World Bank clears $407 million loan for two projects

The Bank said although India has a well-developed banking system, and there has been significant progress in banking reforms, a significant portion of its billion-plus population has only limited or no access to financial services

The World Bank (WB) will provide a $407-million loan for two projects to promote microfinance and strengthening statistical base, reports PTI.

"The WB approved two projects worth $407 million to India, consisting of a $300-million credit/loan for scaling up the Sustainable and Responsible Microfinance Project and a $107-million loan to strengthen statistical data base," the Bank said in a release on Thursday.

The funding to the microfinance project will be used by the Small Industries Development Bank of India (SIDBI) for on-lending to microfinance institutions, the Bank said.

Funding to microfinance institutions is designed to enhance their financial strength and help them leverage private commercial funds for lending larger amounts to the under-served, it added. The project will help establish a microfinance information platform, promote adherence to a code of conduct for microfinance institutions, and enable their capacity building and monitoring capabilities.

The Bank said although India has a well-developed banking system, and there has been significant progress in banking reforms, a significant portion of its billion-plus population has only limited or no access to financial services.

The $200-million loan for the microfinance project is from the International Bank for Reconstruction and Development (IBRD). It has a 25-year maturity, which includes a 14.5-year grace period. The rest, $100 million, is a credit from the International Development Association (IDA), the World Bank’s concessionary lending arm. It carries a 0.75% service fee, a 10-year grace period, and a maturity of 35 years.

The $107-million loan for strengthening statistical data base comes from the IBRD and has a 30-year maturity including a 5-year grace period.

On this loan, the Bank said that India’s rapid economic and social transformation over the past decade has brought to the fore a need for better and timely statistical information.

The Bank also said the loan would support an institutional and policy-based reform of the government for strengthening state statistical systems within a national policy framework.

It further said the country's rapid economic growth, private investments, increased role of states and effects of the global economic crisis—which India is weathering successfully—have renewed demands for more accurate statistical information.


MFIs can't bring financial inclusion due to high lending cost: RBI official

“When the financial inclusion happens, banks will replace microfinance institutions. Then microfinance institutions will take the role of money lenders,” RBI deputy governor KC Chakrabarty said

Microfinance institutions (MFIs) will not be able to bring financial inclusion as their cost of lending is high, a top Reserve Bank of India (RBI) official said, reports PTI.

"Microfinance institutions will not be able to bring financial inclusion. Their cost of lending is high," RBI deputy governor K C Chakrabarty told reporters in Mumbai on the sidelines of the inauguration of Bank of India's mobile-based remittance facility for urban financial inclusion.

"The definition of financial inclusion is providing access to appropriate financial products and services to the most vulnerable group of the society in a fair, transparent and cost-effective manner by the mainstream financial institutions," he said.

When banks reach that level, the competition will bring down the cost, he said.

"When the financial inclusion happens, banks will replace microfinance institutions. Then microfinance institutions will take the role of money lenders," he added.

The Customer Service Committee under former Securities and Exchange Board of India (SEBI) chief M Damodaran will oversee the banks' dealings with customers, he said.

"How fair and transparent the products and pricing are, how the banks provide them to the customers, whether the bank has a system to address the customer complaints, how they deal with the customers, what are the legal and regulatory changes necessary, how the bank's ombudsman is working, all these things will be examined by a high-level committee under the chairmanship of former SEBI chief M Damodaran," he said.

Both the Indian Banks' Association (IBA) and the RBI do rate the banks, but internally, he said.

"We have internal rating and on the basis of that, we will advise banks about the modifications, changes and improvement they have to bring. But we will not make these ratings public," he said.

The deputy governor on Thursday inaugurated Bank of India's (BoI) mobile-based remittance facility through business correspondence for urban financial inclusion.

Bank of India plans to open seven lakh accounts for the unbanked urban poor, the bank's chairman and managing director, Alok Misra, said.

"Using the facility of mobile-based remittance facility through business correspondence, people can send money to their relatives over mobile and can receive the money in every nook and corner of the country," he said.

BoI plans to include one crore un-banked people in its fold and will reach out to about 30,000 villages in the next three years, he said.


SEBI asks for better disclosure of mutual fund performance

SEBI has proposed wide-ranging changes in the way fund performance is currently presented. But it is not clear whether investors will know how to use it and whether they will

Market regulator Securities and Exchange Board of India (SEBI) has proposed a new set of quantitative measures for disclosing an equity scheme's performance. SEBI has proposed that fund returns will be calculated and disclosed in an annualised manner by using both capital gains (change in NAV over a period of time) and the dividend paid out per unit. The returns are proposed to be compared to a popular index such as Nifty and Sensex apart from the scheme's own chosen benchmark. This will give a clearer picture of comparison between absolute returns of a scheme, benchmark returns and the market indices (Nifty or Sensex), especially since index funds are proving to be a better bet than many actively-managed funds. SEBI wants risk-adjusted return to be disclosed as well. The volatility of benchmarks and the schemes is also proposed to be disclosed which will provide a comparison between risk of the scheme, benchmark and the market. Funds may be asked to disclose the beta of a scheme to show the volatility of portfolio and that of the Nifty or Sensex.

Expense ratio will also be a part of disclosure as expenses have a direct bearing on the fund performance. SEBI also wants portfolio turnover ratio disclosed. A higher turnover indicates that the fund manager is churning the portfolio very often.
Reacting to the SEBI proposals, Ajit Dayal, director, Quantum Mutual Fund told Moneylife: "It's very good that SEBI is trying to standardise performance which has become a racket in the industry where people are using performance numbers to fool investors. Unfortunately over 15 years of existence, many of the large fund houses in the industry have chosen not to bother about their investors and worry more about the assets that they can gather."

However, another CEO of an asset management company felt that while all this information is completely useful, it is impractical to expect the investors to understand them and act upon them. "This information is useful for financial planners and advisors. And they already have access to this data. To put all this sophisticated information in the public domain is simply overkill."

"It's great that there is more transparency from what has largely been a most unfriendly stance towards the investor industry. But it does not take away the fact that risk is different for different investors," added Mr Dayal.




7 years ago

new methods for calculating the funds performance is all fine, but not all investors in the fund would have the same results. results earned by the fund and by each individual investor in the fund are totally different. And this point has to be made aware to the investor through this disclaimer, " ....individual returns might vary among participants".


7 years ago

While this initiative is a step towards to more transpareny, the practicality of this would be neglible from investor point of view.If they have the time,inclination and aptitude to go through and understand all of these measures, they might do the investing directly themselves. The current flow of information from the AMCs by way of monthly factsheets ,dily NAV etc., is good enough.

Param Iyer

7 years ago

"SEBI also wants portfolio turnover ratio disclosed." - Kudos to Quantum for doing it from day 1...
I believe SEBI should also insist on the actual hidden expenses - e.g. money spent on brokerage, actual disbursement to distributors from exit load & trail, actual transactions that took place with the price paid to show the impact cost - all these affect the final return beyond the legal expense ratio...

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