Govt approves Rs800 crore interest subsidy to exporters

The scheme under which 2% interest subvention is given to commercial banks for their concessional lending to exporters has been extended for the current fiscal year for handicrafts, handlooms, carpets and small and medium enterprises sectors

New Delhi: The government on Thursday approved additional Rs800 crore for extending interest subsidy to exporters till March 2012 in the backdrop of slowdown in major global markets in Europe and the US, reports PTI.

The scheme under which 2% interest subvention is given to commercial banks for their concessional lending to exporters has been extended for the current fiscal year for handicrafts, handlooms, carpets and small and medium enterprises (SME) sectors.

The approval was given by the Cabinet Committee on Economic Affairs (CCEA).

Till date, Rs1,654 crore has been released to RBI for reimbursement of interest subvention, whereas total requirement projected by RBI for the period up to March 2011 is Rs3,892 crore.

As much as Rs800 crore is required for implementation of the scheme till March 2012.

The Eurozone crisis has been biting Indian exports which grew year-on-year by 10.8% to $19.9 billion in October, the lowest in the last two years.

From a peak of 82% in July, export growth has been slipping to 44.25% in August, 36.36% in September and 10.8% in October.

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Banks asked to adopt technology to grow, offer better service

Former RBI deputy governor and Cafral director Usha Thorat said ICT solutions are required to capture customer details, facilitate unique identification, ensure reliable and uninterrupted connectivity to remote areas and across multiple channels of delivery

Mumbai: The Centre for Advanced Financial Research and Learning (Cafral), an organisation set up by the Reserve Bank of India (RBI), on Thursday asked banks to use technology not only to scale up their operations but also to offer better services, reports PTI.

“To be able to ensure that the challenges of banking the unbanked are met effectively and converted into a growing and sustainable business model, there is no alternative for banks to adopt ICT (information, communication and technology) solutions on a very large scale and range,” Cafral director Usha Thorat told a seminar on banking technology here.

The former RBI deputy governor also said ICT solutions are required to capture customer details, facilitate unique identification, ensure reliable and uninterrupted connectivity to remote areas and across multiple channels of delivery.

Ms Thorat also stressed upon the importance of IT-enabled solutions to provide better customer service and bring the cost down.

“Delivery of banking services through IT-based solutions, such as mobile phones and smart cards, while keeping costs low, enables scaling up and increasing outreach through a technology that is rapidly innovating,” she said.

Referring to the challenges faced by the domestic banking system, she said issues like increasing the outreach and rising competition in the financial services space are to be addressed by the banks in the future.

“To meet the challenges of the next decade, banks will have to exploit technology, raise capital, gear up their capital planning, risk management, pricing systems and pursue HR policies to attract talent,” she added.

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IRDA notifies IPO norms for life insurance companies

As per the guidelines issued by the Insurance Regulatory and Development Authority, life insurance companies, which have been in business for over 10 years, would be eligible to come out with IPOs. Besides, the promoters of the insurance companies would be permitted to offload their stake in the company

New Delhi: The Insurance Regulatory and Development Authority (IRDA) on Thursday came out with guidelines allowing life insurance companies, which have been in business for over 10 years, to raise funds from the public through IPOs, reports PTI.

IRDA, however, will decide the size of the public issue, it said in a notification.

As per the guidelines, promoters of the insurance companies will also be allowed to offload their stake in the company.

The insurance companies, which will become eligible to come out with the initial public offerings (IPOs), include ICICI Prudential Life, HDFC Standard Life and SBI Life.

IRDA would prescribe “the extent to which promoters shall dilute their respective holding, the maximum subscription which could be allotted to any foreign investors,” said the IRDA Regulations, 2011.

IRDA, it added, would prescribe a lock-in period for the promoters to prevent them from exiting the company.

The regulations stipulate that no life insurance company should approach market regulator Securities and Exchange Board of India (SEBI) for an IPO without seeking prior approval of IRDA.

After the insurance sector opened up in 2000, only 23 private companies have entered the life insurance business.

While few companies would immediately become eligible for IPOs, the remaining would have to wait for completion of 10 years of operations.

Commenting on the guidelines, HDFC Standard Life MD and CEO Amitabh Chaudhry said, “It will take some time before companies actually come out with public issues. IRDA has given a lot of flexibility to the insurers in the guidelines.”

After IRDA’s approval, the applicant company would have to file the Draft Red Herring Prospectus (DRHP) for IPO with market regulator SEBI within a year, the norms said.

While granting approval, the regulator would take into consideration the company's overall financial position, its record, the capital structure post issue and reasons for fund raising.

In June, IRDA had issued draft guidelines on such listings for public comments.

No issuance and allotment of capital by an insurance company shall be, in any form other than as fully paid-up equity shares, the guidelines said.

Besides, the insurance companies are expected to have a embedded value of at least twice the paid-up equity capital, it said, adding the insurance company should have been fully compliant with the corporate governance guidelines issued by IRDA.

Further, the insurance companies would have to mention in the draft prospectus the risk factors specific to the insurance companies, overview of the insurance industry, glossary of terms used in the sector and financial statements, among others.

“This is a milder version of the draft guidelines. Now a formal guideline for IPO of life companies will give more clarity,” HDFC Standard Life’s Mr Chaudhry said.

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