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Private Banking

To put it bluntly, money talks. It can open doors, command attention and even turn stiff-lipped bankers into putty. As long as "money owner" translates into a millionaire. If you are one, then you will be welcomed into the world of personal or priority banking, which holds out a bouquet of services not usually given to the plebs.

However, even in the rarified club of exclusivity there is a distinction between millionaires and millionaires. Private banking is received by invitation while priority banking is a tad more democratic - as long as one's deposits average a "net relationship value" set by retail banks, the benefits of priority banking are available to the accountholder.

In India, unlike in its Western counterparts, private banking services can only be purely advisory in nature according to government stipulations. Abroad, the customer gets the "total asset management services" that effectively combines the functions of stockbroker, accountant and portfolio manager in one entity.

Moreover, since the rupee is not fully convertible yet, quintessential private banking that is borderless is not yet possible in India. Instead private banking Indian-kind tries to make do by throwing in some tailor-made retail services (again a no-no with private banks abroad) with portfolio advice. All delivered by an impressively designated `relationship manager'. All at a cost, of course, for instance almost every kind of transaction has a separate fee,.

As far as priority banking goes, relationship arises strictly according to pecking order. If you have the money, then the retail banks will waive all queues for banking transactions, offer financial management, freebies and better service.

Private bankers stress "customized" but if your bank wants your cash sitting in their vaults, retail banks strenuously argue that their attention to you can get pretty personal, too.

Respondez sil vous plait to private banking only after making sure the invitation is not bait.

Service cost of 1-3% may or may not cover advice, custodial and brokerage fees. Check annual custodial charge and how is advice paid for - per recommendation, hour or at a flat rate.

Is the bank's advice on equity limited to mutual funds, is it generic or are actual scrip recommended on buy-sell basis?

What is the range of instruments handled? Debt, equity, mutuals, fixed deposits, government securities, badla financing, et al?

You may land up and realize the invitation was only a test run - is the service up and running or only at the announcement stage?

Only specific mutual fund schemes are marketed by a bank that earns a commission of upto 1% and a fee for the duration of investment. The menu can be too bland.

Private / Priority banking

Commerce Bank with a minimum balance of Rs.4 million, offering advice on on debt/MF, assist with investment deals.

ING Bank with a minimum balance of Rs.1 mn, suggest/ monitor investment funds, buy/sell with short-listed brokers and follow up delivery, payment, trade, etc.

Banque Nationale de Paris with a minimum balance of Rs.4 mn, offer advice on investment, support debt/equity deals and facilitate custody.

ANZ Captain Grindlays Club with a minimum balance of Rs.1 mn, allows overdraft upto Rs.25,000, a Gold card with no annual fee and credit limit of Rs.100,000 along with tax advise.

Standard Chartered with a minimum balance of Rs.500,000, ATM withdrawal of Rs.20,000, free gold standard credit card and 0.5% off on personal loans.

Citibank CitiGold with a minimum balance of Rs.3 mn, withdrawal of Rs.50,000 and any credit card with fee waiver for first year with emergency cash and services abroad.

Hong Kong Bank’s Asset Vantage with a minimum balance of Rs.100,000, offers ATM card with cash withdrawal of Rs.16,000, write-in to bank’s tax advisor and commission-free encashing of Thomas Cook traveler cheques.

Investment in India - Banking - Private Banks

The RBI issued guidelines regarding the formation and functioning of private sector banks in January 1993. These guidelines are as follows:

1. The banks shall be governed by the provisions of The Reserve Bank of India Act, 1934 The Banking Regulations Act, 1949 Other relevant statuaries.

2. Private sector banks are required to be registered as public limited companies in India.

3. The authority to grant a license lies with the RBI.

4. The shares of banks are required to be listed on stock exchanges.

5. Preference will be given to those banks whose headquarters are proposed to be located in a centre which does not have headquarters of any other bank.

6. Maximum voting rights of an individual shareholder would be limited to 1% of total voting rights.

7. The new bank would not be allowed to have as its director any person who is already a director in a banking company.

8. The bank will be subject to prudential norms in respect of banking operations, accounting policies and other policies, as laid down by RBI. The bank will be required to adhere to the following: Minimum paid up share capital of Rs. 1 bln. Promoters' contribution as determined by the RBI Capital adequacy of 8% of the risk weighted assets Single borrower and group borrower exposure limits in force Priority sector lending Export credit Loan policy within overall policy guidelines laid down by the RBI.

9. The banks will be free to open branches anywhere once they satisfy the capital adequacy and prudential accounting norms.

10.The banks would not be allowed to have investments in subsidiaries, mutual funds and portfolio investments in other companies in excess of 20% of the banks' own paid up capital and reserves.

11. The banks would be required to use modern infrastructural facilities in office equipment, computer, telecommunications etc.

Policy for Investment made in Private Banks

New private sector banks have not been allowed to be set up in India since 1969. With a view to increasing competition in the banking industry and in line with the recommendations of the Narasimhan Committee, the Government has now allowed the entry of such banks.

Close monitoring by RBI

However, the freedom of the entry into the banking sector will be carefully managed by the RBI. The RBI will grant approvals for entry of private sector banks provided such banks offer competitive, efficient and low cost financial intermediation services, result in up gradation of technology in the banking sector, are financially viable and do not resort to unfair means like preemption and concentration of credit, monopolization of economic power, cross holding with industrial groups etc.

Foreign Investment in Banking Sector

Under the scheme, Non Resident Indians are allowed to have primary equity in a new banking company to the extent of 40%. In the case of a foreign banking company or a finance company acting as a technical collaboration or a co-promoter, equity participation is restricted to 20%.

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