Loans: Guidelines for NBFC Lending Against Shares
The Reserve Bank of India (RBI) introduced a set of guidelines for lending against shares, especially for non-banking finance companies (NBFCs). This will reduce volatility in the capital market arising from NBFCs offloading shares pledged by borrowers who have defaulted on loans, the central bank said. According to the guidelines, which are only applicable to NBFCs with assets of Rs100 crore and above, NBFCs have to maintain a minimum loan-to-value (LTV) of 50% (of shares pledged) and accept only Group-1 securities as collateral for loans valued at more than Rs5 lakh.

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A New Dawn in Indo-Japanese Relations
In PM Modi's first foreign visit outside the sub-continent, his reaching out to Japan and his personal relations with Japanese PM Abe may pay rich dividends to the bilateral relationship
 
Extending a gesture reserved only for very special guests, Prime Minister Shinzo Abe of Japan travelled all the way from Tokyo to meet PM Modi in the old imperial capital of Kyoto. Generally, visiting heads of states are received in the capital. Apart from visiting the ancient Buddhist temples in Kyoto, an agreement was signed to replicate Kyoto in Varanasi, developing it into a "smart city", maintaining its traditional heritage status while making it more modern than it is today.
 
PM Modi proceeds from Kyoto to Tokyo, to continue discussions with PM Shinzo Abe, with whom he has warm relations from his time as Gujarat Chief Minister. Mr Modi is expected to roll out the red carpet for the Japanese business community, and to set up their manufacturing enterprises in India, where all the essential ingredients are available at competitive prices. He would reiterate his call to make India the manufacturing hub for Japanese products.
 
Moneylife recently covered the proposed visit by PM Modi and the interest shown by the Japan International Cooperation Agency (JICA) in developing the Indian Railways, by setting up high speed railway corridors. In fact, press reports indicate that JICA, supported by an Indian team, has already identified fifteen possible stations along the proposed high speed train corridor between Ahmedabad and Mumbai. According to the Deputy Director General of the South Asia Department of JICA, Mr Katsuo Matumoto, this corridor will also have to set up some special links so that transfers are possible and made easy, when the system is set up.
 
It may be recalled that during the Railway Budget presentation, Minister Sadanand Gowda had stated that such a high speed train service wold involve an outlay of Rs60,000 crore (or about $10 billion), but in the long run this would make travelling easier and cheaper. At the moment, this bullet train system, also called Shinkansen, covers an estimated 2,600 KMs of high speed railway networks in Japan and has the best safety record in the world. While India has none, China boasts 12,000 Kms of high speed trains, for which they began construction only in 2007. Chinese high speed trains are cheaper as compared the Japanese Bullet train. PM Modi has a difficult choice to make, but indications are that he may make a final decision only after meeting the Chinese president Xi Jinping, when he visits India later this month. A proper mix of both the systems may be found suitable, also depending on the long term credit facilities, which may well decide the winner!
 
Both Shinzo Abe and Narendra Modi have a lot of things to discuss, other than the bullet trains. Issues covering mutual defence, civil nuclear agreements and supply of earth minerals and amphibious aircrafts are to be discussed. Currently, Japan obtains rare earth minerals, which are mostly used in the manufacture of high-end electronics, from China. Due to China's controversial territorial claims on some Japanese Islands, it is likely that Japan would like to cultivate India as an alternate source of supply. No doubt, Narendra Modi would do his very best to invite Japanese FDI in many areas and hopefully, he will return successful from Japan.
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

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Insurance for all?
As regular readers know by now, we argue that the best life insurance product to buy is a term plan. Ever since we launched Moneylife Smart Saver Network (MSSN), our premier service on the financial products best suited for your needs, we have been getting enquiries about whether Indians living abroad, can buy online term plans. When we tried to find out, we discovered that no one is clear about what ought to be the practice.
 
One MSSN member holding a British passport could buy a policy but Aviva sent him a policy with nationality as Indian. After 45 days of emails and calls, Aviva has returned the premium. LIC does not entertain requests from NRIs/PIOs/OCIs. What is the complete picture? For the very first time, our Cover Story throws light on this tricky issue.
 
In her Different Strokes section (page 16) Sucheta writes about the peculiar attitude of the Reserve Bank of India (RBI) on consumer protection. One week, it issues a consumer charter to protect the rights of banking consumers; the next week, it acts as a handmaiden of Indian banks and cuts down the number of free usage of ATMs per month. As usual, RBI issued the diktat without sharing any details or justification with the largest stakeholder in the system, namely, bank customers. The RBI governor has been talking frequently about the importance of consumer protection. When it comes to action, it’s another story altogether.
 
In her Crosshairs column (page14), Sucheta writes about another chain-money scheme that has grown unchecked. PACL has been asked to return a mind-boggling Rs49,000 crore to the depositors. But that fact that it could grow to this size is really a reflection of the breakdown of our financial regulation system.
 
Our investment columnist, R Balakrishnan, analyses (page 22) whether the REIT (real estate investment trust) would be a good investment product. Bala’s laser sharp analysis identifies five things that are wrong with REITs. Don’t miss it.  

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