The Reserve Bank of India (RBI) has deferred the implementation of guidelines on compensation for wholetime directors and other executives of private and foreign banks in India by a year to FY13, it said on Wednesday. The guidelines had been due to be implemented in FY12 but the Reserve Bank of India said the move was deferred to give banks sufficient time to frame their policies. In July, the RBI has issued draft guidelines on compensation for whole time directors, chief executive officers, risk takers and control function staff of private sector and foreign banks in India. It said it was examining comments received. It has asked banks to refer to the Basel Committee on Banking Supervision's (BCBS) document on Methodologies for Risk and Performance Alignment of Remuneration, which was issued in October, and start preparatory work for formulating compensation policies.
The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Thursday, February 24, 2011
No blanket nod sought for merging five subs with SBI: Bhatt
Country's largest lender, State Bank of India , on Wednesday said it has not sought a blanket approval from the Government for merging the remaining five subsidiaries with itself. Bank Chairman O P Bhatt said both the mergers which have been done till now -- State Bank of Indore and State Bank of Saurashtra -- have been done with prior permission on a case-to-case basis from all the concerned bodies like the respective Boards, the Government and the RBI. "We have not sought any blanket permission for the mergers," Bhatt told reporters here when asked about a media report on Wednesday which said SBI is mulling to merge all the remaining subsidiaries in the next 12-18-months. He further said that SBI did not meet the Parliamentary Standing Committee on Finance on Tuesday. State Bank of Hyderabad , State Bank of Patiala , State Bank of Bikaner and Jaipur, State Bank of Travancoreand State Bank of Mysore are the subsidiaries which are yet to be merged with the bank and it is argued that merging them will usher economies of scale and reduce administrative costs. On SBI's bond issue, he said that the bank has received subscriptions of around Rs 6,000-crore for its Rs 2,000-crore retail tax saving bond issue (with the green-shoe option) and expects total subscriptions to touch Rs 10,000-crore by February 28 when the issue closes.
Budget: Long tenure deposits to get a tax break?
Rising inflation has forced the Reserve Bank to tighten its monetary policy. As a result, cost of funds has gone up. The banking industry hopes the finance minister will announce policy measures to reduce the impact on banks’ margins. The biggest demand of the banking sector is tax breaks on longer tenor deposits to help deposit growth. Bankers also expect the government to announce subsidies for each no-frills or zero balance account opened so that banks can service first time customers and meet the target of opening 50 million such accounts in 73,000 villages with a population of at least 2,000 by next year. But, that’s not all. Banks expect the government to come out with a roadmap for takeout financing that will address the issue of infrastructure lending. One such measure could be allowing banks to issue infrastructure bonds with tax benefits. The banking industry also wants government subsidy or concessions on interest rates provided on lending to State Electricity Boards given their weak financial health. That will do away with asset quality concerns in power financing segment.
RBI tightens rules for credit swaps debut
The Reserve Bank of India has laid down foolproof guidelines for the introduction of credit default swaps - an insurance against bonds default , speculation on which brought down the global finance to its knees in 2008. High capital requirements, restricting the participation to a few in financial services, a tight transaction norm and limiting it to just vanilla corporate bonds will ensure there is no trading risk on credit default swaps, or CDS. But the absence of immediate profit opportunity could delay the instrument becoming popular or widely sought after. It may deter many players from taking up the business, including market-making, given the high capital requirement and low profitability, at least in the initial years. Only institutions will be able to buy CDS, or protection against default, only to the extent of underlying value of bonds. All CDS trades should have RBI-regulated entity at least on one leg of the transaction and the protection seller cannot unilaterally cancel the contract.
RBI Raises Red Flag on Surging Current A/c Deficit
Central bank Governor Duvvuri Subbarao pointed out dangers of a widening current account deficit on economic stability at a recent summit of the regulators, which may prompt some policy actions by the government. Subbarao flagged his concerns on the dangers of relying on volatile capital flows to finance the country’s rising current account deficit—the excess of imports over exports of goods and services—at a recent meeting of the Financial Stability and Development Council, or FSDC, ahead of the union budget, said people familiar with the discussions. The deficit, if unchecked, could lead to adverse investor perceptions about the economy. The council, which is headed by Finance Minister Pranab Mukherjee and has the chiefs of all financial sector regulators and senior finance ministry officials as its members, meets periodically to discuss issues relating to financial stability, macro prudential supervision and inter-regulatory co-ordination. Liberalisation of foreign direct investment, making bank deposits attractive for non-resident Indians, and freeing up of petroleum products prices could ease the deficit problem that is nearing levels seen during the 1991 currency crisis when the nation pledged its gold reserves to redeem itself. If the deficit situation deteriorates, the rupee could come under pressure, worrying overseas investors. “Though a weak currency typically boosts exports and trade balance, depreciating the currency may not necessarily address the problem in case of India as a sizeable portion of imports (e.g. oil) are price inelastic to a great extent,” said Siddhartha Sanyal, chief India economist at Barclays Capital.
Wednesday, February 23, 2011
Launch of Transparent Pricing Data for the Indian Microfinance Market
For the first time in history, true-cost microloan product pricing data for the Indian microfinance market is now publicly available. MicroFinance Transparency has completed an analysis of microloan pricing in India and shares the results on its website www.mftransparency.org. MFTransparency will present analysis of the data as well as other findings of the Transparent Pricing Initiative in India at an industry conference in Mumbai on February 25, to be followed by an internal conference held by MFTransparency, the RBI and the College of Agricultural Banking in Pune on Feburary 28.
Red beacon for RBI Governor withdrawn
In a seemingly major embarrassment for the Reserve Bank of India (RBI) Governor D Subbarao, the Road Transport and Highways Ministry has directed the Maharashtra Government to withdraw the permission granted to him to use the red beacon atop his car. “The State Government of Maharashtra should immediately withdraw the permission for allowing the use of red beacon light on the vehicle of Governor, Reserve Bank of India,” said a letter from the Ministry earlier this month. In November last year, the Maharashtra Government granted permission to the RBI Governor to use the coveted red dome light on his vehicle. The permission came from that State Government as RBI’s central office is situated in Mumbai. The RBI Governor’s office had requested the State government to grant the status. The State Government informed the Transport Ministry here about the decision. On its part, the Transport Ministry referred the matter to the Home Ministry, which has the authority to decide the issue. Replying to the Transport Ministry’s letter, the Home Ministry, in its letter dated January 14, said, “The Governor of Reserve Bank of India has not been included in the Table of Precedence issued by the Rashtrapati Bhavan.” The Home Ministry even attached a copy of the Table of Precedence dated July 26, 1979 but updated “till now” and including all amendments made so far along with its letter to the Transport Ministry. The RBI Governor is included nowhere in the Table of Precedence, which lists 26 categories of dignitaries right from the President to joint secretaries, officers of the rank of major-general and equivalent rank. In view of the Home Ministry’s decision in the matter, the Transport Ministry said, “The MHA has informed that the Governor of RBI has not been included in the Table of Precedence issued by the Rashtrapati Bhavan. Therefore, the RBI Governor does not hold the rank, status and privilege equivalent to the dignitaries specified in the notification.” As a consequence, the Transport Ministry, in its letter dated February 3, asked the Maharashtra Government to withdraw the permission granted to the RBI Governor to use the red beacon on his Government vehicle with immediate effect.
RBI imposes penalty on four cooperative banks
The Reserve Bank today imposed penalties of Rs 1 lakh each on four cooperative banks on various charges including violation of anti-money laundering guidelines. The four banks are the Jamnagar Mahila Sahakari Bank, Amreli Nagarik Sahkari Bank, Shri Mahila Sewa Sahakari Bank, Ahmedabad, and the Virambam Mercantile Cooperative Bank, the RBI said in different statements. While Jamnagar Mahila Sahakari Bank and Amreli Nagarik Sahkari Bank were found guilty of violating instructions related to anti-money laundering guidelines, the Ahmedabad- based Shri Mahila Sewa Sahakari Bank was held responsible for violating instructions on grant of unsecured advances in excess of the prescribed ceiling. The Virambam Mercantile Cooperative Bank, meanwhile, was charged with non-filing of cash transaction report with concerned authorities. RBI did not provide further details of the cases. RBI's action comes a day after it imposed penalties of up to Rs 5 lakh on two cooperative sector lenders -- Surat Mercantile Co-operative Bank and Urban Co-operative Bank, Cuttack -- for violation of banking norms.
RBI employees want autonomy on staff issues
The Reserve Bank of India (RBI) employees on Wednesday protested against the government move to control the central bank’s staff-related matters. Employees across the country wore badges opposing statutarisation of staff regulations and resolution of pension related issues. “The government move to control staff regulations of RBI threatens the autonomy of the RBI. This would mean the central bank board and the governor would have no say in matter relating to RBI,’’ said a protesting employee union member on the condition of anonymity. “We have raised the issue with the RBI governor however, no action has been taken on the same hence we are protesting,’’ he added. At present, RBI controls matters relating to incentives, promotions and remuneration of its staff. Statutarisation would bring these matters under the purview of government. “Our pension updation has also been stuck as the RBI board is opposing statutarisation. The government has been putting pressure on RBI to make staff regulations statutory under Section 58 of the RBI Act, 1934, and bring them under the subordinate legislation of Parliament.
SBI plans to merge 5 subsidiaries in 12-18 months
The State Bank of India proposes to merge its five remaining subsidiaries with itself over the next 12-18 months. In its deposition before the Parliamentary Standing Committee on Finance, the country's largest lender said the consolidation exercise has been systemically planned as part of a logical step to bring in economies of scale, reduce administrative overheads, redeploy and channelise trained manpower to business development and, in the process, also reduce avoidable competition from different arms of the same group.
Par Panel for clear policy on PSU banks merger
Accusing government of adhocism, a Parliamentary Committee today demanded a clear policy on mergers and consolidation in the public sector banks, including amalgamation of associates with the State Bank of India (SBI). "There is a strong element of adhocism in the policy stance and approach of the government in brining in legislative changes in the Acts regulating the SBI and its subsidiaries in particular," Standing Committee on Finance headed by former Finance Minister Yaswant Sinha said in its report tabled in Parliament today. It is also imperative to assess in clear terms, the reasons for rising NPAs in the SBI Group of banks as well as the desirability of pursuing the policy of merging the subsidiary banks with SBI, particularly in the light of issues relating top manageability of large sized banks, it noted. It is appropriate on part of the government to make an in-depth analysis of issues relating to mergers and consolidation of the public sector banks in general, it said. "The Committee expects the government to spell out the policy-related aspects in this regard, it said. Meanwhile, it cleared the State Bank of India (subsidiary banks laws) Amendment Bill, 2009 for passage by Parliament. The amendment proposals of the State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2009 have been necessitated owning to transfer of ownership of SBI from Reserve Bank to central government, it said. It also suggested amendment in the SBI Pension Fund Rules, which is detrimental to the retirees of the merged subsidiary banks. The panel expects the government to expeditiously act on these matters. The Bill, which, seeks to empower the government to fix the authorised or the issued capital of a subsidiary of the SBI or to appoint its top officials, was referred to the panel on December 18, 2009 for examination. Once passed, the bill would empower the Centre to increase or reduce the authorised capital of a subsidiary bank, fixation and raising of issued capital, issuing bonus shares to shareholders and appointment of managing director, among other things. The legislation would amend the State Bank of Hyderabad Act and the SBI (Subsidiary Banks) Act to incorporate these provisions.
Securitisation volumes fall by a third in Apr-Dec
New RBI norms, hardening rates, liquidity concerns curb appetite. Hit by a slump in single corporate loan sell downs, securitisation volumes shrank in April-December 2010 to Rs 18,800 crore from Rs 28,200 crore in the year-ago period, according to ratings agency Icra. Securitisation is the process of converting existing assets or future cash flows into marketable securities. Typically, loans in segments such as vehicle, home and corporate are pooled and packaged into securities. The repayments from borrowers are assigned to investors in securities. The Reserve Bank of India (RBI) has proposed stringent norms for securitisation, hardening interest rates.
India back on pre-recession growth trend: World Bank
Washington: The Indian economy seems to be back to the growth trend before the global financial crisis with particularly strong GDP growth over the first half of the 2010-11 fiscal, but the inflation is worrying, the World Bank has said. The Reserve Bank of India (RBI) is likely to continue its policy of cautious rate hikes in an uncertain environment, the World Bank said in the second of its semi-annual series of India Updates released Tuesday.
A reforms stimulus
The crying need to bring inflation to heel should hopefully force finance minister Pranab Mukherjee to present a tight budget on 28 February. The Reserve Bank of India (RBI) has already been busy tightening its monetary policy by increasing interest rates seven times since March. This overdue withdrawal of monetary and fiscal stimulus could hurt growth in the short run. It needs to be balanced with a fresh reforms stimulus. Here’s why. Almost exactly a year ago, the finance ministry ended the first chapter of its excellent Economic Survey on an optimistic note: “It is entirely possible for India to move into the rarefied domain of double-digit growth and even attempt to don the mantle of the fastest-growing economy in the world within the next four years.” The optimism came at a time when India was being lauded for its quick rebound from the brutal global downturn. A lot has changed since then. Now the threat of double-digit inflation is a far more potent issue than the prospects of double-digit growth. Policy attention has dramatically swung from the latter to the former. Demand management is thus the big topic of the day. The best way to control inflation in the short run is to compress private demand through higher interest rates and compress government demand through a lower fiscal deficit.
RBI panel mulled linking repo to CD ratios
The Reserve Bank of India’s (RBI) technical advisory committee had considered linking the repo facility to credit-deposit ratio of banks in the third quarter monetary policy review in January, the apex bank said in a statement. “If implemented, the move could have limited lending to banks with high credit-deposit ratio and those who were borrowing frequently from RBI’s repo window at the same time,” said a senior public sector banker. In the first ever disclosure of the minutes of the Technical Advisory Committee meeting a week before the announcement of the third quarter monetary policy review, it is stated that a member of the committee had suggested the statutory liquidity ratio (SLR) could be increased to reduce the borrowing capacity of banks and the repo facility could be linked with the credit-deposit ratio of banks to bring in discipline. Though the central bank did not take this step, it did raise concerns on the widening gap between credit and deposit growth in the review. “The Reserve Bank will constantly monitor the credit growth and, if necessary, will engage with banks which show an abnormal incremental credit-deposit ratio,” RBI said. The incremental non-food credit-deposit ratio was at 102 per cent by end-December 2010, up from 58 per cent in the corresponding period of the previous year. Credit growth clocked 23 per cent as on January 28, much higher than RBI’s projection of 20 per cent for financial year 2010-11. Banks have been borrowing around Rs 1 lakh crore daily from RBI’s repo facility since November 2010. Two members of the panel were also of the view that small and managed depreciation in currency could be considered to manage CAD, but RBI maintained it would intervene only if volatility was high. While one of the members had suggested a 50 basis points increase in the repo rate and 25 basis points increase in the reverse repo rate, another member suggested a rise in the cash reserve ratio (CRR) to contain inflation. But RBI went ahead with a raise in both policy rates by 25 basis points, an action the majority of its members upheld.
Income-tax department says record TDS unpaid
The TDS (tax deducted at source) wing of the income-tax (I-T) department in Mumbai has detected a record Rs4,000 crore in non-payment of TDS in the first 11 months of the fiscal year, tax officials familiar with the development said. “Our surveys will significantly improve collection of TDS in future. Last fiscal we had detected only Rs60 crore in non-payment of TDS,” an I-T official told Mint. He did not want to be named because he is not authorized to speak with the media. The I-T department’s surveys haven’t spared even the Reserve Bank of India (RBI), (over commissions paid by it to banks), besides companies such as Reliance Industries Ltd (RIL) and Jet Airways (India) Ltd. In mid-January, the department surveyed India’s central bank and claimed that RBI did not deduct tax on agency commission of more than Rs800 crore paid by it to banks for doing government business since 2007. An RBI spokesperson said in an email response to Mint: “The I-T department had asked RBI about the amount of agency commission paid by RBI to banks for doing government business. We have informed the I-T department that as per a CBDT (Central Board of Direct Taxes) circular of 2003, RBI is exempt from deducting TDS on agency commission paid by it to banks for doing government business.” However, the department’s contention is that the CBDT circular was in force only till 2006, and RBI should have deducted tax at the rate of 10% on the agency commission.
RBI raises alarm as Bengal goes into severe overdraft crisis
The Reserve Bank of India has warned the Union finance ministry that West Bengal is facing a "severe overdraft crisis" — in other words, it is going bankrupt. The state's financial condition is so bad that it may have to dip into central funds for welfare projects if it has to pay its employees the salary for February. Sources in the RBI say that as on February 21, Bengal has taken more than `1800 crore as loan. It has also been regularly dipping into the ways and means advances (WMAs) to meet its daily expenses. It has come to such a pass that the Buddhadeb Bhattacharjee government has been surviving on overdrafts running into hundreds of crores for the past 10 days.
Tuesday, February 22, 2011
Corporates need to spruce up risk management: Gopinath
Reserve Bank of India Deputy Governor Shyamala Gopinath has cautioned that in an open economy like India , there is need for greater recognition of currency and interest rate risks and the risk management in banks and corporate firms need to gear up their risk management practices further in this area. “It is our experience that a large number of corporates still do not have well-designed risk management policies and practices to take care of volatile exchange rate movements and give scant regard to tail risks. There is also need for greater disclosure and adherence to accounting standards for financial instruments,'' said Gopinath who was addressing .Annual Conference of the Foreign Exchange Dealers’ Association of India (FEDAI) on Friday ``Approach to Capital Account Management - Shifting Contours''. There is also need to more comprehensively qualitatively assessment of of India's external liabilities to encompass liabilities of subsidiaries and branches of Indian financial institutions overseas, not in nominal terms but through a risk-based approach on the probability of recourse to parent bank liquidity support, said Gopinath. However, with focus on capital flows on a net basis, it is often not realized that portfolio flows were $174 billion a year over last three years on a gross basis, far outstripping FDI flows at $37 billion a year. In gross terms, over the last five years (2005-06 to 2009-10) FII flows have accounted for 47% of the gross capital inflows to India as against 9% for FDI inflows. This of course has more to do with the nature of these flows with a much larger churn for portfolio capital. High gross flows make economy more susceptible to such reversals and as such we need to continue to maintain adequate buffers, said Gopinath. In the current context, a high current account deficit (CAD) has been absorbing much of the capital flows in aggregate terms. The concerns, however, arise on account of the composition of flows coupled with lower order of reserves accretion and faster increase in external liabilities, added Gopinath. The enhanced exposure to external liabilities is reflected in the sharp increase in the ratio of external debt to foreign exchange reserves from 89.1% of GDP in 2008-09 to 99.1% as at end June 2010. Moreover, the ratio of short-term debt to reserves has increased from 17.2% to 21.0% during the same period. Another issue that may come up going forward relates to repayment of FCCBs. The redemption pressures on account of FCCBs would start building up from 2010-11 and peak in the next couple of years till 2012-13. She further said that there have been some concerns on the declining FDI flows in the recent past though as stated earlier it has little to do with the regulatory framework per se except in certain sectors. The moderation in FDI inflows to India during April-November 2010 has been driven by sectors such as construction, mining and business services.
Technology not reaching customers: Chakrabarty
RBI Deputy Governor Dr.K.C.Chakrabarty has said the benefits of technology adopted by the banks have not percolated in terms of cost, speed and convenience of the customer. The banks should move towards empowering the present day customers of information or digital age by greater choice, greater access, and better, faster, more efficient modes of delivery and service. "Customers are not going back to the old ways of banking. They are moving forward. If the banks do not complement their speed, the customers will pass by,'' said Chakrabarty.
Diesel price may be freed if inflation falls
Dr. Rangarajan, a former governor of the Reserve Bank of India, said headline inflation was likely to come down to 7 percent by the end of March on moderating food prices. Annual inflation based on wholesale prices eased marginally to 8.23 percent in January as against 8.43 percent in the previous month. ‘We have witnessed two years of high inflation. It has been around 7-8 percent. It needs to be brought down to a comfortable level of 4-5 percent,’ said Rangarajan adding the policy markers would continue to tighten monetary and fiscal policy until inflation was brought down to a comfortable level. ‘Inflation distorts the economy. It hits the poor hardest. We have to bring it down,’ he added.
Loans under JNNSM at 5% not violation of base rate norms: RBI
The Reserve Bank today said banks financing power generation equipment under the Jawaharlal Nehru National Solar Mission (JNNSM) at a concessional 5 per cent interest rate is not violation of norms. This financing below the base rate would not be considered violation of guidelines, RBI said in a statement. "We advise that such lending at interest rates not exceeding five per cent per annum where refinance of Government of India is available, would not be considered to be a violation of our Base Rate guidelines," it said. In the new lending rate mechanism, no loans except few exceptions can be offered below the base rate of a bank. Base rates of most of the banks are 9 per cent. Other category of loans exempt from the guideline include loans to banks'' own employees and loans to banks'' depositors against their own deposits. The Ministry of New and Renewable Energy (MNRE) has formulated a scheme on financing of off-grid and decentralised solar (Photovoltaic and Thermal) applications as part of the JNNSM, it said. Under the scheme, banks may extend subsidised loans to entrepreneurs at interest rates not exceeding five per cent where refinance of two per cent from Government of India is available, it added.
Andhra Pradesh set to usher in new products under new MFI Act
Sensing foul play in the introduction of new products like loans for men and interest-free loans by microfinance institutions (MFIs), the Andhra Pradesh government is set to issue a notification to bring these products under the purview of the new MFI Act. MFIs in the state, whose revenues dropped after the introduction of the MFI Act, were finding new methods to carry on their business by introducing fresh products like loans to men and interest-free loans, a senior state government official said. According to R Subrahmanyam, Principal Secretary (Panchayat Raj and Rural Development), some MFIs are offering loans to the husbands of women members of selfhelp groups(SHGs), saying that extending loans to them will not attract the provisions of the Microfinance Act, which came into existence in December. Some MFIs were considering extending interestfree loans, arguing they would not come under the purview of the Act, he said. “That shows the desperation. When you want to make hyper profits, try to duck and find ways. We will not let that happen. A notification will be issued in a day or two, making it clear that these kinds of loans will also come under the Act,” Subrahmanyam said. The Andhra Pradesh Microfinance Institutions (Regulation of Moneylending) Act, 2010 is aimed at regulating the sector by keeping tabs on lending and recoveries by MFIs. It prohibits them from lending to SHGs already covered by the formal banking system, without seeking prior approval from banks. Share Microfin, one of the largest MFIs in the country, recently launched ‘Suraksha Loan’ exclusively for men. In acircular to its branches, the company said the loan had to be extended to the husband of a woman member of an SHG. The circular stated the outstanding loan would be nullified only in case of death, but not suicide. Sources in SKS Microfinance said extending interest-free loans was a vague idea and one of the 40-odd concepts the company was mulling over. “Even if they term these loans as interest-free or loans to men, they will attract all sections of the Microfinance Act. It will be viewed as a violation,” Subrahmanyam said.
RBI clarification on forex trading
The Reserve Bank of India (RBI) has clarified that existing Foreign Exchange Management Act (Fema) norms do not allow residents to trade in foreign exchange through electronic or Internet based trading portals. The clarification comes after some advertisements recently by electronic /Internet portals offering trading or investing in foreign exchange with guaranteed high returns. “Many companies even engage agents who personally contact gullible people to undertake forex trading/ investment schemes and entice them with promises of disproportionate / exorbitant returns. RBI cautions the public not to remit or deposit money for such unauthorized transactions. The advice has become necessary in the wake of many residents falling prey to such tempting offers and losing money heavily in the recent past,“ the central bank said.
Monday, February 21, 2011
Enabling Inclusion - Aman Srivastava
Various studies have revealed that consumption is usually much less volatile than income, indicating a fair pattern of inter-temporal savings, even amongst the poorest households. But despite this active level of financial management, these households have no recourse to formal financial systems. Policymakers in India have recognised that improving current systems and designing new, innovative systems to reach the poor will require radical improvements in cost efficiency and an associated change in the existing set of regulations. The RBI has in recent years put in place several regulations to encourage financial inclusion by granting greater freedom to the concerned players while simultaneously seeking to protect the interests of the target populations. While many of its regulations have created an enabling environment for inclusion, some, understandably, have limited the progress that could have been made. This is an outcome of the ‘Regulator’s Dilemma’, a term coined by David Porteous: How can regulators balance their need to promote broader access to financial services with ensuring the stability of the financial system? This is a fine balancing act, failure to achieve it could lead to the choking of incipient attempts at providing universal access or financial destabilisation and the bankruptcy of the vulnerable. Ultimately, regulations have to be designed keeping in mind the risks involved. The risks will vary with the model adopted, whether the model is transformational or additive to banking. In addition, regulatory coordination will have to be achieved amongst the respective regulators to ensure they are not working at cross purposes. Since the current regulations touch upon the participatory capacities of players across all the concerned sectors, this discussion is segmented according to the regulations applicable to each sector. Which sectors are expected to play a leading role in expanding financial inclusion? Banks and mobile operators will be in the spotlight, along with any other companies that may partake in the business correspondent (BC) model. The chief regulators to walk the tightrope, then, are the RBI, TRAI and to a limited extent, the Competition Commission of India. Several strides have been taken by the RBI in easing the regulatory environment to enable the entry and scaling up of participants. However, much more still needs to be done to ensure continued growth in this sector. For example, MSPs will have to provide inter-operable services by setting up some sort of clearing/settlement system, which will invariably involve the National Payment Corporation of India as a facilitator. Besides, banks will never have strong incentive to cater to poorer segments as long as their revenues come from floats and not from transactions. While the RBI is currently marketing the FI paradigm through the bank-led model, it isn’t averse to giving centrestage to non-bank actors. Banks need to act quickly on the privileged position they currently enjoy. Since financial inclusion through non-traditional modes is a new concept, and banking alliances with BCs a recent phenomenon, much is still to be learned over the coming years about customer protection issues, AML/CFT concerns, and the feasibility of various models. Regulations will have to keep evolving, and it shall be interesting to follow this evolution, which is already in motion and beginning to tangibly modify the financial landscape.
—The writer is an economist at the Centre for Financial Inclusion, Indicus Analytics. You can reach him at aman.srivastava@indicus.net
BoI to cover 400 villages under BC model
In pursuance of the RBI guidelines and instructions to all the bankers operating in the state, the Bank of India (BoI) will cover all the 400 villages in its share, each with over 2000 people, under the business correspondent (BC) model by the end of the current fiscal. The BoI has also planned to further boost up credit lending so that the state's CD ratio increases. While this would mark the completion of the phase-I of the project, all the bankers have to bring the remaining villages, whatever the size of their population, under the BC model by 2013, said BoI executive director N Seshadri, who is in Bihar in connection with the inaugural launch of the same model at Sakra Mansurpur village in Muzaffarpur district by the RBI Deputy Governor on Monday.
Contenders unsure, new bank licence norms delayed
Draft guidelines on new banking licences have been delayed. According to sources familiar with the development, the main reason for this is that many of the comments received by the Reserve Bank of India (RBI) from various stakeholders on its discussion paper on the issue were contradictory in nature. As a result, the RBI could not come out with the draft guidelines by end-January — as it had said. According to a source in Indian Banks’ Association (IBA), the draft guidelines are expected to come out by the end of this financial year now and after that many players who are eyeing a licence might back out because the government and the RBI are expected to come up with some stiff terms on financial inclusion. “The government does not want new players to enter the banking industry and crowd the metros and big cities. Financial inclusion will get top priority in the draft guidelines,” the source said. In its second quarter review of the monetary policy on November 2, the RBI had said that the draft guidelines shall be put up in the public domain by January-end for public comments. In December, the RBI had released a gist of comments on the discussion paper on the entry of new banks in the private sector. It is now almost a year since finance minister Pranab Mukherjee said in his Union Budget speech on February 26, 2010 that in order to extend geographic coverage by banks, the RBI will consider giving some additional banking licences to private companies and non-banking finance companies. Some experts support the delay in granting of licences. “If the RBI were to really very clearly articulate what is the responsibility rather than the opportunity, it would be more interesting. Then what will happen is that only those who have the long-term commitment to the economy will come forward. So it is better that the draft guidelines come out that way,” said Ashvin Parekh, partner and national leader, financial services, Ernst & Young. In the last one year, the list of players eyeing a banking licence has increased. It includes large corporates as well as medium and small players.
UCO Bank Adopts Village in Gujarat
UCO Bank in Gujarat state adopted Lakshmipura village with the sole purpose of uplifting the economic conditions of the village and making the inhabitants selfreliant by financing various productive activities and completion of 100% financial inclusion in the village. Bank At this occasion, sanctioned loans to the villagers for various activities and donated computers for use in local school. Seen in the picture are A.K.Bera Regional Director of RBI, Rajesh Kumar, GM, RBI, A.K. Roy, ZM, UCO Bank and others
Microfinance, macro problems
Indian activists protest in front of The Reserve Bank of India against micro finance institutions in Hyderabad.
THE MICRO FINANCE MESS - DR. N. A. MUJUMDAR
Recent revelations of forprofit Micro Finance Institutions ( MFIs) have exposed naked exploitation by these institutions in the name of financial inclusion. Dr. . V. Reddy, former Governor, Reserve Bank of India ( RBI), recently said that these MFIs are worse than money- lenders. A money- lender lends out of his own money, whereas here, MFIs were actually borrowing money from depositors and banks and then further lending the money. In retrospect, the government of Andhra Pradesh deserves to be congratulated on its 2010 ordinance which spelt out clearly the malpractices of such MFIs. Whereas these Self Help Groups ( SHGs) are being exploited by private MFIs through usurious interest rates and coercive means of recovery resulting in their impoverishment and in some cases leading to suicides..., the ordinance said. This triggered a crisis which almost paralysed for- profit MFIs, with banks reluctant to lend, repayments dwindling and depositors tending to withdraw their money. It is this shock therapy which led to subsequent soul- searching on the part of those MFIs, the promoters of which were fattening themselves off the sweat of poor borrowers. The Microfinance Institutions Network ( MFIN), a grouping of for- profit micro lenders, has now set up a Committee to look into these deficiencies. In fact the clout of these MFIs seems to be so strong that in spite of all that has been now exposed, some influential papers plead: Dont Kill Microfinance. The short answer to such pleas is: We do not want to kill these MFIs but we certainly want to prevent them from killing their poor borrowers. No doubt the for- profit MFIs represent the predatory face of financial capitalism. But this was compounded by the institutional support which was extended to these MFIs. Such support came from the RBI, the public sector banks ( PSBs), NABARD and SIDBI. For instance, during 2008- 09, banks extended loans of something like Rs. 3,700 crore. Why should PSBs extend loans to MFIs at something like 12 per cent, when they were fully aware that these funds would be on- lent by MFIs at 25 to 30 per cent? The answer is that such loans by PSBs to MFIs were treated as riority sector lending. So this had the blessings of RBI. Similarly, some equity or quasi- equity support came from SIDBI and NABARD, of course, at concessional rates. RBI could have stipulated that PSBs should lend only to not- for- profit category of MFIs. PSBs could have also stipulated, on their part, that the on- lending rate of beneficiary MFIs should not exceed say 17 or 18 per cent. This was not done. This systemic support perhaps also lent some respectability to for- profit MFIs. Thus public sector financial resources were used to perpetuate usurious lending practices of MFIs. It is one thing to say that RBI had no stautory powers to regulate MFIs. But was it obliged to support for- profit MFIs? These questions must be answered by Dr. Reddy, during whose tenure the MFI party began. RBI could have stipulated that PSBs should lend only to not- for- profit MFIs, fixing a ceiling on their on- lending rates. This support made the system, in a manner of speaking, a co- conspirator in this business of exploiting poor rural borrowers. Public funds were allowed to generate private profits. RBI has not covered itself in glory in this episode. Because of obscenely high returns, stemming from exorbitant lending rates, for- profit MFIs have become attractive investment destinations for Private Equity and Venture Capitalists. The recent success of the IPO of SKS Microfinance is a case in point. It attracted high profile investors like billionaire George Soros, venture capitalists Vinod Khosala and Infosys Founder Narayan Murthy. Alluding to this transformation of the humble animal microfinance, Muhammad unus, the father of microfinance movement said: “ It is a complete detour and nothing but a quitting of microfinance mission.” Basically, lending to the rural poor at 30 or 40 per cent defies all economic logic. Our small rural borrowers are not Schumpeterian mini- heroes, who can make the project or activity for financing what they have borrowed, financially viable. In fact, by inflating interest cost, we are building ‘ ab initio’ non- viability into the project. Secondly, the engagement of for- profit MFIs with borrowers has been shallow based on touch and move on business models shorn of any development content. The average loans per client in both MFIs and SHGs have been low, between Rs. 3,500 and Rs. 5,000. The duration of the loan is short, typically one year or less. The small loan size and short duration do not enable most borrowers to do much except to ease liquidity problems.
(Dr. Mujumdar is editor of the Indian Journal of Agricultural Economics.He has worked for the RBI and has advised the central banks of Zambia, Mauritius, Tanzania, Belize and Cambodia.He was consultant to the World Bank, the FAO and ESCAP)Sunday, February 20, 2011
Non-review of MFI's programs by banks draw RBI's ire
The Reserve Bank of India is pulling up banks for not adhering to best practices and slacking on their role of reviewing microfinance institutions’ operations after extending credit support, reports The Hindu Business Line. The newspaper is quoted as saying that the apex bank sent a circular to the public sector lenders, mentioning that they were “not engaging themselves in capacity building and empowerment of the groups to the desired extent.'' At present, MFIs are disbursing loans within 10-15 days of the formation of new groups. However, the practice is to take six-seven months of group formation or nurturing/ hand-holding. “As a result, cohesiveness and a sense of purpose were not being built up in the groups formed by these MFIs,” the RBI is reported to have said in the paper.
Finmin weighs extension for Union Bank, LIC chairmen
After putting new SBI and a new SEBI chiefs at helm, the finance ministry is currently evaluating whether to give extension to the tenures of LIC chairman T.S.Vijayan and Union Bank of India CMD M.V.Nair - both will be completing their respective five-year tenure but will be having residual services to reach 60. Vijayan, who recently had to do a lot of firefighting after Central Bureau of Investigation arrested officials from LIC's investigation department and LIC Housing Finance CEO R.R.Nair in bribe-for-loans cases, will be completing five years in April but will have two more years to reach the superannuation age of 60. Similarly, Nair will ending his five-year tenure at UBI in March but will have one more year to reach the retirement age of 60. It has not been an easy decision for the finance ministry to decide whether to go for extension in both Vijayan and Nair's cases as not giving extension after 'a tenure of five years' has become a parctice for so many other important appointments in financial sector and other public sector enterprises. Usha Thorat, Deputy Governor, Reserve Bank of India, Sarthak Behuria, CMD, India Oil, Ashok Sinha, CMD, Bharat Petroleum Company were earlier denied extension though all of them had residual services to reach 60. Sources point out that initial round of discussion among the top official of the ministry hasn't found favour for giving extension to both Vijyan and Nair.. But finance minister Pranab Mukherjee is yet take a call. There are indications that Vijayan may be rehabilitated in any other top posts like UTI Chief which has fallen vacant after U.K.Sinha's appointment as SEBI Chairman or a member in the Securities Appellate Tribunal. Similarly, Nair may be shifted as the executive chairman of Star Union Life Insurance, a life insurance joint venture among Bank of India, Union Bank of India and Japanese major Dai-ichi. The contenders for the LIC chiefs in terms of seniority are DK Mehotra, Thomas Mathew, AK Dasgupta - all are currently LIC's three managing directors. Finance ministry sources point out there will be a decision about the LIC chief soon. Meanwhile, the ministry is also in the process of filling up posts of UTI chairman, Nabard chairman, CMDs of Sidbi and ECGC. For top posts of Nabard, the name of Prakah Bakshi, one of the junior most executive directors in Nabard is doing the round, sources point out. If selected Bakshi will be superseding many of his seniors including SK Mitra who is the senior most ED in the organisation. Incidentally, KG Karmakar, managing director of Nabard who has almost completed five years in the post was excluded from the exercise to choose chairman as he has one and half years of service left, falling short of the two year of residual service norms for selection of Nabard chief.
April 1 date hint for MFI interest rate cap
The Reserve Bank of India may impose an interest rate cap on loans by microfinance institutions (MFIs) from April, in line with the recommendations of the Malegam committee last month. According to RBI Deputy Governor K.C.Chakrabarty, the apex bank has commenced talks with the stakeholders on the implementation of the Malegam proposals. “Some part of the report such as interest rate will be applicable from April 1,” he said. He, however, said officials at the RBI were still discussing the proposals and no binding decision had been taken it. The committee, headed by Y.H. Malegam, proposed the capping of interest rate charged by the MFIs at 24 per cent. Its recommendations followed a regulation by the Andhra Pradesh government restraining the MFIs from adopting strong-arm tactics to facilitate loan recovery. It also stipulated that the loan repayment cycle should at least be monthly from the earlier practice of weekly collections.
Saturday, February 19, 2011
India Infoline launches financial literacy programme
Brokerage firm India Infoline (IIFL) on Friday said it has launched a financial education and awareness initiative called FLAME (Financial Literacy Agenda for Mass Empowerment), with an aim to improve financial literacy across over 1,000 cities in India. The company has a budget of Rs 25 crore for its initiative towards the corporate social responsibility, IIFL said in a statement. “We shall leverage our network of 3,000 locations, 15,000 employees and 1 million customers across the country to reach out to small towns as well as under-privileged sections of the society. We have set aside a budget of Rs 25 crore, in addition to efforts of a crack team of 500 from the company,” IIFL Chairman Mr Nirmal Jain said. The company’s programme will comprise a mass media campaign, an online portal, a helpline, ground level financial awareness workshops, connecting with students at B-schools, books and training via expert sessions on financial literacy, the statement added. FLAME was launched by Reserve Bank of India’s Deputy Governor Mr K C Chakrabarty and HDFC Chairman Mr Deepak Parekh. Commenting on the occasion, Mr Parekh said “India cannot grow at a sustained high pace without greater financial inclusion and hence a significant investment in financial literacy is no longer a policy option, but a compulsion.” As a part of this new initiative, IIFL will setup a helpline to answer queries pertaining to financial services, which will be manned by the company’s trained professionals, the statement said.
Beyond Core Banking
Seen in the photograph is Dr. K. C. Chakrabarty, Dy. Governor, Reserve Bank of India, along with M. V. Nair, Chairman & Managing Director, Union Bank of India, S. S. Mundra, Executive Director, Union Bank and B. Sambamurthy, Director, IDRBT during the Executive Round Table on ‘ Beyond Core Banking’ organised by Union Bank and IDRBT in Mumbai. This was a unique effort for benefit of the banking community to draw a road map for better customer services and business growth by leveraging investment already made in Core Banking System.
RBI starts discussion with stakeholders on Malegam report
Reserve Bank of India (RBI) Deputy Governor Mr K C Chakrabarty on Friday said the Central bank has started discussion with all the stakeholders regarding implementation of the Malegam committee recommendations on microfinance. “This (the Malegam report) is at the discussion stage... We have not decided anything yet,” Mr Chakrabarty told reporters. “Some part of the report like interest rate will be applicable from April 1,” he said. RBI has already invited public comments on Malegam panel report which suggested among other things capping interest rate at 24 per cent for loans extended by microfinance institutions. The committee, headed by Reserve Bank’s Central Board Director Mr Y H Malegam, suggested that small loans cannot exceed Rs 25,000 and creating of a separate category of non-banking financial companies (NBFC-MFI) for the MFI sector. RBI constituted the committee in October last year in the wake of allegations of overcharging and use coercive recovery practices by MFIs that led to a spate of suicides in Andhra Pradesh. The committee submitted its report on January 19. These recommendations, the committee said, should be implemented from April 1, 2011.
New CPI series out, retail inflation at 6 pc in January
The new consumer price index, intended to reflect the actual movement of prices at the micro-level and help policy-makers like the RBI in better framing of decisions was launched today, with initial data pointing to six per cent retail inflation in January. While Consumer Price Index (CPI), according to new series, has increased to 106 in January this year from a base of 100 in 2010, government has chosen not to mention the inflation figure saying the exact level could be arrived only next year. Analysts were also guarded as the new indices have a long way before they evolve into the country''s benchmark for inflation. The figure was arrived based on a comparison with the annual all-India CPI index average for the whole of 2010. According to new series, all-India Consumer Price Index stood at 106 (provisional figure) for January 2011 taking the base at an annualised level of 100 for the entire last year. "Since these indices are being introduced for the first time, annual inflation rates have not been compiled," the Ministry of Statistics and Programme Implementation said in a statement. Inflation, as measured by the Wholesale Price Index -- which remains the top benchmark -- stood at 8.23 per cent in January. Economists said the new series will help both the Government and Reserve Bank to frame their polices as CPI is a better reflection of actual prices than the current practice of following the wholesale price index (WPI). Crisil chief economist D K Joshi said that the country desperately needed an index which is comprehensive. "Not much should be read from the figure of 106 as released today. However, they could be used for framing policy decisions by both the Government and RBI with the passage of time," he said adding the index will move up as there is inflation in the economy. The WPI based inflation for the month under review stood at 8.23 per cent. The CPI has been released for rural, urban and all-India levels. While the rural CPI indices stood at 107, CPI urban stood at 104 during the month under review. ICRA economist Aditi Nayar too said the new series would become benchmark for policy makers, including the RBI, in the future. "Broadly speaking, India is one of the few countries in the world using the WPI as benchmark. The new unified CPI would help the RBI to frame policies in a proper manner," she said adding this reflects the micro level price situation more clearly.
Canara Bank reverses decision to charge for updating passbooks
The Bank had decided to charge Rs10 for updating passbooks of account holders from other branches, but relented after a customer insisted that such basic services should not be charged. When a customer of a nationalised bank protested against new charges to be levied, the officials reversed the decision. Banks, however, insist that it is becoming increasingly difficult to continue providing basic services free of charges and customers will have to start paying up.
How do migrant workers move money in India? - Justin Oliver & Dan Radcliffe
Imagine you’re a migrant laborer living entirely in the cash economy. How do you send money home to your wife and kids? How do you buy supplies from the next town over? How do you pay utility bills? In short, how do you move physical cash over distances? Without access to systems that permit transferring money conveniently, safely, and cheaply, hundreds of millions of domestic migrants face these dilemmas regularly. To better understand just how costly making remote payments can be for poor households, the Bill & Melinda Gates Foundation commissioned the Centre for Micro Finance at the Institute for Financial and Management Research (IFMR) and the Reserve Bank of India’s College for Agricultural Banking to survey 274 domestic Indian migrants and their families living at opposite ends of four domestic remittance corridors.
This is a guest blog by Justin Oliver & Dan Radcliffe. Justin is Executive Director of the Centre for Micro Finance in India and Dan is Program Officer with the Bill & Melinda Gates Foundation.
State Bank chief Bhatt doesn’t see big policy rate hike
State Bank of India chairman OP Bhatt on Friday has said that the interest rates are unlikely to harden in a big way. “Still, I do believe that if the situation on the inflation front continues to remain at the present level, then the Reserve Bank of India (RBI) may increase key policy rates by 25 basis points,’’ Bhatt said.
Budget will be a platform to provide directions on reforms
This year's budget is significant for two reasons. First, the recent spate of corruption scandals has dampened investor sentiment and the budget will be an important platform for the government to provide policy direction on reforms. Second, the current macro challenge facing the government is one of containing inflation and sustaining growth, unlike the last two years when a fiscal stimulus was the need of the hour. Hence, the government's resolve in tightening its fiscal belt will be closely watched. The Reserve Bank of India has been doing a lot of heavy lifting in terms of containing inflation, but monetary policy is less effective if fiscal policy is not supportive, particularly since the food price inflation partly reflects supply constraints in agriculture. At least on paper, the budget should persist down the path of fiscal consolidation. In FY11, the central government budgeted a fiscal deficit of 5.5% of GDP, but this will likely be bettered at 5.2% due to seignorage (inflation tax) and a one-time revenue gain from 3G spectrum auctions.
U.K.Sinha assumes charge at SEBI
Upendra Kumar Sinha with his predecessor CB Bhave (right) as he arrives to assume charge at the Sebi headquarters in Mumbai on Friday. Sinha, who was the Chairman and Managing Director of UTI Mutual Fund, took over as the eighth Chairman of the market watchdog.
Friday, February 18, 2011
RBI undertakes programmes on financial literacy
New Delhi : As part of its financial literacy campaign, the Reserve Bank organised an interface on policy decisions relating to foreign exchange here. During the event yesterday, RBI's Chief General Manager-in-charge of Foreign Exchange Department (Central Office) Salim Gangadharan presented an overview of systems under the Foreign Exchange Management Act (FEMA) since 1999, and explained major initiatives taken towards liberalisation, the central bank said in a statement. The event was attended by students, money changers and people engaged in export-import business, it added. Reserve Bank personnel also visited Kendriya Vidyalayas in the city to provide information on the role and functions of the apex bank and issues such as security features of genuine currency notes, complaints redressal mechanism through Banking Ombudsman Scheme and its initiatives on financial inclusion and literacy, the statement said.
NBFCs told to drive up CAR to 15%
Finance companies which raise public deposits will have to bring in more capital to do business. The new rule, laid down by the Reserve Bank of India , will apply to large non-banking finance companies such as Mahindra Finance , Shriram Transport Finance and Sundaram Finance , among others. This is in response to an RBI directive, which asks finance companies taking deposits from the public to maintain higher capital adequacy ratio (CAR) of 15% by March 2012. CAR is the ratio of capital (comprising equity, free reserves and long-tenure debt) to risk-weighted assets. At present, finance companies are required to maintain a CAR of 12%. RBI report has noted that as on March 2010, 212 NBFCs had a capital adequacy ratio of more than 12% against 221 NBFCs a year ago. "It may be highlighted that the NBFC sector is witnessing a consolidation process in the last few years, wherein the weaker NBFCs are gradually making an exit, paving the way for a stronger NBFC sector," it said. There are as many as 12,630 NBFCs registered with RBI as on end-June 2010, slightly lower than 12,740 a year ago.
RGB becomes first rural bank to achieve CBS
The Rushikulya Gramya Bank (RGB), a regional rural bank (RRB) operating in south Orissa, has become the first RRB in the state to have placed all its branches on the Core Banking Solutions (CBS) platform. Presently, five RRBs including RGB are functioning in the state. All the 81 branches of the RGB located in Ganjam (71) and Gajapati (10) districts migrated to CBS on Monday. The day coincided with the Foundation day of the Berhampur based bank, which completed 31 years of its service. The bank was established on February 14, 1981. “Our bank is the first RRB in the state to have fully implemented CBS, much before the stipulated time set by the Reserve Bank of India (RBI)”, said RGB's chairman PVSTR Seshagiri Rao. The Central government had directed the RRBs across the country to implement CBS before the end of September 2011. The bank has planned to issue debit cards to its customers and explore the possibilities to utilise the ATMs of its sponsoring bank- Andhra Bank.
Sebi looks at cash settlement in IRF
As part of efforts to boost volumes in exchange-traded interest rate futures (IRF), the Securities and Exchange Board of India (Sebi) is evaluating the option of introducing cash settlement in the segment. If approved, it could come as a shot in the arm for the niche market that has been witnessing almost nil volumes for months. IRF is an exchange-traded derivatives product for hedging interest rate risks. Only the National Stock Exchange (NSE) offers IRFs, which were launched for the first time in 2003. According to people familiar with the development, the joint technical committee reviewing the guidelines and contract specifications for IRFs is looking at cash settlement as one of the ways to attract more market participants. The committee comprises representatives of Sebi and the Reserve Bank of India (RBI). With U K Sinha, the new chairman of Sebi assuming office from Friday (February 18), it is expected that the revised guidelines for IRFs will be unveiled soon.
MFIs demand bank funding resumption
Microfinance institutions, or MFIs, plan to approach banking regulator, Reserve Bank of India (RBI) and banking lobby Indian Banks’ Association (IBA) to demand the resumption of bank finance to the industry. Commercial banks have been slow in releasing loans and considering new loan requests from microlenders since October, when Andhra Pradesh, the hub of the Indian microlending industry, imposed curbs on how MFIs recover money from borrowers—putting their ability to repay bank loans in question. “At an industry level, we are going to take up the issue with the Reserve Bank and IBA as survival of MFIs without adequate bank finance is difficult,” said Alok Prasad, chief executive of Microfinance Institutions Network (MFIN), an industry lobby. MFIN is likely to approach RBI by next week, Prasad said. Microlenders said banks were unwilling to comply despite an RBI notice last month asking them to recycle loans to the sector—or channel money received as payment of earlier loans back to MFIs. “Banks are advised that they should endeavour to recycle the collections to MFIs,” RBI had said.
Foreign travel made easier with prepaid cards
As per the Reserve Bank of India guidelines, a tourist can carry foreign exchange up to $10,000 per fiscal, of which only $3,000 can be carried in the form of foreign currency notes and coins. For the rest, one has to resort to traveller’s cheques or banker’s draft. What if the cheque or draft was misplaced or stolen, or got stuck in baggage that was delayed? Prepaid travel cards are available in different currencies and can be bought even on the day of travel. The exchange rate for a particular currency is based on what is prevalent on the day the card is loaded. Though one can get multiple travel cards for different currencies, only one card will be issued for a single currency. One can load up to $7,000 on such cards and carry up to $3,000 in notes and coins. There are three types of prepaid cards —- closed-ended, semi-closed and open-ended. Closed-ended prepaid cards are used for payments meant for a single purpose. For example, the card will be issued to the holder to make payments towards DTH TV bills. Semi-closed prepaid cards are available in physical and virtual forms. A physical card is like a normal debit or credit card and has an account number and password. A virtual card only has an account number and password and can be used for online payments. Open-ended cards combine foreign exchange, travel and gift cards. These cards are issued by banks, travelling agencies and are accepted by all current point of sale (POS) terminals.
Subscribe to:
Posts (Atom)