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IDBI to continue as ‘Indian private sector bank’ post strategic sale


The government’s residual 15 per cent stake in IDBI Bank post the strategic disinvestment of the lender will likely be considered as ‘public shareholding’ and a reasonable period may be given to the potential buyer to comply with minimum public shareholding (MPS) norm, finance ministry said on Sunday. IDBI Bank will operate as an ‘Indian private sector bank’ after its strategic sale.

Department of investment and public asset management (Dipam) said that the winning bidder will have no restriction on undertaking a corporate restructuring of the subsidiaries of the bank. It also said that certain asset sizes and timing thresholds related to asset stripping would be provided to give flexibility in operations to the successful bidder.

“The aspects in respect of the treatment of GOI’s residual shareholding and the appropriate transition period for MPS compliance are under due consideration and would, accordingly, be suitably advised to the Qualified Interested Parties at the request for proposal stage,”  Dipam said responding to a batch of 167 queries from potential buyers. On October 7, the Centre invited expressions of interest  for IDBI Bank and offered to sell a total of 60.72 per cent stake, including 30.48 per cent from the government and 30.24 per cent from LIC, along with the transfer of management control. Yet, both the government and LIC will have a 34 per cent residual stake in the lender (19 per cent and 15 per cent by LIC and government, respectively).

According to Sebi, a company is required to have a minimum shareholding of 25 per cent within one year of the merger with/acquisition of a private company or three years after listing. FE





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IRDAI unveils new draft on expenses


The Insurance Regulatory and Development Authority of India (IRDAI) has announced a revised exposure draft on the expenses of management (EoM) for the non-life insurance companies and proposed the removal of caps on payment of commission to insurance agents and intermediaries.

It has also proposed a revised 30 per cent and 35 per cent caps on EoM for general insurers and standalone health insurers, respectively, after taking into consideration the insurance industry’s views.

In the earlier exposure draft, released on August 23, it had proposed to put a lower cap of 20 per cent on commission paid to the agents and intermediaries of both non-life and life insurance companies. It had proposed a 30 per cent cap on EoM for the general insurance companies in the exposure draft issued on August 1.

The regulator has streamlined the expenses of management (EoM) guidelines for insurance companies, now proposing a blanket cap on EoM to the extent of 30 per cent of gross written premium in India for general insurance companies and 35 per cent for standalone health insurance companies.

EoM includes operating expenses, commission to insurance agents and intermediaries and commission and expenses on reinsurance. EoM is currently in the range of 20 per cent to 37.5 per cent for non-life insurers. The additional allowable expenses within the overall expense cap now also include expenses incurred towards government schemes such as Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Jan Arogya Yojana, Pradhan Mantri Fasal Bima Yoyaja (15 per cent) as well as expenses incurred towards promoting insuretech and insurance awareness of up to 5 per cent to widen customer reach.





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Collect data of health professionals from repository: IRDAI to insurers


The Insurance Regulatory and Development Authority of India (IRDAI) has advised insurance companies to capture the identity (ID) of medical practitioners from a repository for verification while issuing or renewing health policies. The new system is expected to enable seamless, cashless functioning of outpatient treatment (OPD) across the country.

According to IRDAI, insurers can validate their ID from the Healthcare Professional Registry (HPR), a comprehensive repository of registered and verified practitioners of healthcare professionals delivering modern as well as traditional healthcare services across India. “This will enable digitization and ease the process of buying and selling the Professional Indemnity policies and push for HPR registration among the healthcare professionals,” the regulator said.

This will also help in avoiding medical malpractices under professional indemnity cover.

General and health insurers offering health insurance policies can also consider leveraging on the Health Professional Registry for building up the network of doctors, physicians or other healthcare professionals for providing OPD or other healthcare services, IRDAI said.

As part of Ayushman Bharat Digital Mission, the National Health Authority (NHA) has incorporated a Healthcare Professional Registry (HPR). Under HPR, a healthcare professional ID (HPID) will be created via Aadhaar or other KYC, along with the medical qualifications of the medical professional which is verified by their respective State Medical Councils.

This HPID serves as a unique ID to the medical practitioners to enable connection with all stakeholders of the healthcare ecosystem. “The potential of the mandate is immense. I see three major benefits from this.  First, the availability of a country-wide vetted repository of healthcare practitioners for insurers and TPAs to leverage and build on their network strength.  Second, the enormous reach of Ayushman Bharat Digital Mission,” said Dr Vijay Sankaran, SVP and Chief Medical Officer at MediAssist.

As Ayushman Bharat Digital Mission manages to reach every nook and corner of the country, insurers and TPAs would now be able to empanel verified doctors from far reaching places, he said. “This brings me to the third and foremost benefit. We will now be able to have our cashless OPD network seamlessly spread across both metropolitans and small towns. This is a welcome move and will result in better access to healthcare in the country,” Sankaran said. Health insurance is now the largest segment in the non-life insurance sector with gross premium collection touching Rs 51,361 crore during the seven-month period ended October 2022, a growth of 21 per cent when compared to the previous year.

The Healthcare Professionals Registry will not replace existing registration issued by respective councils. It will, however, bring together data of those professionals from all States participating in ABDM on a digital platform. It will provide additional digital services to the enrolled professionals and will be their primary identifier under the Ayushman Bharat Digital Mission. If professionals wish to avail of these services, they may do so by enrolling in HPR. Further, the processes for registration vary greatly by state, hence a separate enrollment in the Healthcare Professionals Registry is required to capture a standard set of attributes, NHA said.





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LIC reports Rs 15,952 crore Q2 profit


Life Insurance Corporation of India (LIC) has reported an unaudited, standalone net profit of Rs 15,952 crore for the quarter ended September 2022 as against Rs 1,433.71 crore in the same period a year ago.

According to a statement filed with the stock exchanges by LIC, change in accounting policy resulted in “transfer of the accretion in the available solvency margin from non-participating (non-par) to shareholders funds amounting to Rs 14,271.80 crore (net of tax) pertaining to the accretion on the available solvency margin from non-par to shareholder’s account”.

As a result, the profit for the quarter and half year ended September 30, 2022 has increased to that extent. “The said amount comprises Rs 5,580.71 crore of quarter ended September 2022, Rs 4,148.77 crore of quarter ended June 2022 and Rs 4,542.30 crore of quarter ended March 31, 2022,” auditors said in the review.

It has made an additional provision of Rs. 11,543.75 crore towards employees retirement benefits due to the wage revision which has become due with effect from August 1, 2022.

The “outstanding unclaimed amounts/ deposits” and “Interest accrued on unclaimed amounts” aggregating to Rs 21,283.14 crore does not match with the “assets pertaining to unclaimed amounts” of Rs 21,749.28 crore, the statement said.

The total income was Rs 222,215 crore for the September quarter as against Rs 186,276 crore a year ago, it said.





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Go Digit: Irdai no to Fairfax proposal for CCPS conversion


Upsetting the plan of Fairfax, owned by Indian origin Canadian billionaire Prem Watsa, to increase its stake in Indian insurance joint venture Go Digit General Insurance, insurance regulator IRDAI has rejected its proposal to convert the company’s holdings in compulsory convertible preferred shares (CCPS) issued by Go Digit Infoworks into equity shares.

Go Digit Infoworks Services, based in Pune, is the parent company of Go Digit Insurance. Fairfax currently owns 45.3 per cent of Go Digit Infoworks, which has an 83 per cent stake in Go Digit General Insurance.

The Fairfax proposal would have increased its stake to 74 per cent from 49 per cent in Go Digit General Insurance, which is engaged in the general insurance business in India. Fairfax is expected to make a gain of approximately $375 million when it achieves majority ownership of Digit.

“In June 2022, Digit Insurance and Fairfax Financial Holdings applied to the IRDAI for approval to convert the company’s holdings in compulsory convertible preferred shares issued by Go Digit Infoworks into equity shares of Go Digit Infoworks,” Fairfax Financial Holdings said in a note.

“The IRDAI subsequently communicated that the application cannot be considered in its current form as conversion of the Digit CCPS would result in Digit (currently classified as an Indian promoter of Digit Insurance) becoming a subsidiary of the company, which is currently prohibited for Indian promoters, notwithstanding that the foreign direct investment rules have been amended to allow foreign investors to own up to 74% in an Indian insurance company,” Fairfax said.

Fairfax said it will pursue its plan to increase its stake in the Indian insurance venture. “Digit, Digit Insurance and the company intend to continue to explore all avenues under applicable law to achieve the company’s majority ownership of Digit through conversion of the company’s Digit CCPS, and the company expects to report a gain of approximately $375 million when it achieves majority ownership of Digit,” it said.

The IRDAI is likely to tighten rules on how a holding company can invest in its Indian insurance subsidiary in the wake of its rejection of Fairfax’s application for converting its holding (Digit CCPS) into equity shares of Go Digit Infoworks. The regulator is likely to stipulate that an insurance company promoted by a special purpose vehicle or a non-operative financial holding company can’t issue convertible instruments of any kind and no stock options or sweat equity can be issued to the employees and directors of SPV or NOFHC.

Market regulator Sebi recently kept in “abeyance” the proposed initial public offering (IPO) of Go Digit General Insurance which filed draft papers for the IPO with the regulator on August 17. The company, which has cricket player Virat Kohli and his wife actor Anushka Sharma as investors, announced plans to raise Rs 1,250 crore through a fresh issue of equity shares and an additional offer for sale (OFS) of 109.4 million shares by a promoter and existing shareholders.

The joint venture partners of Go Digit have applied to the IRDAI for a new license to set up a reinsurance and a life insurance venture. Both Axis Bank and HDFC Bank have already announced their decisions to pick up stakes in the proposed life insurance venture.





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Sensex ends Samvat in red 1st time in 7 years


MUMBAI: Samvat 2078 has turned out to be the worst-performing year for the sensex in seven years even as investor wealth increased by over Rs 11 lakh crore since last Diwali. The sensex closed the year flat at 59,307 on Friday. The 0.8% decline since last Diwali meant that the sensex slipped into the red for the first time since Samvat 2071 (calendar year 2015), when it had sunk 4%.
Vikram Samvat, which is about 57 years ahead of the Gregorian calendar and starts on the day of Diwali, is followed mainly by the trading community on Dalal Street. The ‘muhurat’ trading, an hour-long special evening session at the BSE, will be on October 23this year.
The muted performance in Samvat 2078 came after the sensex rallied 38% — a 12-year record — in the previous year. Even during Samvat 2076, when the pandemic broke out, the sensex had risen 11% despite extreme volatility.
The Omicron variant of the coronavirus was the first pain-point for investors. It was followed by the invasion of Ukraine by Russia in February, which wreaked havoc on global supply chains and pushed up energy & commodity prices. The third blow came from the relentless rate hikes by the US Federal Reserves to counter soaring inflation, which led to flight of foreign institutional investors. The ongoing economic slowdown in China, rate hikes in India and the sliding rupee have added to bearishness among investors.
Market players said that buying by domestic institutional investors like mutual funds helped cushion the sensex’s fall.
A global market weakness notwithstanding, every month retail investors have consistently invested around Rs 12,000 crore in mutual funds, most of which have been deployed in equities. Since last Diwali, foreign institutional investors have net sold about Rs 1.9-lakh-crore stocks, while domestic funds have net purchased over Rs 2-lakh-crore equities.
The addition of Rs 11 lakh crore to BSE’s market capitalisation at Rs 277 lakh crore reflected smarter gains for non-sensex stocks. A part of the gains also came from a handful of high-profile market debuts of companies like LIC, Paytm and Nykaa. Over Rs 8 lakh crore of the market cap rise came from Adani Group stocks alone, which also helped its chairman Gautam Adani become India’s — and even Asia’s — richest person during Samvat 2078.
A research note from Asit C Mehta Investment Intermediaries noted that despite multiple headwinds, the Indian market has outperformed most of its global and emerging market peers by a significant margin. “We strongly believe the growth story of Indian markets will be continued on the back of supportive government policies, anticipation of a healthy economic recovery and sustained growth,” the broking house said in the note.





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Do you pay rent through credit card? It may not be rewarding


MUMBAI: Are you paying rent via credit cards to earn more rewards points? It may no longer remain an attractive option as card issuers have started putting restrictions on such payments to prevent misuse.
ICICI Bank cardholders will have to pay a 1% fee on rent payments from October 20. SBI Card will levy a processing fee of Rs 99 (exclusive of taxes) on rent payments from November 15. HDFC Bank has limited reward points from rent payments at 500 points, while Yes Bank has limited such transactions to twice a month.

In the last couple of years, a slew of fintech companies and property management service startups have promoted services that allow customers to pay landlords using credit cards instead of traditional modes like cheque or netbanking. Some have also sweetened the offer with cashbacks. Card issuers have not provided reasons for levying fees or capping transactions. However, a banker on the condition of anonymity said that the restrictions are being put as these payments may not be bonafide. “People are using these services to transfer money to friends and family members instead of landlords as there is no verification of beneficiaries,” the banker said.
As rent payments are usually high-value transactions, a cardholder would not only earn more reward points, but also be able to meet annual spend milestones that often leads to waiving of a creditcard’s renewal fee.
“Banks charge a fee for cash withdrawal from credit cards. But now they are seeing that customers are virtually withdrawing cash through loopholes in rent payment services,” an industry player said.
Though the platforms that enable rent payments also charge a convenience fee, it still turns out to be cheaper than withdrawing cash from credit cards through ATMs, experts said. They added that if payments companies acquire landlords as merchants after doing KYC (know-your-customer), card issuers should not have a problem. Earlier, businesses like life insurance companies, which have high-value transactions, have been able to negotiate lower credit card fees (merchant discount rate).





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FM clears 12% salary hike, arrears for PSU general insurance sector


The Finance Ministry has approved a 12 per cent salary hike with five years arrears for the public sector general insurance industry. Finance Minister Nirmala Sitharaman, who had earlier refused to give her final approval to the wage hike proposal unless unions of the PSU insurance companies agree for the “performance linked future wage revision” had changed her mind to approve the proposal, sources said.

The FM’s approval has reached the Department of Financial Services (DFS) for its necessary notification and implementation, industry sources said. PSU general insurance firms have also come out with the new salary structure for various categories of employees after the wage revision.

The government had earlier rejected the demand of unions for a pay parity with Life insurance Corporation (LIC) and ECGC.

However, industry observers have now raised questions about the ability of the three loss making companies (Oriental Insurance Company, United Insurance Company, and National Insurance Company) to bear the burden of higher salaries and arrears of their employees unless the government infuses more funds into these companies. With the 12 per cent hike along with five years of arrears, wage bill for NIC will be around Rs 2,177 crore, Rs 2,080 crore for New India Assurance (NIA), Rs 2,135 crore for OIC and Rs 1,752 crore for UII. There will be a total outgo of Rs 8,146 crore from all four companies for meeting wage revision expenses, analysts said. Analysts said the industry will see a large number of employees, particularly above 50, availing VRS (voluntary Retirement Scheme) after receiving their revised salaries.

The government last year had approved a 16 per cent wage revision with arrears for the employees of IPO-bound LIC and had even finalised a hike of 15 per cent with arrears for the PSU banking industry in 2020.





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Govt links wage hike for PSU insurance staff with performance


The government has asked the unions of the PSU general insurance (GI) industry to accept “performance linked future wage revision’’ before it approves the pending wage revision along with arrears since August 2017. There will be a total outgo of Rs 8,146 crore from all four companies and fresh capitalisation by the government for meeting wage revision expenses.

According to an official, in a meeting of the officials of Department of Financial Services (DFS), GIPSA, the coordinating agency of four PSU general insurers, GIC Re and recognised unions, a senior DFS official categorically said that Finance Minister Nirmala Sitharaman wanted an assurance from the unions for implementation of performance linked wage revision before approving the pending wage revision for the industry. Industry observers say the government has to provide capital to the three companies (United India, National Insurance and Oriental Insurance) for implementing their new wages.

With the 12 per cent hike along with five years of arrears, wage bill for National Insurance will be around Rs 2,177 crore, Rs 2,080 crore for New India Assurance (NIA), Rs 2,135 crore for Oriental Insurance and Rs 1752 crore for United India Insurance.

DFS officials informed the unions that wage revision could be released within five days if the union gives an assurance that they would allow smooth implementation of performance-based wage revision in the industry. GIPSA had called for an urgent meeting of unions after the Finance Minister refused to give her nod to the 12 per cent final wage revision proposal of the industry unless the unions agreed for the new revision method. However, in the meeting, the unions responded by reminding the earlier assurance of DFS Joint Secretary Sourabh Mishra and the GIPSA towards sharing the consultant report prepared by Ernst Young (E&Y).

The unions wanted the report of E&Y — hired by GIPSA to turn the PSU general insurers into agile as well as profitable — to study the consultant’s proposals, including performance linked future wage revision, before its implementation. The unions have further clarified that they were not against KPI (key performance indicator) being the sole criteria for assessing the performance and pay structure of PSU insurers in the future but these concepts need detailed and serious discussion, sources said.

Moreover, the unions had asked the DFS and GIPSA to clear the pending wage revision at par with Life Insurance Corporation (LIC) without any condition or linking it with “performance linked future wage revision’’ before Diwali and then to come out with a new proposal for wage revision with effect from 2022-23.

Observers point out that the condition of performance linked revision may not be accepted by the unions easily and will further delay the conclusion of ongoing wage negotiation for the industry. The ministry while finalising the wage revision had earlier informed the unions that the next wage revision will be based on the performance of each PSU general insurer and each individual within the company.

The unions had reservations in accepting it and wanted more details on the issue.

It is now almost over a month since the Finance Ministry had finally rejected the demands of unions for a wage revision on par with LIC and was expected to notify a 12 per cent hike for the industry soon though unions had not agreed with the proposals.

The government last year had approved a 16 per cent wage revision with arrears for the employees of IPO-bound LIC and had even finalised a hike of 15 per cent with arrears for the PSU banking industry in 2020.





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Govt, LIC move to sell 61% stake in IDBI Bank


NEW DELHI: The government and Life Insurance Corporation of India on Friday finally moved to sell nearly 61% stake in IDBI Bank, along with management control, seeing off the process that has been delayed by several months.
Given the complexities, the department of investment and public asset management, which is driving the process, has proposed a two-stage step. In the first, interested parties will be screened on the specified parameters and if they meet the criteria, they will need to clear RBI’s “fit and proper” test as well as the home ministry’s security check.
In the second phase, those who make the cut will be provided the request for proposal and submit financial bids. The successful bidder will have to make an open offer, which is triggered on the acquisition of 25% stake.

To participate in the first stage, prospective bidders must submit an expression of interest by December 16.
While the IDBI Bank stake sale has been in the works for a few years, the move signals the government’s intent to go ahead with the privatisation plan at a time when analysts were expecting to go slow in the wake of crucial assembly elections as well as general elections in the first half of 2024. The sale process is being closely watched as finance minister Nirmala Sitharaman has announced plans to sell stake in two public sector banks.
IDBI Bank, which has been a problem child of sorts, saw LIC step in at the behest of the government before it slipped into the red and was among banks that saw restrictions imposed on its operations under RBI’s prompt corrective action (PCA) policy. The government believes that the lender is now in good health and an attractive bet for investors.
While RBI has made exceptions in terms of doing a fit and proper assessment at the initial stage itself, large industrial or corporate houses are not allowed to participate. Public sector companies too are not allowed to participate in the IDBI Bank sale process.
The preliminary information memorandum also mentioned that in line with the regulatory norms, voting rights will be capped at 26%. Given that the government and LIC will hold around 19% each, the successful bidder will be the only entity with veto power.
In addition, the buyer, even if it is a consortium, has to hold at least 40% of the paid-up and voting equity share capital of IDBI Bank for five years. Bidders will have to provide a 15-year glide path to reduce their shareholding in line with RBI norms.
In the past too, the government has sought to sell its stake in IDBI Bank, but the process has not gone through.





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