Banking and Financial News – 07 May 2014

Pranab Mukherjee to dedicate indigenous payment card RuPay to nation (dna) – Rupay, an indigenous payment card, will be dedicated to the nation on Thursday 8 May. Rupay (coinage of the terms Rupee + Payment), has been developed by National Payments Corporation of India (NPCI), a not-for-profit company envisioned by RBI and created by banking industry. RuPay card, launched on March 26, 2012, have been issued by more than 150 co-operative banks & Regional Rural Banks (RRBs). It is accepted at all ATMs (over 1,60,000), 95% Point-of-sales (POS) terminals and most e-commerce merchants. Kisan Card, a variant, is now issued by all public sector banks.

Paying bills on-time and keeping a track of them may now be easy - RBI had appointed an advisory committee to look into the mechanisms and structure of a nation-wide bill payment service. As per the observations made by the committee, cash and cheque payment modes still dominate the payment systems in India. With an aim of encouraging people for using electronic payment systems and lowering their dependence on cash, the committee recommended that pan-India integrated bill payment system should be developed. The committee further recommended that, a not-for-profit entity, Bharat Bill Payment System (BBPS) and a for-profit entity, Bharat Bill Payment Operating Units (BBPOUs), should be setup. Aforesaid entities would have distinctive roles. While BBPS would have to set standards and would be responsible for brand positioning, BBPOUs would carry out functions such as enlisting billers, providing infrastructure, handling transactions, customer grievances and providing value added services.

RBI tells banks not to levy prepayment charges on floating rate loans (The Mint) - The Reserve Bank of India (RBI) on Wednesday said banks cannot levy charges on individual customers if they choose to close their floating rate loans.

No Minimum balance penalty for dormant bank accounts. (The Hindu) - The Reserve Bank of India (RBI) on Tuesday told banks that they cannot levy penal charges for non-maintenance of minimum in any dormant or inoperative account.

Registration of 5 NBFCs cancelled. (The Hindu) - The Reserve Bank of India (RBI) has cancelled the certificate of Registration of five Non-Banking Financial Companies (NBFCs).

OECD lowers global growth forecast to 3.4%. (The Hindu) – According to the Paris-based Organisation for Economic Co-operation and Development (OECD), the world economy is projected to grow at 3.4% this year, lower than expected.

Kingfisher leads list of top defaulters. (The Hindu) – According to All India Bank Employees’ Association (AIBEA), who released the list of top bank defaulters, Kingfisher Airlines (Rs.2,673 crore) is the biggest defaulter to the Banking system. According to AIBEA, there has been a four-fold increase in bad loans (NPAs) in the past four years to Rs.1,64,000 crore in March 2013.

AirAsia Set for Takeoff in India, Gets Licence to Fly (NDTV Profit) - AirAsia India, the joint venture between Air Asia and Tata Group, is closer to starting its operations in India. The aviation regulator today issued air operator permit to the airline.

FTIL chairman Jignesh Shah arrested in NSEL fraud (The Mint) - The Mumbai police’s Economic Offences Wing (EOW) has arrested Jignesh Shah, chairman and group chief executive of Financial Technologies (India) Ltd, in connection with the Rs.5,574.34 crore fraud at National Spot Exchange Ltd (NSEL). The crisis at NSEL came to light on 31 July 2013, when the exchange suspended trading in all contracts. A spot exchange isn’t supposed to offer Futures Contracts, but NSEL was doing that.

Important Financial Terms in the News explained.

Floating Interest Rate: An interest rate that is allowed to move up and down with a benchmark index or with the market rates or along with an index. This contrasts with a Fixed Interest Rate, in which the interest rate on a loan or debt obligation (Bond) stays constant for the duration of the agreement. A floating interest rate can also be referred to as a variable interest rate because it can vary over the duration of the debt obligation.

Dormant / Inactive / Inoperative Account - If an individual has not made any transactions in his/her account (except for interest payments credited by the bank) for more than two years, the savings / current account is declared as dormant / inactive / Inoperative .

• Non-banking financial company (NBFC) - is a company registered under the Companies Act, 1956 and engaged in the business of granting loans and advances. They require RBI Licence.

• They do not hold a banking license. NBFCs function like banks; however there are a few differences:

• NBFC cannot accept demand deposits withdrawable / operated by cheque; they cannot maintain Savings Bank and Current Accounts.

• It is not a part of the payment and settlement system and as such cannot issue cheques to its customers

• Deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks.

Non-perfoming assets (NPAs) - Also called non-performing loans, are loans given by a bank or finance company, on which repayments or interest payments are not being made on time by the borrower. A loan or debt obligation where the borrower has not paid any previously agreed upon interest and principal repayments to the lender for an extended period of time (At present 90 days). The non-performing asset is therefore not yielding any income to the lender in the form of principal and interest payments.

"Finish each day and be done with it. You have done what you could; some blunders and absurdities have crept in; forget them as soon as you can. Tomorrow is a new day; you shall begin it serenely and with too high a spirit to be encumbered with your old nonsense." - Ralph Waldo Emerson.

Courtesy : The Hindu , The Mint , DNA