Category: Banking & Finance

Rana Kapoor’s wife, daughters remanded to judicial custody, BFSI News, ET BFSI

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A special CBI court in Mumbai on Saturday denied bail to the wife and two daughters of Yes Bank founder Rana Kapoor in a quid-pro-quo case involving private sector lender DHFL and remanded them to 14-day judicial custody.

Kapoor’s wife Bindu and daughters Radha Khanna and Roshini have been named as accused in charge sheets filed by the probe agency in the case, and the court, after taking cognizance of the charge sheet, had summoned the trio.

The three appeared in court and filed for bail through their legal team comprising Vijay Agarwal and Rahul Agarwal, who argued that the charge sheet was filed without Bindu, Radha and Roshni being arrested, and, therefore, as per a Supreme Court judgement, they deserve to be granted bail.

Vijay Agarwal further argued that the court had already exercised the discretion of issuing summons to his clients, which clearly shows there is no need for their arrests.

However, Special Judge S U Wadgaonkar rejected their bail applications and sent them to judicial custody till September 23.

After the prosecution submitted that the jail superintendent wouldn’t accept the custody of the accused without an RTPCR report, the court allowed the probe agency to keep the three in judicial custody till it was received.

As per the Central Bureau of Investigation, Kapoor, who is in jail in a related case being probed by the Enforcement Directorate, entered into a criminal conspiracy with DHFL’s Kapil Wadhawan.

The CBI has stated that between April and June, 2018, Yes Bank invested Rs 3,700 crore in short-term debentures of Dewan Housing Finance Corporation Ltd (DHFL).

In return, DHFL’s Wadhawan allegedly “paid kickback of Rs 600 crore” to Kapoor in the form of loans to DoIT Urban Ventures, a firm controlled by Kapoor’s wife and daughters.



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Y Combinator-backed inai raises $4 million in seed round

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Fintech SaaS startup inai has raised around $4 million in a seed round led by Berlin-based Paua Ventures and 9Unicorns.

Uncommon Capital, Soma Capital, Anarko ventures, Better Capital, and Gemba Capital along with angel investors — Sriram Krishnan, Lenny Rachitsky, Matt Robinson (Founder GoCardless, Nested), Louis Beryl (Rocketplace, Earnest) , Charlie Delingpole (Founder Comply Advantage), Naren Shaam (Founder Omio) and Kunal Shah (Founder CRED) — also participated in the round.

Founded by serial entrepreneurs Anantharaman Pattabiraman and Karthik Narayanan in May this year, inai is in the payments segment: inai is a no/low code platform that connects with multiple payment methods and payment gateways or processors in one simple integration. It allows merchants to manage checkout, payments, subscriptions, refunds, cancellations, chargebacks across the globe along with the ability to orchestrate any business logic such as localising the checkout by region, routing transactions intelligently or having failover logic to recover more transactions without needing any further developer involvement. Merchants can also connect with BI tools, fraud providers, invoicing and tax tools.

Strengthen tech team

inai will utilize the fresh capital to strengthen its technology team, expand its product portfolio, and build out their sales and marketing. The start-up is part of Y Combinator’s Summer 2021 cohort for start-ups.

Anantharaman Pattabiraman and Karthik Narayanan, Founders, inai, said, “While running our previous DTC business, we realised that with e-commerce going increasingly cross-border, optimising the checkout experience for the customer in each market is extremely important. inai allows merchants to go live within 60 minutes with an international payment stack that is optimised for every market they want to operate in and take control of their payment data. In addition, inai provides a rich software layer to support different subscription models for an e-commerce merchant or a SaaS business to sell across multiple geographies and localise the checkout experience.”

Also see: Tummoc raises $540,000 in seed funding round from angel investors

Federico Wengi , Partner at Paua Ventures said, “As the online payments tech-stack gets more sophisticated with new local payment methods, BNPL solutions (buy now pay later) and e-wallets, companies look for solutions to simplify and coordinate online payments. Inai taps into this large opportunity by offering a no-code software solution to simplify online payments once and for all.”

Dr Apoorva Ranjan Sharma, Co-founder & Managing Director, 9Unicorns, said, “The key differentiating factor of this platform is that it enables merchants to set up their payment stack with a single integration. Merchants are not required to write any code, which makes it easier for start-ups and e-commerce businesses to ramp up their operations without any technical expertise. In an increasingly digital economy like Asia, where e-commerce and cross border e-commerce is on an upward growth trajectory, inai is well-poised to capitalize on the cross border payments market.”

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Credit card issuances, spends see sharp uptick as festive season nears, BFSI News, ET BFSI

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Credit card firms are witnessing a sharp rebound in new card issuances and spends as lockdowns and restrictions ease across geographies.

On a year to date basis, the credit card industry witnessed a sharp improvement in spends, albeit on a marginally lower base in July. New card sourcing picked up momentum, supporting Cards-in-Force (CIF) growth of 10% YoY. In July 2021, the business volumes grew by 38% year on year, which was aided by the increasing shift towards online spending. Spends grew a robust 78% YoY. The new customer additions have shown an improvement in MoM and are expected to improve further thus aiding CIF growth.

ICICI Bank

Amongst the private banks, ICICI Bank continued to remain a clear outperformer registering a growth of 23%/145% YoY in CIF/Spends on a YTD basis. This resulted in the market share improvement of 190/503bps YoY in CIF/Spends to 17.7%/18.4% respectively. New card additions were the highest for ICICI at 655,000 during this fiscal

SBI Cards

SBI Cards picked up momentum with new card additions of 198,000 being the highest in the past 16 months, resulting in a CIF growth of 14% YoY. During YTDFY22, spends grew by 68% YoY, supported by a lower base a year ago. July 21 business volumes are encouraging and with the COVID 2.0 impact waning, the growth momentum is likely to sustain. Business volumes remained strong growing at 40% YoY in July 2021 and 46% on a YTD basis.

HDFC Bank

While HDFC Bank remains the market leader with a 20%+ market share in CIF/spends each, it continued to underperform as the credit card vertical was impacted due to the RBI’s restrictions on new card sourcing. However, with the RBI permitting the issuance of new cards, the company is expected to improve its performance. On a YTD basis, the performance remained muted with CIF remaining flat YoY and spends registering a growth of 60%, favoured by a lower base. The bank’s customer base came down by 222,000 customers in YTDFY22.

AU Small Finance Bank

AU Small Finance Bank, a new entrant in the credit card space since November 2020 has witnessed a strong pick-up (albeit the low base) since the commencement of the business. While the bank holds a negligible market share in terms of CIF/Spends which currently stand at 0.04/0.02% respectively on a YTDFY22 basis, increasing traction in the credit cards vertical would aid revenue streams for the bank.

The outlook

“The relaxations in the Covid related lockdowns and a gradual pick-up in the economic activities have aided a strong revival in spends, new sourcing, and business volumes in July 21. The forthcoming festive season will lend further support to the picked-up momentum in the spends and new customers sourcing. However, a possible Covid 3.0 remains a key risk. We continue to believe that Citi Bank’s exit from the credit cards business along with the domestic corporate loan recovery cycle yet to pick up, provides good growth opportunities for the credit cards business, supported by improving macro-conditions,’ Axis Securities said in a note.



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HDFC Bank, Paytm set to launch co-branded credit cards

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HDFC Bank and Paytm on Monday announced plans for launching a comprehensive range of credit cards powered by Visa.

“The partnership aims to provide one of the widest range of offerings across customer segments, with a special focus on millennials, business owners and merchants,” said a statement.

Customised cards

The credit cards will be customised to meet distinct needs of retail customers, from new-to-credit users to affluent users, and will offer one of the best-in-class rewards and cashback for users, it further said, adding that the new cards offering will also facilitate small business owners.

Also see: Banks geared for card tokenisation

The launch is planned in October 2021 to coincide with the festive season to tap into potentially higher consumer demand for credit card offers, EMIs and Buy Now Pay Later options, with the full suite of products to be on offer by the end of December 2021.

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Non-industrial sectors dominate non-food credit growth since 2014

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The overall non-food credit growth during the period 2014-15 to 2020-21 was almost entirely driven by expansion of credit to non-industrial sectors, particularly lending to the retail segment in the form of personal loans, per an article in the Reserve Bank of India’s latest monthly bulletin.

Active participation of both the dominant-group (including six leading banks on the basis of their share in total non-food credit) and the other-group of banks (which includes the remaining 27 banks) is driving credit growth to the non-industrial sectors, according to an analysis of 33 select banks by RBI officials Pawan Kumar, Manjusha Senapati and Anand Prakash.

Impact of Covid

The authors observed that credit extended by the other-group to the industrial sector was affected significantly due to Covid-19 but the performance of this group is better than the dominant-group as far as credit to agriculture and services sectors is concerned.

They said that, “The sharp slowdown in industrial credit, especially by other-group of banks, warrants attention and steps to step up credit offtake commensurate with appropriate risk-taking, a number of which have already been taken by the Government and the Reserve Bank, could defreeze the credit market for the industrial sector and help in reviving the growth momentum derailed by the Covid-19 pandemic.”

After witnessing a significant slowdown in credit offtake during 2019-20 and 2020-21, there has been some uptick in credit growth in the recent months notwithstanding the second Covid wave, which augurs well for the economy, the authors said.

Credit boom period

According to the article, bank credit growth has witnessed significant fluctuations in the past one and half decades.

“The period between 2007-08 to 2013-14 could be characterised as bank credit boom period in the Indian economy, as non-food credit registered double digit growth, primarily driven by robust credit growth to the industrial sector,” the authors said.

Both dominant-group and other-group of banks lent aggressively to the industrial as well as other sectors.

Also see: E-mandate processing: Banks, payment aggregators rush to meet deadline for recurring online transactions

Within industries, infrastructure, and basic metal & metal product industries accounted for a major portion of credit offtake from both the bank groups during the credit boom period.

Credit cycle reversal

Thereafter, however, the credit cycle reversed along with a shift in the sectoral deployment of bank credit.

“During 2014-15 to 2020-21, overall credit growth decelerated, primarily driven down by reversal in credit growth to the industrial sector because of deleveraging by non-financial firms, increasing dependence on non-bank sources for financial resources, and some risk aversion on the part of banks, especially by the other-group of banks to lend to industries, which got further compounded after the outbreak of Covid-19 pandemic,” the authors said.

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Kotak Mahindra Bank to by 10% stake in KFin Technologies for Rs 310 crore, BFSI News, ET BFSI

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NEW DELHI: Kotak Mahindra Bank on Monday said it is buying about 9.9 per cent stake in KFin Technologies, a leading investor and issuer servicing platform. The lender will purchase the stake for Rs 310 crore.

KFin Tech provides a wide array of financial technology solutions across a broad spectrum of asset classes spanning mutual funds, alternatives, insurance, and pension. It has been growing its market share in the mutual fund servicing segment.

“As a platform of choice for asset managers, investors and corporates, we believe KFin is well-positioned to continue growing its market position. At Kotak Mahindra Bank, this investment is in line with our stated strategy of making minority investments in businesses which are professionally managed and have deep client entrenchment,” said Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank.

KFin’s proprietary applications, big data technologies and hybrid cloud environment enable servicing of over 13 crore folios and processing of over 10 lakh transactions on a daily basis.

“KFin Tech is uniquely positioned to leverage its decades of deep capital markets expertise to deliver a differentiated value proposition to the financial markets in India and abroad. Kotak Mahindra Bank’s investment is testimony to the same,” said MV Nair, Chairman, KFin Technologies.

“With Kotak Mahindra Bank’s support, along with the continued support of General Atlantic, an existing shareholder of KFin, we shall be able to achieve greater heights in our technology, business processes, leadership depth and governance.”



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Banks rush to implement ‘standing instructions’ system, but may still miss deadline, BFSI News, ET BFSI

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Banks and payment aggregators are rushing to meet the October 1 deadline for implementing a new system for standing instructions for recurring online transactions as the Reserve Bank of India is not likely to extend it. Banks are sending communications to customers saying that they will not process recurring payments, and customers will have to make payments directly to merchants.

“In compliance with the regulatory requirements, we are currently building a solution to seamlessly manage all your domestic standing instructions for recurring payments. This solution will be available soon for you. Starting October 1, any existing standing instruction for domestic and international recurring transactions on your card account will not be processed. We request you to make these payments directly to the service providers to avoid any interruptions,” American Express said in a recent message to customers.

How does the new system work?

Under the proposed system, as a risk mitigating and customer facilitation measure, the card-issuing bank will have to send a pre-transaction notification to the cardholder, at least 24 hours before the actual charge or debit to the card. While registering e-mandate on the card, the cardholder shall be given the facility to choose a mode among available options (SMS, email, etc.) for receiving the pre-transaction notification from the issuer. On receipt of the pre-transaction notification, the cardholder shall have the facility to opt-out of the particular transaction or the e-mandate. For transactions above Rs 5000, banks will also be required to send one time passwords to customers.

What is a standing instruction?

A standing instruction is a service offered to customers of a bank, wherein regular transactions that the customer wants to make are processed as a matter of course instead of initiating specific transactions each time.

This service relates to transactions like renewing subscription to over-the-top (OTT) platforms, newspapers and magazines, and utility bill payments.

The issue

Large lenders and payment entities including State Bank of India, Citi, HDFC, Axis, HSBC, Visa and Mastercard had asked the RBI to postpone the deadline for putting in place a new system to alert customers on ‘standing instruction’ transactions.

The banks were asked to set up the system by March 31, 2021.

The lenders also wanted RBI to exclude transactions against pre-existing standing instructions and those with international merchants from the new conditions for e-mandates on cards for recurring transactions.

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Index inclusion buzz lures foreign funds back into bonds

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Foreign funds are steadily increasing exposure to Indian debt amid growing expectations that inclusion of the nation’s bonds into global indexes is imminent.

Bond purchases by overseas investors under the uncapped Fully Accessible Route climbed to 35 billion rupees ($476 million) in August, the highest this year. They’ve bought 29.4 billion rupees of bonds so far this month, set for a fifth straight month of inflows, following outflows from January-April.

Global index provider FTSE Russell, which placed Indian bonds on the watchlist for possible inclusion in its debt index, is set to announce the result of its review September 30. JPMorgan Chase and Co. typically reviews its index this month. Morgan Stanley estimates India’s inclusion in global bond indexes will lure $40 billion of inflows in the next two years.

Also see: Govt receiving max FDI proposals in 3 depts from nations sharing land border with India

Authorities have been working toward making the nation’s bonds eligible for index inclusion to help fund infrastructure projects in Asia’s third-largest economy. Bloomberg LP said in 2019 that it would work with Indian authorities to help the nation gain access to global indexes.

RBI Governor Shaktikanta Das said earlier this month that policy makers are making efforts to enable international settlement of transactions in government bonds, a move that would greatly increase the attractiveness of Indian debt and help in inclusion in global indexes. India has also been trying to sort out taxation issues with Euroclear to facilitate listing of Indian debt.

Most of the spadework is done and the nation’s bonds are expected to be included in the indexes by March, Sanjeev Sanyal, principal adviser to the finance ministry said Friday.

“We expect foreign-investor demand to improve, albeit in a measured way, drawing on falling hedging costs and prospects for index inclusion,” said Ashish Agrawal, rates strategist at Barclays in Singapore.

Following China

India’s inclusion would make it the last major emerging-market nation to join the global bond indexes after China, according to Morgan Stanley. China’s bonds are set to be added to FTSE Russell’s flagship World Government Bond Index in October in phases over three years. Analysts expect the move to prompt foreigners to pour $105 billion-$156 billion into China’s debt.

Prime Minister Narendra Modi’s administration last year opened up a wide swath of its sovereign bond market to overseas investors, its biggest step yet to secure access to global indexes. Still, the foreign investment in rupee bonds has been tepid due to elevated inflation and the government’s near-record borrowing plan.

Also see: ‘Companies accounting for 75% m-cap are audited by Big 4’

“Foreign ownership of Indian government bonds has been declining, but 2022 would be the turning point that could bring an acceleration of bond inflows,” Morgan Stanley strategists led by Min Dai, wrote in a note. The inclusion in global bond indexes should bring $18.5 billion in inflows every year over the next decade, compared to just $36.4 billion in the last ten years, the analysts wrote.

While expectations for index inclusion in this review are low, some including Morgan Stanley forecast it could happen as early as the first quarter of next year.

Goldman Sachs Group’s timeline is less optimistic. It sees India’s inclusion in JPMorgan’s GBI-EM Global Diversified Index likely by end-2022 or early 2023, and in the Bloomberg Global Aggregate Index by end-2022 or 2023. India does not meet the country rating criteria for the FTSE World Government Bond Index, so it is not eligible at this juncture, it said.

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Kotak Mahindra Bank to acquire 9.98% stake in KFin Technologies

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Kotak Mahindra Bank on Monday said it has agreed to make an equity investment of 9.98 per cent stake in KFin Technologies.

As part of the transaction, the private sector lender will subscribe to 1,67,25,100 equity shares in KFin Technologies for about Rs 310 crore.

“Kotak Mahindra Bank shall acquire, subject to necessary approvals, about 9.9 per cent stake in Kfin by investing about Rs 310 crore as primary infusion in the company,” said a statement.

 

Incorporated in 2017, KFin provides a wide array of financial technology solutions across a broad spectrum of asset classes spanning mutual funds, alternatives, insurance, and pension. It had a turnover of Rs 481 crore in 2020-21.

“At Kotak Mahindra Bank, this investment is in line with our stated strategy of making minority investments in businesses which are professionally managed and have deep client entrenchment. We are excited about the future growth prospects of the business and believe that an investment in KFin, with its significant franchise, will create long-term value for our stakeholders,” said Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank.

 

The acquisition is likely to be completed by end of October 2021, Kotak Mahindra Bank said in a stock exchange filing.

M.V. Nair, Chairman, KFin Technologies said, “With Kotak Mahindra Bank’s support, along with the continued support of General Atlantic, an existing shareholder of KFin, we shall be able to achieve greater heights in our technology, business processes, leadership depth and governance.”

KFin is majority owned by funds managed by General Atlantic.

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World Bank’s call to discontinue ‘Doing Business Report’ irks Pakistan, BFSI News, ET BFSI

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The World Bank‘s decision to discontinue ‘Doing Business Report‘ has irked Pakistan as it was confident that the country would make a leap in the next report to improve the current ranking of 108th, Dawn newspaper reported.

Previously, Pakistan progressed 39 places to secure 108th place on the ease of doing business global ranking, in the last two years. According to the Pakistani daily, the companies’ registration through the Securities and Exchange Commission of Pakistan (SECP) has shown a 63 per cent growth.

Fareena Mazhar, Board of Investment (BoI) Secretary said that they were hopeful that the work which they were doing in regulatory reforms would provide an edge in terms of any future mapping criteria. One of the main things that Pakistan was hoping to capitalize on was the promulgation of commercial courts in Punjab province.

Last week, the World Bank Group decided to discontinue publication of its Doing Business report following allegations of irregularities. The decision was taken after a probe of data irregularities due to pressure by some top bank officials to boost China‘s ranking in 2017 came forth.

The Doing Business report assesses regulatory environments, ease of business startups, infrastructure and other business climate measures.

“After reviewing all the information available to date on Doing Business, including the findings of past reviews, audits, and the report the Bank released today (Thursday) on behalf of the Board of Executive Directors, World Bank Group management has taken the decision to discontinue the Doing Business report,” it said in a statement posted on the website.

The probe of data irregularities cited ‘undue pressure’ by top bank officials, including then-Chief Executive Kristalina Georgieva, to boost China’s ranking in 2017.

Georgieva, now the Managing Director of International Monetary Fund, and a key adviser pressured staff to ‘make specific changes to China’s data points’ and boost its ranking at a time when the Bank was seeking China’s support for a big capital increase.



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