IRDA wants kirana shops, chemists to sell micro insurance

IRDA wants to allow individual owners of kirana shops, fair price shops, medical shops, petrol pumps and individual PCO operators to be categorize as micro insurance agents

New Delhi: To promote penetration of insurance in the country, the Insurance Regulatory and Development Authority (IRDA) has proposed to rope in kirana shopowners, chemists shops and petrol pump operators to sell micro insurance products, reports PTI.
Micro insurance products are schemes with low ticket size and targeted towards rural and urban poor.
"In order to broadbase the micro insurance business there is a case to expand the micro insurance agency base by adding few more distribution partners or Individuals," IRDA said in an exposure draft on Micro Insurance Regulations.
The IRDA proposes to allow individual owners of kirana shops, fair price shops, medical shops, petrol pumps, individual public call office (PCO) operators to be categorize as micro insurance agents.
"Since, these individuals have a physical presence and standing in these specific market segments as those of the existing Standalone Micro Insurance Agents, it is considered that they stand on similar footing along with standalone micro insurance agents," the IRDA said.
Currently some entities like non-government organisations (NGOs), Micro Finance Institutions (MFIs) and Self help Groups (SHGs) currently work as micro insurance agent.
District Cooperative banks, Regional Rural Banks, primary Agricultural Cooperative societies, individual agents too work as micro insurance agents.
It said that the intent of regulation in the sector is yet to take off since the notification of the Micro Insurance regulations in November, 2005.
For the year ending March 2011, 36.50 lakh new policies were issues by collecting Rs130.40 crore of new business under individual life insurance business. In respect of group policies, micro insurance covered 1.53 crore lives and garnered Rs155.22 crore premium.


MCX-SX should use the mantra “How to win investors and influence FIIs” to succeed

MCX-SX should take innovative steps that will help in doubling the present market turnover which will not only benefit the investors but create a new benchmark for other stock exchanges to emulate
The MCX Stock Exchange (MCX-SX) having got the Securities and Exchange Board of India’s (SEBI) clearance for setting up a third all-India stock exchange in the country must be preparing to launch its capital market operations shortly. It is said, “two’s company, three‘s a crowd”. Only time will tell if the third exchange will result in too much of a crowd in the capital market.

But MCX-SX must not lose sight of the fact that it can succeed only if it proves itself daringly different from the existing stock exchanges and do something unique to win investors’ confidence and influence FIIs, and make a mark in this “dog-eat-dog world” of capital market.


Here are a few innovations that the MCX-SX should consider introducing not only for the benefit of the investors, but also from the angle of giving a new orientation to the capital market dealings in our country.

Speed-up settlement system
The most important innovation that is required in the stock market today is how to speed up the operations of the settlement system. In April 2003, when SEBI introduced T+2 rolling settlement system in both the stock exchanges, there were apprehensions about its success, as it was felt that the banking system in the country was not prepared then for the speedy transfer of funds from one account to another even on the next day. And without the availability of funds in the account of brokers for no fault of theirs, settlement might get delayed and investors may not get the payments on the stipulated date. But fortunately, there have not been any noticeable mishaps in the market and the settlements have been smooth in both the stock exchanges for the last ten years.

At preset the T+2 settlement system is practiced more in its breach rather than in its adherence. Because, even under the automated online trading system, you do not get the payment for the shares sold on the third day of completing the deal and you get the payment only on the fourth working day. In the case of purchase of shares also, though your bank account gets debited with the amount payable on the next day, the shares are credited to your demat account only on the fourth working day. The present settlement system of T+2 is, therefore, only for the brokers, and for all investors virtually it continues to be T+3. Unfortunately SEBI has not done anything to ensure that the benefit of T+2 settlement system percolates down to the investors, who form the backbone of the capital market.

Since then, the most important development that happened in the banking industry in our country is that all public and the private sector banks have introduced core banking solutions in all their branches, and have put in place a technology for transferring funds from one account to another in any bank ad in any place in the country within a few minutes under the real time gross settlement system (RTGS).  This system has been perfected over the last two years and is the preferred mode for transfer of funds among all the institutions in our country.


It is, therefore, possible now to go the whole hog to introduce T+1 rolling settlement system in the place of the present official T+2 (but unofficial T+3) settlement system that is in vogue in both the stock exchanges now.

It is a golden opportunity for MCX-SX to commence operations on T+1 rolling settlement system, thereby stealing a march over the other two stock exchanges, which have done precious little to speed up the settlement system for the last ten years. With the technology forming the backbone of all operations, it shouldn’t be difficult for MCX-SX to go for this speedier settlement system, giving a boost to the entire stock market operations in our country.

Introduce delivery vs payment system
The second improvement required in the settlement system is the introduction of delivery vs payment system that is in vogue in the gilt-edged securities market. In the wake of the Harshad Mehta scam that happened in the securities market in early 1992 which was unearthed by the noted journalist Sucheta Dalal, the Reserve Bank of India (RBI) came out with the new system of all settlement of government securities (G Secs) on the basis of delivery vs settlement, thereby totally eliminating the risk of non-delivery or non-payment in that market. In the present system followed in the capital market, it is not clear whether this system is followed, as the investors are not given the benefit of this delivery vs payment system, as they are out of funds two days before getting delivery of shares or they get funds only after two days of delivery. Also the risk of not getting payment or not getting delivery of shares is very much prevalent, though technically it may be covered by the stock exchange guarantee, invoking of which will take its own time.

The MCX-SX should therefore, devise a system whereby the investor will get delivery of shares on the same day of payment, or gets the payment for the shares sold by him on the same day of delivery. This will not only obviate the risks involved, but will considerably improve investor confidence in the market that will go a long way in drawing new investors into the market.

Reduce cost of dealings for the investor
At present there is plethora of charges levied while buying or selling shares in the stock market. There are as many as six different types of charges and taxes levied on the investor, which discourages people to deal in the stock market. Starting with brokerage, demat charges, transaction charges, securities transaction tax, stamp duty and ending with service tax, these add to a substantial amount, which is not justified when the entire operations are done through the internet, without manual intervention. The biggest share of this cost comes from the brokerage payable to broker, and this requires to be considerably reduced, having regard to the fact that the investment in the stock market is a risk investment and keeping the charges low will be the only way to attract more investors to the market.
MCX-SX should, therefore, ensure that the brokers empanelled by them should be allowed to charge only a fixed amount of brokerage for every transaction done, and not according to the value of the transaction, which is neither reasonable nor ethical under the present system of online trading done on all exchanges. This will bring down the cost for investors considerably, serving the cause of investors admirably.

SEBI should also consider bringing down the brokerage currently charged by the brokers in all the exchanges by converting ad-valorem to fixed charge per transaction, to contain the dwindling investor interest in the stock market.

If these innovative steps are taken by the stock exchange to be started by MCX, it will help in doubling the present turnover and will benefit not only the investors, but will be a step in the right direction for it to succeed and create a new benchmark for other stock exchanges to emulate.

Will MCX-SX rise up to the challenge and prove equal to the task of taking the Indian capital market to the new orbit of convenience, confidence and safety unheard of before?

(The author is a banking & financial analyst. He writes for Moneylife under the pen-name ‘Gurpur’)



Narendra Doshi

5 years ago

Very true. I hope MCX-SX will listen and also ADD a few more novelties. After all it has waited so long to get these clearances. Good luck Mr. Jignesh Shah. You have proven time and again of your forward looking solutions all these years, all over the world. It is time to do that once again.

S&P lowers outlook of Tata Steel, UK unit to negative

The rating agency said it may lower the rating on Tata Steel if the company’s consolidated operating performance does not recover in line with its expectations

New Delhi: Standard & Poor’s (S&P) on Thursday lowered the outlook of Tata Steel and its UK-based subsidiary Tata Steel UK Holdings (TSUKH) to ‘negative’ from 'stable' citing continued weak performance, reports PTI.

“We assess Tata Steel on a consolidated basis, including Tata Steel UK Holdings (TSUKH), which represents about half of the company’s total consolidated assets. We expect the company’s consolidated profit margin to continue to be weak, resulting in its debt-to-EBITDA ratio staying above 4 times,” S&P said in a statement.

The ratings agency said it expected the company’s profit margins to improve when the “company’s India operations receive the full benefit of a recently commissioned 3 million tonne annual capacity”.

These benefits are expected to accrue only in the fiscal year ending 31 March 2014, it added.

S&P has also affirmed its ‘BB’ long-term corporate credit rating on Tata Steel and its ‘BB’ issue rating on the company’s senior unsecured notes.

‘BB’ generally indicates less vulnerability in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.

At the same time, it also lowered the recovery rating on TSUKH’s 3.53 billion pound bank loan to '2’ from ‘1’ and the issue rating to ‘BB-’ from ‘BB’, the statement said.

“We have revised the outlooks to reflect the poor performance of Tata Steel’s wholly-owned European subsidiary, TSUKH,” said S&P’s credit analyst Suzanne Smith.

The rating agency said it may lower the rating on Tata Steel if the company’s consolidated operating performance does not recover in line with its expectations.

This is likely to be due to further slowing in the European operations, it said adding, “A double dip in the European economy or worsening steel industry conditions in India would result in EBITDA per tonne of about $300 or lower, further hurting Tata Steel’s financial ratios.”

S&P said it may revise the outlook to stable when it expected the company to improve its operating performance in line with its earlier expectations, resulting in a ratio of adjusted debt to EBITDA of about four times and funds from operations to adjusted debt of more than 15%.

“In our view, the European steel industry will continue to face soft demand and excess steel-making capacity for the next one to two years. We therefore expect TSUKH to continue to have a very low margin of 2.3% in the fiscal year ending 31 March 2013,” it added.

Limited pricing flexibility, slower-than-expected sales growth at the India operations following brownfield capacity expansion, and lower volumes in Europe will keep EBITDA margin at about 12% in fiscal 2013.”

S&P said “We also expect Tata Steel to generate negative free operating cash flow of Rs6,000 crore in fiscal 2013, resulting in only a gradual recovery in the company's financial metrics”.

We expect the ratio of debt to EBITDA to recover to 4.5 times in fiscal 2013 and 3.5 times in fiscal 2014, it added.

Saying that the improvements will be mostly driven by growth in India operations, the agency assessed Tata Steel’s liquidity as ‘adequate’, and stated that Tata Steel has adequate resources and willingness to ensure that liquidity at TSUKH is also adequate.



ashok sen

5 years ago

Tata Steel U.K. is a disaster

Tatas should get out, otherwise the indian outfit would keep suffering.The story here is quite different to Tata Motors, which has a demand outside U.K.;mainly in China.
The steel unfortunately can sell in europe primarily, where for a long time to come,the demad is going to be poor.

This buy of Corus,was a terrible mistake by Tatas.The difficulty,in these terrible times for european industry, will be to find a buyer to pay at least half of what Tatas paid for the purchase

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