Rangarajan seeks recast of MFI biz model

Mumbai: Prime Minister’s economic advisory council chairman C Rangarajan has asked microfinance institutions (MFIs) to overhaul their “flawed” business model for sustainability, reports PTI.

This comes on the heels of former Reserve Bank of India (RBI) Bank governor YV Reddy likening MFIs to moneylenders.

Stating that most MFIs are either registered or unregistered non-banking financial companies (NBFCs), he said they are following a flawed business model by lending to consumption-related spends.

“Unless they change their lending model, they will not be able to sustain their business for long,” Mr Rangarajan said here while giving away best banks award instituted by the Business Today magazine last evening.

MFIs should lend more for productive purposes and not just for consumption-related expenses, he said adding bulk of the current MFI lending is towards consumption.

The former RBI chief also said MFIs should stop extending multiple loans to the borrowers as this could lead to default.

Mr Reddy last month had labelled MFIs as nothing better than traditional moneylenders and had called for stern regulation.

“Profit-seeking MFIs should be studied as they do not come under the laws relating to money lending or usury. After all, they are no better than money lenders,” Mr Reddy had said.

The nearly Rs20,000-crore MFI industry is reeling under a severe crisis following the Andhra Pradesh ordinance in October.

The ordinance sought to control interest rates charged by MFIs and also to check the coercive recovery tactics adopted by them.

This adversely impacted their collection and left them in a severe liquidity crisis. Since the ordinance, banks have slowed down their exposure to the sector.

MFIs are in the business of lending to the poor who do not have access to bank funds. These institutions source their funds from banks at an interest cost of 12%-13% and in turn lend at much higher cost of nearly 30%.

The RBI has also set up a panel to look into the entire gamut of MFI business.

On the corporates’ call for developing debt market, Mr Rangarajan said, to fuel the faster growth of the economy, the banks will have to grow 25% annually to meet the huge demand for funds from all areas of the economy.

On the back of strong Q1 and Q2 gross domestic growth (GDP) growth, the government early this week upped its growth forecast to 9% or even above this fiscal from the previous 8.5% as was projected in the budget.

He warned that banks can face “a liquidity mismatch” in times to come as increased exposure to realty and infrastructure could enhance the maturity of bank assets.

During the ceremony, Axis Bank bagged the best bank award in the large banks category for the second time in a row.

This was followed by Punjab National Bank and HDFC Bank.

Yes Bank was adjudged as the best mid-size bank, followed by Kotak Mahindra Bank and Jammu & Kashmir Bank.

In the small banks category, DBS Bank has been picked up as the No 1 followed by Scotia Bank and BNP Paribas.

The award for top three amongst the very small category, have gone to Shinhan Bank, Mashreq Bank and Oman International Bank respectively.

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Personal finance Thursday

ICICI Pru MF unveils one year fixed maturity plan; SBI Mutual Fund floats Magnum Income Fund–FRP–Saving Plus Bond Plan–Daily (D); Sundaram MF introduces 367 days plan; Tata Indicom launches remittance service through CellPayÒ

ICICI Pru MF unveils one year fixed maturity plan

ICICI Prudential Mutual Fund has launched ICICI Prudential Fixed Maturity Plan-Series 53-One Year Plan D, a close-ended income scheme.

The investment objective of the Plan D is to generate regular returns by investing in fixed income securities/debt instruments which would mature on or before the date of maturity of the plan. The tenure of the plan is 371 days. The plan offers growth and dividend (payout) options.

The new issue opens on 9th December and closes on 16th December. Being listed on the stock exchange, no exit load will be applicable on the plan. The minimum investment amount is Rs5,000.

CRISIL Composite Bond Fund Index is the benchmark index. Chaitanya Pande will be the fund manager.

SBI Mutual Fund floats Magnum Income Fund–FRP–Saving Plus Bond Plan–Daily (D)
 
SBI Mutual Fund has launched SBI Magnum Income Fund–FRP–Saving Plus Bond Plan–Daily (D), an open-ended floating rate scheme.

The investment objective is to provide investors an opportunity to earn returns that would be higher than the returns offered by comparable investments in debt and money market securities.

The new issue opens on 9th December and closes on the same day. The minimum investment amount is Rs2,000.

Sundaram MF introduces 367 days plan

Sundaram Mutual Fund has launched Sundaram Fixed Term Plan–AS, a close-ended income scheme.

The investment objective is to generate income with minimum volatility by investing in debt and money market securities, which mature on or before the maturity of the plan. The plan offers growth and dividend (payout) options.

The new issue opens on 9th December and closes on 10th December. The minimum investment objective is Rs5,000. The tenor of the plan is 367 days.

CRISIL Short-Term Bond Fund Index is the benchmark index. Dwijendra Srivastava will be the fund manager.

Tata Indicom launches remittance service through CellPayÒ

Tata Indicom has tied up with eSSecom to offer CellPayÒ (direct debit to account) solutions. CellPayÒ will provide consumers a secure way to make their payments through their mobile phones using funds in their bank accounts (direct debit to account) or through credit card. This service is available for all Tata Indicom postpaid mobile subscribers across Karnataka.

The CellPayÒ solution is available for customers who are registered for mobile banking with CellPay connected banks. The registered customer has to create a unique PIN by calling the CellPay IVR. Once the number is generated, the caller is eligible to avail all the benefits. Customers using CellPayÒ service have two options to make payments. One, they can either use an SMS requesting for payment using their CellPayÒ virtual number wherein they will get a confirmation of the payment via SMS on their phone. Secondly, the customer can also opt for an application available on the handset to make the payment. Here, the customer has to simply select the CellPayÒ application on the phone as a payment option post which a confirmation SMS will be sent to the phone once the payment is received. 

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3G tech vulnerable to cyber crime, says experts

New Delhi: As third generation (3G) mobile services are set to be rolled out soon in the country, cyber experts sound a word of caution about the high tech enabled mobile phones, which they say are more vulnerable in the world of technology related crimes, reports PTI.

While the next generation technology aims to make life simpler enabling downloading of movies and music within minutes, it can also be used for various unscrupulous activities.

“With 3G, cellphones will have faster broadband Internet and with such speed you can watch television live, make video calls and download music and movies in no time. But through spying software and virus, the hacker can easily break into your system,” says Ankit Fadia, an ethical hacker and cyber security expert.

“The hacker can record all the audio conversation and video files. Not many people in India install anti-virus in the phones. I would recommend them to install anti-virus and fireballs while using 3G, says Mr Fadia who recommends switching off the bluetooth function of the phone when not required to protect the user’s password.

Not limited to an individual’s privacy issues, the 3G technology will also lead to increase in piracy of films and music, thereby giving a staggering amount of losses to the entertainment industry that is battling the piracy threat.

“It will become extremely easy for anybody to download an entire Bollywood film in few minutes using 3G. This is going to lead to further tremendous growth of websites like torrents,” says advocate Pavan Duggal, a cyberlaw expert.

The Internet and Mobile Association of India (IAMAI) points out that Bollywood would be hit most by the 3G and wants service providers to adopt a stricter approach to check cybercrimes.

“Today it takes several hours to download a new release Bollywood film but with 3G it will be in minutes that will encourage people to use illegal means to view a film,” says Rakshit Tandon, consultant, IAMAI.

According to a PricewaterhouseCoopers report titled, “Indian 3G broadband subscribers,” the mobile subscriber base is projected to cross one billion in 2014. The 3G broadband subscriber base is expected to cross 107 million by 2015.

Indian law enforcement lacks the necessary training to deal with cyber-crimes and there is a distinct need for amending the law and making security agencies aware about the Internet, say experts.

“Laws are there to protect but our police agencies are yet not ready to take-up the cyber crime challenges, especially 3G. They need to be trained to tackle the growing usage of Internet by criminals,” says Mr Fadia.

Mr Duggal, who is a Supreme Court lawyer, says there is a distinct need for amending the law so as to provide for far more broad generic provisions which can withstand the onslaught of any other new technology.

“Further adequate statutory protections needs to be given to users so that whatever limited right to privacy they have in the context of the electronic ecosystem are not appropriately compromised with the advent of new technology,” he says.

As mobile handsets are becoming an integral part of the consumer experience, the availability of a large number of feature-rich handsets at affordable prices or in attractive bundled offers is likely to further drive the adoption of 3G value-added services, according to a report by RNCOS.

The industry analysis provider also predicts that the number of 3G mobile subscribers is expected to grow at a CAGR of around 80% during 2011-2013.

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