And Now Small Financing Banks

The RBI’s granting of licences to 10 applicants for setting up small finance banks (SFBs) is a significant step towards extending formal finance access for enterprises now dependent on high-cost unorganised sector funding. Together with the 11 licences awarded for payment banks last month, it marks the beginning of a radical overhaul of the banking structure that will hopefully address the abysmal levels of financial inclusion in India. The SFBs are expected to focus primarily on accepting deposits and lending to small business units, small and marginal farmers, micro and small industries and other unorganised sector entities, currently underserved by regular commercial banks. The RBI estimates that close to 90 per cent of small businesses today have no links with formal financial institutions. The key takeaway of this move is the RBI’s efforts to promote niche banking. Commercial banks are largely interested in funding large and medium corporations, or giving out loans for home and vehicle purchases. On the other hand, it is not easy for diamond cutting and polishing units, job work fabricators or small restaurant owners to get working capital finance support. Lending to them is a specialised affair, just as truck financing is. These are segments where regular banks have gradually withdrawn, with their place being partly taken by various non-banking financial companies. SFBs can probably do even better in filling the gap. The entities that have been given licences are mainly microfinance institutions that have already reached out to remote hinterlands. Currently, they are mainly on-lending funds from banks, which works out to be rather costly for the ultimate small borrowers. Becoming SFBs will allow them to directly take deposits, which will bring down their cost of funds and translate into lower interest rates for clients. Regional rural and urban cooperative banks ought to have performed this role, which they clearly haven’t — not least due to political interference and being weighed down by high fixed costs. The SFBs may be in a better position to exploit the huge business opportunity in funding small and medium enterprises. The RBI expects them to be high technology-low cost operators, while also bringing in innovations in service delivery. It is heartening to see the RBI change its conservative image, which ensured that till early 2014, only 12 new bank licences had been awarded since liberalisation. India needs a more dynamic and flexible banking system. The SFBs and payments banks are a good initiative in that direction. Extending the formal banking system’s reach will also ensure better monetary transmission, important for the effectiveness of the RBI’s own interest rate policy action.

The microfinance business will now be dominated by small finance banks (SFBs) which will bring down systematic risk but at the cost of lower returns, India Ratings and Research has said.

Of the 10 shortlisted candidates for small bank licence by the Reserve Bank of India, eight are micro finance institutions (MFIs), one mainly a commercial vehicle financier and one a local area bank. Earlier this week, the RBI granted in-principle approval to entities to start small finance banks.The total managed loan assets of the 10 SFBs were Rs 20,100 crore and balance sheet size was around Rs 22,200 crore in 2014-15, India Ratings said, adding that MFIs that have received approval as universal banks and SFBs stood at 54 per cent of NBFC-MFI gross loan portfolio in FY15.

Under the banking format they can provide multiple financial products including savings to the under-served individuals and MSMEs, it said.

Reserve ratios and deposit insurance will reduce systemic risk, and over time lower deposit cost could be transmitted to lower lending rates, it added.

The agency said more than 50 per cent of the micro finance landscape could be out of the mandatory purview of the micro finance credit bureaus.

These institutions will, at least for the next two to three years, target the same segment as the balance NBFC-MFIs in most states, it added.

The rating agency further said that SFBs would need to lend to the under-banked, which means higher investment into systems/processes and lending to individuals rather than groups, which will push up credit risk and cost, thus return on assets may decline to 1-2 per cent from 2-3 per cent in FY15.

The agency estimates the microfinance sector to grow strongly at 24 per cent annually over FY15-FY19. Thus the 10 players could be required to replace Rs 20,000 crore of bank loans and at an aggregate net worth of Rs 4,700 crore.

They will need to raise equity of Rs 2,000 crore and Tier 2 capital of around Rs 1,500 crore by 2017-18, it said.

The Reserve Bank of India (RBI) has granted ‘in-principle’ approval for 10 companies to set up small finance banks.

The approval will be valid for 18 months to enable the applicants to comply with the requirements.

The firms include

Au Financiers (India) Ltd., Jaipur,

Capital Local Area Bank Ltd., Jalandhar,

Disha Microfin Pvt., Ahmedabad and

Utkarsh Micro Finance Pvt. Varanasi,

Equitas Holdings Pvt., Chennai,

ESAF Microfinance and Investments Pvt., Chennai,

Janalakshmi Financial Services Pvt., Bengaluru and Ujjivan Financial Services Pvt., Bengaluru.  The RBI also granted permission for RGVN (North East) and Microfinance Ltd., Guwahati, and the Navi Mumbai-based Suryoday Micro Finance Pvt.

“Until a regular licence is issued, the applicants cannot undertake any banking business,” RBI said in the press release. The RBI said that it intends to use the learning from this licensing round to appropriately revise the guidelines and move to giving licences more regularly, that is virtually ‘on tap,’ going forward.

The central bank said that it selected the applicants after three different committees contributed to the final decision, backed by a detailed case study of each applicant.

The scrutiny involved assessment of financial soundness, proposed business plan, fit and proper status based on due diligence reports received from the regulators, investigative agencies and banks, said RBI.

“An important factor was proposed reach into un-banked areas and under-served sections of the population,” RBI added. The RBI received 72 applications for small finance banks.an

New Delhi, Mumbai Among World's Cheapest Cities to Live In: UBS

London: London is the fifth most expensive city in the world to live in but wage levels have failed to keep up compared to other major centres, a report by Swiss bank UBS has found.

The British capital ranked behind Zurich, Geneva, New York and Oslo when it came to the relative cost of goods, including rent, but was in 13th place on a comparison of gross salaries.

The study found that whilst it was cheaper to live in Sydney, Copenhagen and Chicago, residents there earned more relative to Londoners.

Rising levels of rent have helped to push up the cost of living in London in recent years with Britain having failed to build enough homes to meet rising needs.

Demand has also risen because of growing levels of net migration and people opting to rent for longer in order to save up for increasingly more expensive properties, the report said.

Meanwhile, earnings have risen more slowly than inflation for most years since the 2007/08 financial crisis although they have begun to pick up robustly this year.

UBS found that London was also far more expensive than comparable European capital cities Paris and Berlin when the price of an average basket of 39 foodstuffs was compared but Zurich, Seoul and New York were the costliest locations.

A Londoner must work 41.2 hours to afford an iPhone 6, twice as long as a resident of Zurich who only needs to work 20.6 hours, it added.

However, the British capital was one of the cheapest places to buy a kilo of bread, with Londoners having to work for just 6 minutes to buy the basic foodstuff, half the time it would take a New Yorker.

UBS said that the decision in January by the Swiss National Bank to abruptly abandon its cap of 1.20 francs per euro, leading to a surge in the franc's value, had hugely altered the indicators.

"Zurich and Geneva rose to the top of the rankings. Eurozone cities plunged," the report said, adding that the crisis in Ukraine had pushed Kiev to the bottom of the price and wage charts.

Among the cheapest places in the world to live were Sofia in Bulgaria, Bucharest in Romania and New Delhi and Mumbai in India, where wages were also among the lowest of the 71 locations compared around the world.

© Thomson Reuters 2015

The 7 Habits of Highly Effective People

Be Proactive. Take the initiative. Don’t wait for things to happen. Make them happen.

As candidates describe their major accomplishments, have them describe where they took the initiative, went the extra mile, exceeded expectations, and did more than required. Patterns emerge revealing the types of work the person finds innately satisfying and motivating. Map this to the performance-based job description to determine best fit.

Begin with the End in Mind. Define the outcomes before you create the process.

When I have a candidate describe a major accomplishment, I always ask how the person developed the plan, how they managed against the plan and if they were successful. The best people always begin any major activity with a thorough plan giving full consideration to all of the various alternatives.

Put First Things First. Prioritize what’s important, not just react to what’s urgent.

Find out how people multi-task, getting specific examples and details for each MSA. As part of this, determine how the candidate prioritized different activities and how the person balanced competing objectives. Collectively this is all part of the decision-making process.

Think Win-Win. Consider the impact on all of the stakeholders; how the person deals with superiors, subordinates and peers; and how the person deals with conflict.

Ignore the generic “I’m a real people person.” Instead dig into how the candidate develops team-based consensus. Get specific examples of when the person persuaded people in other functions, including higher-ranking managers, executives, vendors and customers. Thinking win-win is not about capitulating, but about persuading and convincing others, and being persuaded and convinced.

Seek First to Understand, and Then Be Understood. Don’t offer solutions or assume your approach is the best. Understand the problem first.

One of the core MSA questions is: “Can you describe the biggest problem or challenge you’ve ever handled?” As part of the fact-finding, it’s important to find out how the person figured out the root cause of the problem and the process the person used to put together a solution. To best understand this habit, focus on how the candidate reached out to others, modified his or her approach, and achieved group consensus.

Synergize. This is team skills on steroids: working with, influencing, coaching and developing people.

Rather than focusing on personality traits to assess team skills, it’s better to find out the types of teams the candidate has been assigned to, participate in, and lead. Those who can “synergize” are typically assigned to important cross-functional project teams far more often than their less “synergistic” peers. During the fact-finding, ask who was on the teams, the person’s role, and why the person was assigned to the team. If these teams are growing in size and importance over time, you’ve found someone who can synergize.

Sharpen the Saw. Constant self-improvement is how a person remains current and relevant.

Ask people how they’ve become better. Be very concerned if they have not taken any proactive self-development action. On the other hand, keep a very open mind to someone who has done something exceptional when they were underemployed or unemployed. These are the diamonds that others have failed to recognize or hire.

Job-seekers should own these habits, and interviewers should focus on them. If you’re into the seven habits, you’ll discover I changed the definitions a bit — but you should appreciate the switch especially if you begin with the end in mind, seek first to understand and then be understood, and think win-win. Collectively, that’s how you sharpen your own saw. Quite frankly, that’s why Stephen Covey’s “The 7 Habits of Highly Effective People” is transformational.

10 important initiatives

Prime Minister Narendra Modi has launched the Digital India program, which essentially comprises of various initiatives aimed at digital empowerment, improving digital infrastructure and offering on-demand governance and services. From building broadband highways, easing mobile connectivity and mainly promoting e-governance, the Digital India mission’s main aim is to bridge the connectivity gap between the rural and urban areas. Here are the top 10 services launched by the government today.

1. DIGILocker - This initiative looks to minimize the usage of physical documents. It is a dedicated personal storage space for e-documents as well as Uniform Resource Identifier (URI) of e-documents issued by government departments. Individual locker will be linked to the resident’s Aadhaar number, and enable sharing of e-documents across agencies whenever required. The sharing of these e-documents will be done through registered repositories thereby ensuring the authenticity of the documents online, and also minimize the loss and damage of important documents like birth certificate etc.

2. Bharat Net - This initiative will work towards building high-speed digital highways to connect all 2.5 lakh Gram Panchayats of country by next year. This would be the world’s largest rural broadband connectivity project using optical fiber.

3. MyGov app – The PM also launched the mobile version of the MyGov.in website. This platform encourages citizen engagement in governance, and the app will do the same on mobile.

4. eSign – An initiative to eradicate forgery and fraudulent signature, the eSign framework would allow citizens to digitally sign a document online using Aadhaar authentication.

5. National Scholarships Portal – This new service is said to be a one-stop-solution for end-to-end scholarship process right from submission of student application, verification, sanction and disbursal to end beneficiary for all the scholarships provided by the Government of India.

6. Swachh Bharat Mission (SBM) app - To further the Swachh Bharat mission, the government has launched this app and would be used by people and Government organizations.

7. E-education – The program looks to provide high-tech education using technology like smartphones, apps and Internet services. It can also be used to provide education in far-flung areas where it may not be possible for teachers to be present in person. The education can be imparted through virtual means as part of the program.

8. E-health – This initiative aims at providing timely, effective and economical healthcare services to all, especially to the ones that have little access to healthcare services. This service too will be linked to Aadhaar numbers, and will make getting lab reports and OPD appointments easier. The Online Registration System (ORS) under the eHospital application has also been introduced.

This application provides important services such as online registration, payment of fees and appointment, online diagnostic reports, inquiring availability of blood online etc, the government claims. With this initiative, one can skip the hassles of registration and other formalities at hospitals by merely identifying self through the Aadhaar Number, select hospital and department, select date of appointment and get the same through SMS.

9. Next Generation Network (NGN) – This is a BSNL initiative which looks to replace 30 year old exchanges, with this new IP-based technology to manage all types of services like voice, data, multimedia/ video and other types of communication services.

10. Wi-Fi hotspots - BSNL has undertaken large scale deployment of Wi-Fi hotspots throughout the country for Internet access on smatphones while on-the-go. The initiative has already kicked off with the government offering free Wi-Fi at tourist places like Taj Mahal, and spots at Shimla too.

The government even launched the official website for the Digital India program, and you can take a look at it here.

Trees, grass turfs to make NH stretches green

The National Highway (NH) stretches will be made green corridors by planting trees, landscaping, and laying grass turfs and ornamental shrubs.

The initiative of the Ministry of Road Transport and Highways (MoRTH) to make the NH stretches eco-friendly is part of the green highways policy to “tree-line” 96,000 km of NHs across the country.

Green Highways Fund

In a communication to all States, the Ministry said a Green Highways Fund would be set apart utilising 1 per cent of the civil work cost while arriving at total road project cost.

The funds to be transferred to the National Highways Authority of India (NHAI) would be used exclusively for plantation and maintenance on all NH stretches being developed on the Engineering Procurement Construction (EPC) and Build Operate Transfer (BOT) mode.

The NHAI will act as Fund Manager for maintaining the account and for release of the payments made by the Regional Officer or Project Director based on the recommendation of the monitoring agency-Indian Highways Management Company Ltd (IHMCL).

At least one NH corridor in each State would be taken up for model plantation, which would be replicated in other stretches subsequently. The plantation and maintenance would be done through empanelled agencies of MoRTH through competitive bidding.

The participation of community, farmers, non-governmental organisations, private sector, government agencies and the Forest Department will be ensured for effective plantation and better impact.

Can’t bring political parties under RTI, Centre tells SC

Political parties cannot disclose their internal functioning and financial information under the Right to Information Act as it will hamper their smooth functioning and become a weak spot for rivals with malicious intentions to take advantage of.

This was the answer given by the Union government to the Supreme Court against making political parties publicly accountable under the RTI Act.

The affidavit filed by the Department of Personnel and Training said the Act “never visualised or considered to bring political parties within its ambit.”

The Supreme Court had earlier issued notice to six national parties, including the BJP and the Congress, asking them why they can’t come clean and explain their hesitation to disclose complete details of their income, expenditure, donations, funding, including donor details, to the public under the RTI Act.

The other major parties to receive the notice were the Communist Party of India (Marxist), the Communist Party of India, the Nationalist Congress Party and the Bahujan Samaj Party.

The EC and the Centre were also asked to file responses.

Kejriwal effect on 'Lal Batties'

NEW DELHI: India could be moving to an era of just five of country's top constitutional authorities - namely the President, vice-president, Prime Minister, chief justice and Speaker of Lok Sabha - using red beacons in the wake of the prevailing mood against such VIP culture. What could force the government into such a pruning is an unusually frank legal opinion given by the solicitor general Mohan Parasaran.

In response to the four options suggested by the road transport on who should be entitled to have red beacon on their official vehicles, the SG has recommended that he personally feels that restricting the use to only five dignitaries is actually in "conformity" with the original thinking of the Supreme Court as expressed during oral argument. However, he has opined that limiting the present list of dignitaries by excluding constitutional functionaries such as chairman of Union Public Service Commission and chairman of SC/ ST Commission will be sufficient compliance of the Supreme Court orders to limit the VIP culture.

Sources said that in one of it options the ministry has proposed that many dignitaries including deputy ministers at Centre, chairman of Central Board Direct Taxes (CBDT), chief commissioner of Income Tax, members of Planning Commission and Cabinet secretary should be excluded from the list. This is option no-2 while the option-3 is for only five constitutional authorities.

Giving his view, which the Centre can consider option-3 from "policy prospective" in view of prevailing situation, the SG has written, "We cannot also be oblivious to the prevailing situation in the country and the sentiments of the people with regard to the usage of red beacon and also voluntary acts of some high dignitaries including chief ministers of some states openly declaring that they would not use Red Beacon any more."

He has opined that the third option is not necessarily mandated by the SC. Parasaran has said that the ministry in consultation with the Prime Minister's Office and the Cabinet as well as other appropriate agencies may consider whether it is desirable to amend the Motor Vehicle Rules notification more than what is required beyond the second option.

Source: TOI