PSU banks’ exposure to telecom cos over Rs14,000 crore

Financial services secretary DK Mittal said that though the total funds provided by PSU banks to telecom companies hit by the Supreme Court order was Rs14,345 crore, the amount involved in 122 cases was limited to Rs3,299 crore and it is not a matter of concern

New Delhi: The government on Friday said public sector banks have a total exposure of over Rs14,000 crore to telecom companies whose licences have been cancelled by the Supreme Court though a bulk of the amount is backed by securities, reports PTI.

Out of the total exposure of Rs14,345 crore, only Rs2,888 crore given to big companies, including Idea Cellular, Tata Telecom, Uninor and Videocon, is unsecured.

“Rs14,345 crore is total exposure to telecom companies... Out of this Rs2,888 is to big companies Idea, Tata Telecom, Uninor and Videocon which does not have security except telecom licence and assets created by these companies,” financial services secretary DK Mittal told PTI.

He further said that though the total funds provided by PSU banks to telecom companies hit by the Supreme Court order was Rs14,345 crore, the amount involved in 122 cases was limited to Rs3,299 crore and it is not a matter of concern.

“Public sector banks have no exposure which is totally uncovered,” he added.

The Supreme Court on Thursday cancelled 122 second generation (2G) spectrum licences granted by former telecom minister A Raja on the ground that they were issued in a “totally arbitrary and unconstitutional” manner.

Many of these large companies will not go out of operations following the Supreme Court order as they have valid licences in other circles, he said.

In the case of Tata Teleservices, which has a pan-India presence, only three licences were cancelled. The number of cancelled licenses was nine in the case of Idea Cellular and 22 in case of Datacom Solution promoted by Videocon.

Punjab National Bank (PNB) said its exposure for roll-out under 2G is limited to Rs508 crore. However, the bank did not give any loan for seeking licence.

PNB has total exposure of Rs10,923 crore to the telecom sector. Of this, the bank’s exposure to the government sector is Rs1,016 crore, the bank said.

“I don’t think we will be affected much by the verdict.

We have a fund-based exposure of Rs1,100 crore in five accounts, while another Rs3,400 crore are non-fund based, which is based on a guarantee of roll-out. Now that the licences are cancelled, that guarantee is not fulfilled,” SBI deputy managing director (DMD) Santosh Nair had said on Thursday.

Another state-owned lender, Corporation Bank, said it has exposure of Rs146 crore in one of the telecom companies hit by the order.

“We have Rs146 crore exposure to Videocon Mobile. Though it is a secured funding, we are a bit worried as to how it will pan out post the Supreme Court verdict,” Corporation Bank chairman and managing director Ajay Kumar had said.

Even Oriental Bank of Commerce (OBC) said the bank had disbursed loans to telecom companies whose licences have been cancelled.

Loans have been given to all leading players. However, there are some concerns on the loans given, a senior official of OBC said.


Market seems stretched: Friday closing report

Nifty may move in the range of 5,220 and 5,395

The Asian indices opened cautiously and the domestic indices too were range bound for the major part of the trading session. However, in the last hour, the indices pushed higher extending the significant rally that started in late December. Today Nifty hit the highest intra day high since 31 October 2011.   From here we may see the Nifty moving in the range of 5,220 and 5,395.The National Stock Exchange  (NSE) saw a volume of 81.24 crore shares.

At the end of the session the Asian market were a mixed bag ahead of key US jobs data which will be out later today, which will offer more clues over the global growth and appetite for risk, while Greek debt restructuring talks dragged on.

The Sensex and the Nifty opened at 17,444 and 5,276 respectively. In the morning range bound session the respective indices hit their intra- day low at 17,383 and 5,256. Last hour of the trading session saw a huge jump taking the benchmarks to intra-day highs of 17,631 and 5,335. The Sensex closed at 17605, 173 points up (0.99%) while Nifty closed at 5326, 56 points up (1.06%). Both the Sensex and the Nifty had the highest closing since 31 October 2011. The advance-decline ratio on the NSE was 1115:655.

Among the broader indices, the BSE Mid-cap index surged 1.28% and the BSE Small-cap index climbed 1.17%.

The BSE Metal index (down 1.09%) was the lone loser in the BSE sectoral indices today. While all the other 12 sectoral indices gained, BSE Realty topped with gainers (up 2.15%). The others gainers among the top five were, BSE Healthcare (up 1.69%), BSE Power(up 1.49%), BSE FMCG(up 1.44%) and BSE Bankex(up 1.42%)

In the 30-share Sensex pack, 24 stocks gained while six fell. Among the top five gainers, NTPC (up 2.71%); Hindustan Unilever (up 2.69%); Sun Pharmaceutical (up 2.38%); DLF (up 1.97%); BHEL (up 1.93%). While the bottom five losers were Hindalco Industries (down 3.08%); Jindal Steel (down 2.66%); Tata Steel (down 1.56%); Sterlite Industries (down 0.97%); Hero MotoCorp (down 0.69%).

India's services sector grew at its fastest pace in six months during January as new businesses swelled, extending the previous couple of months' positive trend into the new calendar year, a survey showed.

The HSBC Business Activity Index, compiled by Markit and based on a survey of around 400 firms, bounced to 58.0 in January from 54.2 in December.

That was the third month the index has been above the 50-mark separating growth from contraction.

India's economy is expected to grow by 7 to 7.5 percent in the current fiscal year ending March, Prime Minister Manmohan Singh said in a speech on Friday. Gross domestic product grew 8.4 percent in the year tosince March 2011.

Reserve Bank of India Deputy Governor Subir Gokarn said the monetary authority will cut interest rates once it i's confident that inflation will keep slowing.

European was trading in green on the back of encouraging macroeconomic data in the euro zone and the UK. The data on Friday showed that the euro zone's private sector economy snapped a four-month decline in January and expanded, although very weakly,. aAccording to a  business survey  that hinted the euro zone may avoid recession. Britain's dominant services sector expanded at the fastest pace in 10 months in January. Investors have become more confident of a debt swap deal involving Greece and its private sector creditors, and that the country can avoid a disastrous default.

Back home, Bajaj Hindusthan, today said it has fully repaid external commercial borrowings (ECB) worth $80 million (about Rs389 crore). The ECB of 9.191 billion yen in form of syndicated term loan facility, which was raised in 2006-07, for the purpose of financing the capital expenditure, has been repaid in full on its due date 27 January 2012, upon completion of its average maturity of 5 years. Bajaj Hindusthan rose 1.85% to close at Rs35.70 on the BSE.

Madras Cements today reported a 77% rise in net profit for the quarter ended December to Rs76.84 crore on the back of higher sales. Net sales of the company also increased to Rs741 crore during the October-December quarter of the current fiscal from Rs579.21 crore in the same quarter last fiscal. Madras Cements rose 3.48% to close at Rs129.40 on the BSE.


Do you visit high-end hospital when mediclaim coverage is high?

Health insurance claims data shows that as the sum insured increases, so does the average claims size. Co-payments brings partial responsibility of payment and hence scrutiny of bills by the insured. Are co-pays the new weapon to fight excessive hospital charges?

Health insurance claims data based on a study of claims data of 4,90,000 employees of 285 employers across major industries by Vantage Insurance Brokers and Risk Advisors shows as the sum assured increases, so does the proportion of claim size, the rise being most dramatic at the highest end. The average claim size of mediclaim policyholder having sum insured (SI) of Rs50,000 is Rs13632. For SI of Rs1 lakh, Rs2 lakh, Rs3 lakh, Rs4 lakh and Rs5 lakh average claim size is Rs25057, Rs28685, Rs34562, Rs40572 and Rs49017 respectively. Are customers availing better category of room and services when coverage is high or are hospitals pushing the patient having sufficient insurance to more expensive services?

In India, the category of room (private a/c, private non a/c, twin sharing, etc) also determines all the other incremental charges associated with it. The better the room, higher the associated charges even including doctor’s fees. Mediclaim policyholders having high coverage may not negotiate with the hospital on the amount being charged and will avail better facilities even for ordinary hospitalization just to reap the benefit of paying premium to the insurance company over the years. Have companies caught on to this trend?

According to the same study, on the corporate insurance, 45% of the employers imposed co-pay in 2011 as compared to 13% in 2008. Co-pay simply means that the policyholder pays a certain percentage of medical costs while the rest is paid by the insurer. The percentage can vary between 10 and 30 in most cases. If your co-pay is 20% and the claim amount is Rs1 lakh, you will shell out Rs20,000—while the insurer is liable to pay the balance. Co-pay has been widespread in the US for a long time and is now used by Indian insurers.

Co-pay is mainly applied for parental coverage, but it is catching up with spouse, children and lastly the employee. According to Arvind Laddha, chief executive officer, Vantage Insurance Brokers and Risk Advisors, “Employers should define a cap on the maximum amount to be borne by the employee (co-pay), so as to limit the employee’s liability especially where the treatment costs become prohibitively high.”

Will co-pays be common feature in all retail mediclaim soon? According to Avadhoot Mavlankar, principal officer, Shinrai Insurance Broking, “Today, it is as much ubiquitous in retail policies as in corporate insurance.”

The co-pay clause is applied in different ways by insurers. Some may apply it when a policyholder gets treatment in a non-PPN (preferred provider network) hospital. In some cases, co-pay may be applied only to certain ailments specified in the policy or medical expenses related to pre-existing conditions. Others may insist on co-pay if the policyholder undergoes treatment in certain metropolitan cities.

Check out how the co-pay is applied in your policy, as it may even be subtly applied in conjunction with room rent. In this case you will not see the word co-pay in the policy, but it work in similar way. According to Rohan Dukle, Director, Magus Corporate Advisors Pvt. Ltd, “United India health insurance gold and silver policy prorates the claim based on your room rent and actual room you availed. E.g. If the room rent limit is 1% of SI and assuming SI of Rs2 lakh, your room rent limit is Rs2000 per day. In case you avail a room of Rs3000 rent, your claim is also prorated to pay only 2/3rd of the claim. The remaining 1/3rd will be borne by the policyholder.”

The main advantage of co-pay to the policyholder is a lower premium. Higher co-pay may lower the premium. Unfortunately, the co-pay clause is rife in senior citizens’ mediclaim where premiums are not low. It means that at the age when you need medical facilities the most is when you will also have to bear the burden of hospital bills partially. Star Health’s Senior Citizen Red Carpet policy has 50% co-pay for pre-existing diseases/conditions and 30% co-pay for all other claims.

According to Juzer Jawadwala, Technical Advisor, Nandi Insurance Broking, “Oriental insurance family floater policy has 10% co-pay for SI of Rs5 lakh or less. There is no co-pay for Oriental individual policy. Bajaj Allianz health guard also has co-pay of 10%, but if you pay 10% extra premium they will remove the co-pay.”

The other trend that will surface sooner or later in India is ‘deductibles’. It is popular in the US. The policy starts paying after a prefixed deductible amount is paid by the policyholder for medical services. For example, a deductible of Rs15,000 would mean that a policyholder pays the initial Rs15,000 in a year before he starts claiming from the policy. If the deductible amount is not reached in a year, the policy will pay nothing. This is, today, common in overseas mediclaim policies sold by Indian insurance companies to people travelling abroad.

An equivalent concept of deductible has arrived in Indian mediclaim through ‘Top-up’ and ‘Super Top-up’ policies. For these policies, payments kick in after a threshold amount has been spent. The difference between the two is that in the case of a top-up policy the expenses for a single treatment should be over the threshold, whereas in a super top-up the total expenses in a year must be above the threshold level for the policy to be effective. Thus, between top-up and super top-up, super top-up is more beneficial for the customer.

Arvind Laddha says, “Co-pay model is more popular than deductibles in India. Deductible amount on every claim will weed out smaller claims.”



Dr Vaibhav Dhoka

5 years ago

It is well understood and has become common practice as at time of admission the first querry is Are you Insured?And if answer is YES new set of charges are applied.But poor policyholder fails to understand that he will be loaded during next premium payment.This is sign of vanishing social ethics in all fields.


5 years ago

Unless , the Heath ministry is closely involved , proper costing of the hospital packages , ( A SEMINAL EXERCISE worked out by AFMC), could be arrived at by the Insurers. Co-pay or deductible would not work , for the reasons , that pricing of hospital care/ use of modern medicine , are exploitative & aggressive in the market.

Nagesh Kini FCA

5 years ago

Well done Raj!
The whole gamut of Health Care calls for a serious revisit more particularly the senior citizen component where the premium is heading north when the claims filed are heading in the opposite direction due to the harassment of the TPA and demands of irrelevant paper work like prescriptions to accompany every bill

In an RTI response one PSU insurance co. it was disclosed that the claims in the 35-45 age group to be the highest.Yet the 60+ are loaded with increasing premium and co-pay.

In stead of increasing the sum insured by a % as NCB the New India ought to review the claim record case by case and offer discount in the renewal premium as is done in motor insurance.

Increasing the SI makes no sense for an elder, lowering of premium makes for a lot of reasonableness.


Harish Kohli

In Reply to Nagesh Kini FCA 5 years ago

I cannot agree that for the elder lowering the premium is better than increasing the SI. Nagesh's conclusion is seems to be based on the statistics of one Insurer. I have had a Mediclaim policy for over 20 years for 3 lakhs without claim. But in one year I have had cataract surgeries in both eyes and gall bladder removed. I chose the hospitals for expertise not comfort. Still the cost was 1. 3 lakhs. Nearing 70, I don't know what is in store for me next? Will I need would a knee replacement or will I slip in the bathroom or fall down the stairs? The only insurance I don't need is Life Insurance. The SI should not be reduced. Let everyone choose their levels.

nagesh kini

In Reply to Harish Kohli 5 years ago

Reply to Mr.Kohli,
Even I have not lodged any claim whatsoever for more than your time.
What I proposed was an alternative way of rewarding the insured. I understand some other PSU insurance co. is doing this.
I agree the cost of treatment is skyrocketing and can exceed the SI.
The IRDA has to work out a suitable mechanism other than a 5% increase subject to a max of 25% in the SI.
Business Line on 4 Feb. reports that the IRDA has formed a "Health Insurance Forum to act as a consultative body for all stakeholders... for effective dialogue between hospitals,insurance companies,TPAs and consumer in an order issued today" says the Chairman IRDA.
Surprisingly, the insured is not included in "the members of the Forum would include 6 CEOs of insurance companies and representatives of the Health Ministry."
There ought to be an equal representation for the consumer-insureds, more particularly the senior citizens who keep shelling crores of rupees. And also the Service Providers through the Hospital Associations. The TPAs the biggest culprits need to be effectively kept away as they are on the way out more particularly with the abrogation of the Cash less since last year.


In Reply to nagesh kini 5 years ago

valid point from both Mr. Kini and Mr. Kohli. Thanks

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