Banking and Financial News – 25 June 2014

Banking and Financial News – 25 June 2014

RBI lets NBFCs work as banking correspondents (Mint)

  • RBI on Tuesday permitted banks to appoint NBFCs which do not accept deposits as their business correspondents (BCs), a move which could help extend banking services to remote areas.

  • Commercial banks hire BCs to offer basic banking services in areas where they do not have branches. As of now, banks appoint individuals, small grocery stores and private enterprises as BCs. The BCs act as agents of the parent bank.

  • NBFCs have been seeking permission to be BCs for long, claiming they are well-positioned for the task.

  • Early this year, an RBI committee headed by Nachiket Mor had recommended that the scope of BCs be expanded and suggested the possible inclusion of new entities as BCs.

  • As per the new rules, even microfinance institutions operating as NBFCs (NBFC-MFIs) can operate as BCs.

  • RBI also issued rules for appointing non-deposit taking NBFCs (NBFC-ND) as their BCs.

  • Banks and NBFCs operating as their agents, should ensure that “there is no co-mingling of bank funds and those of the NBFC-ND appointed as BC.

  • Also, there should be a specific contractual arrangement between the bank and the NBFC-ND to ensure that all possible conflicts of interest are adequately taken care of.

  • Banks should also ensure that the NBFC-ND does not adopt any restrictive practice such as offering savings or remittance functions only to its own customers and forced bundling of services offered by the NBFC-ND and the bank does not take place.

  • RBI also scrapped any existing distance criterion applied to BCs.

Kapol bank's board dissolved by RBI; (Times of India)

  • RBI on Tuesday dissolved the board of Kapol Cooperative Bank, Kalbadevi, Mumbai.

  • The RBI dissolved the bank's board because of its weak capital adequacy and high-level of non-performing assets.

  • An administrator was appointed to run the Mumbai-based urban cooperative lender.

  • Though the bank's operations have not been restricted under Section 35A of the Banking Regulation Act, 1949, it would not be able to sanction any new loans.

  • Depositors too cannot withdraw their deposits pre-maturely.

  • No restrictions or limits on withdrawal of money from current and saving accounts of account holders have been placed.

Do not bother just to be better than your contemporaries or predecessors. Try to be better than yourself. ~ William Faulkner

Courtesy : Mint , Times of India


 

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