RBI issues guidelines to standardise mobile banking services

The TReDS will be an authorised payment system and also be subject to the oversight of the RBI


The Reserve Bank of India (RBI) on Thursday issued operative guidelines for mobile banking transactions seeking to standardise mobile banking services.


The guidelines for setting up and operating the Trade Receivables Discounting System (TReDS), a scheme for setting up and operating the institutional mechanism to facilitate the financing of trade receivables of micro, small and medium enterprises (MSMEs) from corporate and other buyers, including government departments and public sector undertakings (PSUs) through multiple financiers.


In the first phase, the TReDS would facilitate the discounting of these factoring units by the financiers resulting in flow of funds to the MSME with final payment of the factoring unit being made by the buyer to the financier on due date. In the second phase, the TReDS would enable further discounting, re-discounting of the discounted factoring units by the financiers, thus resulting in its assignment in favour of other financiers.


According to RBI, entities desirous of setting up and operating the TReDS are required to have a capital of Rs25 crore, it should be able to provide electronic platform, have a robust MIS system to dissemination information in real time basis, a suitable business continuity plan and online surveillance capability to monitor positions, prices and volumes in real time so as to check system manipulation.


Last year in September, RBI governor had declared the central bank's intention to facilitate Electronic Bill Factoring Exchanges in the country, which could electronically accept and auction MSME bills against large companies so that MSMEs could be paid promptly.


MSME sector faces the problem of delayed payment mainly due to their dependency on their buyers within corporate and other sectors, including government departments, undertakings. They are often unable to take up the problem of delayed payments through appropriate institutional setup created for the purpose.


How Financially Savvy Are You? Moneylife Survey Results

The results and analysis for Moneylife's survey on questions relating to  savings, investments and health & life insurance

The life of a financial consumer is not easy. Regulators tell you to get financially educated but we don’t have much scope to acquire the unbiased information we need; too much of what we read and hear is not in our interest or contradicts one another. But there is no escape from having to deal with myriad financial questions.

To check where Moneylife readers stand on the financial literacy scale, we decided to conduct a survey that included questions relating to savings, investments and health & life insurance. Here are the results of the survey with our comments on how most people have answered each question.

It’s heartening to see that more than 50% respondents have said that they save more than 25% of their income. Another 23.6% save at least 15%. Only 22.3% of the respondents have admitted to saving less than 15%. For many, a low level of savings may not be their fault. They are probably paying back home loan instalments through their nose, to have a roof over their head.

More than 68% have money in bank fixed deposits (FDs) (we are surprised it’s not 95%); but many are putting money in debt mutual funds, tax-free bonds, even insurance policies and annuities. While fixed-income does remain the asset class of choice (73.2%), remarkably, 67.9% have invested in equity mutual funds and shares.


Almost 28% of the respondents skipped this question, unsure of the answer. Barely 50% of the respondents were firm that none of these was fixed-income investment.


What is it that attracts investors most to fixed-income products? The two most popular attributes were capital protection and guaranteed returns. Interestingly, 16% of the respondents said that they don’t prefer to invest in fixed-income products. We also wanted to check whether investors have either too high or too low expectation of returns from fixed-income.


Almost 55% of respondents expected a return of 7%-9% from fixed income while 28.2% expected a return of more than 9%, which is unrealistic. On the other hand, about 24% of the respondents expected less than 7% return from fixed-income.


When asked about the proportion of equity funds and shares in their financial investment, only 30.5% said that it is over 50%. More than 40% have less than 25% of their money invested in equity funds and shares. They are not likely to create much wealth over the long term.




What were the main concerns of investors regarding mutual funds? Almost 40% of the respondents were worried about poor performance of fund managers. One-third were hassled by too many schemes to choose from. Both these issues can be addressed easily.


Analyse the performance record of 10 years or more and choose among the five or seven best. After all, these schemes have proven themselves over different market cycles.


Over 72% of the respondents have health insurance (mediclaim), which is an encouraging sign. Unfortunately, only 26% of the respondents have personal accident (PA) policy. A comprehensive PA policy, covering permanent total disability, permanent partial disability and temporary total disability, is a must for everyone.


The 24-hour hospitalisation rule topped (35.9%) as the main issue with health insurance. The obstacle is the mechanical rejection of claims even if hospital discharge is done minutes before completion of 24-hour stay. The criticality of medical need of the insured and the expense incurred for less than 24-hour stay is not considered.


TPA’s behaviour (25%) and cashless issues (25.8%) also attracted a lot of criticism. Sub-limits (22%), room rent limit (21.5%), stringent timeliness for hospitalisation intimation (20.3%) and stringent timelines for claims submission (17.3%) were other important factors for customers. Surprisingly, high premium (19%) and changes in product features (13.2%) are still not a major issue for consumers.


Thirty per cent of the respondents have an endowment plan which is a popular product. While LIC’s endowment plan with a term of more than 15 years has given a return of approximately 7%pa, we do not know what is store for the policyholders in future.


Over 45% of the respondents already have term plan; 12% do not need life insurance. For the remaining, the main reason for not buying term plan is the classic reason—‘need to get returns on maturity’ (8.4% respondents). For them, the kind of returns is not important. Insurance is considered as a waste if nothing is given back at the end of the policy period.


The main reason for buying an offline term plan, instead of online term plan, is the worry about claims settlement of online term plans. Just around 10% of the respondents need agent’s help to buy insurance. That is good because agents will sell what he/she is asked to push, not what you need, namely, term plan. Difficulty in buying term plan online can be due to the do-it-yourself process.


For a detailed analysis and a look into the common mistakes, misconception and problems with investors' perceptions about financial services, do follow the in-depth story here


India forms panel to check trade-based money laundering

A committee headed by DG of CEIB has been formed to study modalities of trade based money laundering and device methods to deal with problems


To curb the menace of illicit fund flows, the Indian government has set up a high level panel that will look into trade-based money laundering activities which particularly involve manipulation of invoices.


Director General (DG) of Central Economic Intelligence Bureau (CEIB) will be convener of the committee, which was step up recently to suggest steps to check trade-based money laundering activities.


"A committee has been formed to study modalities of this (trade based) money laundering and device methods to deal with problems on how it happens and develop models and ways of dealing with it," an official said.


This is part of the government's efforts to clamp down on black money generation by Indian entities both within and outside the country.


The committee consists of DG CEIB, DG Directorate of Revenue Intelligence (DRI), Enforcement Directorate, Director Financial Intelligence Unit (FIU) and CBDT investigation wing.


The official said the committee will develop and crystallise indicators - on what kind of transactions - study and identify red flags if something is wrong.


Besides, it is entrusted with flow of meaningful information among agencies, filtering the information and passing it on to relevant organisation, the official added.


Trade-based money laundering is over or under invoicing based on whether some entities want to take money from India abroad or bring illegal money from outside and make it legal.


Secondly, it also involves activity such as money remittances made abroad through banks channels but when the import never materialises.


With liberalisation and expansion of economy, unscrupulous elements have also changed the method of tax evasion and avoidance.


"The world is also now obliterating the distinction between avoidance and evasion," Finance Minister Arun Jaitley said at the inauguration of the 2nd Regional Customs Enforcement Meeting.


"We have entered the world of free trade and the essential pre-requisite of any free trade is fair trade but then when fairness ceases to happen, it is such institution (DRI) (that) step in. There are various reasons why fairness ceases to happen," he added.


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