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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.


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