Reserve Bank of India – Press Releases
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Month: September 2021
PayPal heats up buy now, pay later race with $2.7 billion Japan deal, BFSI News, ET BFSI
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US payments giant PayPal Holdings Inc said it would acquire Japanese buy now, pay later (BNPL) firm Paidy in a $2.7 billion largely cash deal, taking another step to claim the top spot in an industry witnessing a pandemic-led boom.
The deal tracks rival Square Inc’s agreement last month to buy Australian BNPL success story Afterpay Ltd for $29 billion, which experts said was likely the beginning of a consolidation in the sector.
The BNPL business model has been hugely successful during the pandemic, fuelled by federal stimulus checks, and upended consumer credit markets.
These alternative credit firms make money by charging merchants a fee to offer small point-of-sale loans which shoppers repay in interest-free instalments, bypassing credit checks.
Heavyweights like Apple Inc and Goldman Sachs are the latest heavyweights that have been reported to be readying a version of the service.
Paypal, already considered a leader in the BNPL market, also entered Australia last year, raising the stakes for smaller companies such as Sezzle Inc and Z1P.AX Co Ltd, stocks of which were down in midday trading on Wednesday.
“The acquisition will expand PayPal’s capabilities, distribution and relevance in the domestic payments market in Japan, the third largest ecommerce market in the world, complementing the company’s existing cross-border ecommerce business in the country,” PayPal said in a statement on Tuesday.
After the acquisition, Paidy will continue to operate its existing business and maintain its brand. Founder and Chairman Russell Cummer and President and Chief Executive Riku Sugie will continue to hold their roles in the company, PayPal said.
The Financial Times had reported last month that Paidy was considering becoming a publicly listed company.
The transaction is expected to close in the fourth quarter of 2021, and will be minimally dilutive to PayPal’s adjusted earnings per share in 2022.
BofA Securities was the sole financial adviser to PayPal on the deal, and White & Case was lead legal adviser. Goldman Sachs advised Paidy, and Cooley LLP and Mori Hamada & Matsumoto provided it legal counsel.
(Reporting by Anirudh Saligrama in Bengaluru; Writing by Sayantani Ghosh; Editing by Ramakrishnan M. And Kim Coghill)
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Gold steadies below $1,800 as firm dollar, yields weigh, BFSI News, ET BFSI
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Gold prices steadied on Wednesday, after slipping 1.6% in the previous session when it breached the key psychological level of $1,800, as gains in the dollar and a rise in US Treasury yields hurt bullion’s appeal.
FUNDAMENTALS
Spot gold rose 0.1% to $1,796.03 per ounce by 0116 GMT, hovering slightly above the more than one-week low of $1,791.90 hit on Tuesday.
US gold futures were steady at $1,799.40.
The dollar hovered near a one-week peak against major peers.
The benchmark 10-year Treasury note rose as high as 1.385% on Tuesday for the first time since mid-July, increasing the opportunity cost of holding non-interest bearing bullion.
US President Joe Biden will present on Thursday a six-pronged strategy intended to fight the spread of the Delta coronavirus variant and increase vaccinations.
Japan’s economy grew faster than the initially estimated in the April-June quarter, helped by solid capital expenditure, although a resurgence in COVID-19 is undermining service-sector consumption and clouding the outlook.
Russia’s Nornickel, world’s largest producer of palladium and high-grade nickel, has extracted additional metals from waste products as part of new technology it tested to support its 2021 output from its Arctic mines that were hit by flooding, it said on Tuesday.
Venezuela’s gold reserves fell by three tonnes in the first half of 2021 to their lowest level in 50 years, central bank data showed on Tuesday, as President Nicolas Maduro’s cash-strapped government continues selling gold as a source of income.
Silver rose 0.1% to $24.32 per ounce, platinum edged 0.3% higher to $1,001.36 and palladium was up 0.2% to $2,376.37.
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SGX Nifty up 45 points; here’s what changed for market while you were sleeping, BFSI News, ET BFSI
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Domestic indices look set to open on a positive note on Wednesday. But indecisiveness among market participants at highs may keep any such gains capped. Asian markets are largely mixed as the dollar hovered near a week’s high level. US stocks closed mostly lower in overnight trade. Here’s breaking down the pre-market actions:
STATE OF THE MARKETS
SGX Nifty signals a positive start
Nifty futures on Singapore Exchange traded 46.5 points, or 0.27 per cent, higher at 17,425.50, signaling that Dalal Street was headed for a positive start on Wednesday.
- Tech View: Nifty50 on Tuesday snapped a three-day winning run and formed an indecisive candle on the daily scale, the second time in a row, suggesting a halt in the positive momentum.
- India VIX: The fear gauge gained eased over a per cent to 14.90 level on Tuesday over its close at 15.10 on Monday.
Asian stocks mixed in early trade
Asian markets opened mixed on Wednesday as investors sought to lock in profits after recent rallies and US Stock settled mixed after an extended weekend. MSCI’s broadest index of Asia-Pacific shares outside Japan was down by 0.11 per cent.
- Japan’s Nikkei gained 0.45%
- Korea’s Kospi shed 0.17%
- Australia’s ASX 200 tanked 0.31%
- China’s Shanghai edged up 0.02%
- Hong Kong’s Hang Seng added 0.29%
US stocks closed mostly lower
The S&P500 index closed lower while the Nasdaq Composite edged higher to a record high, as investors balanced worries about the slowing pace of economic recovery with expectations that the Federal Reserve will maintain its accommodative monetary policy.
- Dow Jones declined 0.76% to 35,100
- S&P 500 shed 0.34% to 4,520.03
- Nasdaq added 0.07% to 15,374.33
Dollar near one-week high
The dollar hovered near a one-week peak on Wednesday against major peers, buoyed by higher Treasury yields and a weaker euro amid caution before a European Central Bank policy decision.
- Dollar index held at 92.553
- Euro flat at $1.1843
- Pound slipped to $1.3783
- Yen declined to 110.28 per dollar
- Yuan depreciated to 6.463 against the greenback
FPIs sell shares worth Rs 145 crore
Net-net, foreign portfolio investors (FPIs) turned sellers of domestic stocks to the tune of Rs 145.45 crore, data available with NSE suggested. DIIs were net sellers of Rs 136.57 crore worth equities, data suggests.
MONEY MARKETS
Rupee: The rupee plunged by 32 paise to close at a more than one-week low of 73.42 against the US currency on Tuesday due to dollar buying by corporates and importers and the greenback’s gain in overseas markets.
10-year bond: India 10-year bond yield jumped 0.36 per cent to 6.19 after trading in 6.17 – 6.20 range.
Call rates: The overnight call money rate weighted average stood at 3.15 per cent on Tuesday, according to RBI data. It moved in a range of 1.95-3.40 per cent.
DATA/EVENTS TO WATCH
- JP Current Account JUL (5:20 am)
- JP GDP Growth Rate QoQ Final Q2 (5:20 am)
- JP GDP Price Index YoY Final Q2 (5:20 am)
- AU RBA Chart Pack (7 am)
- AU RBA Debelle Speech (1:40 pm)
- US MBA 30-Year Mortgage Rate 03/SEP (4:30 pm)
- US MBA Mortgage Applications 03/SEP (4:30 pm)
- US Redbook YoY 04/SEP (6:25 pm)
- US 10-Year Note Auction (10:30 pm)
MACROS
DoT moots 4-yr moratorium on AGR, spectrum payments
The telecom department (DoT) has proposed a four-year moratorium on adjusted gross revenue (AGR) and spectrum payments apart from a reduction in spectrum usage charge (SUC) prospectively, among measures to improve the health of the debt-laden sector and retain a three-private player market.
Sebi wants T+1 settlement for trades
The Securities and Exchange Board of India has proposed a ‘trade-plus-one’ (T+1) settlement cycle from January 1, where the trades will get settled the day after the transaction. Initially, exchanges can pick stocks where they want to offer the next-day settlement. Under T+1, the buyer would get shares in the demat account and the seller the sale proceeds the day after the trade.
Cheaper smartphones could fire up Jio ARPU
After a sluggish movement since March, the stock of Reliance Industries (RIL) has gained nearly 18% within a month ahead of the company’s launch of affordable smartphones on September 10. Nearly a quarter of the total smartphones are priced below Rs 7,500 per unit. This may help the company to reach the 500 million subscriber base by FY24 and improve ARPU by 10-15%. India’s largest company by revenue and market capitalisation is slated to launch an entry level smartphone priced between Rs 5,000 and Rs 7,500 in partnership with Google.
Probe into PSB frauds on hold
Investigations into alleged fraud caused to public sector banks totalling over Rs 50,000 crore have been put in abeyance by the Central Bureau of Investigation (CBI) for want of general consent from states. Of these, complaints over Rs 20,000 crore are from Maharashtra alone, ET reported. Claiming vendetta by the Centre, eight states ruled by non-NDA parties including Maharashtra, West Bengal, Chhattisgarh, Mizoram, Kerala, Rajasthan and Punjab in the last one year have withdrawn general consent accorded to the CBI under the Delhi Special Police Establishment Act to probe cases in their jurisdictions.
Rocky start for Bitcoin as legal tender
El Salvador faced a rocky transition in its adoption of Bitcoin as legal tender on Tuesday. The government’s app for facilitating transactions — its “digital wallet” — went offline temporarily, protesters took to the streets of the capital to denounce the move, and the price of Bitcoin dropped sharply, demonstrating the volatility of the cryptocurrency market. The country is the first to use Bitcoin as an official currency, encouraging businesses and citizens to use it in everyday transactions, and authorities struggled to smooth out glitches in the new system.
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NPCI, Fiserv to open RuPay API platform, BFSI News, ET BFSI
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The National Payments Corporation of India (NPCI) has tied up with Nasdaq-listed fintech firm Fiserv to launch an application programming interface (API) platform for startups and banks looking to build credit card-based products on top of the RuPay rails, said senior company executives.
They said the collaboration will help faster and cheaper onboarding of customers and merchants by banks as well as enable fintech firms to build out new models of digital interfaces for customers launching RuPay credit card products.
“We are trying to expand the credit ecosystem in India, where a lot of great work has happened on the debit side,” Rishi Chhabra, head of India and Sri Lanka at Fiserv, told ET.
The Wisconsin-based firm, which has been operating in India for over a decade, works with seven of the top ten credit card issuing banks in India.
“While collaborating with NPCI one of the shared visions is to expand credit issuance in India,” said Chhabra. “Our tech stack on RuPay will support scalability from an onboarding perspective for both banks and fintechs. We have hundreds and thousands of micro-APIs for the fintech firms to code, consume and onboard and launch their services at scale.”
The collaboration comes at a time when card networks Mastercard and American Express have been barred by the Reserve Bank of India (RBI) from issuing any new cards owing to non-compliance with data localisation mandate resulting in a clutch of card-issuing banks migrating their networks to Visa and NPCI’s homegrown RuPay.
According to Nalin Bansal, the chief of corporate relationships and fintechs at NPCI, the collaboration with Fiserv will help RuPay build an ecosystem around its credit card products, thereby attracting more fintech firms to innovate and scale these offerings.
“In India what we have achieved on debit, we haven’t been able to emulate on credit. The need now is how to make credit more affordable for a larger set of customers,” said Bansal. “The platform will help onboard fintech firms at a fairly reasonable cost and speed. These need not be high-end, premium products. It could be a credit card with lower feature sets and limits to the broad-based credit market in India.”
The platform, called ‘nFiNi’, will power RuPay cards by offering access to services through the NPCI network and Fiserv’s microservices-based platform-as-a-service with a set of APIs. This stack, among other things, will support orchestration of the digital user experience, enable push alerts for in-app, mobile messaging app and SMS notifications, simplified integration options and instant digital card provisioning, allowing customers to transact immediately after being approved for a card.
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Here are top 5 things an Account Aggregator System can do, BFSI News, ET BFSI
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The Reserve Bank of India last week launched the Account Aggregator (AA) system, which according to industry experts, will be a game changer.
The network is a collection of user data, and has a three-tier structure – FIP, FIU and consumer.
A Financial Information Provider (FIP) will hold customers’ data, and it can be a bank, a non banking financial company, mutual fund, insurance repository or pension fund repository. Then, a Financial Information User (FIU) will consumes the data from an FIP to provide various services to the consumer. The FIU is the lending bank that wants access to the customer’s or the borrower’s data to determine if the borrower qualifies for a loan. Banks, here, will play a dual role – as an FIP and FIU.
The system will not support transactions by customers, but will ensure appropriate mechanisms for customer identification.
As of now, eight of India’s major banks – State Bank of India, ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, IndusInd Bank, and Federal Bank have joined the account aggregator network.
Here are top 5 things the network can do –
1. The network can help bridge the gap between the physical collateral required for approving a loan. For instance, if a customer wants to avail an MSME loan, they can provide ‘secure data sharing via AA’, which can quantified as an information collateral or data on future MSME income. Information collateral, with the help of AA, can be used to access a small formal loan. HDFC Bank and Axis Bank have been using AA for auto loans, LendingKart for MSME loans, and IndusInd Bank for personal finance management.
2. With consent from customers, all financial institutions in the network can share their collection of user data in the system, which can be accessed across institutions. The AA will share information only with the customer to whom it relates or any other financial information user as authorised by the customer.
3. Customers will not need to do their Know Your Customer (KYC) formalities for taking loans, getting insurance or investing in mutual funds, if everything is linked to the AA.
4. If customers link their information with the AA, they can share financial information of various accounts such as banks deposits, equity, mutual fund and pension funds to any entity requiring access to such information.
5. A system like AA can help customers access their personal data, especially amid COVID-19. The network will help in reducing fraud associated with physical data by introducing secure digital signatures and end-to-end encryption for data sharing.
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Top bankers may only get bonus after new RBI rule, BFSI News, ET BFSI
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The Reserve Bank of India‘s directive to treat grant of employee stock options as an expense is having an unintended impact.
Banks are doing away with ESOPs and adding deferred bonus payments to the senior managerial staff as the new rules could add significant costs to banks, eroding their quarterly earnings.
The shares are required to be valued at a fair value that may add to the costs. Though it is a non-cash cost, it still results in a higher expense in the P&L for the bank, impacting its profits and earnings.
The RBI directive
The RBI said last week the fair value of the share-linked incentives paid to chief executive officers, whole-time directors and other key functionaries by the private banks should be recognised as an expense during the relevant accounting period.
Issuing a clarification in this regard, the RBI said, “the fair value (of share-linked incentives) …should be recognised as expense beginning with the accounting period for which approval has been granted”.
In terms of the extant guidelines, share-linked instruments are required to be fairly valued on the date of grant using the Black-Scholes model.
The Black-Scholes model, also known as the Black-Scholes-Merton model, is a mathematical model for pricing an options contract. In particular, the model estimates the variation over time of financial instruments.
Treatment as expense
The RBI issued the clarification saying “it has been observed” that banks do not recognise grants of the share-linked compensation as an expense in their books of account concurrently.
The RBI also asked all banks, including local area banks, small finance banks and foreign banks to comply with its directions for all share-linked instruments granted after the accounting period ending March 31, 2021.
The central bank had issued guidelines on the compensation of whole-time directors/ chief executive officers/ material risk takers and control function staff in November 2019 in which it had said that share-linked instruments will be included as a component of variable pay.
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Axis Bk diversity charter to empower staff, clients, BFSI News, ET BFSI
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Mumbai: Axis Bank has taken several HR measures to bring equality to employees and customers from the LGBTQIA+ community as part of its strategy to promote diversity and inclusion.
The private lender on Monday announced a ‘ComeAsYouAre’ charter of policies and practices that will apply to those within the organisation and customers. The bank said that this charter is in keeping with the spirit of the Supreme Court verdict on September 6, 2018 on Section 377, which ruled that all sexual relationships between consenting adults in private should be decriminalised.
While multinational banks have already in place a diversity charter in keeping with their global practices, Axis Bank is the first among domestic lenders to publicly announce a charter. Under this charter, employees can list their partners for mediclaim benefits irrespective of gender, sex or marital status. Employees can dress following their gender or gender expression.
“We recognise that employees could have gender or gender expression that’s different from their sex assigned at birth. They can choose to dress in accordance with their gender/gender expression,” the bank said. Employees can also choose to use the restroom of their choice following their gender expression/gender identity.
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India Post Payments Bank, LIC Housing tie up to sell home loans, BFSI News, ET BFSI
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India Post Payments Bank (IPPB) has joined hands with LIC Housing Finance for selling housing finance products of the latter to its 4.5 crore customers, a statement said on Tuesday.
Through its robust and extensive network of 650 branches and more than 136,000 banking access points, IPPB will make LIC Housing Finance Ltd’s (LICHFL) home loan products accessible to its customers pan-India, the statement said.
Under the strategic partnership, credit underwriting, processing, and disbursement for all home loans will be handled by LICHFL, while IPPB will source the loans.
The alliance with LICHFL is part of IPPB’s strategy to expand its range of products and services, and to cater to the banking and financial needs of diverse customers, especially unbanked and underserved, across the country.
IPPB already distributes general and life insurance products through partnerships with insurance companies. Credit products are natural extension for the customers at the last mile, the statement said.
IPPB has an on-ground workforce of nearly 200,000 postal employees (postmen and Gramin Dak Sevaks) equipped with micro ATMs and biometric devices for doorstep banking. This will play a significant role in offering LICHFL’s housing loans.
“Easy access to credit for buying a house is an important prerequisite towards achieving inclusive growth. The partnership with LICHFL is a significant tie-up in IPPB’s journey to become one of the largest platforms for availing credit products by our customers for meeting various needs,” J Venkatramu, MD & CEO, India Post Payments Bank said.
LIC Housing Finance MD & CEO Y Viswanatha Gowd said the strategic MoU with IPPB will help the company to further deepen the market penetration.
“It will enable us to increase LICHFL’s home loan product outreach in untapped geographies across the country. With an unmatchable presence of post offices, we see this strategic partnership as a significant step that will help our long-term business growth and improve our market share,” he said.
LIC Housing Finance offers home loans starting from 6.66 per cent for loans up to Rs 50 lakh for salaried individuals.
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Banks may see stress rising in retail, MSME segments by March, BFSI News, ET BFSI
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Domestic rating agency India Ratings on Tuesday maintained a stable outlook on the banking sector for 2021-22 while it expects an increase in stressed assets in retail and MSME segments by end-March.
It estimates gross non-performing assets (GNPA) of the banking sector to be at 8.6 per cent and stressed assets at 10.3 per cent for fiscal 2021-22.
“We have maintained a stable outlook on the overall banking sector for the rest of FY22, supported by the continuing systemic support that has helped manage the system-wide COVID-19 linked stress,” the rating agency said in its mid-year banks outlook released on Tuesday.
Banks will continue to strengthen their financials by raising capital and adding to provision buffers which have already seen a sharp increase in the last three to four years, it said.
Private banks
The agency said its stable outlook on large private banks indicates their continued market share gains both in assets and liabilities, while competing intensely with public sector banks (PSBs). Most have strengthened their capital buffers and proactively managed their portfolio.
Outlook on PSBs takes into account continued government support through large capital infusions (Rs 2.8 lakh crore over FY18-FY21 and further Rs 0.2 lakh crore provisioned for FY22), it said.
The agency has a negative outlook on five banks (about 6.5 per cent of system deposits), driven primarily by weak capital buffers and continued pressure on franchise.
It estimates that the asset quality impact in the retail segment has been higher for private banks with a median rise of over 100 per cent in gross NPAs over Q1 FY21 to Q1 FY22 (about 45 per cent for PSBs).
“Banks have also undertaken restructuring in retail assets (including home loans), which could have postponed an immediate increase in slippages. Overall stressed assets (GNPA + restructured) in the segment is expected to increase to 5.8 per cent by end-FY22,” the report said.
It said the MSME sector has been under pressure with demonetisation, introduction of GST and RERA, slowing down of large corporates and now COVID-19.
ECLGS stress
However, the government has supported the segment by offering liquidity under the Emergency Credit Line Guarantee Scheme (ECLGS) and restructuring, it said adding that it expects that beginning Q3 FY22, a portion of such advances would start exiting moratoriums a part of which could slip.
GNPAs of MSMEs is expected to increase to 13.1 per cent by end-FY22 from 9.9 per cent in FY21. Stressed assets similarly would increase to 15.6 per cent from 11.7 per cent.
For corporate segment, the agency estimates GNPAs to increase to 10.2 per cent and stressed asset to increase to 11.3 per cent.
The rating agency has kept its FY22 credit growth estimates unchanged at 8.9 per cent for FY22, supported by a pick-up in economic activity post Q1 FY22, higher government spending especially on infrastructure and a revival in demand for retail loans.
Last week, the agency had changed the outlook to improving from stable for retail non-banking finance companies (NBFCs) and housing finance companies (HFCs) for the second half of FY22.
It said non-banks have adequate system liquidity (because of regulatory measures), sufficient capital buffers, stable margins due to low funding cost and on-balance sheet provisioning buffers.
These factors provide ‘enough cushion to navigate the challenges that may emanate from a subdued operating environment leading to an increase in asset quality challenges due to the second covid wave impacting disbursements and collections for non-banks’, it had said.
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