Category: Banking & Finance

Here are the interest rates of home loans linked to repo rate, BFSI News, ET BFSI

Banking & Finance

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Interest rates on home loans offered by banks are now linked to an external benchmark. This is because the Reserve Bank of India (RBI) has asked all scheduled commercial banks (except regional rural banks), local area banks and small finance banks to link interest rates on retail and MSME loans to an external benchmark rate with effect from October 1, 2019.

RBI, in its circular, has directed banks to link their retail lending interest rates to any of the following external benchmarks:

  • RBI’s repo rate
  • Government of India 3-months Treasury bill yield published by Financial Benchmarks India Pvt. Ltd. (FBIL)
  • Government of India 6-months Treasury bill yield published by FBIL
  • Any other benchmark market interest rate published by the FBIL

Most banks have chosen RBI’s repo rate as their choice of external benchmark. The lending interest rate linked to repo rate is known as Repo Rate Linked Lending Rate (RLLR). RLLR is made up of RBI’s repo rate plus spread or marginRLLR = Repo rate + Margin charged by the bank.

The Central Bank reviews the repo rate in every two months.

The margin charged by a bank will remain same for all home loan takers, however, as per the RBI circular, banks are allowed to charge a risk premium from borrowers. Risk premium charged by the bank will depend on how risky your bank perceives you to be and will therefore vary from one borrower to another.

Here are home loan interest rates offered by top banks for salaried individuals

BANK NAME RLLR Minimum Interest rate(%)** Maximum Interest rate (%)
IDFC First Bank 6.50 6.50 8.00
Kotak Mahindra Bank 6.65 6.65 7.10
Bank of Baroda 6.75 6.75 8.35
ICICI Bank 6.75 6.75 7.40
Punjab & Sind Bank 6.85 6.75 7.35
Union Bank of India 6.80 6.80 7.35
SBI Term Loan 6.65 6.80 7.15
Indian Bank 6.80 6.80 8.25
Central Bank of India 6.85 6.85 7.30
Bank of India 6.85 6.85 8.20
Axis Bank 6.90 6.90 8.40
Bank of Maharashtra 6.90 6.90 8.35
Canara Bank 6.90 6.90 8.90
IDBI Bank 6.90 6.95 8.55
Punjab National Bank 6.80 6.95 7.85
Indian Overseas Bank 6.85 7.05 7.30
UCO Bank 6.90 7.15 7.25
SBI Max Gain 6.65 7.15 7.50
Karur Vysya Bank 7.05 7.15 9.35
South Indian Bank 7.25 7.25 9.50
J & K Bank 7.20 7.30 7.60
Karnataka Bank 7.50 7.50 8.85
Federal Bank 7.65 7.65 7.75
Dhanlaxmi Bank 7.00 7.85 8.50
DCB Bank 8.16 8.16 8.16
Yes Bank 7.60 8.95 11.80

**Sorted on minimum interest rate charged by the bank after adding risk premium
*IDFC First Bank charges up to Rs 10,000 as processing fees (Additional premium is charged based on risk profile)
*Kotak Mahindra Bank charges a processing fee of max 2% + GST and any other statutory charges plus documentation charges up to Rs.10,000/-
*Bank of Baroda processing fees is 0.25% to 0.50% of loan; Min. Rs.8500/- Max. Rs.25000/-
*ICICI Bank charges processing fees in the range of 0.50% and 2% subject to a minimum of Rs 1,500
*Punjab & Sindh Bank offers a full waiver of processing and inspection charges
*Union Bank of India charges a processing fee of 0.50% of loan amount, Max. Rs 15000
*SBI charges 0.40 per cent plus GST as processing fees. Minimum Rs 10,000 and Maximum Rs 30,000 plus GST. (Exception builder-tie up projects)
*Indian Bank charges 0.230 per cent on loan amount as processing fees with a maximum amount of Rs 20,470.
*Central Bank of India charges 0.50% processing fee subject to Max Rs 20,000
*Bank of India charges 0.25% of loan; minimum Rs 1,500 and maximum Rs 20,000
*Axis Bank charges up to 1% of the loan amount subject to a minimum of Rs 10,000.
*Bank of Maharashtra charges a processing fee of 0.25% of Loan amount Max Rs.25,000/-
*Canara Bank charges 0.50%; minimum Rs 1,500 and maximum of Rs.10,000/-
*IDBI Bank charges a processing fee of Min Rs.2,500/- Max Rs.15,000/- (Plus GST)
*PNB charges 0.35 per cent as processing fees; minimum Rs 2,500 and maximum Rs 15,000 plus documentation charges 1,350/-
*Indian Overseas Bank charges 0.50% as processing fees; max Rs 25,000
*UCO Bank charges 0.5% of the loan amount, minimum Rs 1500 & maximum Rs 15,000.
*Karur Vysya Bank charges minimum Rs 2,500 and maximum Rs 7,500 plus GST as processing fees
*South Indian Bank charges 0.40 per cent of loan amount
*J&K Bank charges 0.25% plus GST Minimum Rs 5,000; maximum Rs 25,000 (NIL PC for takeover loans)
*Karnataka Bank charges 1 per cent with minimum Rs 500.
*Federal Bank charges 0.50% of the loan amount as processing fees; min Rs 10,000 and max Rs 45,000
*Dhanlaxmi Bank charges 1.25 per cent of loan amount
*DCB Bank charges up to 2% of the loan amount; minimum Rs 5,000
*Yes Bank charges 2% or Rs 10,000 whichever is higherHere are home loan interest rates offered by top banks for self-employed individuals

BANK NAME RLLR Minimum Interest rate(%)** Maximum Interest rate (%)
IDFC First Bank 6.50 6.50 8.00
Kotak Mahindra Bank 6.65 6.75 7.20
Bank of Baroda 6.75 6.75 8.35
Union Bank of India 6.80 6.85 7.40
Central Bank of India 6.85 6.85 7.30
Bank of India 6.85 6.85 8.35
ICICI Bank 6.75 6.90 7.55
SBI Term Loan 6.65 6.95 7.30
Indian Bank 6.80 6.95 8.40
Canara Bank 6.90 6.95 8.90
IDBI Bank 6.90 6.95 10.05
Punjab National Bank 6.80 6.95 7.85
Axis Bank 6.90 7.00 8.55
Indian Overseas Bank 6.85 7.05 7.30
Punjab & Sind Bank 6.85 7.10 7.90
Bank of Maharashtra 6.90 7.15 8.45
UCO Bank 6.90 7.15 7.25
Karur Vysya Bank 7.05 7.15 9.35
SBI Max Gain 6.65 7.30 7.80
J & K Bank 7.20 7.30 7.60
Karnataka Bank 7.50 7.50 8.85
South Indian Bank 7.25 7.60 10.00
Federal Bank 7.65 7.70 7.80
DCB Bank 8.16 8.16 8.16
Dhanlaxmi Bank 7.00 8.35 9.00
Yes Bank 7.60 8.95 11.80

**Sorted on minimum interest rate charged by the bank after adding risk premium
*IDFC First Bank charges up to Rs 10,000 as processing fees (Additional premium is charged based on risk profile)
*Kotak Mahindra Bank charges a processing fee of max 2% + GST and any other statutory charges plus documentation charges up to Rs.10,000/-
*Bank of Baroda processing fees is 0.25% to 0.50% of loan; Min. Rs.8500/- Max. Rs.25000/-
*ICICI Bank charges processing fees in the range of 0.50% and 2% subject to a minimum of Rs 1,500
*Punjab & Sindh Bank offers a full waiver of processing and inspection charges
*Union Bank of India charges a processing fee of 0.50% of loan amount, Max. Rs 15000
*SBI charges 0.40 per cent plus GST as processing fees. Minimum Rs 10,000 and Maximum Rs 30,000 plus GST. (Exception builder-tie up projects)
*Indian Bank charges 0.230 per cent on loan amount as processing fees with a maximum amount of Rs 20,470.
*Central Bank of India charges 0.50% processing fee subject to Max Rs 20,000
*Bank of India charges 0.25% of loan; minimum Rs 1,500 and maximum Rs 20,000
*Axis Bank charges up to 1% of the loan amount subject to a minimum of Rs 10,000.
*Bank of Maharashtra charges a processing fee of 0.25% of Loan amount Max Rs.25,000/-
*Canara Bank charges 0.50%; minimum Rs 1,500 and maximum of Rs.10,000/-
*IDBI Bank charges a processing fee of Min Rs.2,500/- Max Rs.15,000/- (Plus GST)
*PNB charges 0.35 per cent as processing fees; minimum Rs 2,500 and maximum Rs 15,000 plus documentation charges 1,350/-
*Indian Overseas Bank charges 0.50% as processing fees; max Rs 25,000
*UCO Bank charges 0.5% of the loan amount, minimum Rs 1500 & maximum Rs 15,000.
*Karur Vysya Bank charges minimum Rs 2,500 and maximum Rs 7,500 plus GST as processing fees
*South Indian Bank charges 0.40 per cent of loan amount
*J&K Bank charges 0.25% plus GST Minimum Rs 5,000; maximum Rs 25,000 (NIL PC for takeover loans)
*Karnataka Bank charges 1 per cent with minimum Rs 500.
*Federal Bank charges 0.50% of the loan amount as processing fees; min Rs 10,000 and max Rs 45,000
*Dhanlaxmi Bank charges 1.25 per cent of loan amount
*DCB Bank charges up to 2% of the loan amount; minimum Rs 5,000
*Yes Bank charges 2% or Rs 10,000 whichever is higher
All data sourced from Economic Times Intelligence Group (ETIG)
Data as on September 11, 2021

How will your EMI change in the new external benchmark linked lending rate regime?
To categorise the borrower on the basis of credit risk, some banks have internal risk assessment teams while others rely on credit scores to grade the risk of each borrower. As per RBI’s circular, if your credit score undergoes substantial changes, the bank can revise the risk premium charged on the home loan.

Also Read: 5 lesser known things about credit score that can impact your home loan interest rates

As leading interest rates are linked to an external benchmark, banks are required to reset the interest rates at least once in three months. Therefore, any change in the external benchmark rate, will mandatorily have to be passed on to the borrower within three months of the change.

Also Read: How your EMI will be reset under external benchmark lending regime

Why RBI asked banks to link lending interest rates to an external benchmark
Under the previous marginal cost of lending rate (MCLR) regime, home loan borrowers and others often complained that banks did not pass on the benefit of a lower rate whenever RBI cut the key policy rates but often raised the interest rates quickly whenever policy rates were hiked. Linking the interest rates to an external benchmark is supposed to bring in more transparency and faster transmission of changes in key policy rates.

For any queries or changes, please write to us on etigdb@timesgroup.com or call us at 022 – 66353963



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Court rejects bail plea of Ambience group’s promoter in Rs 800-crore fraud case, BFSI News, ET BFSI

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NEW DELHI: A Delhi court on Friday dismissed the bail plea of businessman Raj Singh Gehlot, the owner of Ambience Mall who was arrested in a money laundering case related to Rs 800 crore bank loan alleged fraud case.

The Enforcement Directorate arrested Gehlot in July, in an alleged bank loan fraud case worth more than Rs 800 crore. He was arrested under the Prevention of Money Laundering Act, 2002 (PMLA) for committing bank fraud against the Jammu and Kashmir Bank Consortium.

Additional Sessions Judge Dharmender Rana dismissed the bail plea and said, “considering the nature of allegations, intricate nature of the investigation and the possibility of the applicant/accused attempting to influence the course of the investigation, I am of the considered opinion that the instant bail application is bereft of any merits and the same is accordingly dismissed.”

“…the economic offences are required to be treated as a separate class and bail cannot be granted as a matter of routine…”, Court said.

Earlier, Court while granting custody to ED said, “Investigation of an offence under the Prevention of Money Laundering Act, (PMLA) in itself is an intricate exercise of skills and patience. The very nature of the offence requires sustained interrogation and an intensive analysis of the copious material collected during the course of the investigation. Considering its intricate nature, Investigation under PMLA, for obvious reasons, is a time-consuming process.”

Enforcement Directorates through Advocate Atul Sharma and Advocate Naveen Kumar Matta submitted that his custodial interrogation was required to unearth the end-use of some portion of loan funds in order to ascertain the exact quantum of proceeds of crime for determining the role of various other persons and aides who have assisted in the sanction and diversion of loan funds and also to unearth the entire modus operandi involved in the present case.

Senior Advocate Vikas Pahwa appearing for Gehlot forcefully argued that the relevant information about the transactions concerning the loan and its utilization has been mischievously withheld by ED. It was also submitted that even prior to disbursal of the loan amount in question, construction was commenced with the funds of the promoters.

It was submitted that there is no siphoning or misappropriation of loan amount and the amount alleged to be siphoned off was in fact the money that was paid back by AHPL under the instructions of the turnkey contractor to the persons who supplied material and rendered services to AHPL before disbursal of the said loan.

Advocate Tanveer Ahmad Mir also represented businessman RajSingh Gehlot argued that the accused is an old and ailing man with firm roots in the society and he is neither a flight risk nor in a position to tamper with the evidence nor influences the witnesses and he deserves to be admitted on bail.

Last year, the ED had initiated an investigation under PMLA on the basis of an FIR registered by State ACB, Jammu against Aman Hospitality Pvt Ltd (AHPL) and its Directors for money laundering in the construction and development of the 5-star ‘Leela Ambience Convention Hotel’ situated near the Yamuna Sports Complex in Delhi, the investigation agency said.

It stated that investigation under PMLA revealed that a huge part of a loan amount of more than Rs 800 crore, which was sanctioned by a consortium of banks for the hotel project, was siphoned off by AHPL and Raj Singh Gehlot and his associates through a web of companies controlled by them.

A month after Enforcement Directorate arrested Raj Singh Gehlot, owner of Ambience Mall in Gurugram, on money laundering charges, Central Bureau of Investigation has booked him and two other directors of his firm for allegedly siphoning off Rs 289 crore from J&K Bank.

The ED arrested Gehlot last month in an alleged bank loan fraud case worth more than Rs 800 crore. He was arrested under the Prevention of Money Laundering Act, 2002 (PMLA) for committing bank fraud against the Jammu and Kashmir Bank Consortium.

KMC’s Zonal Officer Rajesh Kumar Gupta told PTI that the shopping mall was sealed for not paying the civic body’s dues of Rs 13,36,24,712 that comprises property tax of Rs 10,44,88,848 and the interest of Rs 2,91,35,864.



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RBI extends curbs on UP-based People’s Co-operative Bank, BFSI News, ET BFSI

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Mumbai, The Reserve Bank of India (RBI) has extended restrictions on People’s Co-operative Bank Limited, Kanpur, for a further period of three months from September 11 to December 10.

The bank has been under restrictions since June 10, 2020, through the directives issued under Section 35A of the Banking Regulation Act, 1949 (AACS).

“The validity of the directive, which was last extended up to September 10, 2021 has further been extended for a period of three months from September 11, 2021 to December 10, 2021 vide directive DOR.MON.D-35/12.28.059/2021-22 dated September 8, 2021 subject to review,” said an RBI statement on Saturday.

Section 35A of the Banking Regulation Act, 1949 gives the central bank power to give directions to banks and can take action, to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company.

As per the directives, the Kanpur-based co-operative bank has been barred from granting fresh loans and accepting deposits for six months without prior approval of the RBI, due to its weak financial position.

“In particular, no amount of the total balance across all savings bank or current account or any other account of a depositor may be allowed to be withdrawn,” the RBI had said in its statement on June 11, 2020, when it had imposed the restrictions.



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CBDT, BFSI News, ET BFSI

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In order to make disinvestment deals of ailing state-owned firms more attractive for strategic investors, the government on Friday allowed erstwhile public sector companies to carry forward losses to be set off against future profits. The Central Board of Direct Taxes (CBDT) in a clarification said that Section 79 of the Income Tax Act shall not apply to an erstwhile public sector company which has become so as a result of strategic disinvestment.

“Accordingly, loss incurred in any previous year prior to, and including, the previous year of strategic disinvestment shall be carried forward and set off by the erstwhile public sector company,” the CBDT under the Finance Ministry said in a statement

The relaxation, it added, will cease to apply from the previous year in which the company, that was the ultimate holding company of such erstwhile public sector company immediately after completion of the strategic disinvestment, ceases to hold 51 per cent of the voting power of the erstwhile company.

Section 79 of the Income Tax Act deals with carry forward and set off of losses in case of companies.

“In order to facilitate the strategic disinvestment, it has been decided that Section 79 of the Income-tax Act, 1961, shall not apply to an erstwhile public sector company which has become so as a result of strategic disinvestment,” it said.

Necessary legislative amendments for the above decision shall be proposed in due course of time, the statement said.

Commenting on clarification, Nangia Andersen LLP Head (Government and Public Sector Advisory) Suraj Nangia said “the Government has allowed that even after change in shareholding of such ailing PSUs due to transfer of shares in such PSUs by Government to strategic investors, past losses of such PSUs will be allowed to be carried forward for set off against future profits.”

This will make disinvestment deals of ailing PSUs more attractive for strategic investors, he said.

Under normal tax provisions, he said, without this relaxation, past losses of a company are not allowed to be set off, if there is change in majority shareholding of a company (i.e. 51 per cent).

“It may be noted that such relaxation will be available, only till the strategic investor retains at least 51 per cent in the PSU after takeover. In case the strategic investor’s shareholding falls below 51 per cent, such relaxation will be withdrawn,” he added.

The ambitious divestment pipeline also includes loss making national carrier Air India for which the deadline for submission of financial bids is September 15.

The government will be selling budget airline Air India Express and Air India’s 50 per cent stake in Air India SATS Airport Services Private Limited (AISATS) besides offloading its entire stake in loss-making Air India.

The deadline for submission of Expressions of Interest (EoI) or preliminary bids was extended five times earlier before closing it in December last year.

Finance Act, 2021 has amended section 72A of the Income-tax Act, 1961 that deals with amalgamation of a public sector company (PSU) which ceases to be a PSU (erstwhile public sector company), as part of strategic disinvestment, with one or more company or companies and carry forward of losses in case of change in shareholding following sale by the government.

The Centre budgeted Rs 1.75 lakh crore from stake sale in public sector companies and financial institutions, including 2 PSU banks and one insurance company, in the current fiscal year.

As part of the privatisation strategy, the government aims to complete the strategic sale of Bharat Petroleum Corporation Ltd (BPCL), Shipping Corp, Container Corporation, Neelachal Ispat Nigam Ltd, Pawan Hans, Air India, among others, by March 2022.

So far this financial year, Rs 8,368 crore has been mopped up through minority stake sales in PSUs and the sale of SUUTI (Specified Undertaking of the Unit Trust of India) stake in Axis Bank.



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Things should return to normal with economy back on track: Bajaj Allianz General chief Singhel

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Bajaj Allianz General Insurance Company Limited (BAGIC), the country’s largest private general insurer by revenue and profits, sees the company’s overall business operations returning soon to pre-pandemic level with the economy getting back on track, a top official said.

As in previous years, this 20-year old private general insurer is hopeful of outdoing overall industry growth (estimated at 12-15 per cent) even during this fiscal with the recent uptrend in business led by health insurance followed by growth in motor and property insurance, Tapan Singhel, Managing Director & Chief Executive Officer, told BusinessLine in an interview.

“I can comfortably say, with no further waves withstanding, things should return to normal with the economy getting back on track. The growth of the economy and insurance industry is directly proportional to each other. Hence the better the Indian economy does, the better the insurance industry does “, he said when asked if business operations had returned to pre-pandemic level..

As of end August this fiscal, BAGIC recorded gross direct premium of ₹ 6468 crore, up 18 per cent over ₹ 5471 crore in same period last fiscal. The overall industry stands at about 14 per cent growth for all general insurance companies.

Singhel also hoped to see government playing an even bigger role in improving the healthcare system in the coming days and noted that a “holistic” approach that covers aspects like need to reduce GST on health insurance ( from current 18 per cent to say 5 per cent) and putting in place a regulator for hospitals was the need of the hour to solve the current problem of absence of an efficient healthcare system in the country.

Asked how had Covid-19 impacted BAGIC’s business, Singhel said that the impact of Covid on general insurance industry was predominantly on health space. BAGIC too felt the heat with loss ratios going up just as it happened for the industry. “Loss ratio for health has not been very good for us and that is for the entire industry. While Covid created awareness and sales of health policies went up, claims also got created. The good part is that the industry supported Covid 19 claims. You must also understand health reinsurance was not available internationally for Covid. Industry settled nearly ₹ 30,000 crore claims on its own internal resources.

Every industry affected by Covid has asked for government relief. Did you hear insurance industry asking for any such relief from the government inspite of paying so much claims?”, Singhel asked.

Singhel asserted that it would not be right to describe 2021-22 as a “bad year” for BAGIC, noting that settling claims was part of the business.

Medical inflation

Asked about customers anxiety over increase in health insurance premiums in the current pandemic times, Singhel asserted that Covid is not the reason why health insurance premiums will go up. “People are not understanding this. There is no regulator for hospitals. Premium increase on health policies is very natural phenomena because of the dichotomy in the system. The problem is you can’t increase health premium for three years. It’s a kind of lock-in. Every premium increase has to go to regulator and IRDAI allows this only once in three years. With average medical inflation of about 12-15 per cent per annum, price rise in premium translates to cover 45 per cent medical inflation over three years. Insurance premiums is locked for three years, while medical bills are moving up every year. Premium increase will have to happen to match the previous inflation”, he said.

Singhel said that General insurance industry had already approached the insurance regulator seeking yearly adjustments to insurance premiums rather than once in three years.

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Punjab National Bank’s board approves raising Rs 6,000 crore, BFSI News, ET BFSI

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New Delhi: Punjab National Bank (PNB) on Friday said its board has approved raising up to Rs 6,000 crore by issuing bonds. The decision was taken at the meeting of the board of directors on Friday.

In a regulatory filing, the bank said its board has “approved raising of capital through issue of Basel III additional Tier-1 (AT-1) bonds or Tier II bonds or a combination of both in one or more tranches up to an amount of Rs 6,000 crore”.

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SBI and Bandhan Bank planning to move their back office verticals to fintech hub of Kolkata, BFSI News, ET BFSI

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Banks like State Bank of India and Bandhan Bank are planning to move several of their back office verticals and processing centers in the sprawling fintech hub of Kolkata which is being built on 70 acre in New Town area.

As many as 28 financial institutions and legal firms have already taken land in the fintech hub, for which foundation stone was laid in 2012, one year after Mamata Banerjee came to power ending three decades of Left rule.

The government on Friday made the land booking and registration process online. About 48 acre of 70 acre has been allotted so far.

The government has also made rules easier for mutual funds to acquire land here.

Entities other than mutual funds, become eligible for a plot of land in the fintech hub if and only if they have annual revenue in excess of Rs 500 crore every year for three years.

Bandhan Bank has taken two plots in the hub and is planning to build its headquarter here as well as create a currency chest and back office, managing director Chandra Shekhar Ghosh said at the event to launch the online facility.

SBI chief general manager Ranjan Kumar Mishra said the bank is contemplating various of its verticals and processing centers here.

The hub, which is located at one of the most modern townships adjacent to Kolkata, is expected to be ready in three to four years time.



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Punjab National Bank’s board approves raising ₹6,000 crore

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Punjab National Bank (PNB) on Friday said its board has approved raising up to ₹6,000 crore by issuing bonds.

The decision was taken at the meeting of the board of directors on Friday.

In a regulatory filing, the bank said its board has “approved raising of capital through issue of Basel III additional Tier-1 (AT-1) bonds or Tier II bonds or a combination of both in one or more tranches up to an amount of ₹6,000 crore”.

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Fintechs are paving path for greater financial inclusion in India

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Despite two waves of the Coronavirus pandemic that unleashed devastation across most areas, India has an 87% Fintech adoption rate that is substantially more than the world’s average adoption rate of 64%.

By Kapil Rana

Fintech organizations have a wide scope of business in India, particularly around payment lending, personal finance management, and regulation technologies. Needless to say, that nations’ immense population, expanding the number of web users, and the government’s endeavours to make the nation digital are bringing numerous new opportunities for Fintech and new companies. Financial organizations, new businesses, investors, and controllers are accepting Fintech and utilizing those opportunities to stand in the competition and grow fast. In recent years, India has seen the development of various new start-ups, regulators, the public and private financial institutions that have made the Indian Fintech market the fastest developing business sector in the world. 

Despite two waves of the Coronavirus pandemic that unleashed devastation across most areas, India has an 87% Fintech adoption rate that is substantially more than the world’s average adoption rate of 64%. India has witnessed 2.7 billion dollars of Fintech investment last year. This was the second largest investment close to 3.5 billion dollars in 2019 as confirmed by Professional Service Firm KPMG. Likewise, the report of Florida-headquartered ACI worldwide uncovered that 25.5 Billion constant exchanges were made in India in 2020 that is the highest in the world. 

It goes without saying that the increased adoption of Fintech technologies powered by artificial intelligence (AI), machine learning (ML), data analytics, process automation, and Blockchain has transformed the financial world. These advancements empower Fintech to run colossal measures of information through calculations designed to distinguish patterns and risk, fake practices, spam information, and make or suggest the right moves. 

FinTech organizations utilizing these innovations to assist organizations to manage and control activities like managing and controlling their finance, fulfilling tax compliance, paying and accepting bills, and utilizing other financial administrations according to the requirements. They additionally empower customers, organizations, and entrepreneurs to have a superior comprehension of investment and purchasing risk. Till today, countless new businesses and financial institutions are accepting Fintech to control and manage their financial operation and decrease their functional expense. However, still there are many difficulties and bottlenecks in the adoption of financial technologies, which are making it hard for organizations to use its benefits entirely. 

Key Challenges for Fintech Start-ups Companies

Cyber security is the biggest challenge for Fintech businesses. The risk of information leakage, malware, security break, cloud-based security risk, phishing, and identity threat is making the Fintech businesses helpless at some point or others. Such dangers are unwarranted by clients, therefore, Fintech associations need to advance their technologies, teach customers, and make powerful policies to eliminate such dangers. 

Fintech organizations work in a joint effort with traditional financial institutions in different manners like association, incubation, and acquisition, and so on. This joint effort poses many obstacles like the two players have their own arrangement of rules relating to size, productivity, and acknowledgments. Likewise, Fintech organizations are essentially intended to work with a modern working model. So, it is a bit hard for them to keep a smooth relationship with traditional banks and other financial institutions. Also, Banks fear working with Fintech as they risk losing their reliability. 

Further, banking and other monetary foundations are strictly regulated. Similarly, Fintech organizations in India should be intensely managed with policies that will assist them with moderating the possible dangers of network safety. However, many existing monetary laws and government strategies are not completely favorable for Fintech start-ups in the Indian financial sectors. 

Most of the Indian clients are still utilizing cash rather than tech-driven options like UPI transactions. Fintech is attempting to assemble a credit-only economy and this will be a significant snag for them to handle, particularly to push conventional Indian buyers to embrace digital payments. Dependency on cash, cybercrime, and poor internet services are a couple of obstacles among others that are making it hard for Fintech organizations to do business in India. 

Summarizing 

Post demonetization, the number of Fintech businesses in India has been substantially increased. These businesses are vivaciously working on different sub-areas like mobile POS (point of sale), internet banking solutions through neo banking, managing compliance-related issues on a solitary platform, credit management, and so on. Thanks to the innovative Fintech plan of action that is bringing great advancements in the fields of finance and technology to help organizations and small businesses in their processes. 

The fintech business model is working with a remarkable and consistent framework that permits entrepreneurs, business owners, and proprietors to go through huge information and make better choices in their businesses. There is no denying that Fintech is forming the future of next-generation financial solutions, and despite the way that there are a few obstacles that Fintech companies are coming across in the current business landscape, they have certainly a thriving future in India.

(The author is founder and chairman Hostbooks. Views are personal and not necessarily that of Financial Express Online.)

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Buying Citi assets can be a game-changer for Kotak, IndusInd faces constraints, BFSI News, ET BFSI

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The retail and credit card business put on the block by Citibank India are best fit for Kotak Mahindra Bank and DBS Bank, while for HDFC Bank it is still a good asset though not a game-changer, according to CLSA.

The brokerage house had estimated the value of Citi‘s business in India at $2-2.5 billion.

HDFC Bank, Kotak Mahindra Bank, Axis Bank, IndusInd Bank and DBS Bank have emerged as the top five contenders to take over Citi India’s retail business that includes, credit cards, mortgages, wealth management and deposits. The race will be narrowed down to three, with whom Citi would negotiate a higher value.

How they stack up

While IndusInd Bank has the size and valuation constraints to acquire such an asset, the operations can be a game changer for Kotak Mahindra Bank because it can add 20% to the bank’s current retail loans, it said. “For Kotak Bank, the business adds 20% to its current retail book and increases its card segment by 3x (times),” the brokerage said in a note. “It is also complementary to its affluent customer base and Kotak Bank’s premium valuation will aid it in a purchase.”

It said Citibank’s affluent retail business also fits well with DBS Bank India’s premium offerings and banking relationships. DBS Bank does not have a credit card business in India.

For HDFC Bank, the acquisition won’t be a game changer as it is only nearly 6% of the lender’s total book, it said, while for Axis it will be a valuable acquisition, but valuations would be constrained, it said.

What’s on offer?
Citi’s total assets In India at the end of FY20, including credit extended to Indian institutional clients from offshore Citi entities, stood at Rs 2.99 crore.

The consumer banking business, which includes cards and loans against property, would be around Rs 32,000 crore. It also has a huge amount of savings accounts built over the last few years, which has a lucrative liability book and also credit cards, in which it was the largest among foreign banks in India.

The bank also had Rs 27,911 crore of loans to agriculture, affordable housing renewable energy and micro, small and medium enterprises (MSMEs). Of this, Rs 4,975 crore was to weaker sections, as part of Citi India’s priority sector lending obligations, results released last year showed.

Citi Bank has 2.8 million retail customers, 1.2 million bank accounts and nearly 2.6 million credit cards as of June.

Citi’s consumer business contributes about a third to the overall India business in terms of profitability, while total India business contributes 1.5% of profits to the global book. Overall, Citibank’s India unit had a market share of advances and deposits of 0.6% and 1.1%, respectively.

Citi credit cards
Buying Citi assets can be a game-changer for Kotak, IndusInd faces constraints

Citi started retail operations in India in 1985 and was among the pioneers of credit cards in the country. However, its share of credit cards has dropped from 13% to 6% now. Despite being the sixth-largest player in the space, Citi has the highest average spend on its card touching close to 2 lakh per card. The average spends per card for Citi is 1.4 times higher than the industry average, making it a profitable business for the bank in India. The other four major players have had nearly the same steady growth in spend per card at 11-12%.

Citibank’s outstanding credit cards as of February stood at 2.65 million, the largest among foreign banks in India, ahead of 1.46 million by Standard Chartered and 1.56 million by Amex. Citi India had 2.9 million retail customers with 1.2 million bank accounts as of March 2020.

At the end of March 2020, Citibank served 2.9 million retail customers with 1.2 million bank accounts and 2.2 million credit card accounts.



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