Category: Banking & Finance

Airtel Payments Bank launches Digigold

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Airtel Payments Bank on Thursday launched DigiGold, a digital platform for customers to make investments in gold. This has been rolled out in partnership with SafeGold, a provider of digital gold.

With DigiGold, Airtel Payments Bank’s saving account customers can invest in 24K gold using the Airtel Thanks app. Customers can also gift DigiGold to their family and friends, who have a savings account with Airtel Payments Bank.

The gold purchased by customers is stored securely by SafeGold at no additional cost and can be sold through Airtel Thanks app at any time in a matter of few clicks. There is no minimum investment value requirement and customers can start with as low as one rupee.

Ganesh Ananthanarayanan, Chief Operating Officer, Airtel Payments Bank, said in a statement : “DigiGold is the latest addition to our neo-banking proposition of simple, secure, and value-driven products. Our customers can now invest in gold through a seamless digital journey on our app. We also plan to introduce Systematic Investment Plans to enable customers to invest regularly.”

Airtel Payments Bank recently increased its savings deposit limit to ₹2 lakh in line with RBI guidelines. It now offers an increased interest rate of 6% on deposits between ₹1-2 lakh.

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Cryptocurrency investors stuck as banks block transactions

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Cryptocurrency exchanges and investors are facing a new challenge with most banks unwilling to process such transactions.

According to sources, the issue had started cropping up in late February and in recent weeks some banks have directed payment gateways not to process cryptocurrency-related transactions.

Advertisements by cryptocurrency exchanges during the Indian Premier League as well as booming trading volumes are understood to be the cause of concern even though the Supreme Court had lifted the ban on them in March 2020.

Over the last few weeks, some cryptocurrency exchanges have been facing problems in processing transactions even as many investors complained that they were unable to invest though cryptocurrency prices were on the rise.

“Most banks are not working with cryptocurrency exchanges and investors because the Reserve Bank of India had informally indicated that they should not to work with them,” said a person familiar with the development.

An e-mail query to the RBI by BusinessLine on the issue did not elicit any response.

Banking access

“There seems to be confusion among the banking industry because they are not giving banking access to the crypto industry in India despite the Supreme Court verdict. We request banks in India to update their compliance teams about the Supreme Court ruling that set aside the RBI circular against crypto,” said Nischal Shetty, CEO and Founder, WazirX, noting that NPCI has refused to block fund movement for crypto trades.

WazirX has, however, removed the UPI option because banks are not providing UPI to crypto exchanges, Shetty said.However, not all exchanges seem to be impacted.

According to Sathvik Vishwanath, co-founder of cryptocurrency exchange Unocoin, the problem has arisen because some banks have decided not to permit their payment gateways to process these transactions.

“There were always some banks, which never processed cryptocurrency-related transactions. Some banks have changed their stance now, which is creating the problem,” he said, adding that Unocoin has not faced any such problem.

Ashish Mehta, co-founder, Digital Techlab Private Limited (DigitX), said his exchange has not faced any banking issues but said such issues scare away investors from an alternative asset class that crypto.

“This is a bank-related issue due to lack of understanding and could be at an entity level or a momentary pause as they try to bring in regulations for more transparency for KYC or anti-money laundering,” Mehta said.

Regulatory uncertainties

Sources in cryptocurrency exchanges, as well as banks, point out that there continues to be regulatory uncertainty, which is causing most of the problem.

“While the Supreme Court has lifted the ban a long time ago, but the Finance Ministry and the Reserve Bank of India have not been in favour of private cryptocurrencies. This has been leading to a lot of confusion even though the trading volumes and investor interest has been picking up,” said a player.

Even prior to this, most lenders had been wary of processing cryptocurrency-related transactions.

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JPMorgan, others discuss issuing credit cards to people with no credit scores, BFSI News, ET BFSI

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– JPMorgan Chase & Co, Wells Fargo , U.S. Bancorp and other banks plan to share data on customers’ deposit accounts to extend credit to people who have traditionally been barred from getting them, the Wall Street Journal reported.

The plan, part of a government-backed initiative, will factor in information from applicants’ checking or savings accounts at other financial institutions to increase their chances of approval for getting credit cards, the report said on Thursday, citing people familiar with the matter. (https://on.wsj.com/3w3L6fK)

The move is aimed at customers who do not have credit scores but are financially responsible, the report said, adding that the lenders would consider applicants’ account balances over time and their overdraft histories.

The banks did not immediately respond to Reuters’ requests for comment.

The banks are discussing using credit-reporting firms, such as Equifax, Experian PLC and TransUnion , as well as fintech company Early Warning Services LLC, for this data sharing, the WSJ report said.

The new plan marks a significant contrast to the strategy generally adopted by lenders, who traditionally rely on credit scores to determine eligibility for a loan. Reforming credit scores is one of U.S. President Joe Biden’s many priorities as he tries to repair the financial wreckage caused by the COVID-19 pandemic.



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RBI tells lenders to re-consider ties with crypto exchanges, traders, BFSI News, ET BFSI

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India’s central bank is informally urging lenders to cut ties with cryptocurrency exchanges and traders as the highly speculative market booms, despite a Supreme Court ruling that banks can work with the industry, three sources told Reuters

The guidance comes as India is crafting a law to ban cryptocurrencies and penalize anyone dealing in them, which would be among the most sweeping crackdowns on the new investing fad in the world. But with the COVID-19 crisis engulfing the country, no one is sure when such a bill may be passed, adding to investors’ confusion.

The Reserve Bank of India (RBI) in 2018 had forbidden banks from dealing in all transactions related to bitcoin and other such assets. That diktat was challenged by the crypto exchanges and in March 2020, India’s top court overturned the RBI ban and allowed lenders to extend banking facilities to them.

With investors continuing to rush into the hot new asset class, however, regulators appear to be gearing up for another try.

Thousands of new users are piling into the system every day at a time when the prices of major digital currencies have been on the rise. There are over 10 million crypto investors in India with total holdings of over 100 billion rupees ($1.36 billion), according to industry estimates. No official data is available.

“The regulator has been unofficially asking us that why are we dealing in such business when it is ultra speculative. A lot of money flows overseas via this trade which the RBI is not comfortable with as it may lead to money laundering,” said a senior executive at one of the banks which was contacted.

RBI did not respond to a request for comment.

Private lender ICICI Bank has already asked payment service companies that it works with to stop all crypto-related payment transactions, three sources said, while other lenders are also following suit.

ICICI Bank did not respond to an email seeking comment.

None of the sources wanted to be identified as the discussions with RBI were private and no official order has been issued yet.

“Even though the discussions are informal that is enough. No one wants to go against the regulator,” said another source.

The central bank has often voiced its apprehension about digital currencies. Earlier this year, RBI Governor Shaktikanta Das said that they have “major concerns (around crypto) from the financial stability angle.”.

THE CRYPTO CONUNDRUM
With Indian banks increasingly wary of dealing with them, crypto exchanges are scrambling to find new business partners.

Axis Bank, Citibank, Kotak Mahindra Bank and others are limiting their exposure to the cryptocurrency market, sources said.

“Axis Bank has taken a fairly negative stance against crypto. They are citing internal policy and risk measures and have stopped transactions with crypto exchanges,” said the CEO of a global crypto exchange with presence in India.

IndusInd Bank is also in the process of stopping all crypto-related transasaction, said two sources.

Axis, Kotak and IndusInd did not reply to an email seeking comment while Citibank declined to comment.



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The financial condition of PMC Bank continues to be precarious: RBI

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The Reserve Bank of India said any generalisation for release of funds to meet ‘financial needs’ of scam-hit Punjab and Maharashtra Co-operative (PMC) Bank’s depositors may not be appropriate and sustainable, owing to the bank’s precarious financial position.

The central bank made the aforementioned observation in its affidavit filed in the Delhi High Court in reply to consumer rights activist Bejon Kumar Misra’s petition.

Also read: Distraught depositors want PMC Bank revived soon

Through the petition, Misra is seeking immediate release of emergency funds to meet financial needs arising out of out-break of second wave of Covid-19 and to declare extension of directions issued to PMC Bank under the Banking Regulation Act 1949 as ultra vires.

In its reply, the central bank said there is no merit in the relief sought by the petitioner for immediate release of emergency funds to meet the financial needs arising out of sudden out-break of second wave of Covid-19, as depositors are already allowed to withdraw up to ₹5 lakh on hardship grounds for treatment of terminal illnesses, including treatment of Covid-19.

The RBI further submitted that to make the process of withdrawal on hardship grounds easier and to avoid delays in sending such recommendation to RBI for approval, the authority for approving the payment under hardship grounds has been delegated to the PMC Bank.

“…it is the duty of PMC Bank to pay hardship amount to the eligible depositors as per directions of RBI and subject to availability of liquidity with PMC Bank,” RBI said.

Takeover/ merger

The RBI submitted that the financial condition of PMC Bank continues to be precarious, with its liquidity position not improving enough to allow much room for enhancement of withdrawal limit.

Further, the bank also needs to maintain bare minimum liquidity to run as a going concern and to make itself viable for prospective investors for takeover/ merger etc. Then the reconstruction of the bank will be feasible, which will be in the interest of larger body of depositors, the central bank said.

Due to precarious financial condition of PMC Bank and on account of significant deposit erosion, serious financial irregularities and mismanagement of affairs of the bank and to protect the interest of the depositors in general and in public interest, RBI had placed PMC Bank under directions vide directive dated September 23, 2019, the affidavit said.

Withdrawal limit

The directions are presently valid up to June 30. The withdrawal limit per depositor is capped at ₹1 lakh.

“It is submitted that all efforts are underway to expedite consultations with the prospective investors who have submitted their final offer, in order to arrive at best possible resolution in the interest of all depositors and other stakeholders of the bank,” the central bank said.

The Centrum Group-BharatPe combine is believed to be the font-runner to takeover PMC Bank.

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Indians prefer digital swipe, but keep cash handy amid Covid, BFSI News, ET BFSI

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Digital modes of payment have soared manifold since the demonetisation in late 2016, but cash too has kept pace, more so during the Covid pandemic.

Digital transactions have grown at a CAGR of 66.4% to 40.1 billion transactions in FY20 from 3.1 billion transactions in FY15, as per the Reserve Bank of India data. The average daily digital transactions in India in January 2021 were at 142.6 million, up from 8.6 million in 2015.

Interestingly, the currency in circulation is also at its highest in a decade, as people prefer cash storage in anticipation of medical emergencies amid restrictions in movements.

Cash conundrum

From 12% of the GDP in FY16, currency usage slumped to 8% in FY17 following demonetisation and has been gradually rising since.

Currency in circulation rose 17% ( year-on-year) to Rs 28.6 lakh crore by end-March 2021, compared with 14% at the end of the previous fiscal year, the latest Reserve Bank of India (RBI) data showed. Cash in the system further increased to Rs 29.4 lakh crore as of May 7.

Withdrawal of benefit payouts and subsidies from Jan Dhan accounts, better agriculture output and farm-gate receipts are among the various factors attributed for the cash shortage.

Digital transactions

Digital transactions have grown at a CAGR of 66.4% to 40.1 billion transactions in FY20 from 3.1 billion transactions in FY15, as per central bank data. The average daily digital transactions in India in January 2021 were at 142.6 million, up from 8.6 million in 2015.

The growth of digital payments slowed in April 2021 over March, remained higher than in February, according to a report.

The Unified Payments Interface (UPI) transactions dropped from the Rs 5­ lakh crore peak in March to Rs 4.93 lakh crore via 264 crore transactions.

The Immediate Payment Service (IMPS) saw 32.29 crore transactions worth Rs 2.99­lakh crore in April as against 36.31 crore transactions of Rs 3.27 lakh crore in March.

Bharat Bill pay platform processed 3.51 crore transactions worth ₹Rs 5,201.92 crore in April as against 3.52 crore payments amounting to Rs 5,195.76 crore in March.

As the movement of people and goods slowed, the FASTags, AePS transactions through the NETC saw a sharp decline in April at 16.43 crore transactions worth Rs 2,776.9 crore. It was 19.32 crore transactions worth Rs 3,086.32 crore in March.

The Aadhaar enabled Payment System saw 7.42 crore transactions valued at Rs 22,139.05 crore in April as against 7.78 crore payments worth Rs 22,697.82 crore in March.



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Ess Kay Fincorp raises ₹337 crore in Series E funding

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Ess Kay Fincorp Ltd, a non-banking finance company, has raised ₹337 crore in a Series E funding from TPG Growth, Norwest Venture Partners and Evolvence. The company’s promoter Rajendra Setia also invested in this round.

With this investment, the firm has raised over ₹1,000 crore of external capital from marquee investors.

Akshay Tanna, Partner, TPG Growth, said “This is our third round of investment in the company in the last 2.5 years and we continue to be strong believers in Ess Kay’s business model that bridges the large credit gap that exists for un-banked and under-banked populations in India. The strength of the founder and management team has allowed the company to navigate several disruptions along its journey, creating a successful rural focused lending platform in India. We are excited to strengthen our relationship with Ess Kay and look forward to continuing to work with the team to build on Ess Kay’s long-term success”.

Spark Capital was the financial adviser to the company, Ess Kay Fincorp said in a statement.

Rajendra Setia, Managing Director of Ess Kay, said, “Over the years, we have created a niche positioning for ourselves in the rural and semi-urban markets with deep distribution across North, West and Central India, on-ground sales and collection infrastructure to cater to the underserved customer segment, strong underwriting and focus on asset quality”.

“We are grateful to our existing investors – TPG Growth, Norwest Venture Partners & Evolvence for their continued support and confidence on Ess Kay. They, along with Baring India and our 45 lending relationships, add tremendous strength to our balance sheet and growth plans, as we emerge as a leading player in the used vehicle finance and SME finance segment,” he added.

Also Read: TPG Growth leads $ 33 million equity investment in Ess Kay Fincorp

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Retail loans constitute large share of loan recast by private banks

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Even as Resolution 2.0 announced by the Reserve Bank of India is expected to help small borrowers tide over the current economic uncertainty, trends from the restructuring scheme last year indicate that retail customers were the ones to benefit most from it.

Data released by banks along with their fourth quarter results show that loans by retail borrowers dominated the loan restructuring scheme of last year, while only a few companies used the benefit.

Also read: RBI allows lenders to revamp MSME accounts under Covid-19 related stress

Private sector lender HDFC Bank’s total restructuring was for 3.36 lakh accounts, amounting to ₹6,508.37 crore, of which 2.87 lakh accounts were for retail loans amounting to ₹5,456 crore.

Similarly, the total restructuring by Axis Bank amounted to ₹844.6 crore, of which retail loans accounted for ₹503.71 crore. Kotak Mahindra Bank restructured loans worth ₹121.5 crore, of which ₹82.38 crore were for retail borrowers.

ICICI Bank, YES Bank and IDBI Bank were among the outliers where the amount of corporate loans restructured was higher.

In the case of ICICI Bank, the total loan recast was for 1,624 accounts, of which 1,586 were retail accounts and just 30 were corporate accounts. However, in terms of exposure, retail loan restructuring amounted to ₹643.19 crore, while corporate loan recasts were higher at ₹1,323.28 crore.

For YES Bank, the number of accounts as well as exposure to corporate loans under the recast scheme were higher compared to retail accounts and loans.

Of the total loan recast of ₹1,112.21 crore by YES Bank, corporate loans accounted for 352 accounts valued at ₹940.11 crore.

However, the overall restructuring of loans was low for most private sector banks and they have already made sufficient provisions.

Also read: Covid support for Individuals and Small Biz: RBI asks lenders to frame policies within a month

“We note that the bulk of slippages in 2020-21 has come from retail and MSMEs. Higher restructuring was also availed by both these segments. Among banks, large ones have seen sub-1 per cent restructuring of loans, while mid-size private banks and small finance banks have seen higher loan restructuring,” said Emkay Global Financial Services in a note.

More data will be available on the restructuring trends once public sector lenders also announce their fourth quarter results.

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Divestment hopefuls Bank of Maha, BoI, IOB shoot up on stock market charts, BFSI News, ET BFSI

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Public sector banks Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India, which are reportedly on the privatisation shortlist have risen manifold during the year.

The rally in PSU banks has strengthened in the last few days despite the yo-yoing markets due to the coronavirus pandemic wave.

Bank of Maharashtra shares have nearly doubled from Rs 13.55 at the start of the year to Rs 25.40 per share. It was up 2.21% over the previous close on Wednesday.

From 10.80 at the start of the year, Indian Overseas Bank’s shares have risen over 52% to 16.45. The shares were up 3.13% over the previous close on Wednesday.

From Rs 50.35 a share in January start, the Bank of India share price has climbed to 72.70 on Wednesday. It was up 4.76% over the previous close.

From 14.10 in January, the share price of Central Bank of India has jumped to Rs 18.45 on Wednesday. It was up 7.89% over the previous close.

The top PSU banks including SBI, Bank of Baroda, Canara Bank and PNB are also outperforming over divestment hopes around PSU banks.

More upside seen

Traders see another 10-15% jump in PSB shares if the Nifty holds 14500 levels.

SBI is the top investment pick in case the Nifty holds 14,400, with others offering a good trading opportunity for greater upside on talks around divestment.

PNB, Canara Bank, Bank of Baroda and SBI, which hold 74.63 per cent weight in the Nifty PSU Bank, have rallied between 4 per cent and 17.5 per cent in April 20-May 11, driving the index up by 15.05 per cent to 2,239.7 over the same period. This beats the Bank Nifty’s 6 per cent rally through 32,953 over the comparative period.

On May 12, when the Nifty and Bank Nifty corrected by more than 1 per cent, the Nifty PSU Bank closed up 3.2 per cent, underscoring the buying in these counters.

Futures prices of these stocks along with aggregate open interest change signal the market interest in these counters.

Canara Bank active futures contract has risen 17.5 per cent through 151 between April 20 and May 11. Over this period, the aggregate open interest, which measures traders’ outstanding buy-sell positions, rose 11.25 per cent, implying bullish sentiment on the counter.

Bank of Baroda’s 17 per cent gain in futures was accompanied by an 11.3 per cent decline in aggregate OI, signalling that bears were covering their sell positions. Likewise, SBI active futures contract, which has risen 11 per cent in the relevant period, was accompanied by an 8 per cent decline in aggregate OI, implying short covering. PNB futures, which rose 4 per cent, saw aggregate OI jump 40 per cent, suggesting bullish build-up.

The status

Indian Overseas Bank and Central Bank are under the Reserve Bank of India‘s stringent prompt corrective action framework.

These banks have reported net non-performing assets (NPAs) below levels that trigger PCA. However, on the proforma net NPA front, Central Bank falls short as its NNPA is 6.58% against the 6% required to be out of PCA.

The Reserve Bank of India is likely to delay regularising struggling state-run lenders that are under the prompt corrective action (PCA) framework as it has reservations over their capital adequacy levels.

Two public sector banks and one general insurance company are expected to be disinvested this year in addition to the divestment of IDBI Bank, Finance Minister Nirmala Sitharaman had announced during Budget presentation in February.



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