So, the next time someone tempts you with a slightly higher FD rate from a lesser-known bank, point them to hybrid funds that can deliver extra returns without the administrative and emotional rollercoaster.
The revised ceiling will be within the Rs 10 lakh mark.
'We deposited money just yesterday, but they did not say anything...'
If a bank shuts down, every account holder it has will get back their money for a maximum limit of Rs 5 lakh. It was Rs 1 lakh before.
At the press interaction, Sitharaman said secretaries from the department of financial services and economic affairs will be meeting a deputy governor of RBI soon to look into the "shortcomings" of the functioning of multi-state cooperative banks and see if any amendments can be made to the laws.
The ED summoned Varsha Raut for questioning in the PMC Bank money laundering case on December 29, officials had said on Sunday.
A bench headed by Chief Justice of India Ranjan Gogoi said, "We are not inclined to entertain this petition under Article 32 (writ jurisdiction). Petitioner can approach the high court concerned for appropriate relief."
The ED wants to question Varsha Raut with regard to "receipt" of some funds that were allegedly siphoned from the bank, official sources claimed.
The Deposit Insurance and Credit Guarantee Corporation (DICGC) will pay the depositors of 21 stressed cooperative banks, including the Punjab & Maharashtra Co-Operative Bank (PMC Bank), up to Rs 5 lakh within 90 days. The Reserve Bank of India (RBI) had imposed restrictions on the withdrawal of deposits from these banks. Of the 21 banks, 11 are from Maharashtra, five from Karnataka, and one each from Uttar Pradesh, Kerala, Rajasthan, Madhya Pradesh, and Punjab.
Customers of stressed Punjab & Maharashtra Co-Operative Bank (PMC Bank) will not get up to Rs 5 lakh insurance cover in the first lot as the multi-state co-operative bank is under the resolution process. Deposit Insurance and Credit Guarantee Corporation (DICGC) in the first lot will pay customers of 20 stressed banks except PMC Bank. For the first lot, the mandatory 90 days period concludes on November 30.
The Supreme Court on Friday stayed the Bombay high court order directing sale of bankrupt Housing Development and Infrastructure Ltd (HDIL) to ensure the repayment of dues of crisis-hit Punjab and Maharashtra Cooperative Bank. A bench comprising Chief Justice S A Bobe and justices B R Gavai and Surya Kant took note of the appeal of the Reserve Bank of India against the Bombay high court order.
'The government in the past has also increased (the limit) from Rs 2.5 lakh to Rs 5 lakh. In future, whenever the time arises, we will look into the matter.'
Suitors for Punjab and Maharashtra Co-operative Bank (PMC Bank) may have to infuse additional capital of nearly Rs 750 crore so that the payout per depositor is more than the Rs 5 lakh sum assured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). The Reserve Bank of India (RBI) has also slotted its board meeting on March 19 in Mumbai - a fortnight short of the current deadline to find a resolution for the beleaguered bank and the moratorium placed on it comes to an end. Sources close to the PMC Bank transaction said that the central bank wants the suitors "to go the extra mile so that depositors can get more than the Rs 5 lakh insured by the DICGC". This is also to ensure that the new owners of the bank - who are to be issued a small finance bank (SFB) licence - are serious and have deep pockets.
As per the RBI directions to PMC Bank, withdrawals have been capped at Rs 1,000 per account and the bank is not allowed to make any fresh loans.
The plea, filed by Delhi-based Bejon Kumar Misra, said the Centre and RBI should be directed to ensure complete insulation and insurance of the hard-earned deposited money of people in various co-operative banks, including nationalised banks, by enacting an appropriate measure of 100 per cent insurance coverage towards the deposited amount.
Private equity (PE) is set to play a bigger role in banks. Of 21 recommendations accepted by the Reserve Bank of India (RBI) out of 31 made by its Internal Working Group (IWG), its stance on non-promoter holdings in private banks is seen with excitement, though it doesn't refer to PEs explicitly. On non-promoter holdings in these banks, the RBI said this will be capped at 10 per cent of the paid-up voting equity share capital in the case "of natural persons and non-financial institutions and entities"; and "at 15 per cent for all categories of financial institutions, entities, supranational institutions, public sector undertaking, or the government." While this is a modification of the IWG's stance for the non-promoter holding in banks at up to 15 per cent, it does open up a huge window for PEs, all the same. This is because, while the RBI has remained silent on the eligibility of industrial houses for bank licences, fresh high-quality capital in large amounts can only come from PEs.
He said trust and confidence were the backbone of any financial system and one should never underestimate the power of ethics and values.
Crisis-hit HDIL on Tuesday said that loans taken from banks including Punjab and Maharashtra Cooperative Bank were in normal course of business after providing adequate security cover and that it is ready to discuss with the bank to protect the interest of depositors.
If the policy is extended to NBFCs and co-operative banks, they will have to disclose divergence in asset classification and provisioning during RBI inspections in their audited financial reports. Till now, these entities have been exempted from this. At present, there are more than 98,000 co-operative banks and 10,000 NBFCs. Sources said the RBI would concentrate on the top 50 co-operative banks and NBFCs.
Other major laggards were IndusInd Bank, SBI, Bharti Airtel, ONGC, Tata Steel and Reliance Industries -- falling as much as 6.30 per cent.
There will be different ways of returning the money, depending on the profile of the depositors and the amount, predicts Tamal Bandyopadhyay.
In the aftermath of the PMC Bank mess which was in the RBI's highest rating of 'A' category, trustworthiness of these ratings may be up for a review.
Police FIR reveals the bank had replaced 44 loan accounts of HDIL with 21,049 fictitious loan accounts. These 21,049 were actually not created in the core banking solution of the bank, but were mere entities in the advances master indent submitted to RBI for conducting its inspection for the year ended March 2018.
Economists praise Das for his pragmatism and willingness to face challenges head on. And in doing so with the finesse of an able administrator.
While Waryam Singh was a non-executive director at HDIL, he is listed as one of the promoters of the company and had relations, including shareholding, with several other entities controlled by the Wadhawans, the HDIL founders.
Do not go for riskier options like co-operative bank only for the higher return. Even if you go for them, park only a small portion of your capital there, say Tinesh Bhasin and Sanjay Kumar Singh.
'What is critical today in India is confidence of depositors.' 'If you have these kinds of problems spreading like this, the confidence level of a lot of people in the system gets shaken.'
'Common sense says if one can afford, servicing the loans during this period is a better bet than postponing it by three months,' says Tamal Bandyopadhyay.
'No commercial bank will be allowed to fail. There is nothing to worry about.'
A flavour-of-the-season approach does not work in investing, suggests Deepesh Raghaw.
'The new ceiling will cover around 93 per cent of all deposit accounts, up from 90 per cent earlier,' notes Tamal Bandyopadhyay.
The career bureaucrat-turned-central banker walked into the 19th floor corner room of the Reserve Bank on December 12, 2018. Since February 2019, the Das-led RBI has cut the repo rate by a whopping 135 basis points to support the sagging growth, including an unprecedented 35 bps reduction in August. As he completes one year at the helm, woes in the NBFC sector, overall health of the banking sector and steeply falling economic growth are among the major challenges that needs to be tackled sooner than later.
'When an institution believes its knowledge and capability is superior to everyone, it behaves like a frog in the well.' 'And this is precisely the cause for the mess,' says J N Gupta.
Only when the RBI inspection started on September 19 did they realise that their game was up and one of them had sent a letter to the central bank, leading to the RBI crackdown, report Anup Roy and Subrata Panda.
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