24 august 2001
non-life premia to go up
delhithe provisions of the proposed insurance
(amendment) bill, currently open in parliament, seeks to push up
non-life premiums by as much as 12.5 per cent.
senior insurance officials say that formerly in a regulated
insurance market, no room was left for intermediaries. however, at
present with brokers getting a foothold in the indian insurance
framework, public sector general insurers will have to add on the
additional cost of selling through an intermediary to the premiums
and unless they do so, they will not be in a position to attain
profits and survive in the
moreover, almost all these psu insurers are in red as a result of
underwriting losses. with fire premia down by 30 per cent and
ending of cross subsidisation, the companies have no option but to
pass the buck on to the consumers.
way for 3-tier corporate debt revamp plan
mumbaithe reserve bank of india (rbi) has set the stage
for the creating a three-tier corporate debt restructuring system
(cdr) in the country, which will apply to all multiple banking
accounts, syndicates, and consortium accounts with outstanding
exposure of rs 20 crore and above with the banks and financial
the cdr system will comprise of the following: standing forum,
empowered group and cdr cell. one of the salient features is that
reference to cdr system could be triggered by: (a) any or more of
the secured creditor who have minimum 20 per cent share in either
working capital or term-finance, or (b) by the
concerned corporate, if supported by a bank or fi having stake as
the objective of the cdr framework is to ensure timely and
transparent mechanism for restructuring corporate debts of viable
entities facing problems, outside the purview of board for
industrial and financial restructuring, debt recovery tribunals,
and other legal proceedings.
21 august 2001
to come out risk-based supervision system
mumbai--the reserve bank of india (rbi)
plans to come out with a bank-specific risk-based supervision (rbs)
system from the last quarter of the financial year 2002-2003.
banks with a better compliance
record and a good risk management system will be entitled to an
incentive package, which means lesser supervisory intervention.
those banks which fail to show
improvement in response to the monitorable action plan (map) will
be subjected to a disincentive package.
this will include frequent
supervisory examination and higher supervisory intervention
including directions, sanctions and penalties.
the risk profile of each bank will
determine the supervisory programme consisting of off-site
surveillance, on-site inspections, structured meetings with banks,
commissioned external audits, specific supervisory directions with
close monitoring through map.
key individuals at each bank will
be accountable for each of the action points. if actions and
timetable set out in the map are not met, rbi will consider
issuing further directions to the defaulting banks and even impose
sanctions and penalties.
the rbs process essentially
involves continuous monitoring and evaluation of the risk profiles
of the supervised institutions in relation to their business
strategy and exposures.
as part of the supervision process,
the rbi has called for the risk profiling of banks via camels
(capital, asset quality, management, earnings, liquidity and
systems) rating with trends; narrative description of key risk
features captured under each camels component; summary of key
business risks including volatility of trends in key business risk
factors; map and bank's progress to date; strength, weaknesses,
opportunities, threats (swot) analysis and sensitivity analysis.
the supervision cycle will vary in
accordance with the risk profile of each bank, the principle being
the higher the risk the shorter will be the cycle.
the supervision cycle will remain
at 12 months in the short-term and will be extended beyond 12
months for low risk banks at a suitable stage.
the inspections under the new
approach would be largely systems based rather than laying
emphasis on underlying transactions and asset valuations.
all this was done following
recommendations of pricewaterhouse- coopers (pwc), a management
companies cut returns
mumbai--insurance companies have started
dropping the returns their policies offer policyholders, in
keeping with the general drop in interest rates.
soon after the life insurance corporation of india (lic) reduced
the assured rate of return on its single premium product bima
nivesh, icici prudential life insurance company has applied to the
insurance regulatory and development authority (irda) to bring
down the promised return on the icici pru single premium bond by
around 50 points to 100 basis points.
the private insurance player is now
offering 9.39 per cent on this bond.
a couple of other new players are
expected to follow the trend over the next few weeks. since icici
prudential launched its products six months back, the yield on
10-year government paper has fallen by 130 basis points.
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