RBI working on exhaustive wealth mgmt services norms for banks

In the FSDC meeting held in May, sources said, RBI was of the view that if such services are offered by banks, there should be effective firewalls or they should offer the services through a separate legal entity which could then be regulated by SEBI

New Delhi: Concerned over banks offering wealth management services beyond the existing regulatory framework, the Reserve Bank of India (RBI) has decided to bring in exhaustive rules for such services in consultation with market regulator Securities and Exchange Board of India (SEBI).

“Both the RBI and SEBI are studying the issue...,” a source said.

The matter came up for discussions in the last meeting of the Sub-Committee of Financial Stability and Development Council (FSDC) held on 16th August here and chaired by RBI governor D Subbarao.

The present regulatory guidelines permit banks offering wealth management services to give only non-discretionary or advisory services.

However, over the time there has been a ‘blurring of activities’ between offering non-discretionary and discretionary services (like investment management), they said.

“Banks may actually be offering a greater gamut of services than is permitted under the extant guidelines,” sources said.

The RBI in consultation with SEBI had earlier circulated a questionnaire to banks offering the services.

All major banks like SBI, ICICI and Standard Chartered offer wealth management services in the country.

RBI, SEBI and the government began to look at ways to revise the norms for offering by banks after the alleged multi-crore fraud at Citibank’s Gurgaon branch came to light late last year, sources added.

Several depositors and high-networth individuals (HNIs) were duped in the Rs460.91-crore fraud, allegedly engineered by Citibank’s global wealth manager Shivraj Puri who was working at the branch of the bank.

The RBI has already imposed a Rs25 lakh fine on the bank for not following account opening and anti-money laundering norms at the Gurgaon branch.

Wealth management services are tailor-made asset management facility provided to HNIs.

In the FSDC meeting held in May, sources said, RBI was of the view that if such services are offered by banks, there should be effective firewalls or they should offer the services through a separate legal entity which could then be regulated by SEBI.

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RBI allays fears of larger impact of Basel-III norms on banks

“The estimate RBI has done is that transition to Basel-III would not be much of an issue for our banks, as all the capital ratios of our banks are at about the minimum requirement of Basel-III,” RBI deputy governor Anand Sinha said on Wednesday

Mumbai: Reserve Bank of India (RBI) deputy governor Anand Sinha on Wednesday allayed fears that the implementation of Basel-III norms will seriously hit domestic banks, reports PTI.

“The estimate RBI has done is that transition to Basel-III would not be much of an issue for our banks, as all the capital ratios of our banks are at about the minimum requirement of Basel-III.

“Moreover, capital requirement on increased covering of risks would not be applicable to our banks as either those activities are not allowed or the magnitude is quite small,” Mr Sinha told a session on the topic at the Ficci-IBA banking summit here.

The Basel-III norms kick in from 1 January 2013 and have to be completed by 1 January 2019.

Crisil Ratings director Ramaraj Pai said that public sector banks would need a whopping Rs8 trillion in core capital by 2019.

As of FY09- these banks had a core (Tier-I) capital of only Rs70,000 crore, well above the Basel-II requirements.

Mr Sinha said, “Resecuritisation is not allowed in the country and there is a whole lot of capital load that we don’t have, similarly our trading books are much smaller.

“The stress point for our banks would be to adjust to the amortised portion of pensions and gratuity liabilities in opening balance sheet on 1 April 2013, while transitioning to the international financial reporting standards or IFRS.”

Mr Sinha also pointed out that going forward, the capital requirements, including core equity capital, are likely to be substantial for supporting high gross domestic product (GDP) growth, and the credit to GDP ratio, at 55%, is currently lower than some of the Asian countries.

But he warned that this ratio is bound to jump as a rapidly growing and structurally changing economy will demand more funds. He said initiatives like financial inclusion, and rising loan demand from more credit intensive sector like manufacturing and infrastructure, would pose challenges.

“So in our estimate, the Basel-III transition is not a problem, but going ahead there would be large capital requirements and that has to be managed,” Mr Sinha said.

He added, “We are in the process of drafting the Basel-III guidelines, after which we will request the banks, and RBI also would separately estimate what is the capital requirement so that you have the adequate time frame to plan for that.”

The RBI is also looking at to what extent banks’ holdings under the statutory liquidity ratio (SLR) provisions will be eligible as liquid funds under the Basel-III norms, Mr Sinha said. At present, the 24% mandatory SLR exposure of banks is not a readily available liquid asset.

However, he admitted that “the definition of liquid assets is very stringent under Basel-II and strictly speaking, SLR requirements would not qualify as liquid assets under it, because SLR need being mandatory has to be complied with at all times”.

“Our dilemma is asking banks to maintain more liquid assets over and above SLR, as it would put them in a competitively disadvantageous position. Therefore, we are considering to what extent the SLR can be reckoned towards Basel-III requirements for holding big assets or if there is any other way,” he said.

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Government sends Jan Lokpal Bill to Parliament Standing Committee

Concerned about Anna Hazare’s condition on the ninth day of his hunger protest, government says it is ready to work with the Gandhian on a new anti-corruption law. The 74-year-old asserts that he could continue his fast for another nine days

 

New Delhi: Appealing to Anna Hazare to end his fast, the government today said it has forwarded the Jan Lokpal Bill to the Parliament’s Standing Committee for consideration and it is up to it to take a decision. “We have forwarded the Jan Lokpal Bill to the Standing Committee for its consideration. It is for the Committee to decide,” minister of state for personnel V Narayanasamy told the Rajya Sabha.

Winding up a short duration discussion on the issue of corruption, the minister said that the government has an "open mind" on the Jan Lokpal Bill. On the issue of the inclusion of the prime minister under the ambit of the proposed legislation, Mr Narayanasamy said Manmohan Singh himself was open to the idea, reports PTI.

Appealing to Mr Hazare to end his nine-day-old fast, the minister said the Gandhian should help the government work out a strong and effective Lokpal Bill. But he emphasised that parliament is supreme. "Parliament and the rule of law should be upheld by the government," he said.

The minister said that the Lokpal Bill alone could not end corruption and that the government was in the process of bringing in several other legislations to tackle the problem.

Meanwhile, in an apparent response to the concerns expressed about his condition, Mr Hazare said today that he could carry on his fast for another nine days. "My fast has entered the ninth day. Nothing will happen to me. I can fast for another nine days. We will fight together," he told a gathering at Ramlila Maidan. His statement was received with loud applause and cheers by the people gathered around.

Doctors have advised that Mr Hazare be hospitalised, even as he has turned down any medical help and refused to take intravenous drip. "I am receiving energy from the enthusiasm of the crowd. Some people have spoiled the country, we will all together re -build the country," Mr Hazare said.

In parliament, commerce and industries minister Anand Sharma said that though people have the fundamental right to "dissent", they cannot be allowed to "subvert" the Constitution. "Democracy should not be replaced by a lynching mob," Mr Sharma said in the Rajya Sabha, apparently referring to the agitation in front of the houses of members of parliament and ministers by participants in the movement for a strong anti-corruption law.

The government, he said, is aware of the public anger against corruption and is addressing the issue within the constitutional framework after following due process and procedures. But, he said, "Parliament is supreme and efforts to denigrate its prestige will not be tolerated." 

 

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