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Banking

SBI Life Insurance to appeal against the order of IRDA to refund Rs.275 crore

The Private sector life insurer, SBI Life Insurance would appeal against the order of Insurance Regulatory and Development Authority (IRDA) to refund Rs.275 crore to the policy holders of Dhanaraksha Plus Limited Premium Paying Term (LPPT), a group insurance policy.

Why IRDA directed SBI Life Insurance to refund Rs.275.29 crore to policy holders within six months?

The insurance regulator, IRDA charged SBI Life of violation of various norms by mis-selling the policy and payment of higher commission to agents. The order was issued after an enquiry that disclosed SBI Life Insurance was charging the second year premium along with the first year premium on its Dhanaraksha Plus Limited Premium Paying Term (LPPT).

  • IRDA spotted that 99.99 % of the total premium procured under the LPPT product was sourced by corporate agents of the life insurer belonging to SBI Group. The insurer has paid 40 % of first year premium as ‘first year commission’ and 7.5 % of second year’s premium as ‘second year commission’.
  • Though, the single premium version of product been offered to the policy holders, the actual commission payable would have been only 2 %.
  • Thus, it can be concluded that the large scale sale of LPPT as single premium payment policy has only facilitated higher commission payments to insurance intermediaries involved who are predominantly SBI and its associate banks.
  • It relates to polices issued during FY9, FY10 and FY11.
  • Thus, IRDA directed SBI Life Insurance to refund Rs.275.29 crore to policy holders within six months, as the amount was collected from them in violation of norms.

Note: SBI Life Insurance is a joint venture between country’s biggest lender, State Bank of India (SBI) and BNP Paribas Cardif.

 

Cricketer Shikhar Dhawan: Canara Bank’s Brand ambassador

Screenshot_1The public sector lender, Canara Bank announced cricketer Shikhar Dhawan as its brand ambassador.

Objective: To gear up for the next phase of banking with a special focus on the country’s youth.

Canara Bank is not the first public sector lender to name a cricketer as its brand ambassador. For example- Cricketer Rahul Dravid has been Bank of Baroda’s brand ambassador since 2005.

ICICI Bank launched portable POS machines

Screenshot_8The private sector lender, ICICI Bank launched portable hand-held machines (or portable POS machines) to avoid inconvenience around entering secret PIN number for card transactions in hotels.

The ICICI Merchant Services is an alliance between ICICI Bank and electronic commerce and payment services company First Data.

Plan: To replace 25,000 machines located in the hospitality sector enterprises with the portable hand-held machines.

Screenshot_9Function of portable machine: A customer will be presented the machine at the table in order to authorize a transaction rather than the current practice of going to the cash counter where the Point-Of-Sale (POS) machines are generally kept.

Note: As per the new PIN rule, the Reserve Bank of India (RBI) has asked for the secret PIN to be entered for all card payments at merchant establishments. To prevent fraud and enhance security, Businesses viz. fuel stations, hotels, hospitals and restaurants would have to buy the portable, GPRS-enabled devices to offer convenience to clients.

China launched a trial programme for private firms to set up banks

For the first time, the China Banking Regulatory Commission (CBRC) approved a trial program to establish five privately owned banks as the government seeks to ease restrictions on the state-controlled banking industry and also move to liberalize deposit rates in the next two years, as regulators grapple with the rising pressure on the banking sector from a newly booming online finance industry.

  • The first batch of the five banks will be opened in the cities of Tianjin, Shanghai, Zhejiang Province and Guangdong Province as a pilot project.
  • Ten private companies’ viz. Internet giants Alibaba and Tencent have been selected to take part in the preparation work for setting up the banks.
  • Each of the banks will be co-sponsored by at least two private capital providers
  • The banks will operate “independently” and will assume responsibility for risks and losses as well as profits.
  • The private banks will need to have adequate net capital, a specific business strategy and a mechanism to prevent risks from spreading and to protect depositors’ interests.
  • Financial services of private banks will be oriented towards small and micro businesses as well as residential communities.
  • No timetable has been given for when they need to be operationally ready.

Note: Alibaba Group is one of the biggest e-commerce companies and Tencent Holdings Ltd is China’s most popular online games provider.