WEEKLY NEWS(1ST NOV. TO 7TH NOV.)

MFIS AGREES TO REDUCE INTEREST RATES TO 24 PC

Micro finance companies agreed to reduce interest rates they charged from borrowers to 24 per cent after a meeting with financial services.

A cut in rates in the backdrop of an unsavoury situation in Andhra Pradesh, where many borrowers have committed suicides apparently due to coercive methods adopted by micro finance institutions (MFIs) to recover money.

MFIs are in the business of extending loans in rural areas, mainly unbanked areas. About 85 per cent of the loans given by the MFIs come from banks. As of September quarter, the MFIs have lent over Rs 30,000 crore ($6 billion) to over 3 crore customers.

While the banks charge interest rates in the range of 9-14 per cent on loans given to MFIs, some MFIs in turn charge as much as 34 per cent from their clients.

WITH TARGET PRESSURE GONE, BANKS REPORT LESS LOAN NUMBERS

Loan growth in the banking system is faltering as borrowers shift to market funding and due to tapering-off of window dressing that boosted numbers at the end of the quarter last month.

The rise in bank credit to the commercial sector was also supplemented by the higher flow of funds from other sources.

Rough estimates showed that the total flow of financial resources from banks, non-banks and external sources to the commercial sector during the first half of 2010-11 was higher at Rs 4,85,000 crore, up from Rs 3,29,000 crore during the same period of the previous year.

If the slow pace of loan growth continues, the central bank’s estimates of 20% this year may have to be cut for the second straight year.

URBAN CO-OPERATIVE BANKS ON A HIGH AS RBI LIFTS CURBS

The Reserve Bank of India has offered urban co-operative banks or UCBs more freedom to operate by removing some of the restrictions, which were put in place five years ago to clean up the system.

The banking regulator has not only removed barriers to widen their catchment area beyond their states of origin, but it has also liberalised the branch licensing policy for UCBs and allowed them to engage business correspondents and business facilitators for deeper penetration.

It has replaced the existing limit of 15% of deposits for housing, real estate and commercial real estate loans by a limit of 10% total assets.

An additional limit of 5% of total assets will be available for housing loans granted to individuals by UCBs for purchase of dwelling units up to Rs 10 lakh.

RBI DOUBLES ONLINE MONEY TRANSFER LIMIT VIA RTGS TO RS 2 LAKH

The Reserve Bank has doubled the threshold limit for electronic fund transfers using the Real Time Gross Settlement (RTGS) system to Rs 2 lakh with effect from November 15.

The RTGS system facilitates high-value transfers of money from one bank to another on a real-time and gross basis.

With the increased number of electronic payment transactions, it has become expedient to position the Indian RTGS system primarily for processing and settling large value payment orders.

OBAMA TO EASE US-INDIA EXPORT CONTROLS, BOOST TRADE

Obama will announce the easing of US controls on exports to India, in a move to boost trade between the two countries .

will address a business summit to showcase US goods as US businesses finalize deals worth around $10 billion with India.

Deals include previously announced transactions involving General Electric for aircraft engines and gas turbines, and Boeing for 737 passenger planes.

But details on a key $4.5 billion sale by Boeing of C-17 military transport planes were still being ironed out.