Month: March 2021

Moratorium likely to raise banks’ losses from unsecured loans, BFSI News, ET BFSI

Banking & Finance

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With deteriorating financial conditions of borrowers, the performance of unsecured assets classes, including microfinance loans and unsecured business loans, is worsening.

“The performance of unsecured asset classes, such as microfinance loans, unsecured business loans and consumer loans, is worsening, given the borrower’s depleted financial cushions and the nature of these loans,” according to a report by India Ratings and Research.

The Reserve Bank of India‘s moratorium on repayment of loans has delayed the stress in these segments where delinquencies have not yet stabilised and higher loan losses are expected to materialise in FY22, it said.

Secured asset classes

For secured asset classes, the agency said, it has a stable performance outlook given the recovery in the economy in FY22.

The agency noted that vehicle loans — including loans for commercial vehicles, passenger vehicles and two-wheelers — have a stable asset performance outlook, given the pickup in economic activities witnessed in the second half of FY21.

“Secured business loans (principally loans against property) also has a stable asset performance outlook, due to the borrower’s higher propensity to repay,” the report said.

Digitisation

As per the report, digitisation initiatives are also expected to help with better portfolio monitoring and in reducing soft delinquencies. “The focus has shifted to building quality secured loan portfolios, upping process efficiency and automating customer follow-ups”.

It noted that recovery momentum and continued policy support in FY22 will be key for loan performance.

Indian securitisation transactions predominantly involve asset classes where the borrowers are either small and micro enterprises/ businesses, or belonging to low and middle-income households, it said.

Varied behaviour

Small business loans are expected to witness differentiated performances depending on the loan type, it said.

The report also said the severity of the impact of the pandemic on their income as well as the impact of the moratorium and fiscal measures on their credit behaviour is varied.

“Thus, the effectiveness and inclusiveness of government support schemes to improve the financial position of the end-borrowers is crucial and is a key monitorable,” it said.



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Reserve Bank of India – Press Releases

Press Releases

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April 14, 2015





Dear All




Welcome to the refurbished site of the Reserve Bank of India.





The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved search – well, at least we think so but you be the judge.





With this makeover, we also take a small step into social media. We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy.




The site can be accessed through most browsers and devices; it also meets accessibility standards.



Please save the url of the refurbished site in your favourites as we will give up the existing site shortly and register or re-register yourselves for receiving RSS feeds for uninterrupted alerts from the Reserve Bank.



Do feel free to give us your feedback by clicking on the feedback button on the right hand corner of the refurbished site.



Thank you for your continued support.




Department of Communication

Reserve Bank of India


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Reserve Bank of India – Tenders

Tenders

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The Reserve Bank of India, Bhopal is in the process of preparing an approved list of tailors/tailoring firms and suppliers located in Bhopal Municipal Limits for stitching of Uniforms for its Class IV staff, for a period of three years 2021-2024.

2. The Terms and Conditions for empanelment along with application form can be downloaded from our website www.rbi.org.in under the link “Tenders” from March 17, 2021 to April 18, 2021. “Applications for Empanelment of Tailors and Supply of Liveries Items’’ addressed to The Regional Director, Reserve Bank of India, 3rd Floor, Stationery Section, Human Resource Management Department, Hoshangabad Road, Bhopal – 462011 so as to reach this office latest by 11.00 AM of April 29, 2021.

Vendors who are currently on Bank’s panel may apply afresh for empanelment.

3. The Bank reserves the right to reject any or all the applications without assigning reason thereof.

Regional Director,
Reserve Bank of India,
Bhopal.

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Bond yields are soaring; Will banks focus on Corporate loans?, BFSI News, ET BFSI

Banking & Finance

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Corporates have been tapping the bond market and avoiding bank loans for the last few years as depressed yields kept borrowing costs lower as against the bank loan rates.

Banks were also wary to extend loans to the corporates but were happy to subscribe to highly rated corporate issuances.

Rising yields

However, after the rise in global bond yields and the government’s plan of borrowing a huge Rs 12 lakh crore, the yields on government bonds are rising for the last two months.

Since January, government bonds yields have surged by 35%. This is leading to a rise in yields of corporate bonds too with those on two-, three- and five-year bonds climbing 50-100 basis points.

With borrowing costs in the bond market rising, corporates are reducing the number of issuances. There has been an 18% month-on-month drop in issuances for February, according to Sebi data.

Banks shying away

Banks are also shying away from investing in bonds as rising yields spell mark-to-market losses as the bond prices go down as yields rise.

Banks have cut their investments in corporate bonds and debentures in the past two months by 3.5% with total investment in corporate bonds by banks down to Rs 5.64 lakh crore by February-end, according to RBI data.

Lower participation

On Tuesday, the corporate bond market saw lower participation with yields on bonds of 10-year maturity fell due to strong demand from long-term investors, mainly life insurance companies and a few pension and provident funds. However, yields on bonds maturing in three to five years remained steady as most investors were engaged in only requirement-based trade.

While it fell on year-on-year basis, the fundraising through a private placement of corporate bonds rose 12% month on month in February as some major public sector companies issued bonds to conclude their borrowings for the current fiscal. Also, some companies fearing a rise in yields stepped up their debt issuances.

Bank credit

Meanwhile, bank credit rose by 6.63 per cent to Rs 107.75 lakh crore in the fortnight ended February 26, according to RBI data.

In the fortnight ended February 28, 2020, bank credit stood at Rs 101.05 lakh crore, the recent data released by the Reserve Bank of India showed. Bank credit increased by 6.58 per cent to Rs 107.04 lakh crore in the previous fortnight ended February 12, 2021.

Thanks to RBI’s stance, banks are flush with liquidity and can offer home loans at low rates seen 15 years back.



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List Of Banks Providing Good Returns Up To 7.25% On Tax Saving FDs

Personal Finance

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Investment

oi-Vipul Das

|

Among the tax saving instruments under section 80C, most of the risk-averse investors consider investing in PPF, Life Insurance Premiums, 5-Year NSC, Post Office Time Deposit and so on. Tax-saving FDs, on the other hand, are ideal for seniors and risk-averse investors. Individuals who invest in tax-saving FDs are eligible for a tax deduction under Section 80C. The tax gain is only applicable to the first holder of a tax-saving fixed deposit made in joint name. Tax-saving FDs have a 5-year lock-in period and no option for early withdrawal. The minimum deposit amount to invest in tax-saving FDs varies between banks. Tax-saving FDs also have a nomination option, which allows a holder in case of his or her death to designate someone to redeem the deposit before or after maturity. The following are tax-saving FDs of private, public, and small finance banks that give higher returns over a five-year period.

List Of Banks Providing Good Returns Up To 7.25% On Tax Saving FDs

Benefits of investing in tax-saving fixed deposits

  • Tax-saving fixed deposits are known to be one of the best investment strategies available. As a consequence, it is a common option among risk-averse investors. The below are some of the benefits of a tax-saving FD:
  • Income earned in such FD schemes is tax-deductible under Section 80C of the Income Tax Act of 1961.
  • In a financial year, a limit of Rs. 1.5 lakh as deductions can be claimed.
  • In tax saving FDs investors earn promised returns, as well as an insurance cover of Rs. 5 lakh by DICGC against bank fixed deposits in the case of a bank’s liquidation.

Best Tax Saving Schemes Under Section 80C

TDS on fixed deposits

For the AY 2019-20, the TDS rate on fixed deposits (FDs) is 10% if the interest amount for the entire financial year surpasses Rs 10,000. If you do not submit your PAN card to the bank, the TDS limit on fixed deposit interest is 20% under current Income Tax laws. Form 26AS comprises the specifics of the TDS withheld by the bank. For either a Time Deposit (FD) or a Recurring Deposit (RD) made with a post office, no TDS is withheld respectively. Senior citizens (those over 60) are able to receive up to Rs 50,000 per year in tax-free FD interest, with no TDS deducted on interest received up to Rs 50,000 annually. You can submit or use form 15G/15H if your gross income for the year is less than Rs 2.5 lakh. Since your income does not fall within the taxable slabs, the bank will not subtract TDS and you will not be eligible to pay income tax.

5-Year FD Rates of Small Finance Banks

Banks ROI in % for general public ROI in % for senior citizens
Suryoday Small Finance Bank 7.25 7.75
Jana Small Finance Bank 7 7.5
Utkarsh Small Finance Bank 6.75 7.25
Ujjivan Small Finance Bank 6.75 7.25
AU Small Finance Bank 6.25 7

5-Year FD Rates of Private Sector Banks

Banks ROI in % for general public ROI in % for senior citizens
DCB Bank 6.75 7.25
IndusInd Bank 6.5 7
Nainital Bank 6.35 6.85
RBL Bank 6.25 6.75
IDFC First Bank 5.75 6.25

5-Year FD Rates of Public Sector Banks

Banks ROI in % for general public ROI in % for senior citizens
Union Bank of India 5.55 6.05
Canara Bank 5.5 6
State Bank of India 5.4 6.2
Bank of India 5.3 5.8
Punjab National Bank 5.3 5.8



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RBI imposes Rs 2 crore penalty on SBI, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India (RBI) has imposed a penalty of Rs 2 crore on the State Bank of India.

“This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers,” the central bank said in a release.

“The statutory inspection of SBI with reference to its financial position as on March 31, 2017, and March 31, 2018, and the Risk Assessment Reports pertaining thereto, and examination of the correspondence with the bank regarding payment of remuneration to its employees in the form of commission had revealed contravention of the provisions of the Act and specific directions issued by RBI.”

In furtherance to the same, notice was issued to SBI to explain why penalty should not be imposed on it for contravention of the provisions of the Act and directions issued by RBI.

“After considering the bank’s replies to the notice, oral submissions made in the personal hearing and examination of additional submissions made by it, RBI came to the conclusion that the aforesaid charges were substantiated and warranted imposition of monetary penalty,” the release said.



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PhonePe captures over 42% of overall UPI P2M market share

Banking & Finance

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With over 42 per cent of the UPI merchant (P2M) transactions, PhonePe said it has emerged as the largest player in the segment.

“PhonePe recently also emerged as the largest digital payments platform processing over 1.07 billion transactions across UPI, wallet, credit and debit cards,” it said in a statement, adding that this is due to the massive adoption it is seeing in Tier-4,5,6 towns and talukas and a deep focus on driving merchant acceptance in these geographies.

PhonePe to tap new revenue streams in financial services, consumer engagement

PhonePe is today accepted across 18 million kiranas in the country, it further said.

“Our leadership in the P2M space is due to an expansion of the market with more merchants using our platform in smaller towns,” said Vivek Lohcheb, Vice-President – Offline Business Development, PhonePe.

PhonePe maintains market leadership in digital payments

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Bank of Baroda bets on new digital platform to expand retail lending, BFSI News, ET BFSI

Banking & Finance

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State-owned Bank of Baroda (BoB) is making a bold move to expand its retail lending through a self made digital lending platform which assesses credit risk through varied public and private data points like bank account statement, tax statements and consumption trends.

Akhil Handa, head fintech and digital lending said the bank has already disbursed Rs 1000 crore through this new platform since it was launched at the end of November and expects half of the bank’s retail loans to be originated through this platform by the end of the fiscal ended March 2022.

BoB has offered 1.25 lakh loans so far, roughly 80% od which are personal loans. The personal loans are capped at Rs 50,000 and are currently offered to only the bank’s customers. Handa said BoB plans to increase the maximum ticket size to Rs 2 lakh and also offer the loans to non customers of the bank before the end of the month.

“The programme was targeted to a very narrow base when it was launched. We have 14 crore liability customers which we could look at by using their vintages like screens, balances and churns. We have now seen repayments in it for three to four months and it gives the confidence that its working fine. Of course we still have to season it but we are at a level that can be scaled up further,” Handa said.

The bank will use over 1200 data points and a 100 digital documents like income proofs, income tax returns and a bank statement which is mandatory.

“There are 50 external integrations like utility bills, mapping addresses and 50 internal integrations including fraud reports that we have done to built a data profile around the customer….It is a risk based dynamic approach…not everyone will be requested for everything…bank account statement will give us a purchase history, income profile, ability to repay…if I am unable to built some of those I will ask for more,” Handa said claiming that BoB is the first to use a completely digital lending for new to bank customers.

BoB’s push into retail comes even as the job and salary cuts caused by the Covid-19 pandemic has increased fears of loan defaults especially in the uncollateralised personal loans.

BoB CEO Sanjiv Chadha himself had warned about rising stress in retail and micro, small and medium enterprises (MSMEs) in a conference call following the bank’s third quarter results.

However, Handa the bank’s experience in the last three months makes him confident of these loans.
To be sure at just Rs 1000 crore the current loan book build through this platform is just above 1% of its Rs 1.16 lakh retail loan book.

However BoB also plans to launch new digital lending products for MSMEs over the next one month including loans up to Rs 10 lakh under the Mudra scheme and also gradually move all yearly MSME renewals online.

“We expect 50% of our retail origination and 25% to 30% of SME loans by amount to happen digitally by FY22,” Handa said. Currently about 18% of retail loans are done through this platform.

BoB’s move comes even as RBI has clampdown on non bank digital lending platforms cautioning the public against the use of “unauthorized” lending apps and reiterating that only RBI licensed banks and NBFCs can participate in lending activities.



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RBI imposes ₹2 crore penalty on SBI

Banking & Finance

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The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹2 crore on State Bank of India (SBI) for contravention of certain provisions of Section 10 of the Banking Regulation (BR) Act, 1949 and the central bank’s specific directions issued to the bank on payment of remuneration to employees in the form of commission.

Specifically, RBI has referred to contravention of section 10 (1) (b) (ii) of the BR Act, whereby no banking company shall employ or continue the employment of any person whose remuneration or part of the remuneration takes the form of commission or of a share in the profits of the company.

“This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers,” per a central bank statement.

This penalty has been imposed in exercise of powers vested with RBI under the provisions of BR Act, it added.

RBI said the statutory inspection of the bank with reference to its financial position as on March 31, 2017 and March 31, 2018 and the Risk Assessment Reports (RARs) pertaining thereto, and examination of the correspondence with the bank regarding payment of remuneration to its employees in the form of commission, revealed, inter alia, contravention of the provisions of the Act and aforesaid specific directions issued by RBI.

In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of the provisions of the Act/ specific directions issued by RBI.

After considering the bank’s replies to the notice, oral submissions made in the personal hearing and examination of additional submissions made by it, RBI came to the conclusion that the aforesaid charges were substantiated and warranted imposition of monetary penalty, the statement said.

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Reserve Bank of India – Press Releases

Press Releases

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(Amount in ₹ crore, Rate in Per cent)
  Volume
(One Leg)		 Weighted
Average Rate 		Range
A. Overnight Segment (I+II+III+IV) 4,07,006.71 3.24 0.01-5.30
     I. Call Money 10,029.64 3.27 1.90-3.50
     II. Triparty Repo 2,97,142.00 3.27 3.15-3.30
     III. Market Repo 99,580.07 3.13 0.01-3.42
     IV. Repo in Corporate Bond 255.00 3.89 3.50-5.30
B. Term Segment      
     I. Notice Money** 62.75 3.50 2.65-3.60
     II. Term Money@@ 65.00 – 3.60-3.60
     III. Triparty Repo 200.00 3.20 3.20-3.20
     IV. Market Repo 690.00 3.25 2.60-3.40
     V. Repo in Corporate Bond 0.00 – –
  Auction Date Tenor (Days) Maturity Date Amount Current Rate /
Cut off Rate
C. Liquidity Adjustment Facility (LAF) & Marginal Standing Facility (MSF)
I. Today’s Operations
1. Fixed Rate          
     (i) Repo          
     (ii) Reverse Repo Tue, 16/03/2021 1 Wed, 17/03/2021 3,83,878.00 3.35
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo          
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo – – – – –
3. MSF Tue, 16/03/2021 1 Wed, 17/03/2021 0.00 4.25
4. Long-Term Repo Operations –   –   –
5. Targeted Long Term Repo Operations – – – – –
6. Targeted Long Term Repo Operations 2.0 – – – – –
7. Net liquidity injected from today’s operations
[injection (+)/absorption (-)]*		       -3,83,878.00  
II. Outstanding Operations
1. Fixed Rate          
     (i) Repo          
     (ii) Reverse Repo          
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo Fri, 12/03/2021 14 Fri, 26/03/2021 2,00,007.00 3.51
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo          
3. MSF          
4. Long-Term Repo Operations# Mon, 17/02/2020 1095 Thu, 16/02/2023 499.00 5.15
  Mon, 02/03/2020 1094 Wed, 01/03/2023 253.00 5.15
  Mon, 09/03/2020 1093 Tue, 07/03/2023 484.00 5.15
  Wed, 18/03/2020 1094 Fri, 17/03/2023 294.00 5.15
5. Targeted Long Term Repo Operations^ Fri, 27/03/2020 1092 Fri, 24/03/2023 12,236.00 4.40
  Fri, 03/04/2020 1095 Mon, 03/04/2023 16,925.00 4.40
  Thu, 09/04/2020 1093 Fri, 07/04/2023 18,042.00 4.40
  Fri, 17/04/2020 1091 Thu, 13/04/2023 20,399.00 4.40
6. Targeted Long Term Repo Operations 2.0^ Thu, 23/04/2020 1093 Fri, 21/04/2023 7,950.00 4.40
D. Standing Liquidity Facility (SLF) Availed from RBI$       32,617.06  
E. Net liquidity injected from outstanding operations [injection (+)/absorption (-)]*     -90,307.94  
F. Net liquidity injected (outstanding including today’s operations) [injection (+)/absorption (-)]*     -4,74,185.94  
G. Cash Reserves Position of Scheduled Commercial Banks
     (i) Cash balances with RBI as on 16/03/2021 4,36,499.28  
     (ii) Average daily cash reserve requirement for the fortnight ending 26/03/2021 4,55,339.00  
H. Government of India Surplus Cash Balance Reckoned for Auction as on¥ 16/03/2021 0.00  
I. Net durable liquidity [surplus (+)/deficit (-)] as on 26/02/2021 8,64,316.00  
@ Based on Reserve Bank of India (RBI) / Clearing Corporation of India Limited (CCIL).
– Not Applicable / No Transaction.
** Relates to uncollateralized transactions of 2 to 14 days tenor.
@@ Relates to uncollateralized transactions of 15 days to one year tenor.
$ Includes refinance facilities extended by RBI.
& As per the Press Release No. 2019-2020/1900 dated February 06, 2020.
* Net liquidity is calculated as Repo+MSF+SLF-Reverse Repo.
# As per the Press Release No. 2020-2021/287 dated September 04, 2020.
^ As per the Press Release No. 2020-2021/605 dated November 06, 2020.
¥ As per the Press Release No. 2014-2015/1971 dated March 19, 2015.
Ajit Prasad
Director   
Press Release : 2020-2021/1252

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