RBI issues final guidelines for small and payments banks

The new small and payments banks will have the responsibility to extend credit to small borrower who is dependent on money lenders and private financers


The Reserve Bank of India (RBI) on Thursday released its final guidelines for small and payments bank in the country. The intent behind such banks is to include the excluded sections of the society in formal banking channels.


RBI said, these payments banks will further spread financial inclusion by providing small savings accounts and payments and remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users.


Small finance banks, on the other hand will provide savings vehicles, and supply of credit to small business units; small and marginal farmers; micro and small industries; and other unorganised sector entities, through high technology-low cost operations, the central bank said.


The new banks, when set-up, will have the responsibility to extend credit to the small borrower who is dependent on the money lenders and other such entities for loan purposes.


Mobile service providers, existing non-banking finance companies and local area banks are seen as potential entities setting up such banks.


Presenting his Budget in July, finance minister Arun Jaitley had mentioned the government allowing the setting up of small and payment banks. He had said, "After making suitable changes to current framework, a structure will be put in place for continuous authorization of universal banks in the private sector in the current financial year. RBI will create a framework for licensing small banks and other differentiated banks. Differentiated banks serving niche interests, local area banks, payment banks are contemplated to meet credit and remittance needs of small businesses, unorganized sector, low income households, farmers and migrant work force”.


Nifty, Sensex to rally? – Thursday closing report

A strong move above 8,510 will ensure a fresh upmove


The Indian stock market witnessed a volatile session on Thursday with the benchmark indices moving erratically. Today, NSE recorded a volume of 98.49 crore shares with the expiry of November futures and options segment. In Wednesday’s closing report, we had mentioned that CNX Nifty seems to be trapped in the 8,430-8,530 zone. Today, the benchmark moved in this range only.

S&P BSE Sensex opened at 28,398 and moved in the range of 28,308 and 28,498 and closed at 28,439 (up 53 points or 0.19%). Nifty opened at 8,478 and moved between 8,456 and 8,507 and closed at 8,494 (up 18 points or 0.22%). India VIX fell 2.25% to close at 12.6925.

The Indian government will announce data on gross domestic product (GDP) for the quarter ending September 2014 on Friday. Ratings agency Moody's expects the country's GDP to grow at 5.3% in the July-September quarter of the current fiscal, better than 4.8% clocked in the year-ago period.

Indian and Chinese companies have inked agreements envisaging an investment of $2.5 billion during the visit of a Chinese delegation to the country.

On the political side, the Bharatiya Janata Party (BJP) announced that it will start fresh talks with Shiv Sena on the issue of the latter's joining the four-week-old government in Maharashtra.

Coming back to domestic stock markets, Strides Arcolab (6.99%) was the top gainer in ‘A’ group on the BSE. Medicines for Malaria Venture has signed collaboration agreements with two Indian pharmaceutical companies, Cipla and Strides Arcolab for the development of rectal artesunate for pre-referral treatment of children with severe malaria. The companies will each develop a product building on the clinical studies led by TDR, the Special Programme for Research and Training in Tropical Diseases led by the World Health Organization (WHO). The goal is to achieve WHO-prequalification of a rectal artesunate product by 2016. Cipla rose 1.27% to close at Rs636.30 on the BSE.

Crompton Greaves (6.11%) was the top loser in ‘A’ group on the BSE. The stock was in the news as Avantha Holdings, part of the promoter group, has decided to sell 4.2 crore shares in Crompton Greaves via a block deal at Rs198-204 per share. Avantha Holdings stated, "This is a one-time transaction by the holding company to reduce debt."

BHEL (4.35%) was the top gainer in Sensex 30 pack. Citigroup upgraded the stock to "buy" from "sell".

Bharti Airtel (1.91%) was the top loser in Sensex 30 stock. It has launched its 4G service in Seychelles, which is the operator's first commercial Long Term Evolution (LTE) network in Africa.

On Wednesday, US indices closed in the green. Durable goods orders, a measure of business spending plans, fell for a second straight month, consumer spending rose less than market expectations and new home sales also unexpectedly fell in October. A separate report from the Labour Department showed initial claims for state unemployment benefits rose above the 300,000 threshold last week for the first time since early September.

The US stock market is closed on Thursday for Thanksgiving Day holiday. The market will reopen on Friday for a shortened session ending at 1 p.m.

Asian indices showed mixed performance. Shanghai Composite (1.00%) was the top gainer while Nikkei 225 (0.78%) was the top loser.     

Total profits of China's industrial enterprises fell 2.1% from a year earlier in October, the National Bureau of Statistics said today, 27 November 2014, in Beijing. That compares with September's 0.4% increase and is the biggest drop since August 2012, based on previously reported data. European indices were showing mixed trading, while the US futures were trading flat.  


Sundaram World Brand Fund—Are there better opportunities abroad?

Sundaram World Brand Fund will invest directly in overseas equity


Over the past one year, as many as 11 schemes, which invest in foreign assets, have been launched. This is, over a time, when Indian equity was the best performing asset class in the world. Over the past one year, NSE’s CNX Nifty has returned 39%. The next best performing market was the US, with the NASDAQ returning 24% and the S&P 500 returning 12.96%. China’s Shanghai index returned 23.77% over the same period.


While Indian equity schemes have returned an average of 50%, mutual fund schemes investing in foreign assets returned a mere 2%. We are not surprised. We had pointed the problems of foreign-flavoured schemes were launched.


Joining the list of overseas investment schemes is the new close-ended scheme from Sundaram Mutual Fund— Sundaram World Brand Fund. The scheme has a maturity period of 1,100 days (or approximately three years) from the date of allotment. The scheme will invest in equity and equity related securities listed on recognized overseas stock exchanges across the world. Overseas stock investments will make up 65%-100% of the portfolio while domestic fixed income and money market instruments will make up the remaining portfolio.


The offer document mentions that the fund’s portfolio shall be diversified by “investing in companies listed in at least three different countries at a given point of time.”


S Bharath (10 years experience) and Dwijendra Srivastava (around 10 years experience) are the fund managers. S Bharath is the dedicated fund manager for investment in overseas securities.


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