insured, discounting helps in minimizing payout and thirdly, in case it’s a reimbursement case (unlike cashless where insurer pays), you need to pay lesser amount. End note: The move is certainly customer friendly and brings out the agreement clauses between insurers, TPA and hospitals out in open for the benefit of policyholders. The IRDAI makes it mandatory for insurers and the TPAs to ensure that every discount received or agreed to be received from the hospital are passed on to the policyholder. The next step could be to make the treatment rate chart along with discount transparent and easily accessible to all.
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India's state social security fund, undeterred by resistance from trade unions, will start investing in equity markets next month, the labour minister said, as part of a reform drive aimed at boosting the economy.With more than $100 billion of assets from some 80-million members, the Employees' Provident Fund Organisation (EPFO) is one of the world's largest. It will begin by investing in exchange traded funds, with the goal of earning higher returns."We are starting with 1 per cent in July and by the end of this (fiscal) year it will go up to 5 per cent" of annual investments), Labour Minister Bandaru Dattatreya told Reuters in an interview late on Wednesday.India's fiscal year ends March 31.An EPFO official said the fund annually invested nearly 1 trillion rupees ($15.72 billion), out of which it could invest nearly 50 billion rupees ($785.95 million) in equities between July and March.The move is part of Prime Minister Narendra Modi's agenda to reform Asia's third largest economy, which includes changing tax, land and labour regulations.The new EPFO rules may help Modi hit an ambitious target of raising nearly $11 billion through selling shares in state-run firms and minority stakes in private companies this fiscal year, a senior government official said, because for the first time EPFO will be able to buy the government's shares.In the past, the government has nudged the state-run Life Insurance Corp of India into buying its assets when market interest is low, a model that could be replicated with EPFO, the official said.Dattatreya said that if the experiment was successful, the fund could increase its equity exposure to 15 percent of annual investments over the next few years. At current investment rates, that would be about $2.5 billion a year.Some unions have opposed EPFO investing in share markets as they worry that their life-long savings could be depleted in a market crash.Until now, EPFO's market exposure has been limited to government and corporate bonds. It earned a return of 9.22 per cent on its investments last fiscal year, and paid 8.75 per cent to its subscribers.But with yields falling on debt securities, the returns are likely to be "much, much more moderate" this year, a senior official at the EPFO said.(Reuters)
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