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Monday Reads: Payment-Only Banks, Lower Inflation, SU-UTI Woes

Let a hundred banks bloom, says Tamal at Mint. RBI broaches the concept of payment-banks, which will have a much lower capital requirement (Rs. 50 cr. versus Rs. 500 cr. for a full fledged bank) and which can only hold deposits and allow for payments (through accounts and prepaid instruments).

Apart from this the RBI proposes that everyone with a UID will automatically get a bank account, initially disabled to prevent misused. That will take care of all KYC requirements if any further bank account is opened anywhere, by just the production of an Aadhaar card. It could be years before this happens, but it will be quite a substantial development in the Indian banking system, if it does!

Inflation is probably down, says ET. Data comes out monday evening (5:30 pm) for CPI and Tuesday noon (12:00pm) for WPI.

Dhirendra Kumar bemoans the mismanagement of the erstwhile US64 fund by UTI, and calls the recent move to sell the holdings of SU-UTI as taking what belongs to the original investors. But I disagree – in 1999 to 2003, when the US64 drama happened, the fund’s value was much lower than the Rs. 10 the government promised. Investors got a better deal and were more interested in not losing money at that time, than of holding on for 10 more years. In effect, the government shouldered the rest of the risk, and is now raking it in.

While Hong Kong and Singapore try to burst their home-grown real estate bubbles, their citizens are looking to invest abroad to avoid the curbs such as minimum mortgage down-payments and lower loan-to-value ratios. India would do well to learn from them and take active steps to bring down real estate prices.

  • Px says:

    I agree with D kumar,
    Look at the current mess of psu disinvestment and oil psu fraud wherein LIC and psu oil cos are becoming the next uti as the govt systematically uses these cos for its vote bank politics. Why are investors disenchanted ?
    1. UTI64 was a trust fund, by legislation and not a mf , and govt and trustees abused the trust of small investors who thought it was too big to fail .
    how did the 64% debt turn into 64+% equity , some of it questionable investment ?
    2. Govt forced UTI to take investment decisions not favorable to investors
    and there were multiple instances of breach of basic investment rules and trust , front running and bailing out of the crony capitalists/mundhras of various govts, What about questionable investment decisions in cronys like Reliance to K10 scripts right since early 90s till its demise?
    3. Capital losses were wiped off cause govt freed capital gains post the uti mess mainly to force a write off of cap losses.
    All said , BJP suffered for the crimes commited moreso in the congress era by the people holding the highest offices right now.
    4. No one was brought to book … another case of jane bhi do yaroon because every big politician and bureaucrat would be exposed !
    Why were there no arrests / no blame fixing ?
    5. Who brought uti down and did they have insider info that uti64 was below nav ? It was selling by big corps like sbi, il&fs psus, banks, tatas, reliance etc that triggered the collapse…
    6. I bailed out on time, as i had an idea as this info was freely available as the rumor mill was abuzz ! many people were not so lucky !
    Bjp paid the price during elections … no doubt about it.

  • Px says:
    Sucheta dalal the scam on uti … now probably not accessible