LIC raises charges on changes in policy terms
Mumbai: Life Insurance Corporation of India has decided to hike charges on services like reducing the insurance cover, changing the mode of premium payment, adding additional riders like accident cover, reviving lapsed policies and changing nominee among others.

It has increased the charge for most services to Rs50 from Rs5, with the fee for assignment of policies going up to Rs250.

Thomas Mathew, MD, LIC, said, "We had various alteration fees for different changes. It was different for some policies, too. Some of these charges haven't changed may be for the last 40 years. That is why we decided to standardised the fee," he says. As for steep hike in assignment charge, he says, "A lot of work is done while endorsing the policy. That is why we decided to hike the fee on assignment."

LIC insurance consultants say though the new fee looks deceptively small it will have a compounding effect on policyholders who have multiple insurance policies. They said most of these changes made by its customers actually help LIC's business.
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SBI to raise Rs.500-cr through bonds
Mumbai: State Bank of India (SBI) plans to raise Rs500 crore through an issue of bonds. The bank informed the Bombay Stock Exchange that the executive committee of the SBI central board had approved the raising of unsecured and rated rupee subordinated upper tier II debt bonds of Rs500 crore. The bonds would be issued with a green shoe option to retain over subscription, with a maturity of over 60 months, by private placement or book building process.
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IRDA to put 20 pc cap on motor premium changes
Mumbai: Motor vehicle insurance premium may not change by more than 20 per cent annually from January 2007 when free pricing of select insurance products becomes the norm. This is part of the Insurance Regulatory and Development Authority's plan to fix a ceiling on the pricing changes in a de-tariffed scenario.

Currently fire, engineering and motor is under tariff meaning that insurers have to follow a pre-determined rate structure. A free pricing or a de-tariffed scenario will come into effect on January 1, 2007 and insurers have been making preparations in terms of data collection and training of underwriters. Currently, about 70 per cent of the non-life insurance market, which generates premium of around Rs18,000 crore, is under tariff. Among the tariffed businesses, motor accounts for around 40 per cent.
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ECBs become costlier after fed rate hike
Bangalore: External commercial borrowings (ECBs) have become more expensive after the 25 basis points hike in the Federal Funds (FedFunds) Rate. Following the Federal Reserve Board's funds rate (the rate at which banks lend overnight funds to each other) hike to five per cent on May 10, the six-month London Inter-bank offered rates or LIBOR rose to 5.3 per cent.

Banking sources said that with the increase, the interest costs of corporates are expected to show sharp increases. While the spreads would remain unchanged, absolute interest servicing costs are likely to escalate. The hike has also reduced the difference between domestic borrowing and international borrowing costs because borrowing in the international markets also means hedging and administrative costs of at least three per cent. This would imply that the effective servicing costs of ECBs would be about eight per cent.

In the domestic market, however, many of the corporate borrowers have been raising funds at almost equivalent rates.
Floating rate borrowings are available at even lower rates of eight per cent with six-monthly or quarterly resets linked to the benchmark prime lending rate or BPLR. Currently, the prevailing rates for top rated corporates are BPLR minus 300 basis points.
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