RBI to compensate banks for loss in NE service

“RBI will compensate 100% revenue loss to banks for five years as an incentive to push banking inclusion in the region,” deputy general manger RBI, T Jamang said.

Having prioritised to provide banking service to the people of North-East, Reserve Bank of India (RBI) had decided to compensate commercial banks for revenue loss in the process, RBI officials said.

“RBI will compensate 100% revenue loss to banks for five years as an incentive to push banking inclusion in the region,” deputy general manger RBI, T Jamang said on the sideline of an annual payment conference of RBI.

The parameters set by the RBI were that each village or cluster of nearby villages with a population of 2,000 people should have a banking facility by March 2012, he said.

However, relaxation would also be given in certain areas in which the population is more than 1,000 and more, Jamang said.

“Our intention is to have villages covered by way of banking correspondent and mobile individuals to sensitise people and have them included in banking services,” the RBI official said.

Further, the official said the RBI is working on a strategy to improve e-banking penetration in the region which is aimed at giving people easy access to banking.
“We would like to give people mobile banking facilities in which banking transaction need not take place at the banks but at their fingertips,” he said.

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Bulls have to defend 5,171 points to prevent further battering

Strong resistance is pegged in the 5,385-5,425 points range and unless and until this is taken out the bulls would continue to be under pressure. One should persist with the strategy of selling in rallies especially close to the above mentioned area

S&P Nifty close: 5278.20

 
Market Trend
Short Term: Sideways        Medium Term: Sideways        Long Term: Down


The Nifty opened marginally better and tried to cross the weekly pivot of 5,374 points but failed, resulting in another bout of selling which saw the Nifty decline precariously close the recent low of 5,171 points (low this week 5,205 points). However the bulls succeeded in defending this low thus averting further selling pressure. In a week of see saw trade the Nifty finally closed the week 39 points (-0.75%) lower.

The sectoral indices which outperformed were BSE Fast Moving Consumer Goods (+2.71%), BSE Healthcare (+1.77%) and BSE IT (+0.43%) while the gross underperformers were BSE Metal (-2.54%), BSE Power (-2.50%), BSE Oil & Gas (-2.20%), and BSE PSU (-1.32%).  The weekly histogram MACD continued to move down but is still above the median line indicating that the correction is still on. However the volumes were lower during the decline compared to the previous week.

Here are some key levels to watch out for this week
  • As long as the S&P Nifty stays below 5,289 points (pivot) the bulls would be under pressure in the near term even though the intermediate trend is sideways.
  • Support levels in declines are pegged at 5,193 and 5,109 points.
  • Resistance levels on the upside are pegged at 5,374 and 5,470 points.

Some Observations
1.    The Nifty failed to close above the pivot last week which resulted in further bull liquidation.
2.    Weekly averages still continue to be negatively phased hence a dip below these would result in the selling pressure accentuating.
3.    Unless and until the previous week’s high (5,385) is taken out in close the bears will hold the edge and a break of the recent low of 5,171 points would set the cats amongst the pigeons.

Strategy
Strong resistance is pegged in the 5,385-5,425 points range and unless and until this is decisively taken out the bulls would continue to be under pressure. One should persist with the strategy of selling in rallies especially close to the above mentioned area. A breach of the recent low of 5,171 points would spell more trouble for the bulls taking the Nifty down to 4,986 or 4,811 points in the weeks ahead.

(Vidur Pendharkar works as a consultant technical analyst & chief strategist at www.trend4casting.com)
 

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New IRDA norms on motor insurance to reduce losses of insurers

“With declined risk pool system, companies would be better placed to manage the risks of their motor policy accounts. So, the loss incurred in the commercial vehicle third party space should come down,” chief financial officer of ICICI Lombard, Gopal Balachandran said

Mumbai: The Insurance Regulatory and Development Authority’s (IRDA) decision to implement “declined risk pool system” for third party motor insurance is likely to reduce the losses incurred in this space, reports PTI quoting officials of various general insurance companies.

“With declined risk pool system, companies would be better placed to manage the risks of their motor policy accounts. So, the loss incurred in the commercial vehicle third party space should come down,” chief financial officer of ICICI Lombard, Gopal Balachandran told PTI here.

He also said that though loss ratio in the commercial vehicle insurance space should reduce in the future, the quantum of decrease would depend on the price correction expected in the next fiscal in the motor insurance premium.

Declined motor pool is the arrangement in which insurers would have the right to refuse or decline vehicle insurance and these vehicles will be insured from the pool shared by insurers.

Presently all commercial third party premium are pooled and losses on account of the commercial third party motor portfolio are shared among all general insurance players according to market share.

Currently, the loss ratio stands at 145% in the motor insurance space or companies incur a loss of Rs45 for every Rs100 premium earned in a policy.

On Thursday, IRDA came up with guidelines for implementation of declined risk pool system, in which it said that this system would only be applicable to standalone third-party liability insurance.

As per the notification, no comprehensive motor insurance policy can be settled from the pool, which will reduce the overall corpus of the third party pool.

Referring to third party pool corpus, Mr Balachandran said that it should be reduced to 25% in the next fiscal from its present size of around Rs6,000 crore.

Other industry officials also echoed similar sentiment.

“We hope that losses incurred in the motor insurance space by general insurance companies will be reduced due to declined risk pool system with prudent underwriting practices,” managing director and chief executive officer of Bharti AXA General Insurance, Amarnath Ananthanarayanan said adding it would help in better claim settlements in motor insurance space.

According to the regulator, the insurance companies would now need to retain 20% of the gross premium in their accounts, give 10% to General Insurance Corporation of India and rest 70% would go to the motor pool.

Referring to this new system, chief executive officer of L&T General Insurance, Joydeep Roy said declined pool is likely to reduce the loss ratio and bring more transparency into the system.

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COMMENTS

g v rao

5 years ago

The risks inherent in the expiring Motor TP pool will not go away by the creation of the new Pool.. The distribution of the consequences of the TP Pool will only get redistributed. This is no cause for relief to the industry as such; but only to selective private insurers, who may write Commercial vehicle business. Insurers are still living in a bubble of their own creation.

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