Month: April 2021

IPO boom prompts ICICI Bank to hire more investment bankers, BFSI News, ET BFSI

Banking & Finance

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By Baiju Kalesh

India’s second largest private lender ICICI Bank Ltd. is making its biggest hiring push in investment banking and institutional equities in four years, as it anticipates a rise in companies going public.

The Mumbai-based firm plans to add five mid-to-senior level hires in each of the two units, which currently have 130 bankers in total, according to Ajay Saraf, head of investment banking and institutional equities at ICICI Securities Ltd. The new roles will be concentrated in sectors such as technology and health care, he said.

“We have not hired these kinds of numbers since 2017,” Saraf said in a phone interview last week. “We see investor interest disproportionately higher for these sectors in the next 12 months.”

India is joining the global share sale frenzy thanks to ample liquidity in the market with foreign investors and even retail buyers looking for new ideas to invest in. The booming local tech scene, which earlier in April minted six unicorns in a single week, is also expanding the initial public offering pipeline for bankers.

So far in 2021, nearly $3 billion has been raised through IPOs in India, the best start to the year since 2018, according to data compiled by Bloomberg. It could even surpass 2020’s $4.6 billion haul as companies such as Zomato Pvt., Policybazaar and Nykaa E-Retail Pvt. are set to go public in Mumbai as as soon as this year, Bloomberg News has reported.

ICICI Securities ranks first for equity offerings in India so far in 2021, according to the Bloomberg league table, a leap from 2020 when it finished 10th.

Saraf expects there to be more deals to go around as high-quality firms come to market in the next three to six months.

“The deal activity on the primary market will be stronger than 2021,” he said. “The number of transactions will be widespread but the rise in volume will depend on the issuers’ decisions on the size.”

The banker doesn’t see those listings taking the form of special purpose acquisition companies. Investors have flooded into SPACs, vehicles that raise money from public listings in order to merge with private companies, and Indian targets are not immune to the frenzy. The country’s biggest renewable power producer ReNew Power agreed to merge with a U.S. SPAC in February, giving it an $8 billion enterprise value, and some bankers in India predict more blank-check firm deals to come.

Saraf is skeptical of a sharp rise in SPAC activity in the country. “What you need for a SPAC is the size, and path to profitability,” he said. “Not many companies pass that muster in India.”



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An informal economy is a biggest challenge for lockdown in India, say Experts, BFSI News, ET BFSI

Banking & Finance

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As many states in India seem to be heading for a total lockdown, the World Bank chief economist Carmen Reinhart has opined that less extreme forms of lockdown can work in a country like India, sparking a debate on their efficacy.

While some favour total lockdown because it can protect lives, others think that a lockdown would destroy livelihoods and thus lives.

A lockdown was necessary to help India develop its healthcare infrastructure to deal with the Covid-19 crisis. Now that is in place along with treatment protocols, there is no need for another lockdown, opine many.

World Bank view

“I think in countries like India, a very big challenge to the lockdown approach has been the informal sector, she told ET.

There are ways of addressing, perhaps less extreme forms of lockdown that allow for some flexibility. But vaccines alone have to still be supplemented with health emergency measures, she said, adding “I have no doubt that that is still the case. And I do think the big challenge remains the tension between needing to work for survival and the tension of containing the pandemic.”

“The informal economy has been and continues to be a big challenge for India but I would say vaccines alone, at this stage, don’t do it. You still need the other protection mechanisms of social distancing and the like,” she said.

Lancet Commission

The Lancet Covid-19 Commission India Task Force has not recommended a blanket national or state lockdown, as opposed to localized, phased restrictions or closures.

Its report said the experience of the past year has shown that economic closures are most disruptive to the poorest sections of the society. In urban areas, daily wage earners, informal sector workers, and low-skill workers are the most likely to be impoverished from disruptions in economic activities.

Yet, experience from other countries has shown that lockdowns do assist in bringing down transmission rates.

Middle approach

A middle ground approach will be needed in India. “We recommend that in areas of high infection rates, the focus is on breaking the chain of transmission through local actions. We recommend that advisories be issued that strongly encourage anyone that can to remain at home (white collar workers, for example, who can work from home) to do so”, the report said.

“We also recommend that venues that host large congregations should be closed, and activities that encourage large gatherings should be banned”, it added. But restrictions on the movement or work of the working urban and rural poor should be minimized and locally determined through the creation of micro-containment zones in high case-load areas.

Localised trends

Decisions on local lockdowns or curfews are best left to local authorities and must be based on localised trends in epidemiological data (transmission, test positivity rates, hospitalisation, and mortality rates). These decisions should be made after in-depth consultations with local businesses, community leaders, and workers associations.

More importantly, extra care needs to be taken in terms of testing and vaccinations to ensure that workers are protected and are safe during this current phase of the pandemic, the report said.

The central government take

Union Health Secretary Rajesh Bhushan had written to Maharashtra Chief Secretary Sitaram Kunte stating that the state’s focus should be on strict and effective containment, not the imposition of a lockdown.

“Measures such as night curfews, weekend lockdowns, have very limited impact on containing/ suppressing the transmission. Hence the district administration should focus on strict and effective containment strategy,” Bhushan wrote.



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British digital bank Starling raises £50 million from Goldman Sachs, BFSI News, ET BFSI

Banking & Finance

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British digibank Starling received a £50 million (Rs 523.75 crore) investment from Investment Bank Goldman Sachs, the digital lender announced in a statement. The investment by Goldman Sachs, through its Goldman Sachs Growth Equity Fund, follows Starling raising £272 million (Rs 2849.07 crore) through its Series D funding round in March 2021. Cumulatively, through both raises, Starling said it had raised £322 million (Rs 3372.44 crore).

Founder and CEO of Starling Bank, Anne Boden, on the fund-raise said “Securing the support of another global financial heavyweight demonstrates the strength of demand from investors and represents yet another vote of confidence in Starling.”

“Goldman Sachs will bring valuable insight as we continue with the expansion of lending in the UK, as well as our European expansion and anticipated M&A,” added Boden.

James Hayward, Managing Director at Goldman Sachs added “Starling is one of the leading and most innovative digital banks in the UK, with an ambitious technology-first leadership team and addressing a deep market opportunity.”

The digital bank, founded in 2014, currently has over two million current accounts, which includes 3.5 lakh business account. Starling said its deposit base had also increased from £1 billion (Rs 1047.36 crore) to £6 billion (Rs 62841 crore) in less than a year and was on its path to declare its first full year in profit by the end of the next financial year.



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After blockchain test in space, JPMorgan offers solution to improve global funds transfers between banks

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The new solution will lead to lowering costs for both the sending and receiving banks.

Weeks after experimenting with blockchain-based payments between satellites in space to see if two machines could transact autonomously, investment bank JPMorgan is now using blockchain technology to improve funds transfers between banking institutions globally. JPMorgan has now launched a new solution called Confirm to help bring down the number of “rejected or returned transactions caused by mismatched payment details,” according to the investment banking company. As a result, the solution will lead to lowering costs for both the sending and receiving banks.

“JPMorgan getting into blockchain is going to help a lot on the institutional side of fund transfers. It is looking to resolve the clearing and settlement problem which happens in the bank-to-bank transfers and takes multiple days to settle. With blockchain, JPMorgan and banks will be able to settle it in near real-time,” Ashish Agarwal, a blockchain expert and Founder of PayO — neo banking platform for SMEs – told Financial Express Online.

Confirm is a global account information validation application on JPMorgan’s blockchain network through which partner banking institutions, according to the company, will be able to request confirmation of the beneficiary account information and receive responses directly from other participating banks receiving the requests in near-real-time. Once the information is validated, the payment may be sent through JPMorgan’s clearing solution PayDirect to route the payment. The investment bank is working with 12 Taiwan banks for testing the use of blockchain technology to improve global funds transfers. JPMorgan had in February this year, according to a news report, partnered with State Bank of India to speed up overseas transactions for customers through the bank’s blockchain technology.

Also read: Zoho’s Sridhar Vembu gives growth mantra to SMBs; suggests entrepreneurs to focus on rural India

Last month, Visa had announced the use of cryptocurrency USD Coin — a stablecoin, which means its value is pegged directly to the US dollar — to settle transactions on its payment network on a pilot basis. Apart from Visa, institutions, and entrepreneurs including Mastercard, BlackRock, PayPal, Square, Tesla’s Elon Musk, Jack Dorsey, and more having been either engaging or dabbling with cryptocurrencies. PayPal had also last month announced that its US customers will be able to convert their Bitcoin, Ethereum, Litecoin, or Bitcoin Cash to US dollars to complete the transaction.

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Not necessary to activate CCyB for banks now: RBI

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Our Bureau

The Reserve Bank of India (RBI), on Monday, said it is not necessary to activate Counter-Cyclical Capital Buffer (CCyB) for banks at this point in time

The aim of CCyB regime is two-fold. First, it requires banks to build up a buffer of capital in good times which may be used to maintain flow of credit to the real sector in difficult times.

Second, it achieves the broader macro-prudential goal of restricting the banking sector from indiscriminate lending in the periods of excess credit growth that have often been associated with the building up of system-wide risk.

The CCCB framework envisages the credit-to-GDP gap as the main indicator, which may be used in conjunction with other supplementary indicators – the Credit-Deposit (C-D) ratio for a moving period of three years (given its correlation with the credit-to-GDP gap and GNPA growth), industrial outlook (IO) assessment index (with due note of its correlation with GNPA growth), and interest coverage ratio (noting its correlation with the credit-to-GDP gap).

Last April, too, the RBI did not to activate CCyB (framework for which was put in place in terms of guidelines issued on February 5, 2015, with pre-announcement of the decision to activate it as and when circumstances warranted) for a period of one year or earlier, as may be necessary.

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ICICI Prudential Life Insurance Q4 profit down 64.5%

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ICICI Prudential Life Insurance reported a 64.5 per cent drop in net profit for the fourth quarter of 2020-21 at ₹63.8 crore compared to ₹179.49 crore in the same period in 2019-20.

For the full year 2020-21, its net profit fell by 10.16 per cent to ₹960.15 crore against ₹1,068.75 crore in 2019-20.

“The value of new business for the fourth quarter of 2020-21 grew by 26 per cent and stood at ₹591 crore. This resulted in value of new business (VNB) of ₹1,621 crore for 2020-21 with an expansion in VNB margin from 21.7 per cent in 2019-20 to 25.1 per cent in 2020-21,” said ICICI Prudential Life Insurance in a statement on Monday.

For the quarter ended March 31, 2021, its net premium income increased by 13.4 per cent to ₹11,879.28 crore against ₹10,475.12 crore in the corresponding quarter in the previous fiscal.

Its 13th month persistency ratio was 86.1 per cent as on March 31, 2021, against 89.2 per cent as on March 31, 2020. The solvency ratio stood at 217 per cent on March 31, 2021, well above the regulatory requirement of 150 per cent.

The board has approved a final dividend of ₹2 per equity share for 2020-21.

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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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RBI set up 6-member panel to review working of ARCs

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Our Bureau

The Reserve Bank of India (RBI) has set up a six-member committee to undertake a comprehensive review of the working of Asset Reconstruction Companies (ARCs) in the financial sector ecosystem, and recommend suitable measures for enabling such entities to meet the growing requirements of the financial sector.

The committee, headed by Sudarshan Sen, former Executive Director, RBI, will review existing legal and regulatory framework applicable to ARCs and recommend measures to improve efficacy of ARCs.

It will review the role of ARCs in resolution of stressed assets, including under Insolvency & Bankruptcy Code (IBC), 2016.

To make suggestions

The committee will make suggestions for improving liquidity in and trading of security receipts; and review of business models of the ARCs. It will submit its report within three months from the date of its first meeting.

As of January-end 2021, the number of ARCs registered with the RBI stood at 28.

The committee has been set up in the backdrop of public sector banks working towards setting up a National Asset Reconstruction Company Ltd to sell large stressed assets of ₹500 crore and above, and the RBI rejecting UV ARC’s resolution plan for Aircel as it did not conform with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.

As per RBI data, as of March-end 2020, the book value of assets acquired by ARCs stood at ₹4,31,339 crore and the Security Receipts issued by them was ₹1,51,435 crore. The amount of Security Receipts completely redeemed was ₹17,947 crore.

The other members of the committee are: Vishakha Mulye, Executive Director, ICICI Bank; PN Prasad, former Deputy Managing Director, State Bank of India; Rohit Prasad, Professor of Economics, MDI, Gurgaon; Abizer Diwanji, Partner, Ernst & Young; and R Anand, Chartered Accountant.

In July 2020, the RBI advised ARCs to put in place Fair Practices Code (FPC), duly approved by their board, in order to achieve the highest standards of transparency and fairness in dealing with stakeholders..

As part of FPC, the RBI asked ARCs to adhere to non-discriminatory practices in both acquisition of financial assets and sale of secured assets, ensuring reasonable fees and expenses charged by them, and confidentiality of borrower information.

Matters pertaining to grievance redressal, outsourcing of activities and use of recovery agents by ARCs are also covered under the code.

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Rule 72: Know How Much Time It Takes To Double Your Investment Returns

Personal Finance

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Planning

oi-Vipul Das

|

Rule 72 in finance is recommended by investment advisors to help investors prevent any sort of delay in achieving their financial goals. The rule basically specifies an investor how long it will take for his or her investment to double. Thus, by applying Rule 72 to your investment instrument, you can determine whether or not the investment strategy can help you to achieve your financial goal. Divide 72 by the interest rate provided by the investment instrument to conclude at the result. For example PPF interest rate is now 7.1 percent, so it will take 10.14 years (72/7.1 = 10.14) to double the money using the Rule 72 calculator, if the PPF interest rate stays constant. The easiest way to do this is to figure out how long each investment instrument takes to double your money. It would be easier to choose a scheme until you know which one will double your money the earliest. Let’s glance at Rule 72 using a bank FD as an example. Let’s say you want to invest Rs 5 lakh in a bank fixed deposit with a 6% interest rate. To calculate the period it will take for Rs 5 lakh to become Rs 10 lakh, divide 72 by the interest rate (6%), 72/6 equals to 12. As a result, if the interest rate on that particular bank FD remains constant for the next 12 years, you will have doubled your money. You can also use this rule in reverse to figure out how much interest rate you’ll need to double your money in a particular period. For instance, suppose you want to double your money in three years. 72 divided by three equals 24. To double your money in three years, you’ll need a 24 percent interest rate. Now let’s apply Rule 72 to different investment vehicles to calculate how much time it will take to double your investments.

Rule 72: Know How Much Time It Takes To Double Your Investment Returns

Bank FD: At present banks leading banks such as SBI, HDFC, Axis and ICICI banks are providing an interest rate at around 5%. Hence, by applying Rule 72 (72/5) it will take over 14 years for your money to double.

Public Provident Fund (PPF): The current PPF interest rate is 7.1 percent per annum. If the PPF interest rate stays constant, the capital will double in around 10 years, as 72/7.1 equals to 10.14.

Sukanya Samriddhi Yojana (SSY): At present SSY is providing an interest rate of 7.6%. If the interest rate remains constant, it will take approximately 9.4 years for the investment to double, as 72/7.6 equals to 9.47.

Kisan Vikas Patra (KVP): KVP has a current interest rate of 6.9%, which is compounded yearly. In ten years and four months, KVP promises to nearly double your investment. At the present interest rate of 6.9%, it will take 10.43 years to double your money using the Rule of 72.

National Savings Certificate (NSC): The interest rate on National Savings Certificates is presently 6.8%. If the rate stays unchanged in the future, it will take 10.5 years for your contributions to double.

Rule 72 does not have a precise figure, but it does ensure that one has a rough estimate of his or her investment objective and the time required to achieve it. The thumb rule is typically applied to fixed-rate investments rather than volatile asset categories such as stocks, mutual funds, and so on.



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Paytm expands ESOP scheme to $604 million

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Our Bureau

In a bid to attract and retain top talent, Paytm has expanded its ESOP pool to 2.4 million equity options. With this addition, the company’s ESOP pool valuation has jumped to $604 million.

The company plans to award the expanded stock options to more employees during its annual performance appraisal. To attract and retain talented professionals, Paytm last year amended certain aspects of its ESOP policy.

“Going back to the spirit of rewarding performance and creating a meritocratic organisation it introduced performance-based ESOPs. These are given at the time of hiring or during the appraisal cycle and all key roles across different levels are eligible for it. It has linked ESOPs to individual goals that are reviewed and approved by the business heads with the flexibility to accommodate multiple scenarios and also meet employees’ aspirations,” the company said.

A Paytm spokesperson added: “We consider our ESOP scheme as a great way to promote the spirit of wealth creation among employees and truly believe that every employee is a stakeholder in the company. Our ESOP policy rewards colleagues on the basis of their overall performance and achievements.”

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