Fintech start-ups give Indian teens a taste of financial freedom

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From a nine-year-old buying Kindle e-books to a 15-year-old investing in a cryptocurrency — a host of fintech start-ups are helping Indian teenagers make independent transactions.

Companies like Junio, FamPay, and YPAY have launched prepaid cards for teenagers (below 18 years), which allow them to do online transactions without setting up their own bank accounts or asking their parents for bank OTPs.

Digital buy

“For all the work that I do in a week, my mom rewards me with a monetary incentive on the app.

“These could be tasks like helping her with household chores, doing well in a school test, etc,” says Rahul Dadlani, a 14-year-old from Mumbai, who has been using Junio for four months now.

Co-founded by former Paytm senior vice-president Shankar Nath and Ankit Gera, Junio is a kids-focussed smart card that lets them make digital and physical purchases.

The task-based rewards system started in the Dadlani family only after they got introduced to the Junio app. Rahul’s father Rajiv told BusinessLine: “On top of the task-based incentives, we also give bonus to our kids if they don’t splurge and are able to save a certain amount.” Till now, Rahul has managed to save about ₹4,000 and hopes to have enough to buy a new phone soon.

In addition to teaching financial literacy to children, such fintech products have also made life easier for working parents. Delhi NCR-based Surbhi Gupta, who works for a venture capital firm, says how her older son has been using a prepaid card for teen products called YPAY.

“At the beginning of the month, when I am doing all the bill payments, I simply recharge YPAY like any other digital payment. Then, for at least two weeks, I am assured that he will not nag me for online purchases.”

Pre-paid cards

Founded by Navneet Gupta, YPAY also offers prepaid cards available on its app, making it convenient for teenagers to make both online and offline payments.

Nita Chawla, a Mumbai-based entrepreneur whose son Rushil uses FamPay, is happy that she does not have to trust her teenage son with her credit-cards. “It makes my life easier because I can monitor his money transactions better. The moment you give cash to kids you don’t know what they will do with it. But, here, all the transactions are accounted for.”

FamPay was founded by two IIT-Roorkee graduates, Kush Taneja and Sambhav Jain, while they were still in campus. Like similar products, FamPay’s numberless prepaid card allows minors to make online and offline payments.

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EMIs rising as consumers sit on cash

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Mumbai-based communication professional Chirag can well afford an iPhone 11, paying upfront. However, he opted to buy it through a six-month EMI (equated monthly instalment) scheme.

Ditto for Harshita, an employee in the financial services sector, who recently purchased a two-wheeler, a refrigerator and an LED TV — all on EMI schemes.

The purchasing behaviour of Chirag and Harshita reflects the mindset shift of a growing number of Indian consumers, who are opting for EMIs or ‘buy now pay later’ (BNPL) schemes.

The pandemic-induced economic uncertainty, job loss and pay cuts have forced them to look for options that will help them conserve cash.

Ezetap, a digital payments company, recorded a 220 per cent (year-on-year) growth in the EMI volumes in July 2021 compared to February 2020.

“The ability to process EMIs through different form factors like credit card, debit card, point of sale and NBFC channels, the general consumer preference for EMIs during pandemic times, and the growing preference for BNPL options among millennials and Gen Z consumers are the key factors driving EMIs,” says Bhaskar Chatterjee, Head of Products at Ezetap.

Digital drive

In a report, ‘The (Covid) Era of Rising FinTech’, full-stack financial solutions company Razorpay said that digital transactions have grown 80 per cent from the first 250 days of lockdown (March 25 to November 29, 2020) to the next 250 days (November 30, 2020 to August 6, 2021).

“With increased adoption of online payments by businesses, all modes of payments saw an increase in usage during these 500 days. Newer payment methods like pay later and cardless EMI also saw a steady growth of 220 per cent and 207 per cent, respectively, indicating consumers’ growing demand for affordable payment options,” the company said. According to National Payments Corporation of India (NPCI) digital payments statistics, the monthly NACH debit of recurring payments (includes recurring payments EMI, Insurance premium, etc.) has jumped from 41.36 million transactions worth ₹35,351.11 crore in April 2020 to 57.73 million transactions worth ₹61,303.46 crore in July 2021.

“Covid has impacted cashflows for almost everyone. They are holding on to as much liquidity as possible, which is evident from their reliance on EMIs,” Amit Kumar, Founder, GalaxyCard, said.

Banks have also been launching a slew of BNPL products. While ICICI Bank offers pay-later services on its app, Axis Bank recently launched a new BNPL product, focussed on new-to-bank customers, through its subsidiary Freecharge.

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Bharti Airtel | HDFC Bank: Would HDFC Bank, Bharti Airtel make good bets now? Sandip Sabharwal answers, BFSI News, ET BFSI

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If insurance stocks correct more, then they could give an opportunity for investors who are looking to invest for one or two years, says Sandip Sabharwal of asksandipsabharwal.com.

We have seen a bit of traction come by this week, specially in HDFC Life. There are two parts of this story in insurance as a whole — life and general. What is your take on the insurance stocks in India?
On one side, the long-term growth prospects are very strong because of the fact that insurance penetration in India is still suboptimal. It is not as suboptimal as it used to be a decade back but it still has a long way to go because there are still lots of uninsured people. Secondly, the way insurance was sold in the past and the changes that are getting made, are yet to play out. So that is one part of the story.

The second part of the insurance story has to do with the valuation story and the provisioning required because of Covid etc, which is event based and cannot be extrapolated because that does not impact the long-term mortality rate of the country.

But on valuations, these stocks are not cheap and that is the key issue. At this point of time, as far as insurance companies go, because the valuations of most of these companies — be it HDFC Life, ICICI Pru — which used to be cheap but is no longer cheap — or SBI Life are very expensive taking into account annualised premium equivalent or the new business premium into account, moving into the COVID hit quarter of last year.

Growth adjusted, these stocks are not cheap but they tend to be contrarian movers to the market. So when markets are weak, these stocks typically hold on and they do not do as well when the markets are moving up. In a corrective move, they could hold on but not absolute gain wise. I would still think that if these stocks correct more, then they could give an opportunity for investors who are looking to invest for one or two years.

For investors with a longer term horizon of say five to ten years, they will still make money even if they buy at these rates.

How do you think the market is reading into fundraising plans of Bharti Airtel? Seems like not quite well. looking at the price action in the stock today?
On one side, we have lots of IPOs getting lapped up at very high valuation. On the other side, we have a company which is actually on the verge of a growth cycle in earnings, where the market has not reacted well to its fundraising. That is fine. I would agree with the fact that fund raising by Bharti of a reasonable size could actually help it strengthen its balance sheet; secondly, gain market share in key segments and also get ready for 5G. The market is at an all-time high.

The Bharti Airtel stock went to a new high before correcting 5-6% from the top. So it is perfectly fine. I don’t think that it is a bad move. It depends on the way they are structuring whether they are getting in more money from Singtel or who is investing or whether it is going to be a QIP or rights issue. We still need to see these things but I would think that it is not a bad move to strengthen the balance sheet as the industry has gone through a very tough phase. The pricing discipline should come in but it has not yet come in.

The stock could obviously remain somewhat weak in the near term till the fund raising gets through but longer term the stock should do well.

What happens to banks? While ICICI Bank and SBI are showing leadership amongst the large banking names, HDFC Bank looks ready to play catch up then to ICICI Bank and SBI and form part of the leadership gang within banks?
The HDFC Bank stock performance will depend more on how the new management executes growth strategy and whether they can do it by managing the NPAs in a manner which was there under Aditya Puri’s leadership. The first signs over the last couple of quarters do not seem to indicate that and to that extent, it is an open competition. The challenge for most of the banks now are twofold; one, the overall credit growth in the system is just 6% and everyone is grappling for growth. So, some banks which were used to growing at 15-20% like HDFC Bank, how do they grow like that when the system wide growth is just 5-6% without taking risk as that could lead to an NPA spike. So that is a challenge.

The overall banking sector is challenged to that extent because there is no growth. There were initially some moves in a lot of these financial schemes because the NPA spike up due to the first wave of Covid was not as much as what people were expecting and the second wave actually has led to some NPA spike. So I would think that the overall financial space is at a stage where more consolidation is needed and it could still underperform as the markets correct.

In the case of HDFC Bank, they need to execute to retain the premium and for that, we will have to wait for two to three quarters. The initial bump up has happened as some restrictions got removed by RBI but that move is more or less through now. It will depend on growth and the NPA picture.



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Best banking & PSU debt funds to invest in 2021, BFSI News, ET BFSI

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Mutual fund experts believe that given the uncertainty around rates and liquidity, the outlook for banking & PSU fund schemes continues to be positive. Banking & PSU funds have offered 5.35% returns in the last one year. Here is a monthly update our list of recommended banking & PSU funds for 2021. There is no change in our list of recommended banking & PSU funds in August.

Another update-LIC MF Banking & PSU Debt Fund lies in 3rd quartile for 5 months, was in 4th quartile before that and in 3rd quartile prior to it. The scheme has been slipping on the performance chart, but if you have investments in the scheme, you should hold onto them. We will continue to monitor the performance of the fund and update you.

Banking & PSU mutual funds have the mandate to invest at least 80% of their corpus in debt instruments of banks, public sector undertakings, public financial institutions. Because of the investment universe and the government ownership of most of the entities, investment experts consider these schemes as safer investments.

These schemes have the option to invest in private banks, too. However, since banks are tightly regulated and monitored by the Reserve Bank of India and the central government, many investors believe they are relatively safer even in times of crisis.

If you are looking for relatively safer investment options in the debt mutual fund category to invest for three years or more, you may consider investing in these schemes. They may offer you some extra after-tax returns than the traditional bank fixed deposits.

Best banking & PSU funds to invest in 2021

  • IDFC Banking & PSU Debt Fund
  • Axis Banking & PSU Debt Fund
  • Aditya Birla Sun Life Banking & PSU Debt Fund
  • DSP Banking & PSU Debt Fund
  • LIC MF Banking & PSU Debt Fund

Methodology
ETMutualFunds.com has employed the following parameters for shortlisting the debt mutual fund schemes.

1. Mean rolling returns: Rolled daily for the last three years.

2. Consistency in the last three years: Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.

i)When H = 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast.

ii)When H

iii)When H>0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series

3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure.

X =Returns below zero

Y = Sum of all squares of X

Z = Y/number of days taken for computing the ratio

Downside risk = Square root of Z

4. Outperformance: Fund Return – Benchmark return. Rolling returns rolled daily is used for computing the return of the fund and the benchmark and subsequently the Active return of the fund.

Asset size: For Debt funds, the threshold asset size is Rs 50 crore

(Disclaimer: past performance is no guarantee for future performance.)



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Central banks’ shift from crisis policies gathers momentum, BFSI News, ET BFSI

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While the financial world waits for the Federal Reserve to start reversing its ultra-loose policy stance, recent moves by a clutch of other central banks signal the days of pandemic-era accommodation are already numbered even as COVID-19 continues to impede smooth economic recoveries around the world.

South Korea’s central bank on Thursday raised its benchmark interest rate by a quarter of a percentage point to blunt rising financial stability risks posed by a surge in household debt, becoming the first major monetary authority in Asia to do so since the coronavirus broadsided the global economy 18 months ago.

Even before the rate hike in South Korea, though, central banks in Latin America and eastern and central Europe had begun lifting interest rates this year to beat back inflation that is building on the back of currency fluctuations, global supply chain bottlenecks and regional labor shortages.

And larger-economy central banks also are getting into the swing. The Bank of Canada has already cut back on its bond purchases and could proceed to raise borrowing costs in 2022, and the Reserve Bank of New Zealand (RBNZ) is expected to lift rates by the end of this year despite balking at an expected hike last week in the face of a snap COVID-19 lockdown.

For its part, the Fed is lumbering toward tapering its $120 billion in monthly asset purchases, with an announcement expected before the end of 2021, possibly as early as next month. An actual US interest rate increase is likely a year or more away, however.

Fed Chair Jerome Powell is set to speak later on Friday on the economic outlook at the US central bank’s annual Jackson Hole summer research conference, which is being held virtually for the second year in a row. His remarks may color expectations at the margin for when the Fed makes its move but are not likely to offer any concrete signal.

THE DIFFERENCE A YEAR MAKES
When Powell spoke at last year’s conference – unveiling a new policy framework that is just starting to be tested – fewer than half of the 22 million US jobs lost to coronavirus shutdowns in the spring of 2020 had been recovered and inflation was running at half the Fed’s 2% target rate. The outlook outside the United States was no less bleak, with lockdowns still widespread.

The situation in the United States and other economies could hardly be more different a year later.

The US economy has more than fully recouped all of its lost output, roughly 9 million more jobs have been regained and inflation is well above target. Elsewhere, most of the world’s economies are back squarely in growth mode, albeit unevenly so in many cases as COVID-19 outbreaks fueled by the highly contagious Delta variant trigger localized lockdowns.

In South Korea, the economy grew 5.9% on a year-over-year basis in the second quarter, the fastest pace in a decade , and young people are bingeing on debt and kindling financial stability concerns at the Bank of Korea. The export-reliant Asian nation’s key factory sector expanded in July for a 10th straight month, even as the Delta variant crimped manufacturing output for rivals like China, Vietnam and Malaysia.

Central Europe’s recovery also accelerated in the second quarter as lockdowns in the region eased. The improvement – along with an upswing in inflation – has already spurred the Czech and Hungarian central banks to raise interest rates twice this summer, the first increases across the European Union. Both are expected to deliver more tightening, and Czech officials are debating if they need to deliver more than the standard quarter-percentage point increase.

While the earliest movers have been emerging market countries where inflation is often aggravated by movements in choppy currency markets, the gears of tightening are also starting to move in top-tier economies.

The RBNZ opted not to raise rates last week because of the messaging complications that would have arisen from such a move alongside a hastily-called lockdown after the island nation reported its first local COVID-19 infection in six months. Central bank officials, however, appear determined to get a rate hike in before the year runs out.

Meanwhile, Norway’s central bank is signaling it will not veer from its plan for its first rate hike next month despite a recent rise in infections, putting it on course to be the first of the Group of 10 (G10) developed economies to raise borrowing costs.

“In the committee’s current assessment of the outlook and balance of risks, the policy rate will most likely be raised in September,” Norges Bank Governor Oeystein Olsen said in a statement last week.

While the Fed and several other G10 banks now appear on course to start reducing their pandemic accommodation measures this year, tightening moves by the Fed’s two largest peers – the European Central Bank and Bank of Japan – look much further off.

Still, that doesn’t mean they don’t see some improvement in conditions even as the Delta variant spreads.

Japan was among the Asian economies to experience factory sector growth last month even as COVID-19 cases hit a record high. And a key ECB policymaker sees only a limited headwind to the euro zone’s recovery due to the variant.

“I would say we’re broadly not too far away from what we expected in June for the full year,” Philip Lane, the ECB’s chief economist, told Reuters on Wednesday. “It’s a reasonably well-balanced picture.”



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Balance transfers lead home loan growth of 26% in H1 as rates hit rock bottom, BFSI News, ET BFSI

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As the economic situation recovers from the pandemic lows last year and interest rates are at all-time low levels, demand for home loans in India rose 26 per cent during the first half of 2021, compared to the preceding six months.

However, there is a catch. About 42% rise in borrowers opting for balance transfers in the first half of the calendar 2021 as compared to the preceding six months of

July-December.

According to a Home Loans Consumer Study, the balance transfer requests have increased because of a dip in interest rates.

“The soaring demand has been triggered largely by the fact that the Reserve Bank of India (RBI) has kept the repo rate unchanged at a constant 4%, allowing many banks to offer interest rates of less than 7% for home loans. This has also been a key driver in augmenting the demand for home

buying,” the report said.

Low rates

Borrowers opt for a balance transfer when they feel that they can bring down their interest rates by switching to a new contract. An increase in the number of balance transfer requests also reflects a growing level of awareness. “Almost 50% of the borrowers opt for tenures less than 15 years. With factors like low interest rates, stable prices and attractive payment plans, we are hopeful that the pent-up demand would soon translate into sales,” said Magicbricks CEO Sudhir Pai.

In terms of the demand for balance transfers, New Delhi, Bengaluru, Mumbai, Pune and Hyderabad were the top five tier-1 cities. Among tier-2 cities, Ghaziabad, Noida, and Visakhapatnam were the top five.

Other loans grow too

In addition to growth in loans for new home purchases and balance transfers, loans against property has also seen a growth of 20% because of the low rates.

For loans against property, Bengaluru, Hyderabad, Chennai, New Delhi and Pune saw the most demand across tier-1 cities, and Gurgaon, Jamshedpur, Patna, Faridabad and

Lucknow for tier-2 cities. Another finding from the report is Bank of Baroda, Indian Bank, SBI, HDFC and ICICI Bank are the most searched lenders on Magicbricks’ platform.



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Bank Holidays in September 2021, List of Bank Holidays in India in September

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Banks in most states will observe a holiday on 10 September 2021, on account of Ganesh Chaturthi. Image: Reuters

Bank Holidays in September 2021 in India: Banks in India will remain closed for up to 12 days in September 2021, including second and fourth Saturdays, and Sundays. Apart from six weekly offs, banks will remain shut in different states on account of different holidays. Banks in most states will observe a holiday on 10 September 2021, on account of Ganesh Chaturthi/Samvatsari. Since there are state-specific holidays for different occasions, banks will not be shut for all six days for all states in September 2021. Also, 11 September’s leave overlaps with the second Saturday. The Reserve Bank of India has categorised holidays under three categories — Holiday under Negotiable Instruments Act; Holiday under Negotiable Instruments Act and Real-Time Gross Settlement Holiday; and Banks’ Closing of Accounts. The list of holidays given below has been notified by RBI.

Bank holidays in September 2021

08 September 2021: Tithi of Srimanta Sankardeva
09 September 2021: Teej (Haritalika)
10 September 2021: Ganesh Chaturthi/Samvatsari (Chaturthi Paksha)/Vinayakar Chathurthi/Varasiddhi Vinayaka Vrata
11 September 2021: Ganesh Chaturthi (2nd day)
17 September 2021: Karma Puja
20 September 2021: Indrajatra
21 September 2021: Sree Narayana Guru Samadhi Day

Only banks in Guwahati will observe a holiday on 8 September due to Tithi of Srimanta Sankardeva. Banks in Gangtok will remain closed on 9 September on account of Teej (Haritalika). Banks in most of the states will remain shut on 10 September 2021, except in Agartala, Aizawl, Bhopal, Chandigarh, Dehradun, Gangtok, Guwahati, Imphal, Jaipur, Jammu, Kanpur, Kochi, Kolkata, Lucknow, New Delhi, Patna, Raipur, Ranchi, Shillong, Shimla, Srinagar and Thiruvananthapuram. On 11 September, banks in Panaji will observe a holiday on account of Karma Puja. While only Ranchi will observe a bank holiday on 17 September. Only banks in Gangtok will remain shut on 20 September on account of Indrajatra. Only Kochi and Thiruvananthapuram will observe a bank holiday on 21 September 2021 due to Sree Narayana Guru Samadhi Day

Weekend holidays in September 2021

05 September 2021 – Weekly off (Sunday)
11 September 2021 – Second Saturday
12 September 2021 – Weekly off (Sunday)
19 September 2021 – Weekly off (Sunday)
25 September 2021 – Fourth Saturday
26 September 2021 – Weekly off (Sunday)

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RBI imposes penalty on 2 co-op banks, 1 NBFC, BFSI News, ET BFSI

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Mumbai, Aug 26 (PTI) The Reserve Bank of India (RBI) on Thursday said it has imposed penalties on two co-operative banks and a non-banking financial company (NBFC), for deficiencies in certain regulatory compliance. A penalty of Rs 3 lakh has been imposed on Jijamata Mahila Sahakari Bank, Pune, Maharashtra for non-compliance with the directions on exposure norms and statutory/ other restrictions-urban co-operative banks (UCBs), the central bank said.

In another statement, it said a penalty of Rs 2 lakh has been imposed on The Muslim Co-operative Bank Limited, Pune, for contravention of/non-compliance with the directions issued by the RBI on Know Your Customer (KYC).

The RBI also said it has imposed a penalty of Rs 5 lakh on Seyad Shariat Finance Limited, Tirunelveli (Tamil Nadu), an NBFC, for non-compliance with certain provisions of the Know Your Customer Directions, 2016.

In all the three cases, the RBI said 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 them with their customers.



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Barclays pumps Rs 3,000cr in India to expand biz, BFSI News, ET BFSI

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Mumbai: Barclays Bank has infused Rs 3,000-crore capital to expand its India operations. This is the single largest infusion made since inception — the last large investment was Rs 540 crore in 2009-10.

With this investment, the bank’s total capital deployed in the country increases to Rs 8,300 crore. “We have ambitious growth aspirations, and the investment will help accelerate that as we look to leverage the attractive opportunities that the present situation offers,” said Jaideep Khanna, head of Barclays Asia-Pacific and country CEO. “As economic activity gathers momentum, there is increased demand for capital from clients. We are well placed to support their objectives and remain committed to working closely with them,” added Khanna.

According to a spokesperson, the money is for the growth of the corporate investment bank and wealth management business. The British bank has four branches and a presence across six cities. As part of its expansion plans in the country, Barclays Bank Plc also inaugurated its international banking unit (IBU) branch at GIFT City in Gujarat in February this year.

The spokesperson added that the 55% jump in capital base will enable the lender to significantly expand its exposure to Indian clients.

RBI rules cap a bank’s exposure to a single borrower, a business group and capital markets at 20%, 25% and 40% of their capital respectively. In 2019, the RBI came out with a large exposure framework, which made it difficult for foreign banks to have back-to-back arrangements with their head office for exposures in India as these too came under the ceiling.



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