Proposal to link tax exemption of Life Insurance policies to the term of the cover

http://www.business-standard.com/india/news/tax-break-in-life-insurance-might-be-linked-to-cover-lic-pushes-proposal/483324/

The Union finance ministry is considering a proposal to link tax exemption of life insurance policies to the term of the cover, rather than the sum assured.

The suggestion was mooted by government-owned Life Insurance Corporation of India (LIC).

The largest life insurer has sought that premiums be linked with the term of a policy and any of 10 years or more should get the exemption.

Currently, tax relief is linked to the sum assured. Under the present system, insurance policies, except pension plans, would have to offer a cover of at least 10 times the annual premium to be eligible for tax benefits under sections 80C and 10 (10D) of the income tax rules. 

Earlier, insurance policies with a sum assured of five times the annual premium used to get the tax benefit. Section 80C allows exemption up to Rs 1 lakh and 10 (10D) gives exemption in maturity proceeds.

Insurers have been arguing that the present system would raise premiums, particularly for customers in the higher age groups as they opt for lower term policies where the mortality rates are higher.

RBI plans checks on banks' exposure to group entities

http://www.business-standard.com/india/news/rbi-plans-checksbanks/-exposure-to-group-entities/483323/

The Reserve Bank of India has planned to cap banks’ total exposure to own group entities at 20 per cent of net worth, to avoid concentration and contagion risk from intra-group transactions.

The limit for exposure for a single entity — a non-finance company or an unregulated finance entity — in a group will be five per cent of paid-up capital plus reserves. The draft norms propose a higher exposure limit for a group’s regulated financial services companies.

A bank can have exposure up to 10 per cent of net worth to a single regulated financial services entity of a group. The aggregate group exposure in the case of all non-financial entities and unregulated group finance units is proposed to be capped at 10 per cent of net worth.

Banks are to operate within these limits on an ongoing basis. They should report their exposure, on a quarterly basis. If exposure exceeds the limits, these should be reported without delay and with acceptable rationale. If satisfied, RBI might allow the bank an appropriate timeline to comply with the limits.

Any excess exposure over the limits is to be deducted from the Common Equity Tier-1 capital until the limits are restored, say the draft norms.

RBI might impose penalties andor prohibit a bank from conducting further intra-group transactions if it fails to comply with the timeline to bring exposure within limits. Banks are not to hold unlimited exposures to group entities, either aggregate or at an individual entity level.

They should avoid entering into cross-default clauses where a default by a group entity becomes ground to trigger an obligation for the bank.

Also, banks should not purchase a low-quality asset from group entities. A low-quality asset should not be accepted as collateral for loan or extension of credit or a guarantee issued on behalf of the group entity, goes the proposal.

Banks, post offices may be roped in to sell G-Secs

http://www.thehindubusinessline.com/industry-and-economy/banking/article3772108.ece

Bank branches and post offices could be used as distribution channels to get retail investors to invest in government securities, according to a Reserve Bank of India panel.

Further, investment in government securities (G-Secs) will become attractive for retail investors if the interest rates offered on various small savings instruments are aligned with the rates yields of G-Secs of comparable tenors.

As retail investors currently have to pay large illiquidity premium when they try to sell illiquid securities, the panel said this issue could be addressed by involving primary dealers (PDs) in the market-making mechanism.

New housing scheme for urban poor

http://www.thehindubusinessline.com/news/article3774711.ece

In good news for urban poor, Prime Minister Manmohan Singh today said a housing scheme will soon be launched which will give them relief on interest on loans less than Rs 5 lakh.

Singh also promised that the government will ensure that all households benefit from bank services in the next two years.

Addressing the nation from the ramparts of Red Fort on the occasion of Independence Day, Singh said, “To provide housing for our poor brothers and sisters residing in urban areas of our country we will soon launch the Rajiv Housing Loan Scheme.

“Under this scheme, people belonging to the economically weaker sections would be given relief on interest for housing loans of less than Rs 5 lakh,” Singh said.

Ten years ago, he said, only three out of every ten households in villages were benefiting from banking services but today more than half of the rural households get the benefit of bank accounts. “It will be our endeavour to ensure that all households benefit from bank accounts in the next two years,” he said.

Muthoot Finance aims to double money transfer payouts

http://www.financialexpress.com/section/banking-&-finance/349/

Money transfer player Muthoot Finance Ltd, which accounted for two million payouts to customers last year, aims to double it by next year, a top company official said today.

Muthoot is the largest distributor of remittances after the Post office, company officials said.

About Rs 75,000 crore is coming to India every year by money transfers with Muthoot Finance accounting for 10 per cent of it.

"We want to double this by next year," Bijumon, Chief General Manager and George M George, Executive Director, said.

In Kerala, Muthoot pays out Rs 3,000-4,000 crore every year through its 3,800 money transfer payout centers across the country.

Quarterly numbers: Dhanlaxmi Bank under scanner

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/quarterly-numbers-dhanlaxmi-bank-under-scanner/articleshow/15469149.cms

What's brewing at Dhanlaxmi Bank? The auditors of the old private sector lender have resigned earlier this month following certain differences with the management while the banking regulator suspects that some of the shareholders of DLB are acting in concert. 

The auditors Walker Chandiok & Co - the local audit arm of the management and audit consultancy Grant Thornton - have put a question mark on some of the bank's performance numbers for the quarter ended June 2012. 

Dhanlaxmi CEO & managing director PG Jayakumarsaid that there was no "truth in the statement" and added that the bank had not received any communication from RBI on shareholding issues. 

But, it is believed that the auditors were not comfortable with the sudden spurt reported by the bank in its yield on advance for the June quarter. 

The bank's yield on advances - which simply put, is the ratio between total interest income on advances and average advance outstanding for the period - rose to 13.27% from 11.35% in the previous quarter. A two percentage point rise in yield on advances in a single quarter is very unusual for a bank unless there is a big surge in unsecured loans where interest charges are higher.

The bank's net interest margin-the difference between interest income and interest expenses upon interest earning assets-has increased from 1.53% to 2.50%. Such an improvement in margins is also rare in a quarter simply because it is difficult for a bank to replace high-cost liabilities with cheaper deposits within such a short span. 

SBI might absorb one Associate Bank this year

http://www.business-standard.com/india/news/sbi-might-absorb-one-associate-bank-this-year/483230/

State Bank of India (SBI) is likely to merge one of its five associate banks in the current financial year.

The board of the country’s largest lender has given its approval for the merger, and SBI will now start the process of identifying an associate for the merger.

SBI merged one of its associate, State Bank of Saurashtra, with itself in 2008. State Bank of Indore was merged with SBI in 2010.

According to bank officials, this time the debate is whether the bank would go for a listed entity or an unlisted entity.

Of the five associate banks of SBI, State Bank of Hyderabad (SBH) and State Bank of Patiala are unlisted, while State Bank of Mysore (SBM), State Bank of Travancore (SBT) and State Bank of Bikaner and Jaipur (SBBJ) are listed entities.

Apart from State Bank of Mysore, the others have reported profit growth for the quarter ended June. While SBM’s profit dipped to Rs 40 crore from Rs 64 crore reported during the first quarter of the previous financial year, State Bank of Patiala posted 87 per cent growth in profit, SBBJ’s profit growth was 31 per cent, while SBT and SBH 30 per cent and 18 per cent respectively.