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.
Read More
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)
Read More
Sunil Dhawan explains how your index fund can be your friend for the long road with less bumpy rideAn index fund is similar to any other diversified equity fund but with a small difference yet yielding a big impact. Index mutual funds remains the most ignored category amongst investment choices. The primary reason for that could be the passive approach to investment that it inherently follows. For those looking to have a flavour of the markets and investing in general, index funds fits the bill. Beginners to mutual funds investing who could be students, those in their mid-forties or even those nearing retirement, can consider index funds especially if it’s their first brush with mutual funds. They are less volatile than their other counterparts-diversified funds. The fund manager of index fund has no say in stock selection because the portfolio of index fund mirrors that of the index. So, an index fund benchmarking the BSE Sensex will only hold those stocks and that too in the same proportion as they are in the index. There is no active fund management involved in index funds. Because of this correlation, the NAV of an index fund moves virtually in line with the index it tracks. For instance, if the Sensex rises 10 per cent in a month, the NAV of a index fund linked to it, will also roughly appreciate 10 per cent over the same period. If the Sensex drops 10 per cent, so will the NAV of the index fund. While looking and comparing various index funds, an important element is the ‘tracking error’ of such funds. Even though, index funds aim to mirror market movement, the returns are actually marginally lower than the index they track. This variation is termed as ‘tracking error’, and occurs due to various costs an index fund has to bear such as brokerage, marketing expenses and management fees. The lower the tracking error, the better is the fund. Over longer term, say 7-10-15 years, actively traded equity diversified mutual funds often fail to beat market. Whether markets are on the slide down or going up, active fund managers have a tough job making the right calls. Once a while, their decisions may work and their stock picks could become market favorite. Over longer periods, across different market cycles and economic conditions, ending up on the right side is always a difficult thing to achieve. Returns from index fund can be expected to be in line with that of the markets, no matter what the time horizon is. The winner mutual funds scheme of today may not be the winner tomorrow or 10-years from now. Your index fund can be your friend for the long road with less bumpy ride.
Read More
Come to think of it. North Block wants to curb black money; it’s mooted a set of initiatives to boost plastic payments – it’s for tax breaks if you transact through debit and credit cards. And contrary to what some trade bodies will tell you, it’s all for a tax rebate for merchants if at least 50 per cent of the transactions is through electronic means; or alternatively, a 1-2 per cent reduction in value-added tax. What’s the idea behind all this? Black money has to be, and can be curbed. You get to have an audit trail of transactions; the Centre can use plastic and e-transactions to ensure welfare schemes reach the audience they are targeted at; and plug leakages. And when you mine such data over a period of time, banks, retailers and the taxman can laugh all the way to the bank – for the right reasons. What’s Sauce For The Goose…It’s almost a decade since the Reserve Bank of India (RBI) introduced its Know-Your-Customer (KYC). The essence of KYC is that a bank should know you: Who are you? What are you? Why do you do what you do? As a customer that is. Of course, in the process, it did put in a few conditions wherein it became difficult to open a bank account. That was corrected ahead of the launch of the Pradhan Mantri Jan Dhan Yojana. What you can’t get away from (even if it was not overtly stated) is that Mint Road wanted some very clever amongst us to change their way of life, and not continue to laugh all the way to the bank by doing what they were doing – that is by being clever. Look at the tamasha that’s on in New Delhi. An otherwise sensible voice describes a transaction as a commercial one between two private individuals; what’s the government got to do with all this? It’s not so simple. It does not follow that just because a transaction is conducted or settled in private or that it was routed through banking channels, it’s above board. To better flesh out this point, let’s flashback to the RBI’s mastercircular dated 1 July, 2014 (KYC/Anti-Money Laundering Standards/Combating of Financing of Terrorism/Obligation of Banks under Prevention of Money Laundering Act (2002) Read this paragraph on politically exposed persons (PEPs); it may be long, but is worth a read. It says “banks should gather sufficient information on any person, customer of this category intending to establish a relationship and check all information available on the person in public domain. Banks should verify the identity of the person and seek information about the sources of funds before accepting PEP as a customer. The decision to open an account for PEP should be taken at a senior level which should be clearly spelt out in Customer Acceptance Policy. Banks should also subject such accounts to enhanced monitoring on an ongoing basis. The above norms may also be applied to the accounts of family members or close relatives of PEPs and accounts where the PEP is the ultimate beneficial owner. In the event of an existing customer or the beneficial owner of an existing account, subsequently becoming PEP, banks should obtain senior management approval to continue the business relationship and subject the account to the Customer Due Diligence measures as applicable to the customers of PEP category including enhanced monitoring on an ongoing basis”. Now let’s go back to the latest set of plastic initiatives. Just about every other payment is sought to be audited now – with the enhanced use of plastic and e-transactions (please see below) What’s On The Cards?At present, there is a Merchant Discount Rate (MDR) of 0.75% on debit-card transactions up to Rs 2,000 and 1% on all transactions above Rs 2000. The possibility of reduction in the MDR and the rationalisation of the distribution of the MDR across different stakeholders will be examined.The existing inter-change fee on debit and credit-card transactions are not uniform and need to be standardised and or rationalised to encourage both issuing and acquiring banks to establish and utilise acceptance infrastructureTax benefits could be provided to merchants for accepting electronic payments. Example: an appropriate tax rebate can be extended to a merchant if at least say 50% value of the transactions is through electronic means. Alternatively, 1-2% reduction in value added tax could be considered on all electronic transactions by the merchants Tax benefits in terms of income-tax rebates to be considered to consumers for paying a certain proportion of their expenditure through electronic means The authentication requirements for different classes of transactions could be re-examined based on the risk profile and safety requirements Consider a levy of a nominal cash-handling charge on transactions greater than a specified level Mandating settling of high value transactions of, say, more than Rs 1 lakh, only by electronic means At present, banks have to report the aggregate of all payments made by a credit cardholder as one transaction, if such an amount is Rs 2 lakh in a year. To facilitate high value transactions, the ceiling of Rs 2 lakh could be increased to say Rs 5 lakh or more All this is well and good. But what about funding of political parties?! Just look at the transparency guidelines issued by the Election Commission of India (1 October, 2014). It noted that “Concerns have been expressed in various quarters that money power is disturbing the level playing field and vitiating the purity of elections”. Okay, “we all know that” you may say. Read this too. If the expenditure incurred by political parties exceeds Rs 20,000, then payment should be made by cheque, draft and not by cash unless there is a lack of banking facility or towards payment of party functionaries. And that while providing lumpsum amounts to candidates for campaigning during elections, political parties shall not exceed the ceiling prescribed for expenditure by the candidate and that the payment should be made only through crossed cheque, draft or bank transfer. If the ECI is for transparency, why is North Block mum on the matter in the new payments’ architecture it has imagined for you and I? Tailpiece: Read the RBI circular on 15 January, 2015 on ‘Foreign Donor Agencies placed in Prior Permission Category’. (It’s on RBI.org.in). Of course, it’s another story!
Read More
Not a fortnight passes by without a snippet -- at least -- on how a bank was left red-faced as cash was fed into its automated teller machine (ATM). That is some Danny Ocean walked away rich. It can only get worse. It’s well over two years since cash logistics firms (CLF) – the ones who load cash into ATMs, take it from toll-posts to banks or in general, move cash about town – raised red-flags over the security aspect of the game. That gun licenses are hard to come by. The matter was taken up with the Reserve Bank of India which said that gun licences came under the purview of the Home Ministry. The deadlock continues. "Its nobody's concern, but our's! The media goes to town with a robbery story. But do you know what we go through everyday", asks the CEO of a CLF. Trouble started when three states -- Maharashtra, Andhra Pradesh and Karnataka – clamped down on gun licenses. That too in an industry where they were hard to come by in the first instance. Now roughly 4,000 weapons are needed to run daily operations of CLFs. Under the terms of contract terms, CLFs have to provide armed guards or they will not be able to get insurance cover for the cash and valuables they move about. It’s not good news as the boom in retail (banking and sundry retailing) means you have much more cash to sort, replenish and carry around. It is estimated to be an Rs 1,500-crore industry: about 10,000 cash vans ply on roads; employs close to 50,000 and expected to grow at 50 per cent annually. It’s an industry where numbers are hard to come by; it’s also secretive by nature. The big four in the business — CMS, Brinks, SIS-Prosegur and Writers — share 80 per cent of the market between them and, on an average, cart over Rs 20,000 crore in cash daily. Which means, in a year, it is a whopping Rs 73 lakh crore. Add all CLFs and it is Rs 91.25 lakh crore. This was the math two years ago; insiders say that amount would now top closer to Rs 100 lakh crore. That’s because the installed ATM base is now at 1,93,000; it is lower than what the London-based Retail Banking Research’s (RBR) projection of 2,25,000 for 2014. RBR — a strategic research and consulting firm in retail banking, automation and payment systems — reports are the gold standard in this line of business. The ATM rollout may have slowed down, but you can’t get away from the fact that about 50,000 new units are deployed every year (this includes replacements of old machines and installations at new sites as well). And that means more cash on the road needs to be guarded. With the curb on guns, that can prove to big headache for CLFs. But if you are in the Danny Ocean mould, it’s a great chance to move in and make a killing!
Read More
Shareholders of Yes Bank, India’s fifth largest private sector bank, have wholeheartedly backed the reappointment of Rana Kapoor as the MD & CEO for a period of three years. At the bank’s eleventh annual general body meeting (AGM) on 6 June, the shareholders voted overwhelmingly in favour of the resolution reappointing Kapoor as the bank’s top executive.The shareholders also approved the resolution fixing the remuneration of Kapoor. “This is a reflection of the faith reposed by the shareholders in Rana Kapoor’s vision & leadership,” the bank said in a release. The AGM saw shareholders approving the reappointment of M.R. Srinivasan as chairman of the bank as well as the appointment of Diwan Arun Nanda and Ajay Vohra as independent directors. A clutch of special resolutions on capital raising by the bank including Rs 10,000 crore through non convertible debentures and bonds as well as $1 billion in fresh equity received the stamp of shareholder approval as did the one on raising the combined Foreign Portfolio Investors (FPIs) and Foreign Institutional Investors (FIIs) investment limit to 74 per cent of the bank’s paid-up capital. Among other resolutions that the shareholders approved included a dividend of 90 per cent (Rs 9 per share), which the bank claims is the highest among private banks; balance sheet for the financial year 2014-15 as well as profit and loss account for 2014-15; and appointment of M/s S R Batliboi & Co. as the bank’s auditors. Radha Singh, non executive chairperson, Yes Bank, thanked the shareholders saying, “We are extremely satisfied with the trust and faith shown by the institutional and retail shareholders to the Board of Directors, in the bank’s performance, its growth plans and decisions to maintain the highest professional standards of management.” Singh added that with the enabling approvals in place, Yes Bank would now look to capitalise on the renewed economic momentum and achieve its vision of emerging as the finest large Indian bank by 2020. The AGM was attended by 9 of the bank’s 10 directors including Kapoor (Diwan Arun Nanda was travelling) The attendees included Radha Singh, Non-Executive Chairperson; independent directors Ajay Vohra, Brahm Dutt, Mukesh Sabharwal, Ravish Chopra and Vasant V. Gujarathi; and M.R. Srinivasan, Non-executive, non-independent director.
Read More
The government plans to inject about $3 billion into state-owned banks this fiscal year and could double that amount next year in a push to boost capital and help lenders meet the global Basel III regulatory requirements, Finance Secretary Rajiv Mehrishi said. The planned capital infusion into the state lenders, which account for more than 70 per cent of all outstanding bank loans, is more than double an earlier estimate of Rs 7,940 crore ($1.25 billion) made in the government's budget for this fiscal year. It was unclear, however, what impact the increased funding would have on the fiscal deficit, which the government has targeted at 3.9 per cent of GDP. "What we are aiming at is an infusion of about $3 billion in the current year and perhaps twice as much in the next year," Mehrishi told news local news channel CNBC-TV18, during a visit to the United States with Finance Minister Arun Jaitley. Shares of most state-run banks rose on the news, with Punjab National Bank gaining as much as 4.9 per cent. A slowing economy and stretched corporate balance sheets have led to a surge in bad loans at Indian banks. State-owned lenders have amassed bad loans at a faster pace than their privately owned peers, raising doubts about their ability to meet tougher global regulatory capital requirements. Rating agency ICRA estimates non-performing loans at state banks this fiscal year to rise to between 5.3 per cent and 5.9 per cent of total loans from 4.4 per cent in the year that ended March. Morgan Stanley estimated this month the government would need to inject $15 billion across all state banks "urgently" to achieve a common equity tier 1 ratio of around 10 per cent. Mehrishi said the government could finance the increased funding through off-budget means, but gave no further details. It was also not immediately clear if the government would require banks to fulfil certain conditions to be eligible for grants. When it announced its previous plans for the $1.25 billion capital injection, the government had said the top most profitable banks would be eligible. Mehrishi and finance minister Jaitley are in the United States to promote investment in India. (Reuters)
Read More
EduKart, has joined hands with more than 90 course providers, writes Manish Kumar PathakEduKart, an online education based service, has raised $1 million from Holostik Group’s United Finsec (family office arm), Yuvraj Singh's YouWeCan Ventures and prominent early stage fund 500 Startups. A Delhi-based startup, EduKart, has joined hands with more than 90 course providers and is looking to support and endorse enrolments in more than 2000 courses in K12, entrance coaching, degrees, diplomas, short courses and industry relevant certifications through the marketplace. “The incoming funds will be utilised for further upgrading the marketplace platform, increasing course portfolio and strengthening marketing efforts.” said Ishan Gupta, CEO of EduKart.com, who is a Stanford University (USA) alumnus, ex Facebook employee and early Paytm team member. EduKart in its short but rather promising journey has been successful in helping students and parents build education related decisions based on proper information. Also, it has given various course providers a platform to spread out their reach to Tier 2 and Tier 3 cities across India. “Through its services like dedicated counselling support and flexible payment options, EduKart is establishing itself as a go-to destination for figuring out one’s educational needs.” said Ankit Gupta, head of strategy and investments for Holostik Group and alumnus of Harvard Business School.“I’m really excited to be a part of the EduKart journey. I have always believed that following your passion is very important in life. At the same time, a focus on education is also a must in today's cut throat competitive environment.” said Yuvraj Singh, ace cricketer and founder of YouWeCan Ventures. The education market in India still wears a rather disjointed look, and this is where EduKart is hoping to find its foothold as education sector of India is pegged over $60 billion, with approximately 50 per cent in higher education sector, 40 per cent in K12 sector and 10 per cent in coaching, skilling and other non-formal areas with thousands of educational institutions and companies in each of these areas. “Education spending is on the rise among the tech savvy Indian middle class. I believe that the online distribution of education products and services will have significant growth in the coming years”, said Pankaj Jain, 500 Startups. Other investors who were present in the recent round of funding included Vijay Shekhar Sharma (Founder, PayTM), Manish Kheterpal (Ex Director of Providence Equity Partners), Amit Patni and Arihant Patni of Patni family, and Stanford Business School’s alumni angels.
Read More
