ECONOMIC AND BANKING NEWS - 41. RBI modifies norms for distribution of MFs by NBFCsThe RBI has revised the guidelines on distribution of mutual fund products by NBFCs.NBFCs, which desire to distribute mutual funds, would be required to adhere to the following stipulations:(i) Operational Aspects

(a) The NBFC should comply with the SEBI guidelines / regulations, including its code of conduct, for distribution of mutual fund products;

(b) The NBFC should not adopt any restrictive practice of forcing its customers to go in for a particular mutual fund product sponsored by it. Its customers should be allowed to exercise their own choice;

(c) The participation by the NBFC's customers in mutual fund products is purely on a voluntary basis and this information should be stated in all publicity material distributed by it in a prominent way. There should be no 'linkage' either direct or indirect between the provisions of financial services offered by the NBFC to its customers and distribution of the mutual fund products;

(d) The NBFC should only act as an agent of its customers, forwarding their applications for purchase / sale of MF units together with the payment instruments, to the Mutual Fund / the Registrars / the transfer agents. The purchase of units should be at the customers' risk and without the NBFC guaranteeing any assured return;

(e) The NBFC should neither acquire units of mutual funds from the secondary market for sale to its customers, nor should it buy back units of mutual funds from its customers;

(f) In case the NBFC is holding custody of MF units on behalf of its customers, it should ensure that its own investments and the investments belonging to its customers are kept distinct from each other.

(ii) Other Aspects

(a) The NBFC should have put in place a comprehensive Board approved policy regarding undertaking mutual funds distribution. The services relating to the same should be offered to its customers in accordance with this policy. The policy will also encompass issues of customer appropriateness and suitability as well as grievance redressal mechanism. The code of conduct prescribed by SEBI, as amended from time to time and as applicable, should be complied with by NBFCs undertaking these activities;

(b) The NBFC should be adhering to Know Your Customer (KYC) Guidelines and provisions of prevention of Money Laundering Act.

NBFCs should comply with other terms and conditions as the Bank may specify in this regard from time to time.2. What are Masala Bonds?Masalabondsare Indian rupee denominatedbondsissued in offshore capital markets. These are rupee-denominatedbondsissued to offshore investors settled in dollars and, therefore, the currency risk resideswith investors.WithMasalaBond, Indian corporates will have more option to blend their debt portfolio to optimize the liability and minimize the cost. Further, it can be a launch pad to sell the strength of rupee to the overseasinvestors.From the issuer perspective, these are rupee-denominatedbondsissued to offshore investors settled in dollars and, therefore, the currency risk resides with investors. The investor set is more broad-based than just FIIs (foreign institutional investors), as these instruments can usually be sold to other investors who prefer the fact that these are listed.The history behind thesebondsIFC issued a 10-year, 10 billion Indian rupeebondin November 2014 to increase foreign investment in India and mobilize international capital markets to support infrastructure development in the country. These will be offered and settled in US dollars to raise Indian rupees from international investors for infrastructure development in India. IFC will convertbondproceeds from dollars into rupees and use the rupees to finance private sector investment in India.The Masalabonds marked the first rupeebondslisted on the London Stock Exchange. IFC named these Masalabondsas masala is a globally recognized term that evokes the culture and cuisine of India. This is not the first time that abondhas been named after the food or culture of a country. Chinesebonds, for example, are called Dim sumbonds, and Japanese ones as Samuraibonds.3. RBI advises Banks to appoint Internal OmbudsmanThe Reserve Bank of India has advised all public sector banks and some private sector and foreign banks to appoint an internal ombudsman. The internal ombudsman would be designated Chief Customer Service Officer (CCSO), it has stated.The CCSO should not have worked in the bank in which he/she is appointed as CCSO. The RBI has taken this initiative to further boost the quality of customer service and to ensure that there is undivided attention to resolution of customer complaints in banks.While all public sector banks will have to appoint a Chief Customer Service Officer, the private sector and foreign banks which have been asked to appoint the Chief Customer Service Officers (Internal Ombudsman) are ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank, Standard Chartered Bank, Citi Bank N.A. and HSBC Ltd. These banks have been selected on the basis of their asset size, business mix, etc.The RBI introduced the Banking Ombudsman Scheme (BOS) in 1995 to provide an expeditious and inexpensive forum to bank customers for resolution of their complaints relating to deficiency in banking services provided by commercial banks, regional rural banks and scheduled primary co-operative banks.From a total of 11 grounds of complaints, when the BO Scheme was introduced in 1995, today, BO Scheme provides for 27 grounds of complaints/deficiencies in bank services. The Reserve Bank operates the BOS, free of cost, so as to make it accessible to all. The banks internal ombudsman will be a forum available to bank customers for grievance redressal before they can even approach the Banking Ombudsman.4. RBI issues new norms for infrastructure debt funds by NBFCsThe Reserve Bank of India on Thursday capped the average exposure limit for an NBFC to issue infra debt funds at 50 per cent and maximum at 75 per cent of its total capital fundThe RBI has allowed NBFCs to invest only in PPP projects which are at least one year into commercial operations and assigning a risk weight of 50 per cent.An IDF-NBFC can invest in individual projects up to 50 per cent of its total capital funds. An additional exposure of up to 10 per cent could be taken at the discretion of the board of the IDF-NBFC, RBI said in the amended circular.The RBI further said that it may, upon specific request, allow an IDF-NBFC an additional exposure up to 15 per cent (over 60 per cent) subject to such conditions as it may deem fit to impose regarding additional prudential safeguards.This has been enabled after amending the maximum exposure limit norms as envisaged in para 8 of the November 21, 2011 direction, RBI said. The RBI has also amended para 7 of these directions.The RBI said NBFCs can invest only in PPPs and post-commercial operations date infrastructure (COD) projects which have completed at least one year of commercial operations.The new rules also say that NBFCs should also enter into a tripartite agreement with the concessionaire and the project authority to ensure a compulsory buyout with termination payment before sponsoring any funds.The new norms are particularly aimed at those projects where there is no project authority present.On a review in consultation with the government, it has been decided to amend the November 2011 directions to allow entry of IDF-NBFCs into infra sector, RBI said in a circular.5. SBI launches online facility for Overdraft against Fixed DepositState Bank of India today launched an online facility for Overdraft against Fixed Deposit. Customers holding Fixed Deposits in a single name can now avail of up to 90% of the FD amount as an overdraft to meet emergency and other needs. As an introductory offer, SBI is charging an interest rate of only 0.5% more than the linked FD. This is among the lowest in the industry.

While the core product has been available at SBI branches for a while now, the online facility is part of SBIs constant endeavor to take products and services onto the digital platform. The OD is created instantly without the need to visit the branch.This facility is now available to all Internet Banking users of the Bank through the OnlineSBIportal. In the coming days, it will also be extended to the State Bank Anywhere mobile App.6. Government decides on constitution of A P Shah panelThe Narendra Modi government has constituted a high level committee on direct tax matters, which is being headed by justice A P Shah, the chairman of the Law Commission. Today, the government has announced the constitution of the new panel. It will be a 3-member body, and apart from A P Shah, Dr Girish Ahuja and Ashok Lahiri will be part of the panel.This high level committee panel will look into the cases of levy of Minimum Alternative Taxation (MAT) on FIIs prior to April 1, 2015. The other issues of direct taxes will also be referred to this panel in due course of time.As per media reports, following a decision of the Authority of Advance Ruling (AAR), Income Tax department slapped 68 notices on foreign portfolio investors saying they have to pay 20 per cent MAT totalling Rs 602.83 crore on untaxed capital gains made by them over the past three years. Some FPIs have approached the courts against the tax department.7. State Bank of India partners with PayPalState Bank of India, countrys premier Bank and PayPal, the worlds leading open digital payments company, today entered into a strategic partnership to promote cross border trade and facilitate payments for SBI and PayPal users both in India and abroad.The partnership will enable SBI Debit cardholders to use PayPal when buying products from overseas websites and allow SBIs Micro Small and Medium Enterprise (MSME) customers to gain access to PayPals secure payment solutions. We would also collaborate on providing innovative financial solutions to the merchants who are using PayPal services.The announcement reiterates the importance of India as a strategic market for PayPal. In addition to having a strong engineering workforce based out of India, PayPal also has a very robust and growing cross border business in the country. The partnership will help PayPal work closely with SBI to make it easy for Indian exporters and consumers gain access to a global audience. One of the key aspects of the partnership is the impetus that will be provided to eGovernance projects of the Government of India.B. Sriram, Managing Director, SBIsaid SBI has been bringing value to its customers by providing them innovative financial solutions. SBI is very pleased to have this tie-up as it provides a perfect opportunity to both of us to collaborate and offer a wide gamut of customized financial solutions to merchants across the board. This would bring new opportunities for our SME customer base.

Key highlights of the partnership include: Helping SBI Debit Cardholders buy from global merchants using PayPal:PayPal and State Bank of India will work together to provide SBI debit cardholders additional options for international spending. The partnership will enrich customer experience and provide them safe and secure payments method through PayPal for buying goods from international merchants who offer PayPal as a payment option.

Helping Indian merchants gain a global audience:PayPal and SBI will work closely to offer PayPals payments solutions to SBIs MSME customers who can reach PayPals 165 million active accounts globally. We would also work on providing innovative financial solutions to the merchants who are using PayPal services.

PayPal and SBI will also create a joint coordination committee to grow and implement this strategic partnership.

8. RBI second Bi-monthly Monetary Policy Statement, 2015-16 by Dr. Raghuram RajanMonetary and Liquidity MeasuresOn the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to: Reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.5% to 7.25% with immediate effect;

Keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0% of net demand and time liabilities (NDTL);

continue to provide liquidity under overnight repos at 0.25% of bank-wise NDTL at the LAF repo rate and liquidity under 14-day term repos as well as longer term repos of up to 0.75% of NDTL of the banking system through auctions; and

Continue with overnight/term variable rate repos and reverse repos to smooth liquidity.

Consequently, the reverse repo rate under the LAF stands adjusted to 6.25%, and the marginal standing facility (MSF) rate and the Bank Rate to 8.25%.

AssessmentSince the first bi-monthly monetary policy statement of 2015-16 issued in April 2015, incoming data suggest that the global recovery is still slow and getting increasingly differentiated across regions. In the United States, the economy shrank in Q1 owing to harsh weather conditions, the strength of the US dollar weighing on exports and a decline in non-residential fixed investment. In the euro area, financial conditions have eased due to the European Central Banks (ECB) quantitative easing and a depreciating euro. There has, however, been some moderation in composite purchasing managers indices (PMI), economic sentiment and consumer confidence in April. In Japan, growth surprised on the upside in Q1, supported by private demand as business spending boosted inventories and personal consumption. For most emerging market economies (EMEs), macroeconomic conditions remain challenging due to domestic fragilities, exacerbated by bouts of financial market turbulence. China continues to decelerate in spite of monetary easing. The recent firming up of crude prices has reduced headwinds to growth for some energy exporters, while increasing them for importers. Even absent a decisive economic recovery or adverse geopolitical shocks, oil prices appear to be volatile.Global financial markets have also been volatile, with risk-on risk-off shifts induced by changing perceptions of monetary policies in the advanced economies. Global currency markets continue to be dominated by the strength of the US dollar, with the G3 currencies reflecting the asynchronicity of their monetary policy stances. Volatility in global bond markets has increased with a number of factors at play: unwinding of European assets by investors due to the Greek crisis; rapidly changing expectations around the Feds forward guidance; sharp movements in crude prices; and market corrections due to changes in risk tolerance.As anticipated, the Central Statistics Office has revised downwards its estimate of Indias gross value added (GVA) at basic prices for 2014-15 by 30 basis points from the advance estimates. Domestic economic activity remains moderate in Q1 of 2015-16. Agricultural activity was adversely affected by unseasonal rains and hailstorms in north India during March 2015, impinging on an estimated 94 lakh hectares of area sown under therabicrop. Reflecting this, the third advance estimates of the Ministry of Agriculture indicate a contraction in foodgrains production by more than 5% in relation to the preceding years level. Successive estimates have been pointing to a worsening of the situation, with the damage to crops like pulses and oilseeds where buffer foodstocks are not available in the central pool posing an upside risk to food inflation. For thekharifseason, the outlook is clouded by the first estimates of the India Meteorological Department (IMD), predicting that the southwest monsoon will be 7% below the long period average. This has been exacerbated by the confirmation of the onset ofEl Ninoby the Australian Bureau of Meteorology.What is clear is that contingency plans for food management, including storage of adequate quantity of seeds and fertilisers for timely supply, crop insurance schemes, credit facilities, timely release of food stocks and the repair of disruptions in food supply chains, including through imports and de-hoarding, need to be in place to manage the impact of low production on inflation. Inflation control will also be helped by limiting the increase in agricultural support prices.Industrial production has been recovering,albeitunevenly. The sustained weakness of consumption spending, especially in rural areas as indicated in the slowdown in sales of two-wheelers and tractors, continues to operate as a drag. Corporate sales have contracted. The disappointing earnings performance could have been worse if not for the decline in input costs. Capacity utilisation has been falling in several industries, indicative of the slack in the economy. While an upturn in capital goods production seems underway, clear evidence of a revival in investment demand will need to build on the tentative indications of unclogging of stalled investment projects, stabilising of private new investment intentions and improving sales of commercial vehicles. In April, output from core industries constituting 38% of the index of industrial production declined across the board, barring coal production. The sustained revival of coal output augurs well for electricity generation and mining and quarrying, going forward. There is some optimism on gas pricing and availability. The resolution of power purchase processes has to be expedited and power distribution companies financial stress has to be addressed on a priority basis. Some public sector banks will need more capital to clean up their balance sheets and support lending as investment revives.Leading indicators of services sector activity are emitting mixed signals. A pick-up in service tax collections, sales of trucks, railway freight, domestic air passenger and air freight traffic could augur well for transport and communication and trade. On the other hand, the slowdown in tourist arrivals, railway traffic and international air passenger and freight traffic could affect hotels, restaurants and some constituents of transportation services adversely. The services PMI declined in April 2015, mainly on account of slowdown in new business orders. Community and personal services are likely to be held back by the ongoing fiscal consolidation.In April, retail inflation measured by the consumer price index (CPI) decelerated for the second month in a row, supported by favourable base effects [of about (-) 0.8%] that moderated the rise in the price index for the fourth successive month. Food inflation softened to a contra-seasonal four-month low, with the impact of unseasonal rains yet to show up. Vegetables inflation continued to ease, along with that of other sub-groups such as cereals, oil, sugar and spices. On the other hand, protein items, especially milk and pulses, continued to impart upward inflationary pressures.Fuel inflation rose for the fourth successive month to a twelve-month high, driven by prices of electricity and firewood. Inflation in these components was accentuated by base effects the recent price uptick coming on top of muted increases a year ago. Inflation excluding food and fuel rose marginally. House rent, education, medical and transport expenses were among the major drivers of inflation in this category. Rural wage growth, although still moderate, picked up. Inflation expectations remain in high single digits, although they may adapt further to current low inflation. Yet, both input and output price pressures remain muted as reflected in the Reserve Banks industrial outlook survey. Purchasing managers indices also corroborate these developments.Liquidity conditions eased in April 2015 after the tightness in the second half of March 2015 on account of advance tax outflows and financial year-end behaviour of banks. The Reserve Banks liquidity management operations were reversed in view of the improvement in liquidity conditions through April. During May, however, rapid increases in currency in circulation and a build-up of government balances resulted in liquidity conditions tightening again. Accordingly, fine tuning operations of varying tenors were conducted, besides the regular overnight repo at fixed rate and 14-day variable rate repo auctions. These injections helped meet the frictional liquidity requirements. In May, the average daily net liquidity injected through LAF fixed rate repos, besides regular 14-day variable rate repos, additional variable rate repos and MSF, was 1031 billion as compared with 819 billion in April. As a result, weighted average money market rates shadowed the policy rate. Longer term interest rates, particularly gilts, hardened in early May on international cues but eased in the second half of the month, particularly after the issuance of the new benchmark bond.Merchandise export growth has weakened steadily since July 2014 and entered into contraction from January 2015 through April, with a recent shrinking of even volumes exported. The deterioration in export performance affected economies across Asia as global demand fell and the fall in commodity prices impacted terms of trade for commodity exporters. From December 2014 onwards, merchandise import growth also turned negative, led by a sharp decline in the volume of oil imports as inventory build-up by refineries subsided. Gold imports spiked in the month of March and remained elevated in April owing to festival demand and regulatory relaxations. Notably, the volume of imports has been recording increases, despite the value decline. Given these developments, the reduction in the current account deficit resulting from the sharp decline in oil prices has begun to reverse, though the size of the deficit is expected to be contained to about 1.5% of GDP this year. Net exports are, therefore, unlikely to contribute as much to growth going forward as they did in the past financial year. Consequently growth will depend more on a strengthening of domestic final demand. While portfolio and direct foreign investment flows were buoyant during 2014-15, with net foreign direct investment to India at US$ 36.6 billion and net portfolio inflows at US$ 41 billion, the year 2015-16 has begun with net portfolio outflows in the wake of a reduction in global portfolio allocations to India. Foreign exchange reserves are around US$ 350 billion, providing a strong second line of defence to good macroeconomic policies if external markets turn significantly volatile.Policy Stance and RationaleBanks have started passing through some of the past rate cuts into their lending rates, headline inflation has evolved along the projected path, the impact of unseasonal rains has been moderate so far, administered price increases remain muted, and the timing of normalisation of US monetary policy seems to have been pushed back. With low domestic capacity utilization, still mixed indicators of recovery, and subdued investment and credit growth, there is a case for a cut in the policy rate today.Yet, of the risks to inflation identified in April, three still cloud the picture. First, some forecasters, notably the IMD, predict a below-normal southwest monsoon. Astute food management is needed to mitigate possible inflationary effects. Second, crude prices have been firming amidst considerable volatility, and geo-political risks are ever present. Third, volatility in the external environment could impact inflation. Therefore, a conservative strategy would be to wait, especially for more certainty on both the monsoon outturn as well as the effects of government responses if it turns out to be weak. With still weak investment and the need to reduce supply constraints over the medium term to stay on the proposed disinflationary path (to 4% in early 2018), however, a more appropriate stance is to front-load a rate cut today and then wait for data that clarify uncertainty. Meanwhile banks should pass through the sequence of rate cuts into lending rates.Assuming reasonable food management, inflation is expected to be pulled down by base effects till August but to start rising thereafter to about 6.0% by January 2016 slightly higher than the projections in April. Putting more weight on the IMDs monsoon projections than the more optimistic projections of private forecasters as well as accounting for the possible inflationary effects of the increases in the service tax rate to 14%, the risks to the central trajectory are tilted to the upside.

Reflecting the balance of risks and the downward revision to GVA estimates for 2014-15, the projection for output growth for 2015-16 has been marked down from 7.8% in April to 7.6% with a downward bias to reflect the uncertainties surrounding these various risks.Strong food policy and management will be important to help keep inflation and inflationary expectations contained over the near term. Furthermore, monetary easing can only create the enabling conditions for a fuller government policy thrust that hinges around a step up in public investment in several areas that can also crowd in private investment. This will be important to relieve supply constraints and aid disinflation over the medium term. A targeted infusion of bank capital into scheduled public sector commercial banks, especially those that implement concerted strategies to clean up stressed assets, is also warranted so that adequate credit flows to the productive sectors as investment picks up.9. Key Highlights of SBIs Standalone results yoyKey Highlights of SBIs Standalone results YOY

Net Profit increased by 20.30% from Rs.10,891 crores in FY14 to Rs.13,102 crores in FY15. Operating Profit increased by 21.19% from Rs.32,109 crores in FY14 to Rs. 38,913 crores in FY15. Total Interest Income by 11.77% from Rs. 1,36,351 crores in FY14 to Rs.1,52,396 crores in FY 15. Total Interest Expenses by 11.84% from Rs.87,069 crores in FY14 to Rs. 97,382 crores in FY15. Net Interest Income increased by 11.63% from Rs. 49,282 crores in FY14 to Rs.55,014 crores in FY15. Non Interest Income increased by 21.69% from Rs. 18,553 crores in FY14 to Rs. 22,577 crores in FY15. Operating Income increased by 14.38% from Rs. 67,835 crores in FY14 to Rs. 77,591 crores in FY15. Staff Expenses increased by 4.59% from Rs.22,504 crores in FY14 to Rs.23,537 crores in FY15. Expenses Ratio has declined by 282 bps from 52.67% in Mar 14 to 49.85% in Mar 15. Net Interest Margin for Domestic Operations up by 5 bps from 3.49% in FY14 to 3.54% in FY15. Gross NPA Ratio is down by 70 bps from 4.95% in Mar 14 to 4.25% in Mar 15.

PROFITABILITY

Q4FY15 OVER Q4FY14

Net profit increased from Rs.3,041 crores in Q4FY14 to Rs.3,742 crores in Q4FY15 ( 23.06% YOY growth). Operating profit increased from Rs.10,628 crores in Q4FY14 to Rs.12,409 crores in Q4FY15 ( 16.76% YOY growth). Total Interest Income increased from Rs. 35,858 crores in Q4FY14 to Rs.40,100 crores in Q4FY15 (11.83%YOY growth). Total Interest Expenses increased from Rs.22,955 crores in Q4FY14 to Rs. 25,389 crores in Q4FY15 (10.61%YOY growth). Staff Expenses increased from Rs. 5,279 crores in Q4FY14 to Rs.6,567 crores in Q4FY15 (24.39%YOY growth). Operating Expenses increased from Rs. 8,861 crores in Q4FY14 to Rs.10,818 crores in Q4FY15 (22.09%YOY growth).

DEPOSITS Deposits of the Bank increased from Rs.13,94,409 crores in Mar 14 to Rs.15,76,793 crores in Mar 15.( 13.08%.YOY growth) Savings Bank Deposits increased from Rs.4,69,262 crores in Mar 14 to Rs. 5,13,905 crores in Mar 15 (9.51% YOY growth) . Current Account Deposits increased from Rs.1,10,935 crores in Mar 14 to Rs.1,23,855 crores in Mar 15 (11.65% YOY growth).

ADVANCES Gross Advances increased from Rs. 12,45,122 crores in Mar 14 to Rs.13,35,424 crores in Mar 15 (7.25% YOY growth). Large Corporate Advances increased from Rs.2,42,719 crores in Mar 14 to Rs.2,71,778 crores in Mar 15 (11.97%. YOY growth). Retail Advances increased from Rs.2,37,667 crores in Mar 14 to Rs.2,72,429 crores in Mar 15 (14.63% YOY growth). Home loans increased from Rs.1,40,738 crores in Mar 14 to Rs.1,59,237 crores in Mar 15 (13.14% YOY growth).

KEY FINANCIAL RATIOS (SBI): Return on Assets 0.68% in Mar 15 increased from 0.65% in Mar 14. Return on Equity 11.17% in Mar 15 increased from 10.49% in Mar 14. Average Cost of Deposits moved to 6.34% in Mar 15 from 6.27% in Mar 14. Average Yield on Advances moved to 10.58% in Mar 15 from 10.47% in Mar 14.

Performance of Associates and Subsidiaries: Net Profit of all Associate Banks increased by 15.23% from Rs.2,777 crores in FY 14 to Rs.3,200 crores in FY 15. Net Profit of all Non- Banking Subsidiaries increased by 12.70% from Rs.1,361 crores in FY 14 to Rs.1,534 crores in FY 15. Net Profit (after minority interest) of SBI Group has increased from Rs 14,174 crores in FY14 to Rs 16,994 crores in FY15 (19.90% YOY growth). Return on Equity of SBI Group is up by 68 bps from 10.83% in FY 14 to 11.51% in FY 15. SBI Capital Markets Ltd (consolidated) has registered a net profit of Rs.334 crores in FY 15 up from Rs.262 crores in FY14 (27.32%YOY growth).

10. State Bank of India launches Her Ghar Her CarAfter the success of the Her Ghar product which provided a concession in interest rates specifically for women Home Loan borrowers, State Bank of India today launched the Her Ghar Her Car loyalty scheme. Under this, Her Ghar borrowers can go in for a Her Car loan at reduced rates of 10% p.a. Car Loans to non Her Ghar borrowers would continue to be at 10.25% p.a. Her Ghar Her Car is an addition to products available with SBI wherein concession in rates have been introduced with the objective of reaching out to women in the country and empowering them to take decisions that can change the course of their family and society at large.11. Bad loans rise! RBI extends NPA-sale timeframe to March 2016The timeframe for the expected deficit from sale of bad assets to securitization companies/asset reconstruction companies (ARCs) at a price below the net book value, has been stretched to March 2016 by RBI, says a report.

Reserve Bank of India had set the facility earlier to March 31, 2015.

"As an incentive for early sale of NPAs, banks can spread over any shortfall, if the sale value is lower than the net book value (NBV), over a period of two years. It has been decided to extend this dispensation for assets sold on or after March 31, 2015 and up to March 31, 2016," said the Central Bank in a notification.

Mounting bad loans are being accounted as the reason for giving more leeway for selling the non performing assets.

A sharp increase in the magnitude of recast loans worsening, which is a point of concern. This has increased chances of borrowers relying on restructured loans, which increased 90 per cent in the fourth quarter of the last fiscal year to Rs. 56,995 crore, as per CDR Cell data, said the report.

FY15 could see bad loans leap by 4.5% or Rs 60,000 crore which means a 20 bps hike, stated by the global analytical company, CRISIL, the report mentioned.

12. RBI Clarification on FDI InflowsIt was recently reported in a section of the press that the amendment to Foreign Exchange Management Act (FEMA), 1999 introduced to the Finance Act, 2015 will do away with the need for the Reserve Bank of Indias approval for foreign direct investments (FDI) in India.

It is clarified that in terms of the Regulations framed under FEMA, 1999, an Indian company receiving FDI does not require any prior approval of the Reserve Bank of India at any stage. It is only required to report the capital inflow and subsequently the issue of shares to the Reserve Bank in prescribed formats.

It may be noted that, FDI in India can be made through two routes, namely, the automatic route, where no prior approval from any authority is needed for an Indian company to receive FDI and the approval route, where the company receiving FDI requires prior approval of the Foreign Investment Promotion Board (FIPB). FDI under both the routes is subject to FDI policy and the conditions laid down in the relevant Regulations framed under FEMA.

13. ICICI Bank introduces voice recognition for biometric authenticationICICI Bank, Indias largest private sector bank, announced the launch of voice recognition service which authenticates customers based on their speech patterns and allows them to execute banking transactions through the Banks call centre in a quick, secure and convenient manner.

The-first-of-its kind service by a Bank in the country, it is available to over 33 million customers of its savings account and credit card. With the voice recognition technology in place, customers are no longer required to enter their card numbers, PIN and answer security questions to authenticate themselves. Their voice will now act as the password for banking transactions through the call centre.

ChandaKochhar, MD & CEO, ICICI Banksaid,"ICICI Bank has always been committed to bringing in new technology and innovation to its customers and the introduction of voice recognition as a means of authentication is an extension of this commitment. Our decision to invest in this new technology was primarily driven by the objective of enhancing the everyday banking experience of our customers. We have noticed that the customers, especially those who use smart phones, find it difficult to enter the 16 digit card number and the 4 digit PIN with accuracy and at a reasonable speed. We wanted to offer them a secure and hands-free alternative to the traditional on-screen commands on smart phones. The voice recognition service has the potential to increase security and convenience."

The voice recognition technology works on voice prints, which are unique to an individual. It comprises more than 100 characteristics including voice modulation, speed, accent, pronunciation which are impossible to imitate, thereby enhancing security. The Bank stores the customer's unique voice print against his account and matches it whenever he calls from his registered mobile number, offering a seamless experience to the customer.

This launch comes close on the heels of a slew of technology-led innovative services introduced by the Bank. The list includes new apps for mobile banking, fully automated and round-the-clock 'Touch Banking' branches, Tab Banking, banking on Facebook and Twitter, the country's first contactless debit and credit cards, and Pockets, Indias first digital bank on mobile phone. The Bank has 4050 branches and 12451 ATMs ( at March 31, 2015).

14. State Bank of India launches Online Customer Acquisition SolutionState Bank of India launched Online Customer Acquisition Solution (OCAS), an online platform to apply for Home Loans, Car Loans, Education Loans and Personal Loans. The application launched by Smt. Arundhati Bhattacharya, Chairman, SBI will help the customers gauge their eligibility and get a quote personalized to their requirement.

The customer will instantly get an e-approval on filling the online form. Thereafter, the Bank officials will contact the customer and complete all the loan formalities. Customers can even upload all necessary documents online. This will help in empowering the customer and also reduce the processing time of their loan. A similar application will shortly also be launched on the mobile platform as well.

India is witnessing one of the highest growth rates of internet users and to cater to this segment SBI has customized this platform for an enhanced customer experience.

15. Splitting chairman and managing director post of PSBs a dangerous proposition: ASSOCHAMBifurcation of Chairman and Managing Director (CMD) post may not augur well for the public sector banks (PSBs), which controls about 75 per cent of the banking business in the country, as it may lead to inefficiencies and bureaucratic hassles rather than improvement, reveals the ASSOCHAM latest paper.

Moreover, proposed roping in of private sector executives may turn out to be a regressive step as public sector banks has completely different culture and ownership as compared to their private sector counterparts.

There are fears that one more layer even though non-executive position may lead to some kind of inefficiencies. Bifurcation could also lead to differences between managing director and chairman at times leading to delay in decision making and other impediments in the growth and expansion of the bank unlike private sector, said D S Rawat, Secretary General ASSOCHAM while releasing the paper.

Concerns are there that large loan sanction which needs board approval if there is difference of opinion between chairman and CEO could get delayed. Delay in sanctioning loan would have adverse impact on the industry, said Mr. Rawat.

Banking system which is considered to be life line of the economy may get choked due to want of fund and subsequently lead to slowdown of the GDP growth.

This has been witnessed in the past and India Inc has been highlighting this issue from the various platforms.

Another practical difficulty, says the ASSOCHAM spokesman, could be if the two top board members are not in good terms than also the loan sanctioning process would take a back seat as the CEO would not clear any loan proposal. As a consequence of this, bank would suffer as main business of the bank is disbursal of loans from the deposits mobilised.

Since the government is considering three-year fix term for both Chairman and CEO, this is one of reasonable concern areas. On the other hand, this scenario may not exist if one person is the chairman and managing director.

It is to be noted that from December 2014 onward, the government decided to split the post of Chairman and Managing Director. It has already appointed Managing Director in four public sector banks namely Indian Overseas Bank, Oriental Bank of Commerce, United Bank of India and Vijaya Bank.

Besides, it has invited application from eligible candidates including from private sector for the post of Managing Director and CEO in the five large state-owned banks viz Punjab National Bank, Bank of Baroda, Canara Bank, Bank of India and IDBI Bank.

Since the first advertisement could not elicit desired response, the Finance Ministry had to relax tough eligibility criteria.

So, it is in the interest of public sector banks and economy as a whole to continue with the old structure of the organogram in such institutions of repute for their exponential growth.

16. RBI appoints ICRA chief as member of External Advisory CommitteeThe Reserve Bank of India, has appointed NareshTakkar, Managing Director & Group CEO, ICRA Limited as member of External Advisory Committee (EAC) for evaluating applications of payment banks in place of RoopaKudva.Kudva has recused herself from the Committee.

It may be recalled that Reserve Bank of India announced the names of the members of the External Advisory Committee (EAC) for payments banks on February 04, 2015. These were:

Chairman: Nachiket M. Mor, Director, Central Board of Reserve Bank of IndiaRoopaKudva, former MD & CEO, CRISIL LimitedShubhalakshmiPanse, former Chairman & Managing Director, Allahabad BankDeepak Phatak, Chair Professor, IIT Bombay

Compiled by-Manju Mishra,Chief Manager, TrainingSBLC, Noida