Money & Banking
Banking system shows signs of instability on rising NPAs: RBI

NPAs, or bad loans, of the Indian banking sector rose sharply to 1.28% in 2011-12 from 0.97% in the previous year due to high interest rate and slowdown in the global economy

Mumbai: The banking system in the country has recently shown signs of moderate rise in instability due to increase in non-performing assets (NPAs), the Reserve Bank of India (RBI) has said in a working paper, reports PTI.

 

“The movements in the banking stability indicator... that there are symptoms of a moderate rise in instability of the banking sector in recent periods perhaps due to the rise in the NPA,” it said in a working paper on “Banking Stability - A Precursor to Financial Stability”.

 

The NPAs, or bad loans, of the Indian banking sector rose sharply to 1.28% in 2011-12 from 0.97% in the previous year, because of high interest rate and slowdown in the global economy.

 

For public sector banks, it rose to 1.53% in 2011-12 from 1.09% a year ago though private lenders reduced their NPAs to 0.46% from 0.56%.

 

The paper said there is a need to exert precautionary measures to improve the overall performance of the banking sector and initiate regulatory measures appropriately.

 

It said policymakers will need to work towards strengthening the banking sector to enable the banks to bear the shocks resulting from an adverse turn in the real sector environment.

 

Also, it said there is a need to build enough safeguard in the banking sector to avoid the negative feed-back loop between the banking sector and the real sector which could lead to the germination and aggravation of a financial crisis.

 

Referring to the recent global economic crisis that began in 2008-09, the paper said, “The real act of the financial crisis was enacted in the courtyard of the banking sector where the trigger of financial crisis initially took place.”

 

However, concerted efforts are being made by various organisations such as the IMF, BIS and the World Bank as well as individual central banks to evolve various leading indicators of the financial stability, including banking sector, in order to make an informed judgement about the evolving risks to the financial system and initiate corrective policy measures.

 

The paper also observed that banking instability has immediate adverse effect on the financial markets stability as well as real sector output.

 

“...stability in the banking sector is a necessary condition for maintaining financial stability,” it added.

 

It further said deterioration in the banking stability indicator has adverse impact on the real sector and similarly deceleration in the real sector performance will adversely affect the banking sector.

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Snapdeal.com ties up with M&M to sell two-wheelers online

Customers can choose to pay for the vehicle either at one go or avail 3 or 6 month EMI options at 0% interest and also get a flat discount of Rs6,000

New Delhi: Shopping portal Snapdeal.com has tied up with Mahindra & Mahindra (M&M) for selling its two-wheelers to customers on the site, reports PTI.

 

“This will be for the first time that a vehicle is being sold online in India and will be delivered at the customer's doorstep,” Snapdeal.com said in a statement.

 

After purchasing the vehicle online, the customers will be contacted by the auto maker for required documents and will collect the same from them as per the customer’s convenience, it added.

 

“Customers can choose to pay for the vehicle either at one go or avail three/six month EMI options (0% interest)... The USP of this offer is a flat discount of Rs6,000 on the vehicle,” the company said.

 

Cities covered under this scheme include Chennai, Delhi-NCR, Mumbai, Bangalore and Kolkata.

 

Speaking about this tie-up, Snapdeal.com Vice President (Business Development) Tony Navin said: “Our endeavour is to be able to participate in our customers’ lives in every way possible. With this partnership, we are the first ones to venture into e-selling of vehicles and have it delivered to our customers' doorstep.”

 

Mahindra Two Wheelers Vice President (Sales and Customer Care) Dharmendra Mishra said: “This partnership will open a new avenue for us. With the buying trends changing drastically over time, we are sure we can deliver more happiness to our customers through this novel tie-up with Snapdeal.com, one of its kind in the country.”

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Insurance companies lingering on settling claims: Consumer forum

The consumer forum made the observation while pulling up New India Assurance for sitting on a claim for over three years prior to rejecting it and directed the insurance company to pay its policy holder Rs13.84 lakh, including Rs1 lakh compensation

New Delhi: Insurance companies are lingering on settlement of claims and using the money legally entitled to the insured for as long as they can, amounting to unfair trade practices, a consumer forum has held, reports PTI.

 

“This has become a general practice that the insurance companies tend to linger on the settlement of the claim and use the money which the insured is otherwise legally bound to have for as much longer period as they can. This clearly amounts to harassment and unfair trade practice,” the North East District Consumer Disputes Redressal Forum said.

 

The forum presided by NA Zaidi made the observation while pulling up New India Assurance Company (NIACL) for sitting on a claim for over three years prior to rejecting it and directed the insurance company to pay its policy holder Rs13.84 lakh, including Rs1 lakh compensation.

 

“We hold the rejection of the claim by respondent company (NIACL) as wholly untenable and it smacks of vendetta to cover their own shortfall for not deciding the claim of complainant for more than three years.

 

“We allow this complaint and direct the respondent company to pay the complainant Rs12.79 lakh, the sum assessed by the surveyor, with compensation of Rs1 lakh for harassment suffered. We further award Rs5,000 as cost of litigation,” the forum said.

 

The order came on the plea of Delhi-based cosmetic company Colorbar Cosmetics Pvt Ltd, whose stock insured with NIACL was damaged in a fire in September 2007.

 

The cosmetic company had filed a claim for the loss and NIACL had appointed a surveyor who had assessed a loss of Rs12.79 lakh, the firm had said in its complaint.

 

It alleged that despite the surveyor's assessment, NIACL did not settle the claim and then after three years had rejected it in October 2010.

 

NIACL, in its defence, had contended that it had rejected the claim as the cosmetic firm’s stock was in the custody of another firm which was not related to Colorbar.

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