The minister also stated that the ministry is continuing with the services of CSFB as the advisor after seeking an opinion from the law ministry. CSFB has been charged with manipulation in the recent stock market crisis.
Back to News Review index page  

Hong Kong bank sets up wholly-owned insurance arm
Mumbai: In what is a first for a foreign bank, Hong Kong and Shanghai Banking Corporation, has become the first foreign bank to set up a separate subsidiary for insurance distribution.

Christened HSBC Insurance Services , the company has already received a composite agency for distributing life and non-life insurance products from Tata AIG.

While several banks have entered into MoU’s with insurance companies to distribute insurance products none of them so far have been in a position to commence agency business. Most of these banks have been waiting for a dilution in the corporate agency norms, which states that all directors of the entity seeking a corporate agency license should pass the agency examination.

The banks are waiting to commence their agency operations in view of a hint from the Insurance Regulatory and Development Authority that these norms will be diluted.

As per the IRDA guidelines, an insurance agent, whether corporate individual, can represent only one life insurance company and one non-life insurance company.
Back to News Review index page  

RBI may review foreign bank capital norms
Mumbai: The country's apex bank, the Reserve Bank of India, is said to be considering the review of capital norms for foreign commercial banks. This follows a slew of foreign banks taking a relook at their operations in the country.

The RBI had earlier said foreign banks’ exposure to Indian corporates through the external commercial borrowings (ECB) route should be excluded from their capital, with effect from March 31, 2002. This condition will mean that foreign banks can no longer take these loans as capital in their Indian books.

According to some officials in RBI, the bank feels that it would be bad for the country if the foreign banks pare their Indian operations on account of the new norms. Coming on the back of the Enron fiasco, this has prompted the RBI to go in for a review of the new norms.

The RBI may dilute the move and give the banks a few years to bring in more capital," pointed out a foreign banking source familiar with the development.

Going by the present norms, a foreign bank with a one-branch operation is required to bring in around $10 million and a further $5 million for the second branch.

According to the existing RBI regulations, foreign banks are not allowed to raise funds from the local market in the form of tier II capital. They are required to bring in funds in conformity with the number of branches opened in the country.

According to the International Chambers of Commerce (ICC), should any branch default, the head-quarters/parent will be responsible to make up the shortfall.
Back to News Review index page  

IDBI to cut bak on high cost borrowings
Mumbai: In a bid to cut down on its high cost borrowing, the country's leading development financial institution, Industrial Development Bank of India, is planning to recall Rs 10,000 crore worth of bonds, placed with banks and institutions, during the current financial year.

According to senior IDBI officials talks are on with banks and financial institutions to redeem a series of privately-placed Omni bonds, which carry an interest rate of 13-14 per cent, ahead of their maturity. In the normal course, these bonds would have around another 2-3 years of maturity left. This is being done as part of its liability management program.

The financial institution plans to make this transaction cash-neutral as it will replace the high yielding bonds with the relatively low coupon papers.
Back to News Review index page