Bfs Roundup Flip 63

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Volume 1, Issue 1

BFS63 5th July, 2013

Weekly

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BFS Roundup @ FLIP

Now, you can't use credit card to buy gold

jewellery on EMIs

Carrying forward the measures to curb gold

consumption in India, RBI has asked banks to:

Stop accepting purchase of gold coins via credit

cards. Not allowing EMI facility on gold purchased

via credit cards.

FLIPs View: Clearly, RBI is pulling all stops, to

curb gold imports. Will the CAD improve ultimately,

that is the bigger question.

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26 in queue for bank license

RBI has received a total of 26 applications for the

banking licenses. These include:

Corporates (Tata Group, Aditya Birla Nuvo,

Videocon etc.)

NBFCs (IIFL, Edelweiss, Muthoot Finance, Religare

etc.)

Micro-Finance companies (Bandhan, Janalakshmi)

Public Financial Institutions (IFCI, Department of

Posts etc.)

Others (UAE Exchange, INMACS Management

etc.)

While RBI has not announced the timeline to

declare successful applicants, licenses are likely to

be granted by end of financial year.

FLIPs View: It seems likely that RBI will proceed

with some caution - a couple of Public sector guys

like India Post should get it. Among the private

sector FIs, Edelweiss, IIFL could be strong

contenders. here again I guess just 2 entities

should land the license.

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RBI moots extra provisioning for unhedged

forex exposure

RBI is considering introducing additional capital and

provisioning requirements for banks exposure

towards companies with unhedged forex exposures.

Companies that do not hedge their foreign

currency exposures can incur significant losses due

to exchange-rate movements system.

RBI has prescribed norms for estimating loss to

The week that was. The week that was.

companies for un-hedged exposures. This

framework may be implemented from October

1,2013.

FLIPs View: A good step given the volatility in the

market. This will also ensure that banks urge their

customers to hedge their exposures.

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RBI norms on wealth management services to

be tightened

In the light of current irregularities found in the

wealth management services offered by Banks, RBI

had proposed new stringent guidelines to bring

more transparency in the system. These include:

Banks should conduct all wealth management

services either from a separate subsidiary or

through a separate division.

There should be clear segregation of functions

between marketing and operational staff. There

should be a code of conduct for the sales

personnel.

Banks need to conform to the guidelines of

sector-specific regulators and distribute

products of only regulated financial entities.

FLIPs View: A long awaited requirement, given

the mis-selling that takes place. I expected the

industry to be pro-active, and appoint a Self

Regulating Organization (SRO) for this.

Updates @ FLIP

Symbiosis Centre for Management and Human

Resource Development (SCMHRD) has launched

FLIPs e-learning programs for their executive MBA

batch.

Prior to this, the regular MBA students from

SCMHRD were undergoing FLIP courses as a part of

their induction.

July 2013 onwards, SCMHRDs MBA executive batch

will also go through FLIPs finance courses.

Way to go!

FLIP - setting a BFS knowledge benchmark.

BFS Roundup @ FLIP


While the, RBI is busy arresting the rupees consistent slide against

USD,our neighbor China is putting up a strong show against USD and

other currencies.

Not too long ago we used to hear stories about the developed world

chiding China over artificially keeping its exchange rates low to

promote its exports.

Did You Know?

Infact in 2003, America publicly encouraged

China to loosen a policy under which its currency

was pegged at 8.28 to the dollar.

In 2013 though, we see yuan in a completely

different light.

Currently its trading around 6.13 against dollar.

It has shown a steep increase against the dollar

and other currencies.

Chinas trade-weighted exchange rate has strengthened by 12.7% since 2010,

according to the Bank for International Settlements, faster than the exchange

rates of the other 60 economies it tracks.

It will be interesting to see how China will continue to retain its export

competitiveness with the appreciating Yuan.

BFS Crunch @ FLIP

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BFS Roundup @ FLIP

Term of the Week White Label ATMs

Most of us must have noticed the above news clippings in the last few days and would have

wondered what these White Label ATMs (WLA) are?

Well explain them for you in this section.

White Label ATMs are simply ATMs without any banks name written over them. Thus they wont be a

SBI ATM or an HDFC Bank ATM, they will simply be an ATM Machine, that all bank customers can access.

Need for White Label ATMs

These will primarily help in enhancing financial inclusion, as RBI guidelines mandate that entities setting

white label ATMs have to establish most of these in rural areas.

Banks incur an average capital expenditure of INR 3-4 lakh per ATM. They also have to incur a variable

cost of INR 40-50,000 per ATM towards security, rent, electricity etc.

With this outsourcing model, banks need not invest in setting up their own ATMs anymore.

How does this work?

Typically there are three parties involved:

Non-bank corporate entity

Authorized ATM network operator (Visa, MasterCard etc.)

Sponsor Bank

The non-bank corporate entity invests in setting up these ATMs. Sponsor Bank provides cash and

supports cash management operations, grievance redressal etc.

Under this model, customer of any bank can use a white label ATM, and his/her bank can pay the

transaction fee to the corporate entity. Bank can in turn, if required, pass on this transaction fee to the

customer using the ATM services.

White label ATMs provide all the services, just like any other ATM.

Example:

Tata Communications Payment Solutions Ltd. (TCPSL), a subsidiary of Tata Communications, launched

Indias first white label ATM under the branch Indicash at Chandrapada, Thane District. It has designated

Federal Bank as a sponsor bank to support operations.

The bank whose ATM card is used in Indicash ATM will have to pay TCPS INR 15 per transaction and INR

5 for every balance enquiry.

Its still early days for white label ATMs, but as a model it can help to bring a large population under the

purview of banking services.

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Bfs Roundup Flip 63