by admin | May 25, 2021 | Corporate, Corporate finance
Mumbai:(IANS) The Reserve Bank of India (RBI) on Wednesday said it has accorded “in-principal” approval for 10 small finance banks that will focus on small geographies for operations but with a strong capital base.
“The ‘in-principle’ approval granted will be valid for 18 months to enable the applicants to comply with the requirements under the guidelines and fulfil other conditions as may be stipulated by the RBI,” the central bank said in a statement.
Those selected are: Au Financiers, Capital Local Area Bank, Disha Microfin, Equitas Holdings, ESAF Microfinance, Janalakshmi Financial Services, RGVN (North East) Microfinance, Suryoday Micro Finance, Ujjivan Financial Services and Utkarsh Micro Finance.
Finance Minister Arun Jaitley had said in his budget speech last July that a structure will be put in place for continuous authorisation of universal banks in the private sector.
“RBI will create a framework for licensing small banks and other differentiated banks. Differentiated banks serving niche interests, local area banks, payment banks etc. are contemplated to meet credit and remittance needs of small businesses, unorganised sector, low income households, farmers and migrant work force,” he had said.
The selection of these small banks was on the basis of the recommendations from three different committees, backed by a detailed case study for each applicant, including that by an External Advisory Committee chaired by former deputy governor Usha Thorat.
“An important factor was proposed reach into unbanked areas and underserved sections of the population,” the central bank said.
“Going forward, the Reserve Bank intends to use the learning from this licensing round to appropriately revise the guidelines and move to giving licences more regularly, that is, virtually ‘on tap’.”
In 2009, a Committee on Financial Sector Reforms under Raghuram Rajan, now the RBI governor, had examined the relevance of small banks in the Indian context. The panel felt there was sufficient change in the environment to experiment with small banks.
It recommended the entry of private well-governed deposit-taking small finance banks to offset their higher risk from being geographically focussed, by requiring a higher capital and strict norms.
Draft guidelines for licensing of small finance banks were released for public comments on July 17 last year and based on the comments, the final norms for licensing of small finance banks were issued on Nov 27.
by admin | May 25, 2021 | Corporate, Corporate Governance
Lucknow:(IANS) The cancellation of Sahara India’s para-banking license by the Reserve Bank of India (RBI) has sent the multi-million rupee conglomerate here into a tailspin.
While the company has been in hot water for some time now, the development is being seen by both insiders and observers outside as a “major blow” to the company, whose chairman Subrata Roy ‘Sahara’ has been languishing in Tihar jail for more than a year now.
While top sources in the company say this was coming for long and that they were “as such not very shocked at the development”, they concede in private that the top management, which was “hoping against hope” to stay afloat, has been jolted by the decision of department of non-banking supervision to cancel the license of its holding company – Sahara India Financial Corporation Limited (SIFCL).
The company has been charged with not complying with earlier advisories and warnings of not overlooking the rules and regulations of financial transactions in the non-banking sector. “There are several irregularities which were pointed out from time to time but it looks like no one was listening at Sahara,” said a top-ranking official.
The notice cancelling its license to conduct financial business was sent to the Kapurthala headquarters of Sahara India earlier this week.
The move is being seen as the ‘final nail’ in the fortunes of the once-prospering company as SIFCL was its core wing from which money was collected through small time subscribers and then routed to other wings such as media, real estate and others.
Under the new order, Sahara India would be barred from any sort of financial transactions. The RBI had in 2008 barred the company from taking any deposits from the people under its chit fund operations. Many depositors had since then complained to the RBI that they were not being paid back their money by Sahara, following which the RBI orderd a probe.
A report of the investigations was sent to the RBI HQ in Mumbai last month after which the penal action of cancelling the license of SIFCL was taken. The cancellation could also leave in lurch thousands of small depositors who have put in the money with SIFCL for many years.
The RBI has, however, said that anybody’s whose payments are being denied by Sahara can make a written complaint to its Kanpur office.
by admin | May 25, 2021 | Corporate, Corporate Governance
Mumbai:(IANS) This is not the first time that the issue of participatory notes or P-Notes has rocked Indian stock markets. Precisely, seven years, nine months and ten days ago, a similar issue had sent key indices tumbling. A recall:
On the evening of Oct 16, 2007, after the trading hours, markets watchdog Securities and Exchange Board of India had sought to regulate the use of P-Notes — the most preferred route or instrument — to invest in Indian stock markets.
Neither the then United Progressive Alliance (UPA) government nor the watchdog had liked the idea of anonymity of an investor. They felt if P-Notes were left unregulated, such investments — particularly those with hedge funds — could create unwanted volatility in the markets.
The next day, the investor reaction was something the policy-makers wouldn’t have anticipated. The sensitive index (Sensex) of the Bombay Stock Exchange (BSE) opened as much as 1,013.96 points lower on Oct 17, 2007 at 18,037.90 points, over the previous close at 19,051.86 points.
Within a minute or so, it crashed further to 17,307.90 points — that is a loss of 1,743.96 points or 9.15 percent, over the previous day’s close, which was the biggest fall in absolute terms and among the steepest in percentage terms.
Automatically, trading was suspended for an hour.
After due consultations with officials, including the markets watchdog, then finance minister P. Chidambaram issued some clarifications. An official note also followed:
“In consultation with the Reserve Bank of India and the Securities and Exchange Board of India, the government proposed to take certain measures to moderate capital inflows. These measures are in the overall interest of the economy and of the market and investors,” it said.
“Proposed measures include some restrictions on the issue of offshore derivative instruments by foreign institutional investors and their sub-accounts in relation to their exposure in market. Neither do these suggest nor is there any intention to ban issue of such instruments,” it added.
When the markets re-opened, there was a significant rebound. The Sensex rose 1,533.39 points (the day’s low) to the day’s high of 18,841.29 points, and it eventually closed at 18,715.82 — with a somewhat lower loss of 336.04 points, or 1.76 percent.
But the story of the crash and the rebound did not end there. The next day, the mood continued to be sullen, resulting in a loss of 717.43 points, followed by a fall of another 438.41 points the day after, which was a Friday.
Once trading began on Monday, after a two-day holiday, the markets started reacting positively after some initial hiccups, ending with a marginal gain of 54.01 points. The next trading day, however, marked a smart recovery of 878.85 points.
Over the next two days, the Sensex rose — by 20.07 points and again by an impressive 878.85 points — to close on Thursday at 18,770.89 points, by which time all the losses incurred over a six-day period, beginning Oct 17, had been recovered.
The market rally continued on Friday with a gain of another 472.28 points, and by Monday, the Sensex had breached the psycologically-important 20,000-point level — all these developments within the matter of just nine trading days.
But what are these P-Notes in financial jargon, that have have come to haunt Indian equities once again? What are the government’s concerns and why have they evoked such strong reactions from investors?
P-Notes, or just PNs, are financial instruments used by foreign funds to invest in the Indian stock markets on behalf of their overseas clients who do not wish to register themselves with the markets regulator.
There are hordes of clients who wish to invest in Indian equities, but not directly as enrolled entities with the regulator but in an informal manner through their India-based brokerages, who issue participatory notes for the shares bought on their behalf.
In the process, the anonymity of the clients is maintained. Accordingly, some large funds, notably those who hedge their investments across markets, are able to invest in a discreet manner without evoking much market attention.
For such clients, trading through PNs is not only easier, as they can be freely transferred like a contract note, but also help them avail of tax benefits that are available in some tax havens, like Mauritius.
What’s the concern now? A special probe team on black money, set up at the behest of the apex court, has suggested that these need to be regulated. For, they are perceived as a major instrument for unaccounted money sent abroad through hawala to be routed back discreetly.
For the moment, Finance Minister Arun Jaitley has sought to assuage the feelings.
“No step will be taken that can adversely impact investment sentiment. The government will certainly not take any such action in a knee-jerk fashion, particularly one which has any adverse impact on investment environment,” he told reporters here on Monday.
But the markets respond in their own way!
by admin | May 25, 2021 | Banking, Corporate, Corporate finance, News
Agartala:(IANS) The central government is committed to provide banking services in rural areas through modern post offices where facilities like ATM, pension account and core banking will be made available, union Communication and IT Minister Ravi Shankar Prasad said here on Sunday.
He said by next month post offices across the country would likely start payment transactions like banks.
“With the approval of Reserve Bank of India, the payment transactions would be initiated by the post offices from August,” he said after inaugurating the core banking services (CBS) in the Agartala head post offices.
Prasad said the government was committed to provide banking services through modern post offices in rural areas.
The department of posts has a network of around 155,000 post offices in India, out of which, 120,000 are in rural areas.
“In the last one year, 2,590 post offices across the country have been migrated to CBS platform to transmit the money anywhere in India in less than a minute,” Prasad said.
“During this period, 115 ATMs (Automated Teller Machines) under the postal department have been set up in different parts of the country and several hundred ATMs would be established in the coming months.”
The minister said: “To boost the e-commerce, the post offices have taken steps to increase the quick delivery of various goods booked by people electronically using various online retailers.”
“During the last one year, the delivery of post offices across the country has been increased by 37 percent, earning revenue of Rs.500 crore.”
He said to make the digital India programme of the government successful, over 60,000 villages would be linked with the Apollo Hospitals through Optical Fibre Network to provide medical advises to the people of these villages.
Prasad said: “At present, India with a population of 125 crore has 98 crore mobile phone subscribers and 30 crore internet connections.”
“The number of mobile phone users would go to 100 crore within this year and we would increase the internet connections to 50 crore in two years.”
Chief Post Master General (Northeast circle) Smita Kumari said India Post was aiming to transform the department of post into a technology enabled and self-reliant market leader.
“Of the total of 155,000 post offices in the country, the northeast region has 2,920. India Post would also soon launch eight ATMs in the region…,” she said.
Tripura Information Technology Minister Tapan Chakraborty said post offices must be strengthened in the northeast by filling up vacant posts and setting up more post offices in the rural areas.
