Singapore may be the new financial hub

The jury is out on what the future holds for Dubai. Fund managers and high-street bankers see the fall of Dubai as a prelude to the emergence of Singapore as the undisputed financial centre of Asia.

But for diamond merchants who left Antwerp to escape the harsh Belgian laws, traders handling third-country exports to the Arab world and Africa, and slush money dealers who found Dubai more friendly than the Swiss banks, the city state has no equal. For them, it could even make sense to re-enter the Dubai property market which drew Bollywood actors as well as the Russian mafia.

“Dubai has a different charm. Many Indians, I feel, have discovered the world of numbered accounts in Dubai... besides, there’s no tax for individuals and corporates. Only foreign banks and insurance companies have to pay a nominal tax,” says Dilip J Thakkar, an expert on Fema matters.

Surely, Singapore or Hong Kong, with tax rates of 18% and 16%, respectively, can’t match this. Many, like Mr Thakkar, are betting that it will soon be business as usual. They think that investors will take haircuts, European banks (which may be holding as much as $40 billion of Dubai’s $80 billion debt) will sell a slice of their investments, and a Kazakh-style clean-up and debt write-off will get the builder’s paradise up on its feet.

But many fear the stigma would stick.

“Market forces in Dubai never work the way they do in other parts of the world. Dubai never really became a financial centre and a large part of its progress was based on what was taking place in its real estate market. It never attained the stature that was given to a market like Hong Kong,” feels Munesh Khanna, managing director of the investment bank Centrum Capital. Singapore, according to Mr Khanna, will be a major beneficiary.

It will be a bigger damage if Dubai authorities are not quick enough in striking a deal with the lenders, as this will impact capital flows to many emerging markets. The very shadow of default could make life difficult for the private sector in the entire Gulf region. Over the past few years, private firms have turned more dependent on foreign borrowing to fund their local growth, and chances are that foreign banks may trim exposure to the region.

Indeed, “increased scrutiny by foreign lenders could curtail domestic growth in the region and aggravate the credit constraints on large family groups,” said an internal note of one of the foreign banks with exposure to the region.

There is a higher possibility that investors would now prefer to operate out of more established jurisdictions, says Siddharth Shah who heads the corporate and securities practice group at the law firm Nishith Desai Associates. “What could help Singapore is its long history of a successful financial centre,” says Mr Shah.

According to Seshagiri Rao, CFO and joint MD of JSW Group, markets may not collapse dramatically, but people fear that there may be more defaults of this kind in the days ahead. While many would agree with Mr Rao that the present sell-off in the financial market is to an extent sentiment-driven, global banks are grappling with an element of mistrust and disbelief.

“Even if this does turn out to be a voluntary restructuring, the lack of clarity and ill-timing of this announcement are likely to raise the international cost of financing for the Emirate for some time to come,” says a note prepared by a large US bank. “Why did it happen? We frankly find no compelling explanation for such a move,” says the note.

Forget net banking,you can m-bank on the go

Internet banking has made lives enormously simpler for those who have access to the world wide web. But in terms of penetration, net banking is yet to achieve the kind of usage that is witnessed by ATMs.

“Post RBI’s regulations on mobile banking issued in September last year, several banks had started working on launching their mobile banking services, and the hectic activity seen in this space in the last few days is the result of the culmination of these efforts,” says Ajay Adiseshann , managing director of PayMate, an mcommerce facilitator.

Though services such as balance check, transaction enquiry and alerts were available with most banks even earlier, this has gained momentum now, as rolling out of full-fledged m-banking facilities is in full swing. Most banks allow their customers to avail of mobile banking even if they have not registered for Internet banking services.

Banking on the move

As per RBI guidelines, an individual can transfer funds — to another account with the same bank or other banks through his/her mobile, subject to a cap of Rs 5,000 per day. For paying your bills/making purchases through your m-banking account, this limit would stand enhanced to Rs 10,000 per day.

Furthermore, banks are allowed to set monthly limits for their customers. For instance , State Bank of India has placed a ceiling of Rs 30,000 in a month for these transactions.

Within these restrictions, you can carry out almost all the transactions that you can do through net banking, including transferring funds, paying credit card and other utility bills, ordering cheque books and demand drafts and issuing stop payment instructions from your cell phone.

Getting started

To avail of these services, you need to download the mobile banking application from your bank’s website on to your cell phone, and get registered for this facility. Generally, any Javaenabled cell phone model (cost starting at Rs 3,000) would be able to support this application .

You would require a GPRS mobile Internet connection (which your cellular operator will make available on request) to transact through this channel. This facility is meant to be operator-agnostic , meaning, that it should be available across cellular operators.

However, you would do well to check the list of telecom service providers through whom your bank is offering this service currently. Some banks also offer m-banking on the sms platform.

While the bank will not levy charges for offering this service, you may have to pay some charges — for use of GPRS/SMS — as specified by your cellular operator. However, some banks could levy nominal charges if you are using your debit or credit card for the purpose.

Securing transactions

The central bank, in its guidelines, has laid down certain parameters for ensuring that mobile banking transactions are done in a protected environment.

Within this framework, banks have taken steps to secure these transactions .

“Access to the customer’s account is protected through a secure Internet PIN (IPIN) known only to the customer. Further, for any funds transfer or payments-related functionality, the customer has to set-up the payee online and only then transfer through mobile,” informs Vijay Ramchandran, chief marketing officer of Citi South Asia.

For using your credit card, apart from entering your card details, you would need to enter your date of birth and create an MPIN — similar to an ATM PIN — that is used to validate all transactions.

If you lose your mobile phone, besides contacting your telecom service provider to deactivate the SIM card, you need to contact your bank or credit card issuer to inform them about the same. “ngpay is a tamper-proof digital wallet on your phone that stores your bank account /credit card/debit card details in an encrypted form.

Even if you lose your phone, unauthorised users cannot access ngpay or your payment/banking transactions without the unique MPIN.

This provides 128-bit end-toend financial grade security from the user’s handset through to the application servers,” explains an SBI Cards spokesperson.

Like in case of any other password-protected transactions, in addition to security measures taken by banks, you need to take basic steps such as ensuring that your mobile banking password is not saved on your mobile phone itself or noted down elsewhere.