Category: Banking & Finance

Private firms’ bank deposits log 26.5% growth during pandemic, households lag, BFSI News, ET BFSI

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In FY21, deposits from private sector companies grew by 26.5%, the biggest jump in nine years, even as the share of household bank deposits declined.

The share of private sector companies in total outstanding bank deposits increasing from 11.3% in FY20 to 12.7% in FY21, according to a report by Kotak Institutional Equities. The growth here has been faster than that of deposits from households, which grew by 12.9% during the year. The ratio of household (bank) deposits to GDP declined to 3 per cent in the third quarter from 7.7 per cent in July-September.

The data shows that the pandemic was not hard on private firms but households suffered.

“The slower growth in retail deposits and solid growth in the private corporate sector gives two opposing signals of the current economic condition. The private sector has accelerated deposit growth for the third consecutive year, giving further evidence that the impact of the pandemic was not negative,” the Kotak report noted.

Households hit

The first wave of Covid last year impacted households as their financial savings moderated to 8.2 per cent of GDP in the December quarter from 10.4 per cent in the previous three-month period, according to RBI data.

The preliminary estimate of household financial savings is placed at 8.2 per cent of GDP in October-December 2020-21, exhibiting a sequential moderation for the second consecutive quarter after having spiked in the pandemic-hit June quarter, RBI said in a release.

“The moderation was driven by a significant weakening in the flow of household financial assets, which more than offset the moderation in the flow of household financial liabilities,” it said.

Household debt to GDP

RBI further said household debt to GDP ratio, which is based on select financial instruments, has been increasing steadily since end-March 2019.

“It (household debt to GDP ratio) rose sharply to 37.9 per cent at end-December 2020 from 37.1 per cent at end-September 2020,” it said.

Despite higher borrowings from banks and housing finance companies, the flow in household financial liabilities was marginally lower in the third quarter following a marked decline in borrowings from non-banking financial companies.

As per the data, financial assets, including deposits, life insurance funds, provident and pension funds, currency, investments in mutual funds and equity, and small savings, stood at Rs 6,93,001.8 crore in the third quarter. It was at Rs 7,46,821.4 crore in July-September 2020-21.

Financial liabilities (loans) stood at Rs 2,48,418.7 crore in the third quarter. In the preceding quarter it was Rs 2,54,915.2 crore.



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Banks get RBI nod to use any other ARR in place of LIBOR

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The Reserve Bank of India (RBI) has permitted banks, which are authorised to deal in foreign exchange, to use any other widely accepted/alternative reference rate (ARR) in place of the London interbank offered rate (LIBOR) for interest payable in respect of export/import transactions.

The central bank has issued a circular in this regard to authorised dealer banks in view of the impending cessation of LIBOR as a benchmark rate.

RBI Governor Shaktikanta Das, in a statement on August 17, observed that the transition away from LIBOR is a significant event that poses certain challenges for banks and the financial system. “The Reserve Bank has been engaging with banks and market bodies to proactively take steps. The Reserve Bank has also issued advisories to ensure a smooth transition for regulated entities and financial markets,” Das said.

Also read: LIBOR transition will be a complex exercise

Banks will be permitted to extend export credit in foreign currency using any other widely accepted ARR in the currency concerned, he added. Since the change in reference rate from LIBOR is a “force majeure” event, banks are also being advised that change in reference rate from LIBOR/ LIBOR related benchmarks to an ARR will not be treated as restructuring, the Governor then said.

On June 8, 2021, the RBI had advised banks and other regulated entities to cease entering into new contracts that use LIBOR as a reference rate and instead adopt any ARR as soon as practicable and in any event by not later than December 31, 2021.

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Include turnover, debt in Ind AS norms: NFRA

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The National Financial Reporting Authority wants the criteria for mandatory applicability of Indian Accounting Standards (Ind AS) changed and expanded to cover aspects like turnover and borrowings from banks.

It maybe recalled that Ind AS is mandated for public interest entities which satisfy the primary criteria of listing in stock exchanges and net worth of companies.

NFRA has now written to ICAI that turnover and borrowings from banks and financial institutions by the companies or overall indebtedness of companies is also an important feature indicating existence of public interest and therefore the CA Institute should consider including them also as a criteria for Ind AS applicability, sources said.

Impact assessment

Meanwhile, for companies that are not required to adopt Ind AS, the NFRA has recommended that a Regulatory Impact Assessment (RIA) be conducted on the revision proposal. ICAI had submitted an Approach Paper for revision of existing Accounting Standards of Companies that are not required to follow Ind AS and the proposed texts of 18 revised Accounting Standards (ASs) out of a total of 32 revised ASs expected to be prescribed upon completion of this AS revision project.

NFRA wants the Approach Paper be developed in a transparent manner after extensive nation-wide consultation. ICAI has been asked to send NFRA the analysis of the public comments on the approach paper if the ICAI had performed any such public consultation in the past.

Compliance costs

Also, NFRA has recommended that a comprehensive study be undertaken on the costs to the preparers of compliance with these revised standards and their technical resource capacity, which should be evaluated against the likely benefits to all the stakeholders of AS Companies.

Also read: KIOCL: Audit regulator flags flaws in financial statement preparation, presentation

NFRA noted that most of the companies to which these proposed revised standards will apply are private limited companies.

They would be mostly owned by small families, sometimes along with a small circle of friends and relatives. Therefore, public interest in the General Purpose Financial Statements of these companies would most likely be minimal. There are a number of revised standards which are very large and complex and may not be relevant and useful to the limited users of GPFSs of these Companies.

NFRA also noted that the expected standard audit cost to perform reasonably good quality audit, performed in compliance with the letter and spirit of the Standards on Auditing is significantly more than the presently reported audit fee ranges i.e., a very large percentage of AS Companies have reported Payment to Auditors of less than ₹25,000.

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At 87%, fintech adoption in India higher than global average: FM

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India has recorded digital transactions of ₹6-lakh crore in January-August this year, Finance Minister Nirmala Sitharaman said on Tuesday.

Addressing the Global Fintech Fest 2021, organised virtually by IAMAI, Fintech Convergence Council and Payments Council of India, Sitharaman said fintech adoption rate in India stood at 87 per cent, much higher than the global average of 64 per cent. “India is the prime destination for digital activities,” she said.

She highlighted that the number of digital transactions in the January-August 2021 period stood at 355 crore.

Also read: Imitating a fintech firm not the right business model: Former RBI Deputy Gov

“India — both from the people and the government — is seeing energetic participation. The government is giving the push and people are wanting to adapt to it. Things are moving in a joyful way (on digital adoption and payments), although in 2020, I would say it (digital payments) was pushed more because of necessity,” Sitharaman said.

Fintechs are proving themselves on the ground in India, Sitharaman said, noting that India stack was maturing on the strength of users, be they government or public.

‘Accessible to all’

Sitharaman also asserted that it was not literacy, numeracy or knowledge that led to increased adoption of technology, but it was “more adapting with a mindset of being ready to take technology on board” that yielded the desired outcomes. “This has helped during the pandemic and all merchants have adopted. Today technology is not out of any section’s reach. Fintechs are updating it with improved solutions”, she added.

She also said India stack had actually played out in pleasantly unexpected ways and enabled the government to move money into accounts of people in far-flung areas with lots of confidence. “This comfort of using the mature and well-layered payment system helped the government”, Sitharaman added.

On the occasion, Sitharaman also launched a report on UN Principles for Responsible Digital payments. She said this report was coming at the right time, especially when many countries are racing with one another to reach out to their maximum population with technology. “The guiding principles brought out by the UN report are applicable to the government, user and industry and this is the need of the hour. We need all our governments to understand that in our desire to bring interoperable system, which has to be pushed for achieving transparency, we shouldn’t be in a hurry to compromise on any of the features (principles enshrined in the report)”, she said.

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NPCI, YES Bank launch RuPay On-the-Go

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The National Payments Corporation of India (NPCI) has partnered with YES Bank to launch a contactless payments solutions — RuPay On-the-Go.

This was launched on Tuesday in association with fintech infrastructure partner, Neokred, and manufacturing partner- Seshaasai at the Global Fintech Festival 2021.

“RuPay On-the-Go will allow customers to make small and large value transactions from the accessories they wear every day. This innovative wearable payment solution would redefine the contactless payments space by eliminating the need to carry a physical card and enabling instantaneous payments with a simple ‘Tap, pay, go’ mechanism,” said a statement.

RuPay On-the-Go is an interoperable, open-loop solution that customers can use at RuPay contactless-enabled PoS at retail outlets and pay up to Rs 5,000 without the need to input the PIN. For payments above Rs 5,000, customers need to tap, followed by their PIN.

For online transactions, the BHIM YES Pay app provides a virtual RuPay card to customers that can be used for digital and e-commerce transactions, the statement further said.

“The wearable tech space is an integral part of driving contactless payments, and we are working toward building a secure and inclusive payments ecosystem with our partners,” said Praveena Rai, COO, NPCI.

Consumers without an existing YES Bank account can also avail of these wearables.

Anita Pai, COO, YES Bank said, “The RuPay On-the-Go smart accessories, such as keychains with tap-and-pay functionality, will enable customers to make digital payments securely, more easily and in style.”

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HC rejects bail pleas of Rana Kapoor’s wife, daughters, BFSI News, ET BFSI

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The Bombay High Court Tuesday rejected bail pleas filed by jailed banker Rana Kapoor’s wife Bindu Kapoor and their daughters Roshini and Radha Kapoor Khanna in a case of alleged fraud caused to Yes Bank Ltd (YBL).

Kapoor is the cofounder of YBL who was arrested in the said matter in March, 2020.

Justice Bharati Dangre, after hearing all the parties had posted the matter today for the pronouncement of the order. The court gave an oral in the said matter.

The Kapoors, in three identical but separate bail pleas, challenged a special Central Bureau of Investigation (CBI) court order that rejected their bail applications and remanded them to judicial custody.

The trio since then have been lodged at Byculla district jail in Mumbai.

As per the CBI, Rana Kapoor and his family members had allegedly received kickbacks of around Rs 600 crore for an investment of Rs 3,700 crore made by Yes Bank in DHFL’s debentures.

Counsels appearing for Bindu Kapoor and her two daughters argued that they have so far extended fullest cooperation to CBI and was not arrested during the investigation.

“On August 20, 2021, the trial court took cognizance of various non-bailable offences and summoned applicants to appear before it as an accused. The applicants immediately submitted to its jurisdiction by appearing personally on September 4, 2021, and moved a bail application in terms of Section 439 of CrPC,” argued counsel for the Bindu Kapoor.

However, special counsel Hiten Venegaonkar, appearing for the investigation agencies countered this argument and said that the CBI court had already considered all these submissions before rejecting the plea.

Senior Advocate Amit Desai appeared for Roshini Kapoor in the case, while Mahesh Jethmalani, senior advocate argued for Bindu Kapoor and Radha Kapoor Khanna in the case.

“The interest of the investigation agencies stand protected as the Enforcement Directorate (ED) has attached properties and bank accounts of the applicant to the tune of Rs 600 crore under various provisional attachment orders,” argued the petition filed by Radha Kapoor Khanna.

“Special Judge failed to consider that the applicant has been granted bail in the PMLA case arising out of the current FIR in the same facts and circumstances,” Khanna’s petition said.

The special court, while rejecting their bail petitions, had observed that the trio are involved in the wrongful loss of public money to the tune of Rs 4,000 crore, which belongs to the public at large, including bank depositors and shareholders.



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Muthoot Finance launches AI-powered virtual assistant ‘Mattu’

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Muthoot Finance has joined hands with Senseforth.ai, a leader in Conversational AI technology to launch ‘Mattu’, an AI-powered virtual assistant.

Available on the website and mobile app, the intelligent assistant enables users to apply for various kinds of loans, address concerns, and perform transactions like checking account balance, paying gold loan interest, availing loan top-ups, making part payments and much more.

Customers of Muthoot Finance can chat or speak with the AI virtual assistant in both English and Hindi. This virtual assistant is also available on WhatsApp, making it very easy for users to access key services through natural human interactions.

Alexander George Muthoot, Deputy Managing Director, The Muthoot Group said, “The launch of a revamped and turbo-charged Mattu marks the beginning of a new chapter for us. This AI-powered virtual assistant offers various customer-friendly features like multi-lingual support, voice search capability, and can handle more than 250 frequently asked questions. Besides, if a user wants to speak with our customer service representative, they can do so via the virtual assistant. This is great customer convenience in current times”

Eapen Alexander Muthoot, Executive Director, The Muthoot Group said, “As a leading NBFC, technological innovations are at the core of our customer-centric approach. Mattu opens up another secure communication channel with our customers and offers a plethora of intuitive features and benefits. This is an excellent value addition for our customers and also demonstrates our commitment to the digital-first agenda at the company.”

Shridhar Marri, CEO & Co-founder of Senseforth.ai said, “The modern-day customer expects their needs to be fulfilled within seconds, without having to browse the website or visiting a branch. The launch of Mattu would eliminate buyer friction and ensure that customers of Muthoot Finance have instant access to key services on a channel of their choice.”

With the launch of this unique AI-powered Chatbot, Muthoot Finance is fast emerging as a leading lender that is persistently offering a range of tailor-made, technology-powered services bringing convenience to its customers. Recently it had launched a facility by which its gold loan customers can repay their loan or make interest payments through PayTM, Google Pay and PhonePe. There is also exciting cashback offers for online interest payments.

Muthoot Finance Gold Loan customers can also avail of loan top-ups in just a few clicks using WhatsApp. They can also get a gold loan from the convenience of their home through the Muthoot Finance Gold Loan@Home service.

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Mumbai HC refuses bail to Yes Bank founder Rana Kapoor’s wife, daughters in DHFL corruption case

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The Bombay High Court on Tuesday refused to grant bail to Yes Bank founder Rana Kapoor’s wife and two daughters in a corruption and cheating case involving private sector lender Dewan Housing Finance Corporation Ltd (DHFL).

A single bench of Justice Bharati Dangre rejected the bail applications filed by Kapoor’s wife Bindu and daughters Roshini and Radha.

The three had approached the HC last week, challenging a special CBI court order of September 18 which refused them bail while noting that they had, prima facie, caused a loss of Rs 4,000 crore to the Yes Bank through illegal acts.

The lower court had remanded them in 14-day judicial custody and said they did not deserve any sympathy for being women.

The three are currently lodged at the Byculla women’s prison in Mumbai.

In their bail pleas filed in the HC, they had said the special CBI court gravely erred in observing that the accusations against them prima facie show complicity in having co-fraudulently and dishonestly received loans as quid pro quo for favour shown by the Yes Bank to DHFL.

The Central Bureau of Investigation (CBI) had opposed their pleas and said there was nothing wrong with the special court’s order and that it was merely securing the presence of the accused for the purpose of trial.

The CBI’s case is that Rana Kapoor, who is currently in jail in connection with a related case being probed by the Enforcement Directorate, had entered into a criminal conspiracy with DHFL’s Kapil Wadhawan.

The CBI stated that between April and June 2018, Yes Bank invested ₹3,700 crore in short-term debentures of DHFL. In return, DHFL allegedly paid a kickback of ₹900 crore to Kapoor in the form of loans to one DoIT Urban Ventures, a firm controlled by Kapoor’s wife and daughters.

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Capital Float raises $50 m funding from Lightrock India, others

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Fintech major Capital Float on Tuesday said it has raised $50 million (about ₹370.3 crore) in funding, led by Lightrock India.

Current investors Sequoia Capital India, Ribbit Capital, Creation Investments and Dinesh Hinduja family office also participated in the round, in addition to new investors David Vélez (Nubank founder), Kunal Shah (Cred founder) and Pine Labs CEO Amrish Rau, a statement said.

The funds raised will be used to strengthen and scale Capital Float’s BNPL (Buy-Now-Pay-Later) platform and expand its partner ecosystem, it added.

The company said it has witnessed rapid growth over the past year, with 2.5 million customers now using its product to finance over ₹2,000 crore of online purchases annually.

Capital Float has partnered with platforms such as Amazon (powering Amazon Paylater), MakeMyTrip, Unacademy, and Boat to help consumers finance purchases across e-commerce, D2C (direct-to-consumer) brands, travel, edtech and healthcare.

It also recently launched a strategic partnership with Razorpay to expand BNPL to over one lakh merchants across the country.

“We are now financing two million purchases every month across 14,000 pin codes, while maintaining NPAs below 1.5 per cent. This positions us as the market leader in BNPL in India today,” Capital Float co-founder Sashank Rishyasringa said.

Growth opportunities

Capital Float Co-founder Gaurav Hinduja added that the company sees an exponential growth opportunity ahead from this point on.

“By solving for affordability as well as convenience, in a fully-regulated format, we believe that our BNPL approach can responsibly expand access to credit to over 100 million customers who are starting to transact online. We are privileged to have the support of our investors in pursuing this vision, and are excited to work in partnership to build out a world-class digital financial institution for India,” he stated.

Founded in 2013, Capital Float is the trade name for CapFloat Financial Services, a non-banking finance csompany registered with the Reserve Bank of India.

It has raised funding from marquee investors such as Aspada, Elevation Capital (formerly SAIF), Sequoia India, Creation Investments Capital Management LLC, Ribbit Capital, and Amazon.

In addition to offering BNPL at checkout across its merchant partners, the company also operates Walnut — a personal finance app with over 12 million lifetime downloads.

Walnut offers a range of personal finance features such as expense tracking, budgeting, and bill reminders, provides instant small-ticket loans to salaried and self-employed individuals 24/7, and recently launched insurance options on the app as well.

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NFRA Chief’s term ends on Thursday; no clarity yet on successor, second term

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National Financial Reporting Authority (NFRA) Chairperson Rangachari Sridharan is expected to demit office on Thursday with his three-year tenure coming to an end on September 30. There is still no clarity on whether he will get reappointed although the rules provide for such a step, official sources said.

The “competent authority” is yet to take the final call, they added, noting that the matter has to go to the Appointments Committee of the Cabinet (ACC) for approval. Over 70 persons including bureaucrats, chartered accountants and retired judges have applied for the post, it is learnt.

It may also be noted that the search-cum-selection committee is free to identify and recommend any person also, based on merit, who has not applied for the post.

Going by what had happened recently in the case of appointments of top officials of Income Tax Appellate Tribunal or the National Company Law Appellate Tribunal, there can always be last minute twists and turns in such appointments, say economy watchers.

Audit quality reviews

In his role as the first Chairperson of NFRA, Sridharan, who had an eventful three-year tenure since October 1, 2018, sought to build NFRA as an independent audit regulator from scratch. Despite challenges around staffing and office infrastructure, he helped devise NFRA’s own process for Audit Quality Review and even created an internal manual.

As many as three Audit Quality Review Reports on statutory audits of three scam ridden entities — IL& FS Financial Services , Jaiprakash Associates and IL& FS Transportation Networks — were issued by NFRA in the three year period. During his tenure, Sridharan had several run-ins with the Institute of Chartered Accountants of India, some of whose members he had pulled up in the three AQRs named above. The ICAI is completely opposed to NFRA’s existence.

Meanwhile, MS Sahoo, Chairperson of insolvency regulator IBBI, is also due to demit office on Thursday after a five-year stint at the helm. Sahoo has already conveyed to the government that he would be unavailable for reappointment.

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