The proposed payments banks will change banking habits in the country as more and more people entering formal banking network would act as a "game-changer" for the economy, Finance Minister Arun Jaitley said on Friday (21 Augusty). RBI has given nod to 11 entities to launch such niche banks within next 18 months. "Payments banks will change the banking habits of people, it will change the way they think, it will change the way they keep the money, where they keep their money, it will change the way they pay," Jaitley said at the Indian Bank event here.He said going ahead, banking is going to be more of technology-enabled and effort is now on to expand banking to every unbanked corners of the society. "... using banks for all transactions, small and middle will become a habit of the people. More and more outside of the regular economy will get into the economy. And this itself is going to be a big game-changer as far as the Indian habits and Indian economy is concerned," Jaitley said. Jaitley said banking network is expanding hugely and the health of banks reflects on the challenges for the economy. "While on one hand we can take some satisfaction in the fact that networks are expanding across the country, there is huge amount of activity which is still to be done," he said. Earlier this week the RBI gave 'in-principle' nod to 11 entities, including Department of Post, Reliance Industries, Aditya Birla Nuvo, Vodafone and Airtel, to set up payments banks and proposed such licences 'on tap' in future. Payment banking licence will allow companies to collect deposits (initially up to Rs 1 lakh per individual), Internet banking, facilitate money transfers, and sell insurance and mutual funds. They can issue ATM/debit cards, but not credit cards.(PTI)
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“The insurance schemes launched by the Prime Ministers created the kind of growth in months what has taken the insurance industry years. There is a hint in it as to what the industry needs to do to create growth and appropriate value,” said T S Vijayan, Chairman, Insurance Regulatory & Development Authority of India at the 17th edition of CII’s flagship Insurance Summit. The theme for this year was ‘Building Growth, Building Value’.Vijayan explained that the trick is to make appropriate schemes easy for customers to understand and if the need arises, to claim it. The purpose of the industry is to cover risk and ride on platforms already created. The Prime Minister’s products did this by responding to the ecosystem available. The industry needs to do the same.Value is determined by how the money that a customer is paying, is apportioned to cover distribution cost, capital cost, processing cost etc. and how much of it goes to balance premium for the purpose it is paid. The proper appropriation of the proportions for all stake holders will ultimately determine value for everyone. "At IRDA disruption is not our aim. We want to bring about gradual changes to give value to all stake holders.” Vijayan addedAsking the companies to expand the market he said, “There is enough money. Companies should work to aggressively expand the market. If they are reluctant to do that, we might need to look at alternate ways. Because India needs insurance, people need insurance.” Highlighting the PM’s insurance schemes he said that audiences respond to simple schemes where they can clearly know the conditions, what they are paying and how they can claim it. The ecosystem created by the PM’s schemes will enable the insurance companies to increase the vital matrix of Sum at Risk as a percentage of GDP which currently is around 70 per cent whereas in developed countries like Japan, this ratio is as high as 350 per cent.He added, “Ecosystem is changing and the regulator is here to support the entire process till claim-clearance. We cannot remain immune to the changing ecosystem, changing time, and cannot talk about the past because what is available now was not available in the past.”The IRDAI Chairman said that he believes that distribution cost is not maximum load on Insurance companies. The load is created by low volume of business given the fixed cost incurred in building the distribution. Volume is the key to all profitability problems in insurance. He hoped that adoption new technology, easily understandable products, easy to claim and unambiguous products, will help them do this. S. K. Roy, Chariman, Life Insurance Cooperation of India, giving numbers, explained how the industry reached a peak in 2010 but has tapered down since. “In March 2002, the number of individual agents associated with life insurance were 8,26,000 which reached a peak of 29,00,000 in 2010 and is now 21,88,000. This is not the cause, but effect of low growth.”He added, “We can’t plan for building growth or building value. We have to plan for growth and value creation together at the same time. Maybe in the past we did not see both together. We grew but maybe some stake holders felt that they did not experience value proposition that they were looking forward to. Perhaps this is one of the reasons that we experienced a slump.”Earlier in the morning, Sanjiv Bajaj, Summit Chairman & Chairman, National Committee on Insurance & Pensions, CII, laid the foundation for the Summit when he said, “The market has expanded and given each one of us more than enough room to prosper. Solvency is far in excess of minimum regulatory requirements. We made some mistakes and the slowdown of the economy hit us hard but the regulator stepped in and the life insurance sector responded by realigning well. The onus is clearly on the industry to realise its full potential in the coming years.”As per Bajaj, for different stakeholders, value has a different connotation. For customers value is what he gets in future for the needs insured. For distributors value comes from long term sustainable and renewal business, while for shareholders value emerges from reasonable Return on Investment. Value for Regulator is created when an enabling framework is created which will enhance financial inclusion and provide adequate coverage.Rajesh Sud, Summit Co-Chair & Co-Chairman, National Committee on Insurance & Pensions, CII said, “Context has changed. Where the industry was 5 years ago to where we are today is significantly different. That is what makes the future so exciting. Yet, product is always central to what we do. To get value, start with the end in mind and work backwards.”
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Just in case you have worked for more than one employer in the previous year, here’s how to file your return, explains CA (Dr) Suresh Surana Dr Suresh SuranaFor the financial year 2014-15, the due date for filing personal tax return is only a few days away with the extended deadline of 31st August 2015 fast approaching. Let’s see the compliances which need to be considered by an individual who is employed with more than 1 employer during the year, while filing his return of income. An Individual receiving salary from more than one employer has to offer total salary received by him from all employers during the year for computing his total income. In case of change of employment, employee should furnish to the successor employer details of the income under the head "Salaries" due or received from the earlier employer and also tax deducted at source therefrom. The penalty: In case this is not done, it is likely that lower tax has been deducted due to basic exemption limit (generally Rs. 2.50 lacs) and eligible deduction (such as section 80C) considered by both employers. In such a case, Individual may need to pay the shortfall of tax on the total income (earlier as well as successor employment) as Self-Assessment Tax along with interest before filing of the return of income. Employer’s role: Please note that every employer deducting tax has to issue a TDS certificate in Form 16 by 31st day of May of the financial year immediately following the financial year in which the income was paid and tax deducted. If an Individual is employed by more than one employer during the year, each of the employers shall issue Part A of the certificate in Form No. 16 pertaining to the period for which such Individual was employed with each of the employers and Part B may be issued by each of the employers or the last employer at the option of the Individual. When one employer’s income shown: If the income tax return reporting the income as shown in one Form 16 only, this may result in concealment of income attracting penal consequences. To avoid this, the Individual may rectify his mistake by filing a revised return. A revised return is to be filed within 2 years from the end of the financial year. However, it may be noted that a revised return can be filed only if the original return was filed on or before the due date. Which form: The forms applicable in case of a salaried individual shall be either ITR-1 or ITR2A or ITR2 assuming that the individual does not have any business income. In case the resident individual has foreign asset or interest or is a beneficiary of such asset, he needs to mandatory e-file his return in ITR-2, which has a specific schedule on foreign asset.
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Hoping that the NPA situation will improve in the coming quarters, Finance Minister Arun Jaitley on Friday (21 August) said an all-out effort has been launched to correct the current "unacceptable" level of bad loans in the PSU banks. "NPAs, which have reached to the present level are unacceptable. They reached this level partly because of indiscretion, partly because of inaction, partly because of challenges in some sectors of the economy, which were evident through the high NPA in these sectors," he said. Jaitley was inaugurating 109 new branches and 109 Bunch Note Acceptors (BNA) on the Indian Bank Foundation Day. Gross Non Performing Assets (NPAs) of public sector unit (PSU) banks at the end of March quarter stood at 5.20 per cent compared with 5.63 per cent in December. "An all-out effort have been launched to correct the health and bring NPAs down. The effort by the bank administration, the effort by the government to infuse more capital, the effort to get more finance by divesting (government holding), and then greater discretion and more importantly addressing the concerns of each of (stressed) sectors. "And I don't have a doubt that over the next few quarters, the banks will be able to address these challenges," he said. The Finance Minister said the government's plan to infuse capital into the PSU banks over the next four years will "infuse lot of financial strength" in these banks to deal with the bad loan problems. (PTI)
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Sunil Dhawan on how by making KYC verification online and allowing to invest in mutual funds from other banks, the big step in online investing takes place. Investing in mutual funds is all set to change. ICICI Direct has launched an ‘online platform’, ‘Insta Account’ to let investors buy mutual funds completely online. Online investing in mutual funds through ICICI Direct’s Insta Account brings two aspects upfront– one, what if the investor is non-KYC compliant and secondly, what if investor doesn’t have ICICI bank account. Insta Account precisely addresses these concerns and allows anyone not meeting the above two conditions to buy MF units from the comforts of his home or office. KYC Compliance: From the ICICI Direct website, clicking on the ‘Insta Account’ link, one can initiate the account opening process. It’s a 3-steps process to open the free Insta Account. 1. One has to submit the Permanent Account Number (PAN) and Date of Birth2. Verify the name and contact details and generate a one-time password (OTP)3. Authenticate using the OTP and create User-id and password Non-KYC compliance: For those who are still not KYC compliant, the purchase has to wait until one-time KYC formalities are done with. One may have to then download and fill the KYC form. After signing it, along with documentary evidence one has to submit it. There would be an in-person verification before you get KYC compliant and can start investing through Insta Account. For ICICI Bank account holders: Post opening an Insta Account, the investor who has an existing ICICI Bank account can start investing instantly. One merely has to link the ICICI savings account by providing the bank branch details including the IFSC code. What if no ICICI bank account: The facility is available even for those who don’t have an ICICI bank account. ‘Insta Account’, is currently allowing investors to invest through any of the 11 banks with whom they have tied-up. Some of the banks are SBI, HDFC, Axis, J&K, and YES bank amongst others. One needs to scan and upload copy of a bank cheque. On successful verification the investor can use their internet banking account to make the investment using their ICICI direct Insta Account. Restriction: In case one has a trading account of ICICI Direct, use of ‘Insta Account’ is not possible. The trading account of ICICI Direct has always been allowing MF buying. But there is a difference in buying MF units from ICICI Direct and through Insta Account. In Insta Account, one doesn’t have to allocate funds separately for buying as purchase is being done from savings account of any bank. In ICICI Direct trading account, funds initially have to be allocated from savings account. End Note: If you wish to buy shares, the trading account of ICICI Direct has always been there, which also allows MF buying. Insta Account is primarily targeting investors who don’t have such account and only wish to buy MF units and are not holding ICICI account. By making the process of buying MF units easy and simple, the reason to not invest for long term goals doesn’t t hold anymore. Choose the right schemes preferably diversified plans based on their long term performance, initiate SIP in them and link them to a long term goal.
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Bringing poor people under the digital banking platform will help financial transfer meant for social security payment easier, writes Nilanjan BanikA quiet financial revolution has begun in India. Reserve Bank of India, India’s central bank, has granted permission to set up payment banks to 11 Indian companies. This is with the objective of bringing new areas under financial inclusion which otherwise are neglected by traditional commercial banks. Payment banks can accept deposit up to INR .1 million, and will offer other banking services such as issuance of ATM/debit cards, and money transfer. Among the big names which are granted license (likely to be operational by September 2015) are India Post, Reliance Industries, Airtel, Vodafone, Tech Mahindra, Paytm, IDFC, National Securities Depositary Limited (NSDL), Fino PayTec, Cholamandalam group, and Aditya Birla Nuvo. Although India Post, with 0.15 million post offices, has already got a network in place, others are tying up with commercial banks (for instance, Reliance with State Bank of India, Airtel with Kotak Bank, etc.) to leverage their presence. The usher of payment banking system is an important step for financial inclusion in India. In 2014, only 35% of the adults have a bank account and a meagre 8% availed loan from banks. Access to formal banking is a necessary condition for any economy to grow. It will increase saving rates, which will enable capital investment in sectors such as roads, ports, and railways. India needs to invest over USD 320 billion in infrastructure. As capital is scarce, a perfect capital market will ensure a higher return for each additional dollar of saving invested for building India’s infrastructure. Importantly, access to banking will increase productivity of the Indian Micro, Small and Medium Enterprises (MSMEs) sector, and aid the much touted Make in India campaign for India. Only 5% of the MSMEs avail loan from institutional sources, underscoring the need for financial inclusion for the MSME sector, and to drive India’s inclusive growth agenda. Although, economists and policymakers, in general, are worried about individual well-being, and the factors affecting this well-being, they somehow seem to assume the market is perfect. All the growth models in economics, explaining why some economies grow faster than the others, have tried to explain higher standard of living (read, per-capita income) without explicitly accounting for market imperfection. In fact, the fundamental assumption for any country to grow is to assume that the capital market is perfect – so that whatever is saved can be invested for productive purposes. Imperfection in capital market affects distribution of income. A person who is economically poor and does not have a bank account has no other choice but to store his money in the form cash, livestock, or jewellery. The value of cash withers with inflation, jewellery run the risk of being stolen, and livestock can fall ill. All these adversely affect flow of income, and hence affect consumption smoothening. Payment bank will be a big boon for thousands of migrant workers. In India, only 2% of the people used an account to receive money from family member living in other regions. A survey among Indian migrant workers showed they pay a commission of 4.6% when they transfer money through informal route such as Hawala. The cost of loan through informal channel is also high in India. Firms/people with access to finance/capital are guaranteed with more income than the ones without access to banks and capital. As these payment banks are backed by big corporates (some of them have already pioneered use of technology in the financial sector such as Tech Mahindra and NSDL), it will usher in a technological revolution in India. Technology helps to augment financial inclusion by making accessibility to bank and financial transactions easier. Long are the days of waiting in long queue in banks. In a digital world financial transaction happens through click of mouse, and over mobile phone. In India, changes have already happened in three specific areas. First is introduction of Real Time Gross Settlement (RTGS) system, enabling banks to transfer funds across all deposit accounts in real time. The newer version of RTGS has many advanced capabilities such as national electronic fund transfer (NEFT), and electronic fund transfer (EFT) across national boundaries. Second is the introduction of online automatic clearing mechanism such as BillDesk, underlying any retail transfers between point of sale for credit/debit cards and bank automatic teller machines. And, third is introduction of electronic clearing service (ECS) for cheques, an electronic mode of fund transfer from one bank account to another. Payment banks will make mobile network operators (MNOs) and internet banking more popular. According to ‘Internet in India 2014’ report jointly published by the Internet and Mobile Association of India, and IMRB International, Internet users in India will cross 300 million by December 2014. The year on year growth rate registered stands at an impressive 32 per cent. In rural India, the number of Internet users increased by 39 per cent to reach 101 million in October 2014. India has the third largest Internet user base in the world, after China with more than 600 million Internet users and the US with an estimated 279 million users. For a populous country like India future strategy for financial inclusion will call for technology to reach bottom of the pyramid, something that these payment banks can facilitate. Bringing poor people under the garb of digital banking platform will help financial transfer meant for social security payment easier. A study by McKinsey points out online payment of social security benefits will save the government USD 22 billion per year. A study involving 2016 households in Kenya found people availing M-PESA service (banking through mobile, and the service is provided by Vodafone) are better equipped to absorb negative income shocks arising from poor health, crop failures, and job loss. Statistically comparable household not availing M-PESA service are likely to experience a 6 – 10% reduction in consumption in response to similar income related shocks. The future will see emergence of contactless payment enabled through usage of near field communication (NFC) technology. NFC will enable smartphones and other devices to establish radio communication with each other by touching devices together or bringing them in close proximity. Going paperless by saving time will not only reduce transaction costs but will also play an important role for financial inclusion. Some big commercial banks such as HDFC has already started work on it. (Nilanjan Banik is with Mahindra Ecole Centrale. He is a Fellow at CUTS International and is an ARTNeT UNESCAP Researcher. He is the author of The Indian Economy: A Macroeconomic Perspective.)
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Technology firm Mphasis, teamed up with The Royal Bank of Scotland plc (RBS), to provide application management services.Mphasis will manage the performance and quality of critical applications at the corporate and institutional banking divisions of RBS.Gopinathan Padmanabhan, President of Global Delivery at Mphasis, said, “This encourages us to further raise the benchmark and help RBS transform their business by leveraging emerging technologies, tools and solutions. We are appreciative of RBS for giving us this opportunity and very excited to start yet another chapter with them.”Mphasis has partnered with multiple large and mid-size, commercial and universal banks globally. The company brings an in-depth understanding of processes and technologies relevant to banks. This, coupled with Mphasis’ impeccable global track record for consistent service delivery, resulted in RBS selecting Mphasis for this mandate.(BW Online Bureau)
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Analysts estimate large amounts of homes across cities lying unsold as property buyers are short of funds and many of them are waiting for interest rates to fall. Sumit Sharma reportsReserve Bank of India governor, Raghuram Rajan, on Thursday (20 August) said real estate developers should consider cutting prices on their unsold inventory property to help clear up the stock as also help boost new demand. "I do believe that real estate developers, who are sitting on unsold stocks, should reduce prices on unsold stocks,’’ said Rajan during an interaction with Arundhati Bhattacharya, chairman of State Bank of India in Mumbai. "We need the market to clear up . . . we don’t need a situation where prices are high and demand doesn’t pick up. " Analysts estimate large amounts of homes across cities lying unsold as property buyers are short of funds and many of them are waiting for interest rates to fall. Developers on their side are holding prices in the hope of selling for profit. "It will be a big help to the sector because once there is a sense that price itself has stabilized then more people will be willing to buy,’’ said Rajan. Rajan said there could be a pick-up in the economy if monsoon improves and rural demand too would pick up. Referring to home loans, SBI’s Bhattacharya said the NPAs from this segment are minimal. In a situation similar to 2008, SBI could offer home loans at a rate lower than its base rate for an initial period and raise it in the subsequent years. Schemes on similar lines had helped lift demand after the global financial crisis in 2008. The same could happen now. Bhattacharya emphasized that due diligence on these loans would be the same as for all other regular loans. Rajan on his part said "I never say no your ideas. We will examine it.’’
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