1 june 2001

insurers may have to shell out penalty for late claim settlement
new delhi--according to the draft guidelines on "protection of policyholders’ interests" prepared by the insurance regulatory and development authority (irda), insurers should pay a penalty of ten percent simple interest if a claim is not paid within seven days submission of surveyor’s report.

in the case of life insurance companies, a 10 per cent simple interest is to be paid if claims are not cleared within 30 days of submission of requisite documents and claim papers. at present, there is no penalty on late claim settlements.

though the draft guidelines are silent on the proposed policyholder protection fund, top sources said that the issue has been discussed with insurance companies but a consensus is yet to be reached.

31 may 2001

investment bankers in soup as business faces downturn
mumbai: with the stock markets in turmoil and depleting volumes on the exchanges, all resulting in a drastic fall in the number of initial public offerings, ipos, merchant bankers have resorted to cut-throat price-cutting in order to grab business. the fees for ipos have come down from 1-2 per cent to 0.50 per cent (50 basis points). investment bankers fear that with no possibility of ipos scene perking up in near future, the fee accrual on this account will be minimal.

the name of the game now is private equity placement where fees can be as high as 2-3 per cent. some of the investment banks are also planning to sell mutual funds.

other activities of investment banking are no longer generating sufficient returns. the fees and charges have not only been slashed to unbelievable levels, some of them are going as far as taking the entire debt on their books (as an investment) to offload it later, merchant banking sources said.

the fees charged for private placement have now drastically come down from 0.25 per cent (25 basis points) to around 0.05 per cent (5 basis points). according to sources, recently some deals have been struck at as low as 0.02 per cent.

underwriting fees have also come down from 0.50 per cent to 0.20-0.25 percent.

sources say that charges for managing open offers are no better, with some bankers doing it at cost.

however, fees are still high on american depository receipt/ global depositary receipt (adr/gdr) - (could be even 3 per cent) and cross-border acquisitions. but very few indian merchant bankers are on the scene.

30 may 2001

dun & bradstreet to invest in credit information bureau
new delhi: the world’s largest credit information provider, dun & bradstreet information services, and us-based trans union have picked up 10 per cent stake each in state bank of india and hdfc-promoted credit information bureau of india. both sbi and hdfc have 40 per cent stake each in the company.

cibil is the first attempt in this country to collect and disseminate data on creditworthiness of individuals and companies. such services are very common in the us and form the bedrock of financial activities like issuance of loans or mortgage in that country.

cibil has also entered into software development and licensing agreements with the two foreign investors — tu and dun & bradstreet — for licensing and providing training services.

while trans union will provide the technical support for maintaining database of corporate accounts, dun and bradstreet will provide assistance for retail accounts.

the availability of a credit information bureau will enable financial service providers to speed up credit decisions for both consumer credit as well as corporate loans.

indusind plans for reverse merger quashed
new delhi: the country’s apex bank, the reserve bank of india, has quashed the application made by indusind bank for approval to its plans of reverse merger of the bank with its subsidiary indusind enterprise finance ltd in its present form.

the central bank has instead asked the private bank management to rework its proposal so as to bring down the promoter stake to less than 40 per cent at one go. the original proposal planned to bring down the promoter’s stake in two tranches.

28 may 2001

finance minister approves madhavpura revival package
ahmedabad: it is understood that the finance minister has given a positive response to the revival package sewn together by the committee set up to revive the troubled madhavpura mercantile co-operative bank.

the package envisages a guarantee from central government, as well as a sizeable interest-free loan from the rbi-sponsored deposit insurance and credit guarantee corporation.

the finance minister is understood to have given an in-principal approval to the revival package. the final decision will now be taken at a meeting between the representatives of the government of gujarat and the reserve bank of india.

the central government is keen on the gujarat government being party to a portion of the risks involved in reviving mmcb.

according to the plan, 150 select co-operative banks of gujarat will lend 4 per cent of their total deposits to mmcb for 10 years, at a reduced interest rate of 7.5 per cent and this will be routed through gujarat state co-operative bank and ahmedabad district co-operative bank.

if mmcb is not in a position to pay back the full principal and interest after 10 years, the state and central governments will be obliged to make good the difference.

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