Impact 
In a bid to expand banking services in the non-bank areas, the country’s central bank – Reserve Bank of India (RBI) has allowed non-bank entities to open White-Label ATMs (WLA) across India in-line with developed countries. The regulator has also laid down draft guidelines to set up and operate those ATMs.
It is noteworthy that unlike regular ATMs, WLAs are not owned by individual banks. Any non-bank entity, be it a large corporate group (e.g. Tata or Reliance) or any individual company can apply to the RBI to open those ATMs. However, companies will not have direct access to core-banking operations. Customers need to pay a fee for withdrawing/depositing money from such ATMs. It will be displayed in the ATM screen.
According to the guidelines issued by RBI, WLA operator has to choose a sponsor bank who will serve as the settlement bank for all service transactions at those ATMs. This means, the WLA operator has to open a settlement account with the sponsor bank and also, it will fund the account. The sponsor bank has to be a member of one of the ATM-sharing networks. Currently, there are two such consortiums: National Payment Corporation of India and Cash Tree led by Bank of India. Moreover, the RBI mandates that the applying WLA operator must have a minimum net worth of Rs 100 crore. A WLA operator would also be allowed to earn extra revenue through advertisement placed on such ATMs. The primary responsibility to redress any customer complaint relating to failed ATM transaction will rest with the issuing bank with necessary support to be given by the sponsor bank.
We think that the step by the RBI will facilitate in providing banking services to the unbanked areas and fast growth of ATMs with involvement of corporates. However, care should be taken that the charges levied for ATM transactions are minimum in order to encourage customers to use the ATM rather than avoiding it due to higher charges. Also, there should be a proper redressal system for any erroneous transactions taking place at such ATMs.
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Impact
The Securities and Exchange Board of India (SEBI) has asked fund houses coming up with new Fixed Maturity Plans (FMPs) to spell out the sectors they will refrain from investing in as the capital market regulator wants to make sure that the bets taken by the FMPs do not back fire and that the investors’ money is relatively safe. The regulator's concern stems from its experience in 2008-09, where many investors lost out as mutual funds, having invested in thinly-traded securities of real estate companies, were stuck when FMPs came up for redemption.
The regulator has also asked a few asset management companies to make changes in their draft prospectus filed recently. Fund houses may have to even share with investors an exclusion list for on-going FMPs, particularly those maturing in six months to a year.
We believe that directives issued by SEBI, is right and will aid in bringing in some transparency, in the way FMPs are managed, as at present these products do not disclose their portfolio holdings as well as sectors which they are exposed to. Moreover along with the move intending to curb exposure in risk businesses, it may also help in proper asset-liability management, and thus would facilitate smooth handling of redemptions. Also, clarity about the investment pattern of the FMPs will help the investors in their decision making process.
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Impact 
The headline inflation for the month of January 2012 cooled down further to 6.55% from 7.47% in the previous month. This has been the lowest level since November 2009 wherein the inflation was at 4.73%.
(Source: Office of the Economic Advisor, PersonalFN Research)
Further analysis reveals that the inflation is now on a cooling path wherein we may see the headline WPI inflation mellowing down further. Also, the food inflation being under the negative terrain may further give impetus to inflation cooling down (weekly food inflation data has been discontinued and instead there will be a monthly figure going forward).
To know what should be your investment strategy as inflation cools down please click here.
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In an interview with the Business Standard, Mr Amandeep Chopra – Group President and Head of Fixed Income at UTI AMC shared his views on the impact of the CRR cut on liquidity front and debt market.
Mr Chopra believes that the CRR cut will not address significant liquidity issues in the very short term, as Rs 32,000 crore is not a meaningful impact when the liquidity adjustment facility (LAF) continues to be over Rs 1.4 lakh crore. “The impact is felt more over a couple of months; it spreads out over a quarter. Also, it’s not leading to lowering of borrowing costs for banks. So, even as people expect lending rates to decline, we don’t see that happening. I think, at best, it’s more of a symbolic gesture which has improved the market sentiment. Structural illiquidity, which the Reserve Bank of India (RBI) has also highlighted, is very much here to stay. So, the liquidity shortfall is going to stay not just this financial year, but also the next. I think a lot more needs to be done,” he said
On the debt market front, given the Government’s fiscal situation, Mr Chopra thinks that the 10-year G-Sec will react to the announcements on the Open Market Operations (OMOs) in the immediate three months. “If there are active OMOs by RBI, the 10-year paper will move back to the 8.1% - 8.2% levels. In case they focus more on the CRR impact over the next one-two months and less on OMOs, the 10-year G-Secs will revert back to the pre-December level of 8.5%. The next big event, in our view, will be the Budget and the mid-term review on March 15. Also, Rs 65,000 – Rs 70,000 crore will move out of the system as advance taxes putting a lot of pressure. That, combined with the Budget, is going to be a very strong reason for another CRR cut. I think another 100-bps cut is needed to address the core structural illiquidity in the system,” he explained.
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Fixed Maturity Plan (FMP): A Fixed Maturity Plan is a close-ended fund that invests in debt and money market instruments of similar maturity as the stated maturity of the plan.
(Source: PersonalFN Research)
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QUOTE OF THE WEEK
"You need a plan to build a house. To build a life, it is even more important to have a plan or goal." - Zig Ziglar
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