“When the financial inclusion happens, banks will replace microfinance institutions. Then microfinance institutions will take the role of money lenders,” RBI deputy governor KC Chakrabarty said
Microfinance institutions (MFIs) will not be able to bring financial inclusion as their cost of lending is high, a top Reserve Bank of India (RBI) official said, reports PTI.
"Microfinance institutions will not be able to bring financial inclusion. Their cost of lending is high," RBI deputy governor K C Chakrabarty told reporters in Mumbai on the sidelines of the inauguration of Bank of India's mobile-based remittance facility for urban financial inclusion.
"The definition of financial inclusion is providing access to appropriate financial products and services to the most vulnerable group of the society in a fair, transparent and cost-effective manner by the mainstream financial institutions," he said.
When banks reach that level, the competition will bring down the cost, he said.
"When the financial inclusion happens, banks will replace microfinance institutions. Then microfinance institutions will take the role of money lenders," he added.
The Customer Service Committee under former Securities and Exchange Board of India (SEBI) chief M Damodaran will oversee the banks' dealings with customers, he said.
"How fair and transparent the products and pricing are, how the banks provide them to the customers, whether the bank has a system to address the customer complaints, how they deal with the customers, what are the legal and regulatory changes necessary, how the bank's ombudsman is working, all these things will be examined by a high-level committee under the chairmanship of former SEBI chief M Damodaran," he said.
Both the Indian Banks' Association (IBA) and the RBI do rate the banks, but internally, he said.
"We have internal rating and on the basis of that, we will advise banks about the modifications, changes and improvement they have to bring. But we will not make these ratings public," he said.
The deputy governor on Thursday inaugurated Bank of India's (BoI) mobile-based remittance facility through business correspondence for urban financial inclusion.
Bank of India plans to open seven lakh accounts for the unbanked urban poor, the bank's chairman and managing director, Alok Misra, said.
"Using the facility of mobile-based remittance facility through business correspondence, people can send money to their relatives over mobile and can receive the money in every nook and corner of the country," he said.
BoI plans to include one crore un-banked people in its fold and will reach out to about 30,000 villages in the next three years, he said.
SEBI has proposed wide-ranging changes in the way fund performance is currently presented. But it is not clear whether investors will know how to use it and whether they will
Market regulator Securities and Exchange Board of India (SEBI) has proposed a new set of quantitative measures for disclosing an equity scheme's performance. SEBI has proposed that fund returns will be calculated and disclosed in an annualised manner by using both capital gains (change in NAV over a period of time) and the dividend paid out per unit. The returns are proposed to be compared to a popular index such as Nifty and Sensex apart from the scheme's own chosen benchmark. This will give a clearer picture of comparison between absolute returns of a scheme, benchmark returns and the market indices (Nifty or Sensex), especially since index funds are proving to be a better bet than many actively-managed funds. SEBI wants risk-adjusted return to be disclosed as well. The volatility of benchmarks and the schemes is also proposed to be disclosed which will provide a comparison between risk of the scheme, benchmark and the market. Funds may be asked to disclose the beta of a scheme to show the volatility of portfolio and that of the Nifty or Sensex.
Expense ratio will also be a part of disclosure as expenses have a direct bearing on the fund performance. SEBI also wants portfolio turnover ratio disclosed. A higher turnover indicates that the fund manager is churning the portfolio very often.
Reacting to the SEBI proposals, Ajit Dayal, director, Quantum Mutual Fund told Moneylife: "It's very good that SEBI is trying to standardise performance which has become a racket in the industry where people are using performance numbers to fool investors. Unfortunately over 15 years of existence, many of the large fund houses in the industry have chosen not to bother about their investors and worry more about the assets that they can gather."
However, another CEO of an asset management company felt that while all this information is completely useful, it is impractical to expect the investors to understand them and act upon them. "This information is useful for financial planners and advisors. And they already have access to this data. To put all this sophisticated information in the public domain is simply overkill."
"It's great that there is more transparency from what has largely been a most unfriendly stance towards the investor industry. But it does not take away the fact that risk is different for different investors," added Mr Dayal.
The stock markets have taken a plunge in May. Based on past patterns, what should we expect for the month of June? Here is a study of the historical behaviour of the markets over the past 20 years
The stock markets have taken a beating during the month of May. The Sensex ended the month of May at 16,944, a 3% decline over its opening level. How does this performance augur for the month of June and even the rest of the year?
Moneylife took a look at the historical data, searching for some clues in the market patterns. We started from the year 1990. Over these years, the Sensex has ended positive in June on 12 occasions. This does not look statistically significant. But it gets interesting once you consider only the occasions when May was negative. The Sensex ended negative in May, eight times (excluding this year). Out of these eight occasions, the market has continued its downward momentum into the month of June only on three occasions, while witnessing a trend reversal five times. That translates into a high 62.5% probability of the June month ending in positive territory. Indeed, the stock markets have rebounded after hitting a low of 15,960 on 25th May.
A previous Moneylife study into the market trend for the June quarter showed an interesting trend. Since 2002, the Sensex has ended the June quarter in the opposite direction every year. Last year, it ended positive over the March quarter closing. Does this mean that the markets will end up lower than the March quarter closing?
We had pointed out then that unless the Sensex gets weighed down by the high valuations and sudden global shocks, it may proceed to turn in a solid performance in the coming year. Since then, the developments in Europe have raised concerns over a possible contagion, which has taken its toll on the markets. The doubts over Europe are expected to persist for the time being, which are likely to keep the markets on tenterhooks for the coming month. Over the last few weeks, foreign institutional investors have taken out large sums of money from the markets in a panic. Domestic investors have stepped in to cushion the impact to some extent.