Crash of the rupee and how it impacts you

http://articles.economictimes.indiatimes.com/2013-05-27/news/39557333_1_rupee-petrol-and-diesel-dollar

Where you gain

> NRIs remitting money back home are effectively putting more money into their family's wallets as they will get more rupees for every dollar remitted.

> Export oriented companies and those with significant foreign currency revenues will benefit from the rupee decline. This is because they will earn more rupees for every dollar worth of goods sold or assets held.

> Domestic gold prices are likely to receive a boost on account of the declining rupee. Individuals in global funds gain as the performance of these funds in rupee terms gets multiplied to the extent of the fall in the rupee.

Where it hurts

> Companies with foreign currency borrowings or those importing raw materials from abroad take a hit.

> A weaker rupee may dampen FII sentiment as the value of their investments (in dollar terms) erodes.

> Foreign travel and overseas education become more expensive.

> Weakening rupee will raise the cost of petrol and diesel.

State Bank of India suggests RBI as single regulator for all home loans

http://www.indianexpress.com/news/state-bank-of-india-suggests-rbi-as-single-regulator-for-all-home-loans/1117535/

The State Bank of India today suggested that the (RBI) Reserve Bank of India should be the regulator for all home loans provided by banks or housing finance companies.

"I see no justification for having a separate regulator for home loans. Perhaps the regulations of objective would be better served with RBI itself becoming the sole regulator for all loans including home loans," State Bank of India chairman, Pratip Chaudhuri said on the sidelines of the ICC banking summit here.

Banks currently accounted for more than two-thirds of total home loans disbursed in the country. A single regulator having the same rules for all players would help remove the regulatory arbitrage that existed between banks and HFCs, he said.

Currently RBI regulated home loans provided by all commercial banks, while housing finance companies like HDFC Ltd, LIC Housing Finance Co Ltd, also offered home loans which were regulated by the National Housing Bank.

RBI had raised objections to SBI's dual rate policy on housing loan which was tagged as teaser loans introduced some time ago.

"If a bank offers a slightly lower rate in the initial years and higher rate in later years it is called a teaser loan and they are required to make provision but could similar rules not be applied for other players in the home loan market?" Chauduri said.

Meanwhile, SBI has urged upon RBI to reduce the minimum tenure of deposits to three days from seven days for inducing more flexibility of consumers.

"These are not issues that will lead to inflation or bring imbalances in financial stability, but induce flexibility to the depositor," Chaudhuri said.

"Now we have shadow banking offering investors investment for even one day," he said.

The liquidity risk was not very different from a seven-day deposit and three day deposit, but the question was why make banks handicapped," he asked.

Woman bank manager gives chase, helps nab serial conman

http://www.indianexpress.com/news/woman-bank-manager-gives-chase-helps-nab-serial-conman/1118522/0

A SERIAL conman who allegedly duped two branches of Bank of India (BOI) in Navi Mumbai was caught while trying to similarly cheat another branch of the bank Monday. The conman was recognised and chased by the branch manager and bank authorities later handed him over to police. However, although the accused was caught early in the afternoon, police tried to avoid taking a complaint citing jurisdictional issues and only registered a complaint late on Monday evening after the bank approached Navi Mumbai police commissioner A K Sharma.

Bank officials said the accused, identified as Prem Prajapati alias Prem Mhatre alias Prem Shakeel, has been on the bank's radar since he duped its Seawoods branch of over Rs 10 lakh. "Prem had taken a vehicle loan, which we later learned was obtained using forged documents. He would avoid paying the EMIs till we pressurised him and would then pay Rs 10,000-Rs 15,000 just to avoid action by the bank. He had done this at our Seawoods branch as well as our Khandeshwar Colony branch," said Captain S C Singh, chief security officer, BOI.

As there had technically been no defaulting of the loan — an aspect that Prem is believed to have capitalised on — the bank had not filed a complaint. However, it had issued an internal circular, with his photograph, cautioning all branches against him.

On Friday last week, Prem turned up at the Airoli branch and met the manager, Pushpa Subramaniam (50). "Prem applied for a loan of Rs 11.5 lakh and claimed to have all the documents. I told him that I would have to contact his bank and get a certificate, to which he replied that he could get that within five minutes. This made me suspicious and I asked him to return this week. In the meantime, I had an occasion to visit our head office, where I saw the circular with his photograph," said Subramaniam.

On Monday, when Prem returned, Subramaniam had left instructions that he should be told to meet her. When he entered her cabin, she asked him to wait and stepped out, after which she called Captain Singh. In the meantime, Prem grew suspicious and started running. Subramaniam gave chase. Prem managed to leave the bank premises and covered quite some distance before he was caught by Subramaniam and passersby. He was brought back to the bank and the Seawoods branch was informed, who, in turn, informed the NRI Seawoods police station, adds Subramaniam.

"The Seawoods police kept saying that no offence had occurred in their jurisdiction, although we were ready to give a complaint. We had to approach the police commissioner," said a bank official.

Sharma said, "There was an issue and the bank officials had come to me, but I have spoken to officers at NRI police station. They have registered a complaint."

Senior inspector Suresh Vedak, NRI police station, confirmed that an FIR had been registered under IPC section 420 (cheating) and said Prem would be arrested as soon as the initial investigations were completed.

Subramaniam, who has been with BOI for 25 years, stays with her son in Vidyavihar. In 2007, when she was with the Ghatkopar branch of the bank, a bag belonging to an employee had been stolen and she had played an active role in helping police nab the accused, who was eventually arrested the same day. "I felt no fear while chasing Prem. My son later scolded me for taking the risk but I could not just let the man escape," she said.

Investors fail to renew Rs 1.9 lakh cr of insurance policies

http://www.thehindubusinessline.com/industry-and-economy/banking/investors-fail-to-renew-rs-19-lakh-cr-of-insurance-policies/article4727994.ece

A large chunk of insurance policies from private insurers lapsed because investors didn’t pay their renewal premium, data from the IRDA’s Handbook of Statistics reveal.

 The lapse ratio was as high as 51 per cent for Birla Sun Life Insurance, 49 per cent for Future Generali and at 42 per cent and 36 per cent, respectively, for ICICI Prudential and Bharti Axa Life in 2011-12.

Lapse ratio is the proportion of policies where renewal premium was not paid.

The Life Insurance Corporation has, however, maintained lapse ratios at 4-5 per cent over the last few years. 

Clubbing private players and LIC, investors didn’t renew a total of 160 lakh traditional insurance plans of the value of Rs 1.9 lakh crore (total sum assured) in 2011-12, registering a two-fold jump from 2008-09. Traditional plans include term covers, endowment policies and health insurance plans. It excludes unit linked plans (ULIPs). Had ULIPs been included the lapse ratios will be even higher.

 LACK COMMITMENT

The persistency ratio – the number of policyholders who stay with their policy for five years or more – is also low. A majority of private insurers saw less than half their policyholders staying on after the fifth year.

 Why did so many investors not renew their insurance plans? Some insurers say this is a result of investors switching plans due to changing priorities.

Saujanya Shrivastava, Chief Marketing Officer of Bharti AXA said, “Policy lapses are high mainly in the endowment segment where the policy tenure is 10 or 15 years and people lack long term commitment because of changing priorities.”

 Another side to the story could be mis-selling, where agents mis-represent the product to the prospect. The Insurance Ombudsman received a total of 1.07 lakh complaints in 2011-12 on ‘unfair business practices’ in life policies. One-third of these policyholders complained that the product was different from what was projected.

 Changing regulations that see insurers launching new products every year could also play a role.

“Insurers keep launching new products and the message that goes to consumers is that old products are not good enough. They then just try to cut losses and move away (from their older plans),” says Shashwat Sharma, Partner– KPMG (India). 

 Where does the money go?

The next big question is – what happens to the premium collected on lapsed policies?

 When a traditional policy is discontinued after three years, it attains paid-up status and the surrender value as agreed is paid back to the policyholder.

However, when a buyer stops premium payments within three years, “the money is moved to reserves and carried forward for future appropriation or made available to shareholders depending on whether it is a participating or non-participating plan,” says Anish P. Amin, Partner-PwC.

 If ULIPs are included, the lapse ratios would be even higher. In a ULIP, if premium payment is stopped within five years, the money is transferred to a separate fund that earns token returns. At the end of the fifth year, the money is paid to the policyholder.

Banks prodding student borrowers to furnish PAN

http://www.thehindubusinessline.com/industry-and-economy/banking/banks-prodding-student-borrowers-to-furnish-pan/article4714991.ece

To prevent student borrowers from doing a vanishing act after completing higher education, banks are encouraging them to apply for permanent account number (PAN) at the time of taking loans.

By asking for PAN, which is a 10-digit alphanumeric number allotted by the Income-Tax Department, banks will be able to track down those who have defaulted on loan repayments.

Though obtaining a PAN is not mandatory for student borrowers, bankers feel they should get one before completion of their course and inform the bank.

This move comes in the backdrop of banks facing stress in the case of education loans of up to Rs 4 lakh.

As per the Indian Banks’ Association’s model loan scheme, banks can neither seek margin nor security for education loans up to Rs 4 lakh.

So, if the borrower defaults, recovering the loan becomes well-nigh impossible.

“Whenever a student visits the branch for getting the next loan instalment, we encourage him/her to obtain PAN. It is up to the student to get the PAN. As responsible citizens, they should obtain PAN,” said a senior official of a public sector bank.

If a student borrower who has taken up a job after completion of his/her higher education course defaults on repaying the loan, then the PAN could come in handy for a bank to cross-check his/her financial status from the income-tax returns or even know his/her whereabouts, he added.

As on February 22, 2013, banks, mainly state-owned, had an education loan portfolio aggregating Rs 55,100 crore (against Rs 50,000 crore as on February 24, 2012).

No of fraudulent cash withdrawal cases down: Pratip Chaudhuri, SBI chief

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/no-of-fraudulent-cash-withdrawal-cases-down-pratip-chaudhuri-sbi-chief/articleshow/19974096.cms

The number of cases of fraudulent cash withdrawals through ATM card cloning has come down significantly for SBI after the bank took concrete steps, its Chairman Pratip Chaudhuri said today. 

He also said it was "unaffordable" for the bank to station a guard outside each and every ATM centres. 

"We have made good the loss (suffered by bank customers due to fraudulent withdrawal of cash). Cameras have been installed in ATMs and SMSes are being issued to customers on certain amount of withdrawal," he told reporters. 

He was responding to queries on what steps the bank had taken to prevent fraudulent withdrawal of cash from accounts of SBI customers. 

He said SBI accounts for 25 per cent of the total ATMs and 25 per cent of transactions. "We have many ATMs in semi urban and rural areas where policing arrangements are not as strong," he added. 

He added that it was not financially viable for the bank to have a guard outside each and every ATM centres. 

"If you want to provide one guard for every ATM centres for 24 hours and for 25,000 ATMs you need 75,000 guards...It becomes unaffordable," he said. 

There has been number of cases reported in the Tricity of Chandigarh, Panchkula and Mohali in the last one year or so wherein customers of SBI and its associate banks complained of fraudulent cash withdrawal from their accounts. 

Police findings had suggested that some unscrupulous persons withdrew the money by cloning the ATM cards and installing skimming machines.

Women's Bank to begin operations in November

http://www.financialexpress.com/news/womens-bank-to-begin-operations-in-november/1112959/0

The blueprint of the country's first Women’s Bank is ready and the venture is likely to start off with six branches across the country by November. With an initial outlay of Rs 1,000 crore, the bank will open with six branches — one each in the four metro cities, while a fifth would be in central India and the sixth in the north east. It would expand subsequently to 25 branches within a span of one year and scale up to 300 over the next four to five years."

"Locations are nearly finalised and the Mumbai branch will be in Bandra Kurla Complex and the one in Delhi will be opened in Parliament Street,” said a senior government official.

To be set up as a public sector bank, the proposed bank will differentiate itself from its state-owned counterparts in terms of lending exclusively to women-run businesses and self help groups. It would, however, include male employees in its payrolls. “We can’t have it manned exclusively by women. It will certainly have men employees as well,” the official said. But to cut down on hiring and recruitment costs, the finance ministry will allow lateral movement of employees from other public sector banks as well. But the plan is to keep staff at a minimum and depend more on technology to ramp up services. “To start off with, it will be a small set up. So the idea is to have as few employees as possible and use technology to provide world class services,” the official said.

But the name of the bank is still a mystery, with a final call likely to be taken by finance minister P Chidambaram. The proposal of a Women’s Bank was mooted by Chidambaram as part of Budget 2013-14 and is aimed at fulfilling one of the UPA’s key agenda of providing gender empowerment and financial inclusion. Soon after, the finance ministry had set up a six member expert committee under former Canara Bank chairman MBN Rao to finalise the road map for setting up the bank.

It would expand subsequently to 25 branches within a year and scale up to 300 over the next four-five years

SBI Chairman says not looking at group consolidation for now

http://www.thehindubusinessline.com/industry-and-economy/banking/sbi-chairman-says-not-looking-at-group-consolidation-for-now/article4689398.ece

State Bank of India on Monday made it clear that it was not looking at consolidation of any of its associate banks with itself for now.

But the issue has not gone off its radar and may well be taken up for consideration after July, Pratip Chaudhuri, SBI Chairman, told Business Line here. He was in the Capital to attend the board meeting of State Bank of Bikaner & Jaipur (SBBJ).

Chaudhuri, however, maintained that there was good economic logic in going for consolidation of its associate banks with SBI.

In recent years, two of SBI’s erstwhile associate banks — State Bank of Saurashtra and State Bank of Indore — were merged with it.

The other five stand-alone associate banks of SBI are State Bank of Patiala, State Bank of Hyderabad, State Bank of Mysore, State Bank of Bikaner & Jaipur and State Bank of Travancore.

RBI to incentivise banks for reporting counterfeit notes

http://www.business-standard.com/article/finance/rbi-to-incentivise-banks-for-reporting-counterfeit-notes-113050500084_1.html

The Reserve Bank will introduce a scheme of incentives for banks to encourage them to report detection of counterfeit notes.

"In view of the recommendation of the DPSC for addressing the menace of counterfeit notes, it has now been decided that in order to encourage banks to report counterfeit notes, detected by them, a scheme of incentives for banks will be introduced," RBI Governor D Subbarao has said in the Monetary Policy Statement for 2013-14.

The Department-related Parliament Standing Committee (DPSC) on Ministry of Home Affairs in a report has recommended the RBI to constantly upgrade security features in high value currency notes and strengthen mechanisms for detection of counterfeit notes.

The existing penalty for non-detection and non-reporting of counterfeit notes by banks is also being revisited, the Governor said.

The RBI will release the detailed guidelines regarding this by the end of June.

Subbarao said incorporating new security features or new designs in the banknotes to stay ahead of counterfeiters is an ongoing process and the process of incorporation of better and improved security features has been initiated by the government in consultation with the RBI and other stakeholders.

As per the RBI data, in 2011-12 as many as 521,000 counterfeit notes were detected in the system.

The recent advances in printing technology have greatly aided production of counterfeit notes which is posing serious threats to the currency and financial system.