BFS63

5 July, 2013
Weekly
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BFS Roundup @ FLIP

The week that was.

Now, you can't use credit card to buy gold
jewellery on EMIs
Carrying forward the measures to curb gold
consumption in India, RBI has asked banks to:
Stop accepting purchase of gold coins via credit
cards. Not allowing EMI facility on gold purchased
via credit cards.
FLIPs View: Clearly, RBI is pulling all stops, to
curb gold imports. Will the CAD improve ultimately,
that is the bigger
question.
`
------------------------------------------------------26 in queue for bank license
RBI has received a total of 26 applications for the
banking licenses. These include:
Corporates (Tata Group, Aditya Birla Nuvo,
Videocon etc.)
NBFCs (IIFL, Edelweiss, Muthoot Finance, Religare
etc.)
Micro-Finance companies (Bandhan, Janalakshmi)
Public Financial Institutions (IFCI, Department of
Posts etc.)
Others (UAE Exchange, INMACS Management
etc.)
While RBI has not announced the timeline to
declare successful applicants, licenses are likely to
be granted by end of financial year.
FLIPs View: It seems likely that RBI will proceed
with some caution - a couple of Public sector guys
like India Post should get it. Among the private
sector FIs, Edelweiss, IIFL could be strong
contenders. here again I guess just 2 entities
should land the license.
------------------------------------------------------RBI moots extra provisioning for unhedged
forex exposure
RBI is considering introducing additional capital and
provisioning requirements for banks exposure
towards companies with unhedged forex exposures.
Companies that do not hedge their foreign
currency exposures can incur significant losses due
to exchange-rate movements system.
RBI has prescribed norms for estimating loss to

Updates @ FLIP
Symbiosis Centre for Management and Human
Resource Development (SCMHRD) has launched
FLIPs e-learning programs for their executive MBA
batch.
Prior to this, the regular MBA students from
SCMHRD were undergoing FLIP courses as a part of
their induction.
July 2013 onwards, SCMHRDs MBA executive batch
will also go through FLIPs finance courses.
Way to go!
FLIP - setting a BFS knowledge benchmark.

companies for un-hedged exposures. This

framework may be implemented from October
1,2013.
FLIPs View: A good step given the volatility in the
market. This will also ensure that banks urge their
customers to hedge their exposures.
-------------------------------------------------RBI norms on wealth management services to
be tightened
In the light of current irregularities found in the
wealth management services offered by Banks, RBI
had proposed new stringent guidelines to bring
more transparency in the system. These include:
Banks should conduct all wealth management
services either from a separate subsidiary or
through a separate division.
There should be clear segregation of functions
between marketing and operational staff. There
should be a code of conduct for the sales
personnel.
Banks need to conform to the guidelines of
sector-specific regulators and distribute
products of only regulated financial entities.
FLIPs View: A long awaited requirement, given
the mis-selling that takes place. I expected the
industry to be pro-active, and appoint a Self
Regulating Organization (SRO) for this.

BFS Roundup @ FLIP

Did You Know?

While the, RBI is busy arresting the rupees consistent slide against
USD,our neighbor China is putting up a strong show against USD and
other currencies.
Not too long ago we used to hear stories about the developed world
chiding China over artificially keeping its exchange rates low to
promote its exports.
Infact in 2003, America publicly encouraged
China to loosen a policy under which its currency
was pegged at 8.28 to the dollar.
In 2013 though, we see yuan in a completely
different light.
Currently its trading around 6.13 against dollar.
It has shown a steep increase against the dollar
and other currencies.
Chinas trade-weighted exchange rate has strengthened by 12.7% since 2010,
according to the Bank for International Settlements, faster than the exchange
rates of the other 60 economies it tracks.
It will be interesting to see how China will continue to retain its export
competitiveness with the appreciating Yuan.

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BFS Roundup @ FLIP

Term of the Week

White Label ATMs

Most of us must have noticed the above news clippings in the last few days and would have
wondered what these White Label ATMs (WLA) are?
Well explain them for you in this section.
White Label ATMs are simply ATMs without any banks name written over them. Thus they wont be a
SBI ATM or an HDFC Bank ATM, they will simply be an ATM Machine, that all bank customers can access.
Need for White Label ATMs
These will primarily help in enhancing financial inclusion, as RBI guidelines mandate that entities setting
white label ATMs have to establish most of these in rural areas.
Banks incur an average capital expenditure of INR 3-4 lakh per ATM. They also have to incur a variable
cost of INR 40-50,000 per ATM towards security, rent, electricity etc.
With this outsourcing model, banks need not invest in setting up their own ATMs anymore.
How does this work?
Typically there are three parties involved:
Non-bank corporate entity
Authorized ATM network operator (Visa, MasterCard etc.)
Sponsor Bank
The non-bank corporate entity invests in setting up these ATMs. Sponsor Bank provides cash and
supports cash management operations, grievance redressal etc.
Under this model, customer of any bank can use a white label ATM, and his/her bank can pay the
transaction fee to the corporate entity. Bank can in turn, if required, pass on this transaction fee to the
customer using the ATM services.
White label ATMs provide all the services, just like any other ATM.
Example:
Tata Communications Payment Solutions Ltd. (TCPSL), a subsidiary of Tata Communications, launched
Indias first white label ATM under the branch Indicash at Chandrapada, Thane District. It has designated
Federal Bank as a sponsor bank to support operations.
The bank whose ATM card is used in Indicash ATM will have to pay TCPS INR 15 per transaction and INR
5 for every balance enquiry.
Its still early days for white label ATMs, but as a model it can help to bring a large population under the
purview of banking services.

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