RBI bans deals as more banks report failure
Mumbai: The reverberations of the Madhavpura Bank scam it seems will never end. Now four more cooperative banks have reported failure and RBI has sent circulars to all banks—private, public and foreign—asking them not to have dealings with the failed banks.
The four new blacklisted banks are the Mumbai-based Friends Cooperative Bank, Western Cooperative Bank, Sitara Cooperative Bank and First City Cooperative Bank. Apart from these, two other banks, Classic Cooperative Bank and City Cooperative Bank, have failed in the recent past.
RBI, in a circular sent to the banks has instructed "restriction on dealing with banks," the RBI has indicated that since these banks are under watch, it was advisable for other banks not to have any commercial transaction with them.
These four banks had been categorised as weak for quite some time by the RBI which had also limited withdrawal of deposits to Rs 1,000. This meant that depositors could only withdraw Rs 1,000 per head.
Sources said that apart from the Western Cooperative Bank, which failed because it lent Rs 20 crore to an individual borrower on a deposit base of Rs 3 crore, the other banks failed due to mismanagement of funds.
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Rupee makes a recovery; closes at 46.86
Mumbai: The spot rupee wound up on a stronger note at 46.86/88 against the dollar, after having slipping to 47.10 in intra-day trading.
Premiums tracked the spot rupee and came off substantially.

The benchmark six months (annualised) premium closed around 4.81 per cent as against the previous day's levels of 4.97 per cent.

There were no reports of direct RBI intervention.
The spot rupee opened at 47.07 /11 and plunged to its intra day low of 47.10 against the dollar.

State-run banks sold dollars consistently during the trading session on Tuesday. The spot rupee touched the 47.02 level and was traded at this level till a large pharma company sold dollars, pushing the rupee to a 46.95 level against the greenback.

Market players who purchased dollars yesterday liquidated their long positions at this level and the Indian unit touched its intra-day high at 46.83/85 against the dollar.

A last bout of dollar purchasing pushed the rupee down from this level to its closing level on Tuesday.

The spot rupee is expected to be in the range of 46.85 to 47.05 on Wednesday with a bias towards the higher end of the scale.

"The Reserve Bank's statement that the currency is not as overvalued as the market estimates it boosted sentiment in the market," said a dealer with a foreign bank.

"The market was choppy and the spot rupee was extremely volatile on Tuesday. The Indian unit gained on account of dollar sales by exporters and state-run banks," said a dealer with a private sector bank.
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TAC suggests changes in tariff structure of fire insurance
Kolkata: The Tariff Advisory Committee, a statutory body fixing tariff for various non-life insurance lines has suggested major changes in the tariff structure for fire, which has always been a key revenue earner in commercial insurance business.
The revised fire tariff structure to be implemented with immediate effect has incorporated a fresh set of norms apart from making significant changes in the existing rating of fire risks.
The fire policy, called the Standard Fire and Special Perils Policy (SFSPP) came into force from May 2000, and basically provided insurance cover to, "Acts of God," calamities like storms, tempest, floods and inundation. Earthquakes, spontaneous combustion or debris removal were put on the list of add-on covers, which were optional and came with an extra premium.
Now TAC has made the list of covers more liberal. Thus, risks like temporary removal of stocks, leakage and contamination, spoilage material damage, or start-up expenses have all been named as "add on" covers that are eligible for fire insurance and last May it incorporated a set of discounts for low claim ratios incurred against industrial and manufacturing risks irrespective of the sum insured.
TAC now specifies that only those who had a sum insured of Rs 50 crore and above would be eligible for these discounts.
As a sequel, a new concept of ‘adverse claim experience loading’ has been introduced.
This is meant to act as a disincentive to those who have a very high claim ratio. But this again would be applicable to sum insured of Rs 50 crore and above, that is primarily for the high risk insured.
The TAC has re-introduced an element of compulsory excess of Rs 10,000 for each and every claim arising out of fire and allied perils and 5 per cent of the claims arising from AOG perils.
This means that for any amount of insurance that is claimed, Rs 10,000 has to be borne by the insured for losses due to fire, while for AOG perils the insured has to bear 5 per cent of the total claims.
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