Dena Bank has cut interest rates to 10.5%, reports Haider Ali KhanDena Bank launched Vehicle Carnival from 1st July 2015 till 31st August 2015 for their customers from JVPD Mumbai on Wednesday. During this period loan will be sanctioned at affordable rates with reduced processing fee. “Dena Bank has set an ambitious target of twenty three thousand vehicles all over India during this period. Customers across India can avail this offer. And if we find the entire necessary documents ready then the loan will be processed within two days” said R.K Takkar, executive director of Dena Bank. He also informed that the interest rates have been reduced from 11.5 per cent to 10.5 per cent and women customer will be charged with 10.4 per cent.
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India has the third largest internet user base in the world, after the US and China, and the country is likely to surpass the US by 2015, says Richard CandayIndia israpidly migrating towards atruly digital economy where businesses must reinvent their delivery channels to provide value to their customers. This phenomenon of digital transformation has impacted the baking and financial sector in a big way. An increasing number of customers are choosing to make their payments online through their computer screens or mobile devices. This stage of connectivity is driving digital payments transformation - the migration of cash payments and plastic card payments to payments made over digital channels, either from digital wallets or through new digital payment mechanisms.RBI Initiatives For A Cashless EconomyIn 2012, RBI proactively envisioned and encouraged electronic payment systems for ushering in a less-cash society in India and to ensure payment and settlement systems in the country are safe, efficient, interoperable, authorised, accessible, inclusive and compliant with international standards. The overall regulatory policy stance was oriented towards promoting a less cash/less paper society, the "green" initiative.Since then, according to a report by IAMAI & PCI, digital payments in India was expected to touch Rs 1.2 trillion by December 2014, a 40 per cent increase from Rs 85,800 crore in 2013, driven by growing internet penetration, growth in e-commerce and the ease of online payments adopted by the tech-savvy populace of India. The market for payments made through digital medium has grown at a CAGR of 10 per cent in between 2010 - 2013.According to latest reports by industry analyst PWC, India has the third largest internet user base in the world, after the US and China, and the country is likely to surpass the US by 2015. More significantly, approximately 74 per cent of Indians own a mobile phone, and prefer the mobile medium of internet access. By 2020 the number of smartphone users are expected to equal the number of active bank accounts in the country.The rising digital economy presents a tremendous business opportunity for banks to tap in to, and private banks are rising to the occasion. In a multi-channel ecosystem, the ability to engage thecustomer through the most relevantchannels has become key to predicting customer behaviour, maximising customer value, and as a result, creating newer and deeper revenue streams forbanks.Reserve Bank of India (RBI) mobile banking data for the month of May 2015 reveals that the top five private sector banks have conducted transactions of close to Rs 1.4 lakh crore, almost four times that of those conducted by the top five public sector banks, based on total value.Challenges GaloreIndustry players have been quick to seize the digital opportunity, with many banks launching their own payment applications that integrate big data analytics with the mobile interface. E-commerce players like Flipkart and Snapdeal have their own payment gateways, and the digital wallets industry is replete with entrants like Apple Pay, Google Wallet, Samsung Pay, Mobikwik, Paytm, etc.As opportunities flourish, a successful digital transformation by banks will require execution excellence, controlled risk-taking, innovative distribution and careful customer relationship management. More importantly, however, it will demand solid understanding of the facets that truly distinguish this market from others and a genuine openness to innovation and building strategic alliances. The world of digital payments is fast evolving and industry stakeholders must take concrete strategic steps to position themselves strongly within it.The author is Associate Vice President - Corporate Affairs at Electronic Payment And Services Pvt Ltd
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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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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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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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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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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!
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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!
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