Govt to Increase its stake in Union Bank of India upto 58 per cent

State-owned Union Bank of India today said it is expecting Rs 1,150 crore capital infusion from the government by March 2011, which will increase the Centre's stake to 58 per cent.Currently, the government holds 55.43 per cent stake in Union Bank of India."We hope to get the second tranche of Rs 1,150 crore capital infusion by March. This will help us to increase our tier I capital to 8.37 per cent from the current 7.9 per cent.The infusion will raise the government's state in the bank to 58 per cent.The Cabinet has already approved the capitalisation plan of the Union Bank, which received Rs 111 crore about four months back as first tranche.The bank was expecting a deposit growth of 20 per cent and credit growth of 23-24 per cent during the current fiscal.arlier this week Union Bank of India raised its base rate to nine per cent.

Banks are not in favour of the proposal to allow the entry of industrial houses into private sector banking.

Banks are not in favour of the proposal to allow the entry of industrial houses into private sector banking.This is due to the “unsavory past experience in India and abroad and the large capital buffer that would be available to the banks sponsored by industrial/business houses that would create an uneven playing field with the existing banks”, the Reserve Bank of India said on Thursday. However, the federations and associations of industry as well as the NBFC and microfinance institutions were generally in favour of permitting industrial/ business houses to promote new banks.
Releasing the comments received by the RBI on allowing new private banks, the apex bank said, “experience of other countries shows that combining banking and commerce implies there would be a lot of connected lending. India does not have enough experience in supervising in a scenario when banks are owned by diversified corporates, and allowing such ownership could have serious potential disasters.”
Another suggestion received by the RBI said, “industrial houses have the entrepreneurial and managerial talent in running asset management companies, mutual funds and insurance companies and have successfully penetrated into rural India, as such, their talent could be gainfully harnessed in the banking sector”
“If industrial/ business houses are permitted to promote banks, they should not be allowed to have their own banking operations through the bank they have promoted. Banks promoted by industrial houses should be issued only a retail banking license for first 5 years. Subsequently, commercial banking should be allowed with restrictions on annual credit lines, extensive reporting requirements relating to large credits, etc,” said another suggestion.

fund is low for indian banking system

Year 2010 is proving to be a year of fund crunch for the Indian banking system.If use of Reserve Bank of India's overnight funding window is an indicator of things, Monday saw banks use the repo route to raise a record Rs 1.59 lakh crore.The high repo borrowings were despite the central bank announcing measures to inject Rs 48,000 crore into the system last Thursday.While the cash position might be tight, bankers are not losing sleep yet. Probably, reflecting the sentiment, interest rate in the call money market -- which is an overnight market used by banks to lend or borrow from other banks -- reached a high of 7%.

RBI's move to lower the minimum holding level of government securities, referred to as the statutory liquidity ratio , has provided some comfort to the market. Compared to the new floor of 24%, banks have significantly higher surplus holdings of government securities.Bankers had factored in additional tightness in the market and expect it to continue till the end of the month when the government pays salaries and pension and government departments step up spending.Apart from RBI's actions last week, the government, which is sitting on a cash pile of over Rs 1 lakh crore said it had lowered its market borrowing to Rs 6,000 crore this week, from the earlier scheduled Rs 11,000 crore, to ensure that adequate amount of cash was available in the system. Last week, RBI had announced that it would purchase bonds to the tune of Rs 48,000 crore over the next one month.The steps from the central bank and government come in the backdrop of cash being drained out of the system as companies paid taxes for the third quarter on December 15.Though advance tax might be the trigger this time, liquidity has remained under strain ever since companies paid over Rs 1 lakh crore in July for use of spectrum, or radio waves, to offer third generation mobile telephony and broadband services.With growth in bank deposits failing to keep pace with the flow of loans, the pressure has only intensified to make the cash position in 2010 tighter than 2008, the year the financial crisis hit the world.

Life insurence industry made loss in 2009-10

life insurance industry in the country made a total loss of Rs 988.82 crore in the financial year 2009-10, according to the latest annual report of Irda. But the more pertinent point is that the industry has reduced its loss by a whopping 80 per cent from net loss of Rs 4,883 crore in 2008-09.

During 2009-10 is that among 23 private sector companies — the only public sector company is Life Insurance Corporation , 8 companies have reported positive bottom line against 4 in the previous financial year.

Significant improvement in profitability was revealed by some of the companies. Of course, LIC has highest profit of Rs 1060.72 crore in 2009-10, jump of 11 per cent. Among private players ICICI Prudential has turned around with net profit of Rs 258 crore, Bajaj Alianz with Rs 542 crore and SBI Life Rs 276 crore.

Reducing losses by life insurance companies is big news because it is an industry where breakeven takes between 7 to 10 years and companies which are becoming profitable started about 10 years ago when the government opened up insurance for the private sector. Apart from long turnaround time, life insurance is also a cash-hungry business as private sector companies have already coughed up Rs 21,014 crore towards share capital till the end of 2009-10.

Bharti AXA Life launches Aajeevan Anand

private sector insurance company Bharti AXA Life Insurance today launched Aajeevan Anand plan that provides guaranteed regular payouts after every 5 years and life cover until the age of 100 years.

"Aajeevan Anand is a powerful financial solution that provides guaranteed regular payouts to meet various life stage needs until the age of 100," Bharti AXA Life Chief Marketing and Operations Officer (CMOO) Mark Meehan said.

In addition to these lifelong paybacks, the product provides customers with life cover and hence is an ideal savings cum protection plan, he said.

This whole life plan is apt for salaried people since all premium payments are made in the first 10-15 years of the policy, he added.

The nominee of the policy holder would get sum assured in case of death during the policy period which is 100 years.

Bharti AXA Life is 74:26 joint venture between Bharti Enterprises and AXA of France.

Mobile banking is poised to grow rapidly in India.

ATM and internet banking have been around in India for a while. While both modes have had some success, penetration and use levels have been moderate.

While ATMs offer convenience, they pose a perceived security threat in India given instances of mugging around them. Senior citizens and women appear reluctant to use ATMs if they have a choice to go to a branch and withdraw money in safety. The security situation in India shows little sign of improvement and therefore a large scale proliferation of ATMs will remain a challenge. Internet banking, on the other hand, relies on PC and internet penetration. Estimates suggest that there are approx 40 million internet users which is expected to rise to 100 million soon – despite this growth, penetration and use levels remain low, especially in non-metro areas. Research also suggests that internet banking is picking up amongst the target user group.

While internet penetration and use in India is relatively low, mobile phone penetration is much higher and growing rapidly. There are over 200 million mobile phone subscribers in India and the number continues to explode. Financial services companies are now working with mobile payment players like mChek to offer innovative mobile phone solutions to urban and rural Indian population. Reserve Bank of India has restrictions on non-bank involvement in money transfer. Therefore, development of mobile financial services applications is being sponsored primarily by banks in India.

Economic Times reports that Citigroup has tested a proposition which allows brokerage to respond to margin calls or enhance credit limits, by authorising transactions over the mobile phone. Once the customer and broker sign up for the application, the process is carried out by PIN validations. A one-time PIN is generated for each transaction, which is verified by the customer, after which the bank validates the transaction and sends it to the broker. Once the transaction is completed, the customer is intimated on his mobile phone again. Citi and mChek are also exploring the possibility of a similar offer for mutual funds. They have also launched a mobile application which enables farmers to receive money for sale of produce through their mobile phones. These payments take the form of ‘intent to pay’ information that can be cashed at partner banks.

The paper also reports that Visa recently announced the launch of its Visa Money Transfer on Mobile service, which will enable money transfer via the mobile phone. Initially, this service will be a pilot program available to Visa cardholders of Corporation Bank, HDFC Bank and ICICI Bank. The recipient can be a Visa cardholder of any bank in India and the money can be transferred to his/her mobile phone or Visa card.

Mobile banking has the potential to bring a whole host of people that have no/little access to land lines/internet connections onto the electronic platform – an innovative way to generate financial inclusion. To do so successfully will require customer training, technology stabilization and managing carefully the ‘know your customer’ issues.

India having the most versatile Insurance industry

India has registered a tremendous economic growth over the last decade and the insurance sector has grown with it.

India boasts one of the most versatile insurance industries in the world going by the number of insurance policies on offer and continues to portray huge potential.

Today, according to market survey, the insurance sector in India together with the banking industry contribute about a sizeable seven percent of the country’s gross domestic product not to mention that the government owned Life Insurance Corporation (LIC) has access to funds equaling eight percent of the country’s GDP.

Valuated at $10 billion, the insurance industry in India received major encouragement when in 1999 the government of India put an end to its monopoly on the sector by passing the Insurance Regulatory and Development Authority (IRDA) Bill which did away with all barriers on the entry of private investors besides allowing for foreign investors to come on board with however some limits on direct ownership.

Foreign investors are allowed up to twenty six percent ownership in any insurance company although there is a bill pending that seeks to have this figure increased to forty nine percent.

This however has not slowed down the amount of foreign investment since government records show that in that decade the sector has benefited from an injection of up to $193 million dollars while witnessing the inception of twenty seven new insurance companies. The economy in India has gained from this.

The sector derives its success from the fact that most Indian citizens view life insurance as a way to pay less tax and with innovative insurance products and aggression from the competing insurance companies the sector continues to register new clients at an impressive rate. It is no wonder that most state banks in India include insurance services among their products.

The insurance sector can largely be divided into two sub sectors namely life insurance and the non life insurance. The LIC continues to dominate the life insurance sector and has been recording average annual growths ranging at about thirty five percent although the non life insurance sector is doing much better with growths of more than a hundred percent in the same breath over the last few years.

The huge potential for the sector is mainly underlined by the fact that only about a fifth of India’s insurable population has life insurance cover which presents huge avenues for growth in the near future.

india's Q2 gdp

India's economy grew a faster-than-expected 8.9 percent in the September quarter from a year earlier, government data released on Tuesday showed. The economy grew at 8.8% during the previous quarter.

Q2 mining output was at 8% whereas energy output was at 3.4%.

The growth estimates got a leg up as the industrial sectors, which account for approximately 20% of the overall GDP, got a boost in the second quarter due to the lower inflation numbers under the new series.

Lower inflation numbers gave a statistical boost to industrial growth estimates and national income numbers, compared with those estimated using the old series.

Rupa Rege Nitsure, Chief Economist, Bank of Baroda , said: "This indeed is a very strong reading despite the fact that we had seen some easing of industrial production in the second quarter. With this reading, achieving a 8.5 percent for full year growth target is not going to be difficult. From a market perspective, this means that India will attract more capital inflows and it will put upward pressure on the rupee."

"From the central bank perspective, this data will enable them to concentrate on inflation management. I expect the Reserve Bank of India to continue caliberating monetary policy. I expect another 25 basis points increase in both repo and reverve repo rates in the December policy and depending on the intensity of capital flows that the country attracts, there is a strong possibility of a CRR (cash reserve ratio) hike in the fourth quarter," added Nitsure.

Annual headline inflation eased to 8.58 percent in October from a year earlier, lowest in last 10 months. Asia's third-largest economy is expected to grow 8.5 percent in the current fiscal to March 2011.

The economy, which had grown more than an annual 8 per cent in the last two quarters, has been riding on robust manufacturing activity and the outlook for farm output has brightened following good monsoon rains.

The central bank's next monetary policy review is on Dec. 16. Analysts polled by Reuters expect the RBI to raise rates by an additional 25 basis points by the end of the fiscal year that ends in March.


India's economy grew a faster-than-expected 8.9 percent in the September quarter from a year earlier, government data released on Tuesday showed. The economy grew at 8.8% during the previous quarter.

Q2 mining output was at 8% whereas energy output was at 3.4%.

The growth estimates got a leg up as the industrial sectors, which account for approximately 20% of the overall GDP, got a boost in the second quarter due to the lower inflation numbers under the new series.

Lower inflation numbers gave a statistical boost to industrial growth estimates and national income numbers, compared with those estimated using the old series.

Rupa Rege Nitsure, Chief Economist, Bank of Baroda , said: "This indeed is a very strong reading despite the fact that we had seen some easing of industrial production in the second quarter. With this reading, achieving a 8.5 percent for full year growth target is not going to be difficult. From a market perspective, this means that India will attract more capital inflows and it will put upward pressure on the rupee."

"From the central bank perspective, this data will enable them to concentrate on inflation management. I expect the Reserve Bank of India to continue caliberating monetary policy. I expect another 25 basis points increase in both repo and reverve repo rates in the December policy and depending on the intensity of capital flows that the country attracts, there is a strong possibility of a CRR (cash reserve ratio) hike in the fourth quarter," added Nitsure.

Annual headline inflation eased to 8.58 percent in October from a year earlier, lowest in last 10 months. Asia's third-largest economy is expected to grow 8.5 percent in the current fiscal to March 2011.

The economy, which had grown more than an annual 8 per cent in the last two quarters, has been riding on robust manufacturing activity and the outlook for farm output has brightened following good monsoon rains.

The central bank's next monetary policy review is on Dec. 16. Analysts polled by Reuters expect the RBI to raise rates by an additional 25 basis points by the end of the fiscal year that ends in March.

New number for taxpayers for tax filing

The unique Document identification number (DIN), on the lines of numbers like PAN and TAN, will be quoted on "every" income tax-related communication, including returns to be filed next year for the financial year 2010-11. Taxpayers will now have to procure a 'new number' for filing returns and making any communication with the Income Tax department.

According to the new guidelines brought out by the Central Board of Direct Taxes (CBDT), the DIN will be mandatory "in respect of every notice, order, letter or any correspondence" with the department, by the taxpayers.

"The DIN will be generated by the I-T department and will be useful, essentially, for error-free filing of tax returns, claiming refunds and other communication with the department by the assesses," a senior Finance Ministry official said.

The 'Aykar Sampark Kendras' will hand out the DIN from this month, the official said.

Assesses will not be put to any trouble, as the numbers will be generated and allotted by the department itself.

I-T officials will also be allotted the numbers in order to streamline the process, the official said, adding, the number has to be produced thereon for every activity with the department. Taxpayers and tax collectors are currently required to quote Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) among others when returns are filed with the department.

According to section 282B of the Income Tax Act that deals with DIN, if the document sent to the tax authority does not bear this unique computer-generated number then "such document, letter or any correspondence shall be treated as invalid and shall be deemed never to have been received."

DIN is aimed at bringing more transparency in tax administration as the whole exercise involves a number of documents and proformas. Apart from regular filing of taxes, a taxpayer deals with the department for various other financial services, which DIN will help to ease, the official said.

SEBI - Mutual Funds To Ensure Quality Of Debt Papers

SEBI has asked the concerned MFs to disclose in the offer documents how they would protect the investors money in these schemes, sources said, but refused to identify these fund houses.

Future offers would also have to abide by this SEBI directive, the sources said. Sources said the market regulator wants the fund houses to invest in debt papers which have got high grades from rating agencies.

This is to maximise returns of the fund from fixed- income instruments.Equity investment is done by MFs to increase the capital base of the fund.Sebi wanted to ensure that the capital of the investor is protected and that the fund house does not give negative returns.

"Sebi wanted to introduce a stringent capital guarantee provision for such schemes of MFs. They want to ensure that even if the fund house is not able to give positive returns, the money invested should be back," Value Research CEO Dhirendra Kumar said.

Currently new fund offers of two fund houses-- JP Morgan Asset Management and Sundaram-- are open for subscription. Investors to these schemes seek returns and minimise risk of capital loss by investing in a portfolio of fixed income securities.

Diversification of portfolios between fixed income and equities spreads risk across various asset classes and if an investor stays invested for longer term the risk arising out of volatility in the market is reduced, said a fund manager at a mutual fund.

Demat account shortage may take toll on FPOs

New listing guidelines may have set the stage for a rash of companies coming to the market, but an acute shortage of demat accounts threatens to stifle the participation of retail investors in the public issues, a key objective of the exercise.

Companies will have to dilute promoter stakes estimated to be worth Rs 65,000 crore, with 35% of the amount kept aside for retail investors, to comply with market regulator Sebi’s minimum public holding rules. But analysts say that looks unlikely because data from stock depositaries CDSL and NSDL show that there are just 4 million active demat accounts.

The number of demat accounts is not enough to absorb such a flurry of issues. The retail portion translates to Rs 23,000 crore, or Rs 52,500 an investor, (which is) virtually an unviable proposition.

An Edelweiss Securities report says 156 Indian firms will have to shed shares worth Rs 150,000 crore in five years to adhere to the new listing norms under which every company’s public float must be at least 25%. Of this, issues worth Rs 61,500 crore are due to be divested before March 2011.

But the contribution of retail investors in these followon public offers is expected to be low. On an average, only about 2 lakh new demat accounts are added in the country every month. Contrast this with nearly 100 times more mobile connections added a month.

In a country where 20 million mobile subscribers are added every month, the cumulative demat account is just 17 million with only 24% of them active. This means investors are still wary of making fresh investments in the stock market.

The dearth of demat accounts comes at a time when the poor response of retail investors in big FPOs such as NTPC and NMDC is still fresh in mind.

Yet, the issues are in no danger of flopping because help is at hand from foreign investors and retail portion will be insignificant , said an investment banker with a foreign firm. While Indians are turning out to be good consumers, they are not yet shaping up as good investors. Most people still treat the stock market as a place of gambling and casinos.

Govt looking to rejig subsidies

The government is looking to rejig its subsidy mechanism with a view to achieving a high growth rate on a sustainable basis while bringing down the fiscal deficit, Cabinet Secretary K.M. Chandrasekhar said on Tuesday at a Confederation of Indian Industry (CII) function that they are looking at subsidies, how the subsidy system can be re-jigged to ensure it reaches the poorest of the poor on one hand, and at the same time it incentivises production.

The economy is set to register a growth rate of 8.5 per cent in the current fiscal, he said, adding, a good monsoon would help in easing prices and the double-digit inflation would ease in the next few months.

With a good monsoon and good crop, inflation will certainly fall. Experts are saying that inflation will be 5-6 per cent by year end, So there is no reason to disbelieve it.

He said though the Reserve Bank of India could take further monetary steps to address the issue, no measure on the fiscal side is likely to be taken and tax and financial sector reforms would be critical in achieving a double-digit growth.

Chandrasekhar has also said that the fiscal deficit could drop below the budget estimate of 5.5 per cent because of high non-tax revenue receipts.

Bank deposit growth slackens

Apart from the developments in the Euro zone, which continue to cast a shadow over the stock market, there could be trouble from the liquidity situation, in the face of retail banking deposit growth slowing and lending picking up.

The aggregate deposit growth rate has slowed from 20.4 per cent in December 2008 to 18 per cent in December 2009. During the same period, the growth rate of gross bank credit increased significantly from 15.9 per cent to 18.3 per cent.

Deposit rates

Banks will have to take a view on hiking their deposit rates in the near-term. With inflation on the higher side, a negative yield on deposits is not something the depositor is going to take for long. This will impact credit growth in the future and with the Reserve Bank of India hiking repo and reverse repo rates by 25 basis points, liquidity is bound to become slightly tighter.

Banks are waiting for stronger signs of credit off-take before focusing on raising deposits or interest rates, said Mr Suman Chowdhury, Head, Crisil Ratings.

Other segments

Barring infrastructure, telecom and real estate, the credit appetite from other segments is sluggish. This could prove a dampener for banks to immediately raise the deposit rates as they would be saddled with liquidity. The lower growth rate in deposits is indicative of the perception about lower returns as well as the availability of alternative avenues for investment.

Bankers feel the runaway inflation has eaten into the surplus in the hands of the common man, which is reflected in banks' deposit accretion. Apart from this, high networth individuals appear to be looking for better returns and opting for investment in real estate and gold ETFs. In the last one year, gold ETFs have logged 114-per-cent growth.

Market experts say the NCDs issued by Shriram Transport and L&T received a good response from retail bankers. Monthly income plans of mutual funds too are in favour. As for institutional investors, they are pouring money into debt funds.

Trade deficit

Another worry for the economy could be the steadily rising trade deficit. The economy will be back on track only if imports are handled well. Exports need to grow at a much faster pace than the existing 35 per cent. Bank deposit growth slackens

Home loan firms may see new lending rate norms

After banks, it’s the turn of housing finance companies to have a more transparent regime for pricing of loans. The National Housing Bank (NHB), the regulator for these companies, is working on a system that is similar to the base rate regime introduced for banks recently.

The base rate, substitute for the earlier benchmark prime lending rate (BPLR) for banks, was introduced from July 1. The country’s largest lender, State Bank of India, fixed its base rate at 7.5%. The rate for most banks is in the range of 7.25-8%.

Housing Development Finance Corporation and LIC Housing Finance are two major players in the home loan market. Since they come in the non-banking financial institution category, they were excluded from the base rate system.

Analysts said introduction of a base rate was likely to put pressure on housing finance companies because of the transparency it would bring. There are expectations that market forces might put pressure on them to make rates more transparent.

Housing finance firms would be under a lot of pressure to come up with a more transparent mechanism. The floating rate of interest will have to be based on certain parameters that will move in both directions. It cannot remain sticky for too long any more.

The main problem for these companies in moving to such a system is their cost of funds. While banks depend on a more stable system, of deposits from their consumers, home loan companies have to borrow from banks and other sources. Home loan companies are more heterogeneous than banks. Their cost of funds, therefore, is quite different.

These companies are one of the largest borrowers from banks. Also, the pricing of bonds they issue are dependent on market conditions. As a result, they are more impacted by liquidity conditions.

There are also fears that any transparent rate, which is a function of cost of funds, will be highly volatile in nature. For, while their costing can vary widely, the assets they provide are for the long term. There could be a pricing mismatch.

In addition, since banks cannot lend below their base rate in the new regime, there are fears that if the rate is on the higher side, the cost of funds for housing finance firms will go up substantially. This, in turn, will impact their lending rate.

India ready for bank tax at G-20

With the G-20 leaders agreeing that any such levy should be left to individual nations, India's stand against any tax on banks for funding bailouts was vindicated. This was its latest trends in Banking.

Though the financial sector should make a fair and substantial contribution towards paying for any bailouts, policy should take into account each nation's circumstances and options.

In their Toronto declaration, the G-20 leaders, including Prime Minister Manmohan Singh, US President Barack Obama, German Chancellor Angela Merkel and French President Nicolas Sarkozy, decided that while the financial sector should make a contribution to prevent a breakdown, the policy approach should differ from country to country.

To protect tax payers: reduce risk from financial system... take into account individual countries' circumstances and options and help promote a level playing field.

While countries like Britain, which has already levied a tax, France and Germany campaigned for such a tax, India has reservations.It pointed out that its trends in banking were conservative by nature and followed healthy norms that prevented any crisis in the country in 2008. India has been in favor of strong financial regulations, rather than imposing a levy on the banks.

All waiting for financial deals between Kotak Mahindra alliance

Japan's Sumitomo Mitsui Financial Group (8316.T) will consider launching retail banking operations in China, Thailand and India through tie-ups with local partners as it seeks to expand in Asia, its president said.

It would be time-consuming to start retail banking operations from scratch on our own. It would be more efficient and effective to enter by tying up with local banks, either through equity stakes or not.

On Wednesday, SMFG's core banking unit, Sumitomo Mitsui Banking Corp, announced that it had agreed to buy a 4.5 percent stake in Indian lender Kotak Mahindra Bank (KTKM.BO) for $296 million.

India has high growth potential and we have determined we need to make a deeper commitment in the market. So far, SMFG and rival Japanese banks' overseas operations have mostly catered to Japanese companies doing business abroad, but they are now trying to reach out to local customers by tying up with local banks.

Portfolio managers hike charges for beating lower returns

Stock brokers have few equals in ingenuity. Even as inflows into their highly-profitable portfolio management service (PMS) schemes have been declining, most large stock broking firms have managed to sustain margins by arbitrarily changing the rules of the game.

Many clients having subscribed to PMS schemes have earned below par returns on their investments in the past few quarters, as stock brokers introduced new charges.

The fee for portfolio management service is higher than plain-vanilla broking transactions, as brokers claim they are giving customised services to their clients.

There is an upfront fee, which the PMS provider partly passes on to the distributor who brings in the business. In addition, the broking firm charges a management fee, performance-linked fee and an exit load if the client withdraws his money before a specified period.

Many broking houses have now introduced charges like allocation fees, custodian fees, incidental charges and also raised brokerage rates and the upfront fee.

Hear the Eko of mobile banking

It was a chance meeting with former president of India APJ Abdul Kalam at Delhi Airport in 2001 that changed Abhishek Sinha’s life forever.

Kalam, who was then a scientific adviser to the government and a recipient of Bharat Ratna, told Sinha that youngsters like him should start something of their own and create wealth not only for themselves but society at large.

Such was the impact of those words that a year later Sinha put his papers in then Satyam Computers to co-start Six DEE Telecom Solutions, a telecom value-added services firm. Though he sold his share in the venture in 2007 due to strategic differences with the partner, a social entrepreneur was born by then.

And along with his brother, Abhinav, he founded Eko Financial Services. The objective being to make banking easy and reachable to the poor people.

This was the time when we as a country were going through a telecom revolution. Even the poorest of the poor has started owning and understanding a mobile banking via phone and our whole idea revolved around promoting it as a financial identity for them.

Today, three years down the line, over 70,000 people in Delhi NCR, Bihar and Jharkhand have opened a no-frills bank account with the help of Eko Financial Services and almost 2,000 people transact currency amounting to Rs 20 lakh on a daily basis using their mobile commerce channel.

Their partners in this venture have been next-door kirana stores, chemists and other such retailers who act as mini bankers or customer service points (CSPs) in the ecosystem. They help accountholders deposit, withdraw and transfer money by punching numbers on mobile phones.

The startup has over 500 CSPs and the total value of transactions exceeds Rs 20 crore. But the journey has been far from smooth. Despite the low-cost financial inclusion model winning TiE-Canaan Entrepreneurial Challenge, a national-level business plan competition in 2006, funding remained a challenge.

We were just not able to raise money. Whatever money my brother and I got from our exit from Six DEE Telecom Solutions soon started drying up.

Though the tale was short-lived. On February 25, the project started and on February 24 the news came of the merger of CBP with the HDFC Bank. By June, the company had to squander its 2,000 accountholders. “We were left like orphans,” he remembers. Our core team of 10-12 people still exists. They never disbelieved the prospects.

The fact that Eko team has nobody from the retail banking experience makes it more unique. The graduate from Birla Institute of Technology, Mesra says the toughest part has been to convince bankers of the SMS-based banking.

In November 2008, American business magnate Bill Gates visited one of Eko’s CSP that offered the much needed visibility. This was a time when Eko found the going really hard as they struggled to pay salaries to their staff and raised money from friends and relatives. Eko now plans to partner 8,000 outlets, targeting to reach a million customers by year end.

Though Eko has started echoing in the market, Sinha says people’s first reaction when they get introduced to SMS-based banking at a mom and pop store is—if it’s a truth or a fraud? Our dream now is to see bank accounts being as popular product categories as pulses or mobile banking via phone recharge coupons are at retail shops

The Govt has cleared 450-cr WB loan proposal for microfinance

Today, the Government has approved a proposal to draw a loan of USD 100 million (about Rs 450 crore) from the World Bank to promote microfinance in the country.

The Cabinet Committee on Economic Affairs (CCEA) cleared the proposal for on-lending to the Small Industries Development Bank of India (SIDBI), which -- in turn -- would disburse the funds to the microfinance sector.

The fund will be used to promote responsible and balanced growth of microfinance outreach, particularly in under-served areas where micro finance penetration is low, thereby serving the larger objective of promoting financial inclusion.

The decision is expected to help broad-base credit disbursals.

Growth in the microfinance sector has been very high in the last few years, with some of the institutions registering 100 per cent year-on-year growth.

Home loan rates may rise

It seems that home loan rates can rise as the base rate regime will come into effect from July 1.

Increase your home loan eligibility

Teaser home loan rates of some banks, including State Bank of India (SBI), which charges only 8 per cent for the first year may rise, as Reserve Bank of India (RBI) has not allowed banks to lend below the base rate. While SBI indicated that its base rate is likely to be around 8 per cent, for others banks the rate will be 8.25-8.5 per cent. SBI will announce its base rate before June 15.

Get a leeway on home loans

In a meeting held last week, bankers have discussed the issue and are of the opinion that they have to increase their home loan rates. The home loan scheme of SBI will be reviewed by the end of the month, as it was extended till June 30, a bank executive said.

Country's largest lender, SBI which pioneered the concept of teaser rate last year and forced others to follow suit, had earlier said the fixed-cum-flexible scheme was launched as the bank was having huge liquidity following the global financial crisis. However, now the surplus liquidity is no longer there as the banks started to access the repo window of RBI since last week.