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PM Narendra Modi, BFSI News, ET BFSI

Personal Finance

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The latest addition to India’s growing catalogue of digital payments solutions, voucher-based digital payment mode e-RUPI, will create a transparent and efficient welfare delivery mechanism, Prime Minister Narendra Modi said in the launch address of e-RUPI on Monday.

The purpose specific digital payment solution, developed by the National Payments Corporation of India in partnership with several government agencies, over its interoperable Unified Payments Interface (UPI) architecture will first be launched for covid vaccine dispensation at private hospitals, PM Modi said.

He added that the use cases for e-RUPI in subsequent years can be expanded from the delivery of various welfare subsidies linked to education, ration, healthcare, and fertilisers as well to relief efforts during natural calamities by different government, non-profit and corporate entities. It can also help in donations and scholarship programs for underprivileged sections of the society, Modi added.

“The launch of e-RUPI for digital transactions and Direct Benefit Transfers is a big step towards ensuring a more effective, transparent and leakage free welfare delivery system in India,” said PM Modi. “With this system, any government or non-government agency can avoid the use of cash to create a purpose specific voucher to intended beneficiaries. This will ensure that the funds will be utilised for its original purpose,” he added.

The payment system has been created by NPCI in association with the Department of Financial Services, Ministry of Health and Family Welfare and the National Health Authority. In essence e-RUPI is a digital payments mode which will be in the form of SMS strings or a Quick Response (QR) code delivered directly to beneficiaries of the intended welfare scheme without any intermediary network.

The pilot for e-RUPI will test its applications for free vaccine delivery, with broad scope also set to soon cover NHA’s PMJAY payouts as well as other digitised stamps based use cases for food delivery, fertilisers, healthcare benefits as well as scholarships and ration payments.

“Technology is a tool for social empowerment and transparency,” PM Modi said in the address. “During the pandemic, India has set an example with its Direct Benefit Transfer (DBT) architecture on effective delivery of benefits to the poor, when many countries struggled to find a solution.”

PM Modi also hailed India’s fintech and startup sectors for creating positive solutions towards social upliftment. Citing the UPI’s record volume in July where the channel reported an all-time high 324 crore transactions worth Rs 6.06 lakh crore, Modi said that indigenous payment solutions such as UPI, RuPay and Fastag have helped India lead digital payments innovations.

Now, the launch of e-RUPI marks the first issuance of a digital voucher in India that can be a purpose-specific substitute for bank notes, debit cards or biometric modes of payments. e-RUPI addresses main challenges with bank account based direct transactions such as lack of transparency on end-use, high authentication failure rates, inactive bank accounts as well as lack of cash out points in rural India, according to experts.

Earlier this month, the Reserve Bank of India deputy governor T Rabi Sankar in a speech also hinted that the central bank is working towards first of its kind Indian Central Bank Digital Currency (CBDC) – an Indian sovereign cryptocurrency.

However, e-RUPI would be different from a CBDC in that it won’t be interchangeable with cash or currency and can be redeemed only for the specific use case it has been created. NPCI and select banks – both public and private sector – onboarded as issuing entities will take payment orders from corporate or government agencies which will include the details of persons and the purpose for which payments will be booked. The authentication of the person can happen through the registered mobile number of intended beneficiaries.

The prepaid digital stamp is set to be accepted at enabled centres – first for vaccinations – without a mobile app or internet banking or any other physical interface.



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RBI imposes Rs 50.35 lakh penalty on Nashik-based Janalaxmi Co-operative Bank, BFSI News, ET BFSI

Banking & Finance

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Reserve Bank of India on Monday said it has imposed a penalty of Rs 50.35 lakh on Janalaxmi Co-operative Bank, Nashik for non-compliance with certain regulatory requirements. The penalty on Janalaxmi Co-operative Bank has been imposed for non-compliance with directions issued by RBI on ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks’ and ‘Membership of Credit Information Companies (CICs)’.

A statutory inspection conducted by RBI with reference to the bank’s financial position as on March 31, 2019 and the inspection report pertaining thereto, and examination of all related correspondence revealed non-compliance with the directions, it said in a statement.

RBI has also imposed a penalty of Rs 3 lakh on the Noida Commercial Co-operative Bank, Ghaziabad.

In a separate statement, the central bank said the inspection report of the co-operative bank based on its financial position as on March 31, 2019 revealed that it failed to adhere to the provisions related to director-related loans and opening of new place of business.

However, RBI said the penalities are based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the two lenders with their customers.



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RBL Bank reports Rs 459 crore loss in Q1 on higher loan provisions, BFSI News, ET BFSI

Banking & Finance

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Mumbai: RBL Bank slumped to a loss in the quarter ended June 2021 as the bank jacked up provisions to deal with current and future stress as it prepared to clean up its balance sheet to prepare for opportunities in the next four years.

The bank reported a net loss of Rs 459 crore largely due to almost a threefold rise in provisions to Rs 1,426 crore from Rs 500 crore a year earlier on a sharp surge in slippages from the bank’s microfinance and credit card portfolios.

Total slippages at Rs 1,342 crore included about Rs 450 crore each from microfinance and credit card loans where collections were hit due to the second wave of the pandemic.

Provisions also included Rs 604 crore of extra provisions as the bank decided to increase cover for bad loans and improve the coverage ratio to 61% from 52% in March. Gross NPAs increased to 4.99% up from 3.45% a year ago.

CEO Vishwavir Ahuja said the bank has consciously decided to bite the bullet as it wants to double down on the opportunities in the near future.

“We have pressed the reset button. As economic activity and growth revives, vaccinations gather pace and health infrastructure improves we wanted to have a clean slate to launch a 2.0 transformation based on vectors like branch banking, credit cards and micro banking which we are already ahead,” Ahuja said.

RBL expects the market to resume normal operations by the third quarter. It has set itself a target of increasing its customers base threefold from the current 4 million in the next four years.

Ahuja said the immediate target is to increase its return on assets to 1% by the end of March 2022 from negative 1.8% at the end of June.

“Our retail loan growth will be more in line with the GDP growth at 7% to 10%. Our corporate book is solid after the cleanups in the last couple of years so corporate growth will also be led by high-quality clients. There has been a significant opening up in the markets, especially in the urban areas as shown by the high-frequency data. But of course, it all depends on the Covid third wave,” Ahuja said.

A strong increase in other income helped revenue to double to Rs 695 crore led by a 137% growth in retail fee income.

The growth in other income masked a 7% fall in net interest income year on year to Rs 970 crore.

The bank has appointed four new directors —Vimal Bhandari as a non-independent director and Somnath Ghosh, Chandan Sinha and Manjeev Singh Puri as independent directors subject to shareholder approval.



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Sebi revises minimum application value, trading lot for REITs, InvITs, BFSI News, ET BFSI

Personal Finance

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New Delhi: Markets regulator Sebi has reduced the minimum application value of REITs and InvITs, and revised trading lot to one unit for these emerging investment instruments to make them attractive for retail investors. The minimum application value has been cut down to the range of Rs 10,000-15,000 for both REITs and InvITs, compared to the earlier requirement of Rs 50,000 for REITs and Rs 1 lakh for InvITs, Sebi said in two separate notifications dated July 30.

Also, the regulator said the revised trading lot will be of one unit for real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).

Allotment to any investor is required to be made in the multiples of a lot.

Earlier, for initial listing, a trading lot was required to be of 100 units.

The Sebi’s move will lead to better liquidity and efficient price discovery and will provide an attractive opportunity for retail investors to earn stable yields with growth potential.

In addition, the regulator has introduced a minimum unit holders requirement for unlisted InvITs.

“The minimum number of unitholders in an InvIT, other than the sponsor(s), its related parties and its associates, shall be five, together and collectively holding at least 25 per cent of the total units of the InvIT, at all times,” Sebi said.

Explaining further, the regulator said a unit holder along with its associates and related parties will be considered as a single unit holder.

REITs and InvITs are relatively new investment instruments in the Indian context but are extremely popular in global markets.

While a REIT comprises a portfolio of commercial real assets, a major portion of which is already leased out, InvITs comprise a portfolio of infrastructure assets such as highways and power transmission assets.

As of March end, a total of 15 InvITs and four REITs were registered. Of these, six InvITs and three REITs were listed on the stock exchanges.

These investment vehicles collectively raised close to Rs 55,000 crore in 2020-21, taking their net assets to Rs 1.64 lakh crore.

The funds were raised through the initial offer, preferential issue, institutional placement and rights issues.

In a separate notification, Sebi has permitted banks, other than scheduled banks, to act as a banker to such issues, to provide easy access to investors to participate in public/rights issues by using various payment avenues.

Bankers to an issue means a scheduled bank or such other banking company as may be specified by Sebi from time to time, carrying activities including acceptance of application money, acceptance of allotment or call money, refund of application money and payment of dividend or interest warrants, the regulator said.

The new rules have become effective from July 30, it added.

The notifications come after the board of Sebi approved proposals in this regard in late June.



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McNally Bharat gets lender’s notice on ‘wilful defaulter’ tag, BFSI News, ET BFSI

Banking & Finance

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McNally Bharat Engineering (MBE) of financially stressed Williamson Magor group has received a notice from one of its lenders to show cause as to why the company or its promoters and directors should not be included in the list of wilful defaulters as per the Reserve Bank of India’s (RBI) guidelines.

In a stock exchange filing on Monday, MBE informed that it received the show-cause notice from the lender on July 30, and the company is taking necessary action in this regard and will submit a “suitable reply” to the lender.

The group got a major relief in October 2019, when the Kolkata bench of the National Company Law Tribunal (NCLT) had allowed a financial creditor to withdraw its insolvency petition against MBE even after admitting the petition to order the commencement of the insolvency resolution process for the company. The matter had been settled with Trinetra Electronics, the creditor, out of court as it was a small amount.

Apart from Trinetra Electronics, a few financial creditors, including Tata Capital Financial Services, and some operational creditors had also filed insolvency petitions against McNally Bharat.

According to McNally’s annual report, its bankers are: State Bank of India, Punjab National Bank, ICICI Bank, Union Bank of India, Bank of India, IDBI Bank, Axis Bank, Bank of Baroda and Canara Bank, among others.



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India’s financial sector banks on IDRBT for security, BFSI News, ET BFSI

Banking & Finance

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With emerging technologies changing the way we bank, cyber security has emerged as a key area of concern. Prof D Janakiram, director of Hyderabad-based Institute for Development and Research in Banking Technology (IDRBT) this year, speaks to Swati Rathor about the threats facing our banking systems and the work IDRBT is doing to beef up their security.

How can banks strengthen security infrastructure?

Banks have to be ahead of the hacker so, we are trying to create a change in the mindset of people managing these entities. For instance, many banks are innovating on AI/ML products by getting data from social media, where it is easy to manipulate data that leads to models being fed with wrong data. Hence, the whole system can be compromised. So, data integrity as well as security becomes a very critical part of the AI/ML system and that is an active research we are pursuing. The second thing we are trying to look at is how to reduce the impact of cyberattacks. For instance, if the digital transactions are on mobile platforms, one can use geo-fencing to reduce the chances of such attacks. Apart from this, cyber drills that we conduct regularly help banks spot vulnerabilities in their systems. We also have a threat intelligence platform that gathers information across banks and multiple sources and shares it with banks.

Which technologies will impact the financial inclusion mandate in future?

Technologies like 5G are likely to provide many opportunities as they will boost the number of internet users. When you add somebody to the financial system, that person would expect more facilities such as access to credit. Now, if you want to make credit accessible, one of the key things is the profile of the person, which means we collect data. Here the usage of the AI/ML models to be able to provide both, risk models as well as prediction models, will become necessary.

What new research areas is IDRBT focusing on?

We are focusing on next-generation digital financial infrastructure. The pandemic has made it imperative that we should have a next-generation video KYC platform. Currently there are many pain points for customers as every bank and financial services entity is trying to do its own video KYC. So, we are looking at a new platform, where, if the customer does a video KYC once, it will be available for other entities to verify. We would like to make this platform a part of the India Stack so that there is a quality enhancement in terms of the digital identity platforms.

But what about new age skills in the banking sector?

IDRBT is focusing on creating a cyber security skilled workforce because it is an extremely critical need. Besides, in the financial sector, skills pertaining to AI/ML and Cloud are also very important and we are working on that along with skilling on the 5G front.



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CS Ghosh, BFSI News, ET BFSI

Banking & Finance

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We are provisioning for net NPA in this quarter also. It has come down and so a very small amount has come. This is a conscious call because we have not written off NPAs in this quarter, says CS Ghosh, MD & CEO, Bandhan Bank.

It has been a kind of mixed performance for Bandhan Bank. While the bank has reported the highest ever quarterly operating profits, NPA stress has also risen. Can you tell us about the quarter?
This quarter was more severe than any other quarter in the pandemic situation. The second wave affected lots of lives and people were more scared about it. That prevented a good number of business owners from properly running their business. It started in the first month of the quarter from central India, Delhi and Madhya Pradesh and Chhattisgarh and it has gradually gone to the north east. Till now, it is happening in the north east.

Secondly, micro credit is nearly 60% of Bandhan Bank’s advanced book. The staff go to customers’ doorsteps to collect instalments. It was not easy to do because of the lockdowns and also because of risk to staff health. The number of cases affected came down in July and lockdowns were also lifted and a couple of rating organisations and the government also declared their GDP growth rate will come to 9-10%. I hope the future turns very good.

The total collection efficiency stood at 86% in Q1. Talk to us about collection efficiency for the overall book and collection efficiency in states like West Bengal and Assam. Are you seeing any improvement versus the last quarter?
There has been improvement in collection efficiency. In March, micro credit collection efficiency was 95%. In April, May, June it was hit in a big way by the Second Covid Wave. For that region, it has come down a little bit.

In case of the micro credit portfolio, in the first quarter our demand was Rs 13,000 crore and we collected nearly Rs 13,000 crore including arrears. That means our customers are paying the instalment. The total collection efficiency including arrear is 98% in micro credit and in case of total bank, it is 101% which shows that after the bad situation in the first quarter, it recovered a lot in this month. I hope next quarter onwards it will improve further.

Has micro finance loan book slowed versus last quarter? Is that a conscious call to slow down the growth as collections and demand may be impacted?
No. There are three factors here; one factor is that in the first quarter of any financial year, demand for credit always comes down. Secondly, there was the impact of Covid 2.0 in first quarter and that also impacted demand. Thirdly, we are disbursing credit conservatively and on a very selected basis.

Credit cost has come down versus the last quarter but it is still pretty high at 4.9. Will operating profits be enough to take care of the provisioning or the credit cost needs?
The provisioning is in two parts. One, it has helped me to increase PCR. The other side, it has helped us to strengthen our balance sheet. We can continue this provision continuously and accordingly the business growth will absorb it.

Gross NPAs stood at 8.2% and the net at 3.3%. At a net-net level, will gross and net NPA for FY22 be higher?
No. We have not written off this quarter. We have a Rs 700 crore account for NPA. If we write off this NPA, it will not be in place. Again, when one calculates the gross NPA percentage, because my advance book size has come down, percentage wise also, it has come down. Otherwise, percentage wise gross NPA has increased by 0.5% from last quarter to this quarter. We are tracking that. We are provisioning for net NPA in this quarter also. It has come down and so a very small amount has come. This is a conscious call because we have not written off NPAs in this quarter.

Overall the loan book has declined by about 8% quarter-on-quarter. What kind of loan growth do you expect this year?
In this type of a situation, the bank will be cautious and very selective. The credit growth will come from the last month of the second quarter before the Puja and Dussehra to the fourth quarter. That has been the case in normal times and even last year. So it depends on whether the Third Covid Wave comes in the Puja season or not.

Over the next one-two years, which segments do you think will lead to growth — microfinance, mortgage or commercial banking?
Microfinance is a very standard model and India is a big country. There is no growth driver needed for that. But we are likely to drive the growth of the housing loan vertical. It accounts for 24% now and in future we would like this segment to account for 30% of the total book.
The second vertical we are focussing on is MSME which caters to less than Rs 5 crore type of MSME. There is a huge market which is secure and we would like to grow it in future. Gold loan is another we would like to grow because like housing loans, it is also secured. These are the three sectors we would like to focus on in future and which we expect to account for 30:30:30 by 2025.

What led to margin improvement during the quarter, at what level do you see margins stabilising going ahead?
I have always predicted that around 8 or 8 plus will be NIM but this quarter, it is a little bit higher compared to the last quarter. That is because of last quarter we have reversed the interest of Rs 500 crore. Otherwise, 8 to 8.4 is what we would like to maintain.

You seem to have sufficient capital, how long will the current capital last considering your growth?
The growth of the bank was a little bit on conservative side last year and this year we expect normal growth. Upto 2025, we do not need the extra capital.

Is the structure of the financial industry changing with competition from fintech players?
The banks are focussing on digital transaction mode for the customers. At Bandhan Bank, in the last quarter, 87% of the transactions happened digitally. 11% of the bank accounts were opened digitally. We are also invested in digital transformation of the bank. We are also focussing on how we can give digital service to the customer.

Won’t you need additional capital to expand in digital space?
We have enough funds and we are already working on that from last year. Whatever is needed, will be invested from our own funds.



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India’s financial sector banks on IDRBT for security, BFSI News, ET BFSI

Banking & Finance

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With emerging technologies changing the way we bank, cyber security has emerged as a key area of concern. Prof D Janakiram, director of Hyderabad-based Institute for Development and Research in Banking Technology (IDRBT) this year, speaks to Swati Rathor about the threats facing our banking systems and the work IDRBT is doing to beef up their security.

How can banks strengthen security infrastructure?

Banks have to be ahead of the hacker so, we are trying to create a change in the mindset of people managing these entities. For instance, many banks are innovating on AI/ML products by getting data from social media, where it is easy to manipulate data that leads to models being fed with wrong data. Hence, the whole system can be compromised. So, data integrity as well as security becomes a very critical part of the AI/ML system and that is an active research we are pursuing. The second thing we are trying to look at is how to reduce the impact of cyberattacks. For instance, if the digital transactions are on mobile platforms, one can use geo-fencing to reduce the chances of such attacks. Apart from this, cyber drills that we conduct regularly help banks spot vulnerabilities in their systems. We also have a threat intelligence platform that gathers information across banks and multiple sources and shares it with banks.

Which technologies will impact the financial inclusion mandate in future?

Technologies like 5G are likely to provide many opportunities as they will boost the number of internet users. When you add somebody to the financial system, that person would expect more facilities such as access to credit. Now, if you want to make credit accessible, one of the key things is the profile of the person, which means we collect data. Here the usage of the AI/ML models to be able to provide both, risk models as well as prediction models, will become necessary.

What new research areas is IDRBT focusing on?

We are focusing on next-generation digital financial infrastructure. The pandemic has made it imperative that we should have a next-generation video KYC platform. Currently there are many pain points for customers as every bank and financial services entity is trying to do its own video KYC. So, we are looking at a new platform, where, if the customer does a video KYC once, it will be available for other entities to verify. We would like to make this platform a part of the India Stack so that there is a quality enhancement in terms of the digital identity platforms.

But what about new age skills in the banking sector?

IDRBT is focusing on creating a cyber security skilled workforce because it is an extremely critical need. Besides, in the financial sector, skills pertaining to AI/ML and Cloud are also very important and we are working on that along with skilling on the 5G front.



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