Companies & Sectors
RBI asks banks to issue Tier II bonds to retail investors

Banks are encouraged by the RBI to consider the option of raising Tier II capital through public issue to retail investors while issuing subordinated debt

Mumbai: The Reserve Bank of India (RBI) has asked banks to issue bonds to retail investors so as to deepen the corporate debt market, reports PTI.


“With a view to deepening the corporate bond market in India through enhanced retail participation, banks, while issuing subordinated debt for raising Tier II capital, are encouraged to consider the option of raising such funds through public issue to retail investors,” RBI said in a notification.


However, it said that while doing so banks are advised to adhere to the prescribed conditions.


The central bank also emphasised that the investor is aware of the risk characteristics of regulatory capital instruments.


Banks usually raise Tier II capital by issuing subordinated debt to banks and large investors.


As per the prescribed format, the amount of subordinated debt to be raised may be decided by the board of the bank.


The bonds have a minimum maturity of five years. However, if the bonds are issued in the last quarter of the year i.e. from 1st January to 31st March, they should have a minimum tenure of 63 months.


The coupon rate of such bonds are decided by the board banks.


Differential interest only on term deposits of Rs1 crore or more

From 1st April, banks would offer differential interest rates for only on term deposits of Rs1 crore and more and may refuse premature withdrawal of the deposit

Mumbai: The Reserve Bank of India (RBI) has tightened norms for differential interest rates asking banks to offer them only on term deposits of Rs1 crore or more, and permitted them to refuse premature withdrawal of such deposits, reports PTI.


“The permission to offer varying rates of interest for deposits of the same maturity shall apply to single rupee term deposits of Rs1 crore and above.


“Banks may therefore offer same rate of interest or differential rates of interest for deposits of Rs1 crore and above of the same maturity,” the RBI said in a notification.


The changes will be applicable from 1 April 2013


For deposits below Rs1 crore of the same maturity, the RBI said, the same rate will apply.


On premature withdrawal of large size term deposit, it said: “The bank at its discretion, may disallow premature withdrawal of large rupee term deposits of Rs1 crore and above” of all depositors, including deposits by individuals and Hindu Undivided Families (HUFs).


The bank shall have the freedom to determine its own penal interest rate of premature withdrawal of term deposits, it added.


The RBI also said that henceforth the expression “bulk deposit” would be used for single rupee term deposits of Rs1 crore and above.


As of now, the term “bulk deposit”, though not specifically defined, has been interchangeably used with “wholesale deposits”—deposits of Rs15 lakh or above.


The country’s monetary authority said that banks should disclose in advance the schedule of interest rates on deposits including those on which differential interest will be paid.


“Interest paid by banks should be as per the schedule and not be subject to negotiation between the depositor and the bank,” the RBI added.


Earlier also, banks were permitted to disallow premature withdrawal of large deposits held by entities except for those held by individuals and HUFs.


The RBI also modified the memorandum of instructions for opening and maintenance of Rupee/foreign currency Vostro accounts of non-resident exchange houses.


Through the amendment, payments to medical institutions and hospitals in India, for medical treatment of NRIs/their dependents and nationals of Hong Kong, Singapore and Malaysia, have been included in the list of “Permitted Transactions”.


Also, payments to hotels by nationals of Hong Kong, Singapore and Malaysia and NRIs for their stay has been included in the list.


Consumers should be offered lowest mobile call rates: Sibal

According to sources the Centre is likely to approach TRAI regarding the steep hike in call rates by some operators

New Delhi: A day after mobile charges were hiked by leading operators, telecom minister Kapil Sibal has said consumers should be offered the lowest call rates. “We want consumers to be offered calls at lowest rates,” Sibal told PTI.


Bharti Airtel, India’s largest mobile phone operator, and Idea Cellular have raised call charges mostly by way of a reduction in free minutes or air-time available on most plans. Others like Vodafone are likely to follow suit soon.


Another mobile services provider Uninor, however, said it has no plans as of now to increase call rates.


“As a young operator focused on the mass market through basic services on a pre-paid only platform, Uninor has made a commitment to remaining “Sabse Sasta” for its customers. This has been our position so far and will continue to be so in all the circles we operate in,” Uninor said in a statement.


Meanwhile, government sources said the Centre is likely to approach the Telecom Regulatory Authority of India (TRAI) regarding yesterday’s hike in call rates.


“We will nudge TRAI to do something,” a source said.


Meanwhile, TRAI chairman Rahul Khullar said, “Forbearance does not mean that we have closed our eyes. Forbearance reposes faith on operators and we realise there is competition in the market.”


TRAI had decided to continue with forbearance in tariff regime that gives freedom to decide on call and other services rates.


The Indian mobile phone industry, known for the lowest telecom services rates, is witnessing a hike in call rates now.


The hike in call charges come as companies face thousands of crore in one-time surcharge on airwaves they hold beyond a threshold.


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