Month: January 2021

Cholamandalam Investment & Finance Co has announced that Arun Alagappan (43) has resigned from the post of Managing Director and Director.

“He wishes to move ahead to assume larger responsibilities within the group, and the board has accordingly considered and accepted the same today,” the company said in a filing to stock exchanges.

Alagappan will be relieved from the services of the company effective February 14, 2021.

Earlier positions

After serving as an Executive Director of the company from August 19, 2017, he was elevated as the Managing Director of Murugappa Group’s NBFC in November 2019.

Then, the company had said the board had approved his appointment as the Managing Director for five years effective November 15, 2019.

Alagappan has about two decades of experience in the areas of strategy and planning, technology, finance, management and governance.

He had held senior management positions in group companies such as EID Parry India and Tube Investments of India before the Cholamandalam stint.

Digital disruption poses a relatively low risk to India’s top-tier banks’ long-standing market position, according to S&P Global Ratings.

“We believe India’s top-tier private-sector banks and State Bank of India (SBI) are well-placed to deal with tech disruptions, given their dominant market positions and continued investments in technology,” said credit analyst Deepali Seth-Chhabriain a report.

The agency, however, underscored that the banking system’s low profitability and weak asset quality present some difficulties in significantly boosting digitalisation for several state-owned banks and smaller private-sector banks.

The agency said collaborations between traditional banks in India and fintech companies are likely to increase. At the same time, it believes traditional banks require considerable investments to upgrade legacy systems.

Shift to UPI

In the report, ‘Tech Disruption in Retail Banking: Top-Tier India Banks Lead the Change’, the rating agency observed that Covid-19 restrictions have been a boost for India’s major digital payment system, Unified Payment Interface (UPI).

The value of transactions processed via the UPI almost doubled in June to November 2020 from the same period a year ago, said S&P.

In India, mobile payment users are shifting away from e-wallets towards UPI, which dominated the payments market, with 51 per cent share in the total number of transactions in October 2020.

Unlike e-wallets, UPI does not lead to deposits moving out of the banking system. That allows India’s banking system to maintain an edge in the payment system.

“We expect this shift in consumer preferences to remain.

“Rising smartphone penetration, increasing internet connectivity, and the young, tech-savvy demographic segment present vast opportunities in India for existing banks and new players,” said S&P.

The agency noted that the Reserve Bank of India and the government have also been pivotal in laying the foundation and raising the bar for the development of fintech.

New technologies

Many banks in India have been quick to embrace new technologies to cater to a vast and growing, young, tech-savvy customer base, it added.

S&P said some non-bank financial companies (NBFCs) have made considerable traction in having technology-led banking solutions omnipresent in their core business models. In addition, financial institutions use artificial intelligence and machine learning not only in loan underwriting, but also customer on-boarding, cross-selling, servicing, and fraud management.

Although it believes the industry’s competitive dynamics will continue to evolve, new entrants have failed to make their mark so far.

“Payment banks in India have less than 1 per cent of the deposit market share and remain unprofitable; restrictive licences render the model rather unviable. “Big tech companies have also entered the industry, but they have not been able to encroach into the mainstays of the incumbent banks, namely lending and deposits,” said S&P.

YES Bank, on Monday, rolled out ‘YES MSME’, whereby the bank will support micro, small and medium enterprises (MSMEs) through solutions across lending, deposits, insurance, customised and segmented digital solutions for retail, manufacturing, wholesale, trade and service providers.

This also includes special current account offerings for the self-employed segment, the private sector bank said in a statement.

The MSME proposition re-engineers business processes, offering swift access to capital through digital lending and fintech partnerships, and products curated with industry associations that empower the bank’s MSME customers – promoters as well as businesses, it added.

The bank underscored that its start-up programme offers collateral-free funding of up to ₹5 crore, along with consultancy and enterprise resource planning (ERP).

Speaking at the virtual launch of YES MSME, Nitin Gadkari, Union Minister for MSMEs and Road Transport and Highways, said: “Investment in the sector is the need of the hour and we are hopeful that concerted efforts by the industry and the government will help expand it.”

Prashant Kumar, MD and CEO, YES Bank, said the bank’s enhanced value proposition will improve access to finance for MSMEs and support their technology upgrade, among other customer-focussed measures.

L&T Finance Holding Ltd (LTFHL), on Monday, said it will raise ₹2,999 crore via a rights issue in the entitlement ratio of 17:74 at ₹65 per equity share.

The rights issue will open on February 1 and close on February 15,. The rights issue price includes a premium of ₹55 per equity share.

As per the company’s regulatory filing, the rights entitlement ratio is 17:74 (17 equity shares for every 74 shares fully paid-up equity shares held by the eligible equity shareholders of the company, as on the record date, January 22).

If the shareholding of any of the eligible equity shareholder is 5 or more, such shareholders will be entitled to at least 1 equity share, the company said.

“For example, if an eligible equity shareholder holds 5 equity shares, such equity shareholder will be entitled to one equity share and will also be given a preferential consideration for the allotment of one additional equity share if such eligible equity shareholder has applied for additional equity shares, over and above his/her rights entitlements, subject to availability of equity shares in the rights issue post allocation towards rights entitlements applied for,” as per the filing.

The outstanding equity shares of LTHFL currently is at about 200.81 crore. This will increase to about 246.94 crore equity shares, post rights issue (assuming full subscription), the company said.

The board of directors of RBL Bank, on Monday, approved the re-appointment of Vishwavir Ahuja as the Managing Director and CEO of the bank for three years.

The re-appointment is with effect from June 30, 2021, to June 29, 2024, and the same is being recommended to the Reserve Bank of India and shall be subject to their approval, the bank said in a regulatory filing.

Ahuja has been MD & CEO of RBL Bank since June 30, 2010. Prior to joining RBL Bank, he was the MD & CEO of Bank of America, India, from 2001 to 2009.

As per the regulatory filing, under Ahuja’s leadership, the deposits of the bank have grown almost 40 times, while advances have grown more than 45 times since 2011.

Tata Capital Growth Fund II has raised ₹1,250 crore from a group of global and European Fund of Funds, reputed Japanese institutions, and a leading Asian development financial institution.

Sponsored and managed by Tata Capital, the fund will be invested in the three investment themes – strategic services, urbanisation, and discrete manufacturing. This investment strategy is continuation of the strategy pursued by Tata Capital Growth Fund I.

Akhil Awasthi, Managing Partner, Tata Capital Growth Fund, said improving underlying economic fundamentals, imminent release of a vaccine, and quality of the current portfolio that Tata Capital Growth Fund II has built till date boost confidence that the fund will continue to identify and invest in industry-leading companies.