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The Reserve Bank of India releases monthly data on India’s international trade in services with a lag of around 45 days. The value of exports and imports of services during the month of December 2020 are given in the following Table:
Monthly data on services are provisional and would undergo revision when the Balance of Payments (BoP) data are released on a quarterly basis. Rupambara Press Release : 2020-2021/1106 |
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Even as investments through participatory notes (P-Notes) have come down due to stringent regulation, the number of foreign portfolio investors (FPIs) routing money through tax havens such as Luxembourg has gone up significantly.
According to data available with market regulator SEBI, there has been a 10-fold rise in FPIs originating from Luxembourg in nearly a decade.
Luxembourg, Europe’s famous tax jurisdiction and home to thousands of ghost companies operating without employees and offices, is the second most favoured destination after the US for FPIs registered in India.
The number of Luxembourg-based FPIs has risen from around 100 in 2012 to 1,143 in March 2020. These Luxembourg FPIs held equity and debt assets worth ₹2,30,500 crore last year. The assets had increased to ₹3,53,541 crore towards the end of January 2021.
“Countries like Luxembourg offer secrecy and it’s not easy to figure ultimate beneficiaries of investment vehicles there. It is highly likely that some Luxembourg FPIs are used by Indian promoters, politicians and others for money laundering or round tripping,” said Shriram Subramanian, founder, InGovern, a proxy advisor.
In 2012, when SEBI started revealing data on FPI origination, there were a total of 1,754 registered foreign funds with 6,322 sub-accounts that were nothing but entities on whose behalf the funds were invested. These sub-accounts mainly used P-Notes to hide the identity of ultimate beneficiary investors playing in Indian markets. As the din over ban on P-Notes grew louder and SEBI relaxed norms on FPI registrations, most sub-accounts converted into FPIs. But destinations like Luxembourg and other tax havens still offer them the same secrecy of P-Notes, experts say.
FPIs originating from just three large tax havens including Luxembourg, Mauritius and Singapore are contributing around a third of India’s stock market flows.
The number of FPIs registered in Mauritius has increased by over six times from 101 in 2012 to 608 while those in Singapore have increased almost 6 times from 75 to 434.
Recently, French daily Le Monde and few other news outlets published an investigation report known as the ‘OpenLux Investigation’ that has now opened the Pandora’s box for Luxembourg as it reveals how funds suspected of criminal activities were concealed in the country. Transparency International, whch tracks financial crimes and corruption cases, has said that nearly 80 per cent of Luxembourg private investment funds may be laundered dirty cash.
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The Reserve Bank of India (RBI) has allowed Authorised Dealer (AD) Category-I Banks to post and collect margin in India, on their own account or on behalf of their customers, for a permitted derivative contract entered into with a person residing outside India.
The AD Cat-I Banks can post and collect margin in the form of Indian currency; freely convertible foreign currency; debt securities issued by Indian Central government and State governments; and rupee bonds issued by persons residing in India.
In the case of rupee bonds issued by persons residing in India, they have to be listed on a recognised stock exchange in India; and assigned a credit rating of ‘AAA’ issued by a rating agency registered with the Securities and Exchange Board of India.
If different ratings are accorded by two or more credit rating agencies, then the lowest rating shall be reckoned.
AD Cat-I banks may post and collect such margin outside India in the form of freely convertible foreign currency; and debt securities issued by foreign sovereigns with a credit rating of ‘AA-’ and above issued by S&P Global Ratings / Fitch Ratings or ‘Aa3’ and above issued by Moody’s Investors Service.
If different ratings are accorded by two or more credit rating agencies, then the lowest rating shall be reckoned.
The RBI, in a notification, said AD Cat-1 Banks may receive and pay interest on margin posted and collected on their own account or on behalf of their customers for a permitted derivative contract entered into with a person residing outside India.
Further, these banks shall maintain a separate account in the name of persons residing outside India for the purpose of posting and collecting cash margin in India, and transactions incidental thereto.
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SIDBI saw a 22 per cent jump in net worth to Rs 20,694 crore for the nine-month period of FY21.
Credit and Finance for MSMEs: Small Industries Development Bank of India (SIDBI) — the principal financial institution focusing on micro, small, and medium enterprises (MSMEs) in the country has reported a 9 per cent net profit growth to Rs 630 crore in Q3 FY21 from Rs 578 crore in Q3 FY20 despite the Covid impact on lending to MSMEs. Engaged in an integrated credit and development support ecosystem for MSMEs, the non-interest income for the bank was up 16.7 per cent to Rs 154 crore in Q3 FY21 vis-à-vis Rs 132 crore in the year-ago period. The net interest income grew 3 per cent to Rs 840 crore in Q3 FY21 from Rs 816 crore in Q3 FY20.
“The credit growth to the MSME sector has been strong despite the impact of the Covid-19 pandemic and this has helped us to achieve encouraging financial performance with a boost to our loan book. We have also managed to keep our asset quality under check. Our focus will be on sustaining the growth and scalability with various measures targeted towards recovery and strengthening of the MSME ecosystem,” said V. Satya Venkata Rao, Deputy Managing Director, SIDBI.
For the nine-month period ended December 31, 2020, SIDBI reported a 38.4 per cent jump in net profit from the year-ago period. The lender posted Rs 2,165 crore net profit up from Rs 1,564 crore during the said period as credit growth to the MSME sector despite Covid remained strong. The operating profit (before provision) increased 14.6 per cent to Rs 3,301 crore in nine months of FY21 from Rs 2,880 crore in the corresponding period of the preceding year.
The bank also saw a 22 per cent jump in net worth to Rs 20,694 crore for the nine-month period of FY21 from Rs 16,941 crore for the similar period of FY20 while the Net Interest Income grew 22.3 per cent to Rs 2,898 crore from Rs 2,370 crore. The Net Interest Margin (annualized) increased to 2.27 per cent from 1.94 per cent and earnings per share was up from 29.41 to Rs 40.70. SIDBI’s Capital Adequacy Ratio (CAR) also improved to 29.04 per cent from 24.79 per cent while Return on Capital Employed jumped to 10.45 per cent from 9.08 per cent.
Year-on-year growth in gross bank credit to micro and small enterprises (MSEs) had remained positive throughout the pandemic last year even as the growth rate had declined. From 7.7 per cent growth in March, the deployment grew 3.3 per cent in April followed by 1.5 per cent in May before it scaled back to 6.5 per cent in June. Deployment in July, August, September, October, and November stood at 5.1 per cent, 5.4 per cent, 6.7 per cent, 6.8 per cent, and 6.1 per cent respectively. SIDBI’s Gross Non-Performing Assets (GNPA) decreased to Rs 669 crore (0.47 per cent) from Rs 1,550 crore (0.97 per cent) during the nine-month period for the two years. Its Net NPA (NNPA) reduced to Rs 114 crore (0.08 per cent) from Rs 884 crore (0.56 per cent).
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Bank credit growth in FY21 so far (up to January 29) has reached about 90 per cent of the year-ago level, going by the Reserve Bank of India’s data on Scheduled Banks’ Statement of Position in India.
This is probably an indication that credit demand is limping back to normalcy after the economy was ravaged by the Covid-19 pandemic in the first six months of FY21.
Year-to-date (YTD) credit growth of all scheduled banks at ₹3,39,147 crore was about 90 per cent of the year-ago YTD credit growth of ₹3,74,938 crore.
On a year-on-year basis, credit growth has slowed to 5.92 per cent as of January-end 2021 against 7.41 per cent as of January-end 2020.
Bankers expect credit offtake to be in the 10-12 per cent range in FY22 as the economy recovers from the impact of the pandemic. The Reserve Bank of India (RBI) has projected real GDP growth at 10.5 per cent in FY22.
Banks are continuing to receive copious deposit inflows despite deposit rate cuts. YTD deposit growth at ₹12,36,944 crore was about 1.5 times the year-ago growth of ₹8,26,394 crore in the year-ago period.
On a year-on-year basis, deposit growth was at 10.85 per cent as of January-end 2021 against 10.42 per cent as of January-end 2020.
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The public offer comprises a fund raise via a fresh issuance of shares amounting to Rs 850 crore. The company will have an Offer for Sale (OFS) of 27,055,893 equity shares by Maj Invest Financial Inclusion Fund II K/S, Michael & Susan Dell Foundation, Tano India Private Equity Fund II, TR Capital III Mauritius and Aavishkaar Goodwell India Microfinance Development Company II Ltd collectively.
The portion reserved for qualified institutional buyers will be up to 50 per cent of the offer, non-institutional investors will have up to 15 per cent of the portion reserved while up to 35 per cent will be reserved for retail investors. The portion reserved for eligible employees will be up to 5 per cent of the offer.
As stated in the DRHP, the company may decide to undertake a pre-IPO placement of Rs 150 crore subject to consultation of the merchant bankers. Net proceeds from the fresh issue will be utilised for augmenting the company’s capital base to meet their future capital requirements which is expected to be deployed in FY22.
As on September 30, 2020, the Kolkata-based company which commenced its operations in 2006, has served approximately 2.21 million borrowers across 17 states and stands as the largest NBFC-MFI in eastern India as per gross loan portfolio. It offers a broad range of products across credit and financial instruments.
Between FY17-FY20, Arohan Financial Services, as per a CRISIL report, had the second highest gross loan portfolio growth at 68 per cent CAGR and stood amongst top five NBFC-MFIs in India. Arohan Financial also had the highest customer growth at 49 per cent CAGR between FY18-FY20. The company’s disbursements, AUM, total comprehensive income has been growing YOY and as on FY20 stood at a CAGR of 110.03 per cent.
The microfinance business of the company operates out of 710 branches across 11 states and the MSME lending business has a reach across eight states through its 10 branches.
Edelweiss Financial Services Ltd, ICICI Securities Ltd, Nomura Financial Advisory and Securities (India) Private Limited and SBI Capital Markets Limited are the book running lead managers (BRLMs) to the issue.
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The outward forex remittance solution is live on the Kotak Mobile Banking App.
For the first time, Kotak customers can conveniently transfer money internationally to their beneficiaries straight from their mobile, Kotak Mahindra Bank said in a release.
The private sector lender said that it is an industry-first move, and customers will not have to furnish any physical documents for transactions up to USD 25,000 or equivalent seamlessly to permissible geographies across the world.
“The mobile has been at the centre of a revolution of sorts and it has changed the way we bank, invest, shop and pay.
“Domestic payments has been one of the core areas of focus. With the launch of Kotak Remit on mobile, we have entered a new phase of digital transformation encompassing international payments, which gives our customers the advantage of banking on mobile for making international fund transfers as well,” said Phani Shankar, President & Co-Head – Treasury & Global Markets, Kotak Mahindra Bank.
Kotak Remit offers remittances in 15 currencies including the US dollar, Australian Dollar, UK Pound Sterling, Hong Kong Dollar, Saudi Riyal, Canadian Dollar, Singapore Dollar, Euro, Japanese Yen.
By entering transfer details and beneficiary details, customers can remit up to USD 25,000 or equivalent per day and up to USD 250,000 or equivalent in a financial year through Kotak Remit.
Customers will receive a notification at every stage of the transaction process, keeping them updated and can also save beneficiary details to facilitate quick repeat remittances.
While outbound remittances under the Liberalised Remittance Scheme (LRS) for resident individuals has seen a decline this year owing to the pandemic, remittances from India have been consistently growing prior to FY 2020-21 and presents a significant market opportunity, said the bank.
In 2019-20, outbound remittances from India grew by nearly 36 per cent to USD 18.8 billion in 2019-20, from USD 13.8 billion in 2018-19.
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The panel will “draw up a vision document for a vibrant and resilient urban co-operative banking sector having regards to the Principles of Cooperation as well as depositors’ interest and systemic issues,” said the terms of reference of the committee which will be required to submit its report to the RBI in three months.
The eight-member panel, including former chairman of Nabard Harsh Kumar Bhanwala, will also review the current regulatory and supervisory approach and recommend suitable measures to strengthen the sector, taking into account recent amendments to the Banking Regulation Act, 1949.
As per the terms of reference of the committee, it will “take stock of the regulatory measures taken by the Reserve Bank and other authorities in respect of UCBs and assess their impact over the last five years to identify key constraints and enablers, if any, in fulfilment of their socio-economic objective.”
Among other things, the committee will consider the need for differential regulations and examine prospects to allow more leeway in permissible activities for UCBs with a view to enhancing their resilience.
As part of the Statement on Developmental and Regulatory Policies released along with the Monetary Policy Statement on February 5, the Reserve Bank has announced setting up of an Expert Committee on UCBs to examine the issues and to provide a road map for strengthening the sector, leveraging on the recent amendments to Banking Regulation Act, 1949.
Following the amendment all urban cooperative banks and multi-state cooperative banks have come under the supervision of the Reserve Bank of India.
There are 1,482 urban cooperative banks and 58 multi-state cooperative banks having about 8.6 crore depositors with total savings deposit of about Rs 4.85 lakh crore.
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Fintech lending start-up KreditBee recently concluded its Series C equity round worth $75 million from Premji Invest, Mirae Asset Naver Asia Growth Fund, Alpine Capital and Arkam Ventures, consisting of both primary and secondary investment.
“The holding entity had previously raised over $43 million cumulatively in equity from marque investors, including ICICI Bank and Arkam Ventures,” it said in a statement on Monday.
The company provides digital personal loans and consumer durable loans to both salaried and self-employed. The loan amount disbursed is up to ₹2 lakh and can be for a period from two to 15 months.
Madhusudan E, co-founder and CEO, KreditBee, said: “With a larger portfolio of loan products, our objective is to provide credit to over 18 crore new-to-credit customers who were not provided formal credit earlier. This investment would help us take more positive steps towards achieving that.”
The company has a user base of over two crore with over 40 lakh credit customers. It plans to diversify its product offering by venturing into digitally-enabled secured loans, home loans and credit line.
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Rebound in GDP growth next fiscal could mean improved prospects for savings and life insurance companies, believes Vibha Padalkar, MD and CEO, HDFC Life Insurance. In an interview with Businessline, she said the Budget proposal on taxing ULIPs will not impact the insurer. Excerpts:
HDFC Life reported 5.8 per cent net profit in the third quarter. What contributed to the growth?
We are fairly satisfied with the performance. The January numbers have come out. We have grown faster than the private sector. We grew by 24 per cent while the private sector grew by seven per cent. On a year-to-date basis, we have grown faster than the private sector. We have had a 250 basis points expansion in market share. Our balanced product and distribution mix has helped us. Also, product innovation is important. Term products continue to do well.
What is your expectation on the life insurance industry?
For new business premium, this year is likely to be close to zero, given that we are at negative four per cent in the private sector space. The next year should be decent with growth between 12 per cent to 15 per cent for the life insurance industry. Some of it will be the base effect. But if we are talking of a fairly good rebound in GDP growth, then there will be growth in savings, and we will channelise some of it in the life insurance sector.
Will there be any impact of the Budget proposal on ULIPs on HDFC Life Insurance?
We have typically not focussed on high ticket ULIPs of over ₹2.5 lakh and, in fact, we haven’t focussed on ULIP at all. We usually pitch some other policy but worst-case scenario will be about three per cent on our topline, but it will be zero impact on our bottomline. Balance product mix is handy for any kind of changes like this.
Instead of a high-ticket ULIP product, what alternatives can a customer go for?
They can buy non-par savings, which is an attractive product. They can also buy participating savings, where they can get their money back immediately. If a customer is in their 50s, it will be very good to buy a deferred annuity in 10 years when you retired. Below ₹2.5 lakh is tax-free. Alternatively, a customer can plan it in a manner and spread it across your family.
Will you look to use the higher FDI limit in any way?
As a listed company, eventually it is possible that more and more of foreign investment will come in. We still have a headroom today, we are not even close to 49 per cent. Gradually, over a period of time for HDFC Life and if and when our promoters decide to pare down their stake, it gives more optionality for foreign investors to come in.
With Covid now bringing a new normal, how are you redefining your strategies on a medium or long term basis?
We are working strategies that are impacting all our key stakeholders, including employees. For employees, we see a shift in how we attract and retain employees. For customers, we are migrating to various facilities. We have introduced a video-based tool for seamless customer servicing; they can directly connect with our executives without having to walk in to a branch. We have a Whatsapp bot to answer simple questions. People are using that quite a bit. We also have digital on-boarding of agents. We are licensing, on-boarding and training them through digital, and we are giving them tools for end-to-end pitch. Our traditional bancassurance channels such as HDFC Bank, Bandhan Bank, RBL Bank are all moving digital, and the entire process of on-boarding a customer is digital.
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