Month: September 2021

Telangana HC directs IRDA to promote overlooked senior official

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Can the chairman of the Insurance Regulatory Development Authority of India (IRDA), which oversees the country’s multibillion-dollar insurance sector, change the qualification terms of appointment of senior officials? On September 1, the Telangana High Court (HC) passed an order against the decision of former IRDA chairman TS Vijayan to relax the minimum qualification for the appointment of a senior official. Vijayan relaxed the requirement from chartered accountant (CA) to chartered financial analyst (CFA) in 2014. A CA degree is more rigorous compared to CFA.

IRDA under Vijayan promoted Mamta Suri as the Chief General Manager (CGM) instead of Jayasimhan Sathyamangalam, who then approached the court. Calling the appointment as one without jurisdiction, arbitrary and contrary to law, the HC directed the promotion of the ignored candidate retrospectively. Sathyamangalam is currently a general manager.

Revitalising insurance

The court ruled that the power of relaxing the required qualification — namely, fellow chartered accountant (FCA) — is not vested with the Chairman since no resolution to that effect has been passed. “Hence the action of the Chairman in relaxing FCA as CFA / ICWAI providing appointment to the unofficial respondent is one without jurisdiction and is arbitrary action and it is also contrary to law,” said Justice T Amarnath Goud in his order.

Insuring the insurers

Apart from terming Suri’s promotion as illegal with effect from 2014, the court asked IRDA to inter-alia delete ICWAI and CFA as eligible qualifications. The order stated that CFA means chartered financial analyst and FCA means fellow chartered accountant. CFA is an investment and financial management course offered by the Institute of Chartered Financial Analysts of India (ICFAI), whereas an FCA is a qualification attained by an associate chartered accountant after five years of practice as an accountant after qualifying as an associated chartered accountant (ACA).

The method of recruitment for the post of Senior Joint Director (CGM) is by promotion from among Joint Directors (GM) after four years, subject to merit, suitability and seniority. The appointment of Suri is illegal as her qualification is CFA, and also for the reason that, as on the date of the notification (October 23, 2013) the un-amended Executive Rules 2009 were in force, which stipulate only FCA as the eligible qualification, the court pointed out, thus allowing the writ petitions and setting aside the impugned orders.

As Jayasimhan is the only person qualified for the vacancy, the respondents can consider him for the vacancy with all consequential benefits, the court added.

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HDFC announces special offer for festival season

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Mortgage financier HDFC on Tuesday unveiled its special limited period offer for the upcoming festival season. Under this special offer, customers can avail HDFC Home Loans starting at 6.7 per cent per annum effective September 20.

Last week, SBI as part of festival bonanza offered a concessional home loan rate of 6.70 per cent under its festive offer. This was followed by other lenders like Punjab National Bank and Bank of Baroda.

“Housing is much more affordable today than it ever was. In the last couple of years, property prices have more or less remained the same in major pockets across the country while income levels have gone up. Record low interest rates, subsidies under PMAY and the tax benefits have also helped,” said Renu Sud Karnad, Managing Director, HDFC Ltd. Record low interest rates, subsidies under PMAY and the tax benefits have also helped, she said.

Low interest rates

Under the festive scheme, HDFC said, “Customers can avail HDFC Home Loan starting at 6.70 per cent per annum effective September 20, 2021. This offer will be applicable to all new loan applications irrespective of the loan amount or employment category,” HDFC said in a statement.

The special festive offer at 6.70 per cent is for all loan slabs and for all customers with credit score of 800 and above.

Before this special offer, the rate for salaried customers for loan above ₹75 lakh and credit score of 800 and above was 7.15 per cent and for self employed was 7.30 per cent. Hence, effective cut for these customers could be up to 45 bps for salaried and up to 60 bps for self employed.

This is a close ended scheme and will be valid till October 31, 2021.

Also see: HDFC Bank, Paytm set to launch co-branded credit cards

Other lenders including State Bank of India and Kotak Mahindra Bank have also recently announced cut in home loan rates for the festive season.

SBI is offering credit score linked home loans at 6.7 per cent, irrespective of the loan amount. Similarly, Kotak Mahindra Bank has reduced home loan rates to 6.5 per cent for a limited period.

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Top 6 Best NRI Investment Options To Consider In 2021

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Equity Mutual Funds For NRI

Mutual funds that invest in a portfolio of stocks spread out the risk of investing in equities. All mutual fund institutions enable NRIs to invest in their schemes, but according to the restrictions of the Foreign Account Tax Compliance Act, investors living in the United States and Canada must go through more paperwork (FATCA).

NRIs can participate directly in the Indian stock market through the RBI’s Portfolio Investment Scheme (PINS). To trade in the Indian stock market, NRIs are required to have an NRE/NRO bank account, a Demat account, and a trading account.

The tax rate is 15% if the investment is sold within one year of purchase. There is a 10% tax if the investment is sold after a year.

NRIs can open a trading account, but they are restricted to only selling stocks that have already been supplied to them.

Fixed Deposits For NRI

Fixed Deposits For NRI

As an NRI, you can create a Non-Resident External (NRE), Non-Resident Ordinary (NRO), or Foreign Currency Non-Resident (FCNR) account with any of India’s leading banks or non-banking financial firms (NBFCs) and start investing in fixed deposits. The interest rate you receive will be determined by the bank you choose, the amount you deposit, and the term of the FD.

Interest earned on NRE and FCNR accounts is tax-free in India and entirely repatriable, however it is subject to exchange rate risk. On the other hand, NRO Fixed Deposits can be used to collect interest on money earned in India over time.

NPS for NRI

NPS for NRI

NRIs can open accounts in the National Pension Scheme. If you have a PAN card or an Aadhaar card, you can now register an NPS account as well. It is possible to use NRE or NRO accounts.

You can open an NPS account with a bank in India called the Point of Presence if you are an NRI between the ages of 18 and 60. You have control over how your funds are divided throughout asset types. If you don’t specify otherwise, your assets will be distributed automatically between asset classes based on your age.

NRI can open an NPS account at the same bank as your NRO or NRE account. In addition, the National Pension System will pay the pension in Indian Rupees.

Real Estate

Real Estate

Over the last decade, real estate prices in major Indian cities such as Delhi, Mumbai, Bengaluru, and Pune have surged. Many non-resident Indians are buying homes in India to rent out. There are numerous possibilities available, including developed plots, villas, and flats, among others.

Before opting to invest in Indian real estate, you should assess your needs and risk profile.

Gold Investments For NRI

Gold Investments For NRI

Another investment option in India is gold. Given the rate of increase in prices over time, it is a fantastic decision. Physical gold, gold exchange-traded funds (ETFs), gold bonds, and other choices are all available.

In times of economic uncertainty, gold strengthens and gold prices rise. The expansion of the epidemic and a drop in economic growth caused gold prices to surge last year, as we saw.

NRIs from all over the world can invest in various gold options and get long-term benefits while diversifying their portfolio.

Bonds/NCDs

Bonds/NCDs

Bonds- This is yet another great investment opportunity for NRIs. This open-ended investment pooled funds from a large number of people to purchase securities. This sort of investment entails considerable risk, but it typically yields higher returns than other options.

NCDs are a good alternative to mutual funds and the stock market if you want to diversify your investment portfolio. These long-term investments are similar to fixed deposits, but they pay out more money. NRE and NRO accounts can be used to make such investments.

Conclusion

Conclusion

Any investment selection should take into account the investor’s needs and objectives. The investment should fit within the individual’s overall financial plan. Long-term investing has various benefits, and even little amounts spent on a regular basis can build into a sizable portfolio over time.



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HDFC Ltd Cuts Interest Rates On Home Loans: Here’s What SBI Offers

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Investment

oi-Vipul Das

|

HDFC Ltd has unveiled a huge deal for borrowers who wish to buy their dream house this holiday season. As part of its Blockbuster Festive Offer, the company has announced cheap interest rates starting at 6.70 percent per annum, as well as reduced processing fees totaling Rs 3000 including taxes. The new interest rates are applicable on Housing Loans and Non-Housing Loans and for those who have Credit Scores of over 800.

HDFC Ltd Cuts Interest Rates On Home Loans: Here’s What SBI Offers

“Under this special offer, customers can avail of HDFC Home Loan starting at 6.70 per cent effective 20th September 2021” HDFC Ltd has mentioned in its press release. Apart from the lower interest rates, the mortgage lender is also allowed to choose a longer tenure of up to 30 years with a digital loan process. This offering is valid till October 31, 2021 according to the announcement of the mortgage lender.

On the other side, some leading banks have also lowered their interest rates on home loans for eligible customers as a part of the festive season. Kotak Mahindra Bank has recently said via Twitter handle that “Kotak Home Loans starting at surprisingly low interest rates of 6.5% p.a Now get your dream home in reality. Hurry Offer valid from 10-Sep to 8-Nov-21.” This low-interest rate of the bank is applicable for all loan amounts and also for new and balance transfer loan types.

Recently Bank of Baroda (BoB) has also announced festive offers with a concession of 0.25% in the existing applicable rate of interest for Baroda Home Loans, Baroda Home Loan Top up and Baroda Auto Loans. After the announcement, the bank is now offering an interest rate starting from 6.75% on home loans with zero processing fees. According to the bank, the offer is valid till 31st December 2021.

The State Bank of India (SBI), our country’s largest public sector bank, is providing festive season home loans at 6.70 percent, regardless of the loan amount. While HDFC Bank, India’s largest private sector bank, is now giving home loan interest rates as low as 6.75 percent per annum. SBI, Punjab National Bank (PNB), Bank of Baroda (BoB), and private lender Kotak Mahindra Bank launched a plethora of home loan deals this month, which can be found here.



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Banks face significant margin pressure despite surfeit of liquidity

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Banks are facing significant margin pressures despite surfeit of liquidity in the banking system, according to the State Bank of India’s economic research report Ecowrap.

A back of envelope estimate by SBI’s economic research department suggests that the core funding cost of the banking system that includes cost of deposits, negative carry on Statutory Liquidity Ration (SLR) and Cash Reserve Ratio (CRR) and Return on Assets is currently at 6 per cent, while the reverse repo rate is at 3.35 per cent.

Additionally, if the cost of provisions is added to the core funding cost, the total cost comes to around 12 per cent, the report said.

Also see: FinMin to soon issue circular on intermediary services under GST

“Clearly, banks are facing significant margin pressures. This apart, market sources point out that risk premia over and above core funding cost are not fairly acknowledging the inherent credit risk,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

The report said the conundrum of weak credit demand and excess liquidity is evident from the average reverse repo at ₹7 lakh crore since April and Government of India cash balances with RBI at ₹3.4 lakh crore.

Is credit risk adequately reflected in pricing?

The report cited the example of 15 years loans, which are being priced at even lower than 6 per cent, linking with repo / treasury bill rates. It emphasised that 10-year Government Security (G-Sec) is currently trading at 6.2 per cent and by the current pricing trends this could even gravitate towards 6 per cent again.

“This anomaly not only negates the concept of tenor premium but may create a material risk with regard to sustainability of such rates in long term, on which borrowers and banks are basing their financial calculations.

“The only good thing is that such pricing war is mostly restricted to AAA borrowers,” Ghosh said.

According to the report, three year term loans are being quoted at close to 4 per cent repo rate and seven year term loans for borrowers below AAA are also quoting a risk premium of 15-20 basis points over the 10 year rates. Working Capital Loans (WCL) are currently being quoted at a notch above reverse repo rate at 3.35 per cent.

Referring to RBI proposing the concept of normally permitted lending limit (NPLL) for specified borrowers, which is meant to nudge them to move towards corporate bonds market, Ghosh felt that this may lose its importance.

Also see: Hiring activity in August up 14% y-o-y: Report

In the current situation, corporate bond rate and bank lending rate are showing huge differential, he said.

CP market: significant churn

Ghosh observed that the commercial paper (CP) market is also witnessing significant churn with banks now almost absent.

“Non-Banking participants like mutual funds who do not have access to RBI Reverse Repo window are creating pricing pressure in CP market as they are sometimes quoting below RBI reverse repo rate.

“In fact, the CP market reflects the huge pricing gap between better and lower rated borrowers,” he said.

Asset Liability mismatch risk

The report underscored that the industry is replacing its long-term debts by very low-priced CP/working capital demand loan (ECDL) and this will obviously act as an enabler once the investment cycle revives. However there is the risk of an asset liability mismatch if the liquidity is withdrawn quickly.

Ghosh said, “As of now, the inflation numbers may not warrant such a decision from RBI, but if core inflation persists in the current range of 6 per cent or above, that might act as a hindrance to continued liquidity abundance.”

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Bitcoin attempts recovery as Evergrande-led selloff eases, BFSI News, ET BFSI

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Cryptocurrency prices bounced off 1-1/2 month lows on Tuesday as a heavy selloff overnight linked to concerns about a possible loan default by property developer China Evergrande eased slightly, but investors braced for more volatility.

Bitcoin, the biggest and the best known cryptocurrency, traded around $43,000, recovering from a fall to $40,192 earlier in the session. It hit a four-month high of $52,000 on Sept 6.

Smaller rival ether, the coin linked to the Ethereum blockchain, rose 1% to $3,012 after falling below $3,000 for the first time since early August.

Global markets started the week on a turbulent note after fears that Evergrande’s troubles could lead to a fallout for the Chinese and global economies prompted a selloff in riskier assets.

“We can’t take a very positive view just as yet until we get through the next few days,” said Matthew Dibb, chief operating officer at crypto index fund provider Singapore-based Stack Funds.

“This is purely sentiment driven right now, and it’s actually been off very low liquidity,” he said, adding that it would be better to wait on the sidelines as crypto markets will continue to be affected by the contagion.

The drop in cryptocurrencies comes at a time when institutional interest in the space has risen and made it more mainstream, with many investment banks taking a more bullish stance.



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Retail depositors earning negative returns; relook taxation on interest: SBI economists

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In a note, which pegged the overall retail deposits in the system at Rs 102 lakh crore, the economists led by Soumya Kanti Ghosh said: "If not for all the depositors, the taxation review should be carried out for at least the deposits made by senior citizens who depend on the interest for their daily needs."

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Reserve Bank of India – Press Releases

Press Releases

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Sr. No. State/UT Notified Amount
(₹ Cr)		 Amount Accepted
(₹ Cr) 		Cut off Price (₹) /
Yield (%) 		Tenure
(Yrs)
1 Andhra Pradesh 500 500 6.86 14
500 500 6.87 19
2 Kerala 500 500 6.86 14
3 Madhya Pradesh 2000 2000 100.42/6.7911 Re-issue of 6.85% Madhya Pradesh SDL 2031 Issued on September 15, 2021
4 Maharashtra 2500 2500 100.05/6.7710 Re-issue of 6.78% Maharashtra SDL 2031 Issued on May 25, 2021
5 Nagaland 150 150 6.80 10
6 Rajasthan 1000 1000 6.77 10
500 500 6.86 15
7 Sikkim 251 251 6.80 10
8 Tamil Nadu 1000 1000 6.76 10
  TOTAL 8901 8901    

Ajit Prasad
Director   

Press Release: 2021-2022/896

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Credit card war hots up ahead of festive season; cos announce a slew of tie-ups, BFSI News, ET BFSI

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Consumers are set to get a flurry of new credit card offers as banks are stepping up on customer acquisitions. Banks are gearing up to grab a bigger share of the market which is set to grow as the economy opens up.

New card additions were the highest for ICICI at 655,000 during this fiscal while added 198,000 cards being the highest in the past 16 months.

HDFC Bank

HDFC Bank, on which RBI recently lifted a ban of issuing new credit cards, has announced a tie-up with leading payments company Paytm to start selling co-branded plastics before the onset of the festive season. The credit cards will be powered by Visa and will include offerings targeted at millennials, business owners and merchants, an official statement said.

Paytm has a reach of over 330 million consumers and 21 million merchants, while HDFC Bank has over 5 million debit, credit and prepaid cards, and serves 2 million merchants through its offerings.

HDFC Bank, the largest private-sector bank which also leads the credit card segment, was banned from issuing new credit cards for over eight months as a penalty for frequent outages. After the lifting of the ban, it outlined aggressive plans to regain lost market share in up to a year.

The bank had said that it will focus on distribution partnerships to achieve its target, under which it envisages ramping up new credit card sales to 5 lakh a month by end of the fiscal from 3 lakh in November 2021.

HDFC Bank and Paytm had last month announced a tie-up on the payments side. Paytm already has a tie-up with foreign lender Citi under which co-branded credit cards are issued. Citi is looking to exit retail banking activities in the country.

The launch of the HDFC Bank-Paytm co-branded cards is slated for next month, ahead of the festive season which typically sees a spurt in spends, the statement said, adding a full suite of products will be available by December.

Yes Bank ties up with Visa

Yes Bank has tied up with Visa to issue credit cards to its customers on the payment platform, which includes a suite of nine credit card variants. The Yes Bank card issuances were hit after RBI had banned Mastercard from issuing cards.

“The transition has been achieved within a record time of less than 60 days, ensuring ease for customers across segments,” the bank said.

Yes Bank and RBL Bank were hit the most by the Mastercard ban as their entire card network was on it. RBL Bank had announced a tie-up with Visa the day after the curbs on Mastercard were announced and resumed issuing cards from September 15. Yes Bank’s Visa credit cards, announced today, will service all segments–consumer cards, business cards, and corporate cards across YES First, YES Premia and YES Prosperity.

AU Small Finance Bank

AU Small Finance Bank (SFB) has issued over 40,000 credit cards since its launch a few months back, and more than half of them are first time users. The Jaipur based lender said it is the first SFB to enter semi-urban and rural areas with its own credit cards. It also offers a special Altura plus credit card to empower women to experience a limitless living.

In future, the bank is also working on bringing out its limited-edition cards, featuring the bank’s brand ambassadors Aamir Khan and Kiara Advani.

“The forthcoming festive season will lend further support to the picked-up momentum in the spends and new customers sourcing. However, a possible Covid 3.0 remains a key risk. We continue to believe that Citi Bank’s exit from the credit cards business along with the domestic corporate loan recovery cycle yet to pick up, provides good growth opportunities for the credit cards business, supported by improving macro-conditions,’ Axis Securities said in a note.



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