Realtors, brokers to get RBI lifeline
MANOJIT SAHA
Mumbai, 21 February
The Reserve Bank of India ( RBI) has softened its stance on allowing
real estate firms and brokerages to apply for banking licences.
Sources familiar with the developments said the final guidelines, to
be announced by the end of the month, would set aside its earlier
reservations about these entities.
In its draft guidelines released in August 2011, RBI had said entities
having significant ( 10 per cent or more) income or assets or both
from real estate construction and/ or broking activities individually
or taken together in last three years will not be eligible." Voicing
its concerns, RBI had said " past experience with brokers on the
boards of banks has not been satisfactory".
RBI Deputy Governor Anand Sinha had recently said the regulator and
the finance ministry would arrive at a common position on the issue.
The draft norms faced opposition from many quarters, including the
finance ministry, on the ground that if banks were allowed to
undertake broking activities, there was no reason why entities engaged
in such legally permitted activities should be disallowed. Also, if
banks could have sizeable exposure in real estate, which was seen by
RBI as a sensitive sector, there was no reason why real estate
developers should be barred from setting up banks.
The sources, however, said while the final norms would not bar real
estate and brokerage firms, they would still insist on stringent fit
and proper criteria for all sectors involved in volatile activities. "
But allowing them to apply for banking licences does not automatically
mean they will be allowed to set up banks," the sources said.
The long- awaited final norms are likely to retain most of the
proposals in the draft norms. For example, the minimum capital
requirement is expected to remain at ₹ 500 crore. However, the draft
norms had clarified the actual capital would depend on the business
plan of the promoters.
Also, a non- operative holding company (NOHC) can hold a minimum 40
per cent of the paid- up capital of the bank for five years from the
date of licensing of the bank.
"Shareholding by NOHC in excess of 40 per cent shall be brought down
to 20 per cent within 10 years and to 15 per cent within 12 years from
the date of licensing of the bank," the draft had said.
RBI has so far given licences to only 12 banks, in two phases,
including conversion of a cooperative bank into a commercial one.
After issuing an in- principle licence, RBI would give one year to an
entity to set up bank.
Set to be allowed to apply for bank licences in the final guidelines
expected by the end of the month
|1993- 94: In the first round, RBI issued licences to 10 private
sector banks |2003- 04: RBI issued licences to two more banks — Kotak
Mahindra Bank and YES Bank PRIVATE PLAYERS IN BANKING
Private banks that got licences after liberalisation
Licence Date of received listing/ Bank in converting
SUCCESSES
HDFCBank 1993 1995 ICICI Bank 1993 1997 Axis Bank 1993 2002 IndusInd
Bank 1993 1998 KotakMahindra 2001 2003 YES Bank 2001 2006
LAGGARDS
IDBI Bank 1993 1995 DCB Bank 1993 2006
FAILURES
Global Trust Bank 1993 Bailout – Merged with OBC Centurion Bank 1993
Merged with BOP and then with HDFCBank Times Bank 1993 Merged with
HDFCBank
BOP: Bank of Punjab Source: Citi Research
Govt clears road to amending wages Act
PRESS TRUST OF INDIA
New Delhi, 21 February
The government today cleared a proposal to make the minimum wages
announced by the Centre for workers in the unorganised sector
statutory for all states, so as to bring parity in wages paid.
At present, the national floor level minimum wage is ₹ 115 a day but
since it is not binding on state governments and employers, the Centre
merely advises the states to raise wages so that these are at par with
the national floor. The Union Cabinet, which met here today, cleared
the proposal to bring in amendment to the Minimum Wages Act, 1948, for
incorporating the statutory provision.
Sources said curently, 15 states were paying workers less than the
national floor level minimum wage.
Assam, Uttar Pradesh, Maharashtra, Tamil Nadu, Odisha and Chattishgarh
are among the states where the minimum wages paid are less than
national floor level minimum wages.
The labour and employment ministry had taken the proposal to the
Cabinet as early as 2009 but because of differences it was referred to
a committee of secretaries.
Sources said the agriculture ministry had reservations about putting
in place a legally enforceable minimum wage, arguing that it would be
difficult to enforce it and that it would put additional financial
burden on states. Besides, fears were expressed that higher wage could
entice labour away from farming and plantation, where daily wages are
low.
The CoS had finally cleared the proposal in August last year following
which it was put before the state labour ministers conference in
September.
Sources said curently, 15 states were paying workers less than the
national floor level minimum wage
Banks require ₹ 2.7 lakh cr for Basel- III'
BS REPORTER
Mumbai, 21 February
Rating agency CRISIL today said Indian banks would need to raise ₹ 2.7
lakh crore by March 2018 to meet the Tier- I capital requirements
under the Basel- III capital framework.
The latter mandates a Tier- I capital adequacy of eight per cent.
These rules are to be implemented in phases from this April.
Of this ₹ 2.7 lakh crore, the banks need to raise ₹ 1.3 lakh crore as
equity Tier- I capital and up to ₹ 1.4 lakh crore in non- equity.
CRISIL says the banks can comfortably raise the former but the latter
will be challenging, as the instruments' features are riskier than
under the Basel- II rules.
Development of bond markets to help banks raise the non- equity
capital component is important, said CRISIL. Also, there is need to
refinance infrastructure projects to conserve the capital of banks.
Infrastructure Debt Funds would facilitate such refinancing, said
Pawan Agarwal, senior director at CRISIL Ratings. The Reserve Bank of
India had estimated total capital requirement ( including Tier- I and
Tier- II) for Indian banks at ₹ 5 lakh crore. It had estimated ₹ 3.25
lakh crore of equity capital and ₹ 1.75 lakh crore of non- equity
capital for BaselIII requirements.
Elaborating on banks' likely difficulties in raising ₹ 1.4 lakh crore
as non- equity Tier- I capital, CRISIL said the instruments would
carry higher risk for their equitylike features, including discretion
on coupon payments and likelihood of coupon non- payment and principal
loss if a bank's equity capital falls below the pre- specified
thresholds. Ramraj Pai, president, CRISIL, said: " It will limit
investor appetite for such instruments and will also reduce their
attractiveness for banks, as these instruments will be costlier than
those under Basel- II."
DIPP, pharma players to talk FDI policy on Budget day
New Delhi, 21 February
When Finance Minister P Chidambaram makes his Budget speech on
February 28, the country's pharmaceutical industry would be busy
discussing regulatory matters.
The Department of Industrial Policy and Promotion (DIPP) has called a
meeting of pharma stakeholders on the day to discuss issues related to
the foreign direct investment ( FDI) policy in the sector. Investments
in existing and brownfield units will be the focus of the discussion,
industry sources said. The meeting will be chaired by DIPP Joint
Secretary Anjali Prasad, it is learnt.
Last December, Prime Minister Manmohan Singh had convened a meeting to
discuss issues surrounding foreign investment inflows into the sector.
Whether the Competition Commission of India ( CCI) should be involved
to scrutinise mergers and acquisitions in pharma sector, and how much
FDI in existing domestic units must be approved by the Foreign
Investment Promotion Board ( FIPB) were deliberated upon. There were
also concerns regarding the FIPB norms and delay in clearance.
Then, it was decided that FIPB would continue to clear FDI proposals
in the pharma sector till the Competition Act is amended to enable CCI
to vet such proposals.
According to sources, Singh had also directed the commerce ministry to
work on the consolidated policy and bring in more clarity. DIPP, which
works under the commerce ministry and has also framed guidelines for
FIPB clearance, would discuss the policy with stakeholders, while also
addressing concerns of the industry on the same, a source said.
In the absence of absolute benchmarks, even minority foreign
investments have to now seek FIPB approval. Pharma companies, which
need foreign investments to support expansion plans, are worried that
the process would get delayed if FIPB does not provide prompt
approval.
The government allows 100 per cent FDI under the automatic route for
new projects in the pharmaceutical sector. But investment in existing
facilities came under the spotlight following acquisitions of some
major domestic companies — such as Ranbaxy, Shanta Biotech and Piramal
Health Care's domestic formulations business —by multinational firms.
Such buyouts triggered concerns among many that it may lead to a
monopoly by foreign firms, resulting in an increase in medicine
prices.
Such issues have also resulted in various inter- ministerial
differences. For instance, the finance ministry was in favour of FIPB
nod only for FDI beyond 49 per cent in existing units. But the
commerce and health ministries wanted every foreign investment
proposal in existing pharma units to be approved by the board.
According to sources, the health ministry had also insisted that
foreign companies acquiring Indian firms must seek government approval
if they decide to reduce or stop making the essential drugs being
manufactured by the acquired entity.
Investments in existing and brownfield units to be focus of discussion
--
CS A RENGARAJAN,, B.Com ,FCS, LLB, PGDBM
Company Secretary, Chennai
CONVENOR, CHENNAI WEST STUDY CIRCLE ICSI-SIRC
email csarengarajan@gmail.com
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