In a notification addressed to all state and central co-operative banks, RBI said they are free to determine their savings bank deposit interest rate subject to conditions. Till now, co-operative banks were mandated to give 4% interest rates on such deposits. The rate was increased from 3.5%
Mumbai: The Reserve Bank of India (RBI) on Monday deregulated interest rate on savings accounts in all state and central co-operative banks, a move that will fetch better returns for depositors, reports PTI.
The apex bank had freed these rates for the scheduled commercial banks in October.
In a notification addressed to all state and central co-operative banks, RBI said they are free to determine their savings bank deposit interest rate subject to two conditions.
Under the first condition, the notification said, “Each bank will have to offer a uniform interest rate on savings bank deposits up to Rs1 lakh, irrespective of the amount in the account within this limit”.
The other condition states that for savings bank deposits over Rs1 lakh, a bank may provide differential rates of interest, if it so chooses.
This would, however, be subject to the condition that banks will not discriminate over the interest paid on such deposits, between one deposit and another of similar amount accepted on the same date, at any of its offices, it said.
Till now, co-operative banks were mandated to give 4% interest rates on such deposits. The rate was increased from 3.5%.
It also said interest rate on Non-Resident (External) accounts scheme and Ordinary Non-Resident Deposit under savings account, which has been prescribed at 4% per annum at present, will continue to be regulated until further review.
Justifying the move, RBI said that with liberalisation in Indian financial markets over the last few years and growing integration of domestic markets with external markets and greater use of derivatives products, asset liability management of for NBFCs have become complex and large, “requiring strategic management.”
Mumbai: The Reserve Bank of India (RBI) on Monday tightened the prudential norms for the non-banking financial companies (NBFCs) under which they will have to account for risks towards off-balance sheet items while computing capital adequacy requirement, reports PTI.
These off-balance sheet items, against which NBFCs will have to make provisions, will include interest rate contracts, foreign exchange contracts, credit default swaps and other market related contracts permitted by RBI.
“Off-balance sheet exposures of NBFCs have increased with the increased participation in... currency options and futures and interest rate futures... It is therefore necessary that NBFCs move over to modern techniques of risk measurement to strengthen their capital framework” RBI said in a notification.
The decision is expected to improve solvency of the NBFCs though it might put additional financial burden on them.
NBFCs will have to assign adequate weights to both on and off-balance sheets items while maintaining the mandatory CRAR (Capital to Risk Asset Ratio).
RBI said that henceforth the NBFCs “will need to calculate the total risk weighted off-balance sheet credit exposure as the sum of the risk-weighted amount of the market related and non-market related off-balance sheet items.”
Giving justification for its move, the RBI said that with liberalisation in Indian financial markets over the last few years and growing integration of domestic markets with external markets and greater use of derivatives products, asset liability management of for NBFCs have become complex and large, “requiring strategic management.”
The new norms, the RBI said, will be effective from 1 April 2012, for off-balance sheet items already contracted. For the new contracts, it said, the norms will apply with immediate effect.
The risk weight to each off-balance sheet items which will include interest rate contracts, foreign exchange contracts, credit default swaps and other permissible contracts will be assigned according to a pre-specified formula.
SEBI’s move to disallow brokers from passing on part of their commission to investors in debt instruments will protect the interests of investors in securities and promote the development of the securities market
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) on Monday asked brokers not to pass on part of their commission to investors in debt instruments as such offers result in unfair advantage to some, reports PTI.
The regulator said it has gathered from market participants that in public issues of debt securities, some brokers/ distributors are passing on part of their brokerage/ commission to the final investors for subscription to such public issue of debt.
“As a result, while on one hand it is giving an unfair advantage/bargaining power to a certain set of investors and distributors, on the other hand it is adding to the cost of issuance for the company,” SEBI said in a circular.
In order to curb such practices, SEBI said “it is advised that in respect of public issues of debt securities, no person connected with the issue shall offer any incentive, whether direct or indirect... to any person for making an application for allotment of specified securities”.
SEBI said the circular has been issued to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market.