Category: Banking & Finance

IndiaTech.org whitepaper proposes defining cryptos as digital assets

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Industry association IndiaTech.org has proposed defining cryptos as digital assets and not currencies similar to other assets such as gold, stocks, or marketable securities.

The proposal is part of a whitepaper released by the association, which includes five key points aimed at providing regulatory clarity to crypto assets and exchanges in the country.

“Several countries such as the US, Australia have taken a very similar approach and have defined crypto assets as property,” the whitepaper has recommended.

It has also proposed introducing a system for registering Indian registered or founded cryptocurrency exchanges in the country.

The association has recommended permitting innovative uses of crypto by businesses and creating specific safeguards to protect retail investors from token issuance.

Taxation proposals

It has also called for a clear framework for taxing cryptos in the country.

“Enable taxation (direct and indirect) to treat crypto assets just as other current assets (but not cash), permit disclosures and regulate import which would result in additional revenue generation,” said the whitepaper.

It has also proposed putting in place checks and balances through well-defined reporting mechanisms, accounting standards and mechanisms to counter suspicious activities and transactions.

Regulatory system

Further, IndiaTech.org has suggested self-regulation for the industry based on a code of conduct that is framed in line with the government’s aim of safeguarding consumers as well as ensuring financial stability.

“The foremost need today is for this sector to be granted the much-needed regulatory clarity that it has been seeking. We are hopeful that the government will work with the industry to regulate the sector and that a progressive approach is adopted while doing so,” said Rameesh Kailasam, CEO, IndiaTech.org.

The whitepaper comes at a time when the government has been looking at banning cryptocurrencies in the country.

“More than being a replacement to fiat currencies, crypto by nature is a strong digital asset, a store of value,” said Sumit Gupta, Co-Founder and CEO, CoinDCX.

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PayU sees a three-fold jump in transactions to $100 billion in three years

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PayU, online payments service provider and Prosus’ fintech arm, is expecting a three-fold-jump in GMV (gross merchandise value) to $100 billion over a three-year-period.

The GMV refers to the total value of transactions carried out through PayU platforms and products.

An increase in adoption in digitisation and payment solutions by small merchants along with rising popularity of e-commerce players and their ‘sale days’ are seen as major growth drivers in a pandemic-led new normal.

ACI Worldwide, in a recent report, indicated more than 70.3 billion real-time payments transactions were processed globally in 2020 — a surge of 41 per cent compared to the previous year.

This comes as the Covid-19 pandemic dramatically accelerated trends away from cash and cheques towards greater reliance on real-time and digital payments. The report said India retained top spot with 25.5 billion real-time payment transactions. By 2024, share of real-time payments volume in overall electronic transactions will exceed 50 per cent. This will touch 71.7 per cent by 2025.

PayU to offer Google Pay tokenised payment flow for merchants

Rise in transactions

According to Anirban Mukherjee, CEO, PayU India has doubled transactions growth rate over the last two years.

A PayU Insights report says the number of UPI transactions grew by 288 per cent and expenditure through UPI saw a 331 per cent uptick between 2019 and 2020. Payments in segments like indoor entertainment (subscription of OTT and so on), online training and upskilling courses, retail, e-commerce and financial services (insurance, etc) saw a jump; while travel and dining witnessed a dip.

Digitisation and automation of lending process would be the key going forward, says PayU Finance CEO

“Digital payments are witnessing an accelerated growth and the pandemic has pushed these trends upwards. Moreover, in the online sale days that took place across e-tailers like Flipkart eight out of top 11 merchants settled their transactions through PayU. There has been increased adoption across small merchants and 15X growth in transactions and settlement in this segment. So over a three year period, a three-fold-jump in GMV to $ 100 billion looks very much possible, even if there is a slight dip in momentum,” he told BusinessLine.

PayU earns primarily from service fees based on transaction volumes and values; subsricption charges by merchants and so on.

Omnichannel presence

Mukherjee adds that PayU is also increasing its omni-channel presence as it looks to provide contactless payment solutions to customers both in-store and online, through methods like QR, PoS, and others.

PayU is also expanding scope of its alternative digital credit solutions like LazyPay; and offerings under buy now-pay later or personal loan options are being increased.

The presence of Wibmo, a digital payment security firm and mobile payment technology platform, that PayU acquired in 2019 is being ramped up.

“We are currently profitable in the core payment business; while investments are on in the other verticals like LazyPay or Wibmo,” he added.

The company is also eyeing acquisitions, strategic partnerships and investments into a broader ecosystem spanning payments, credit and other digital financial services

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SBI MD, BFSI News, ET BFSI

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State-run lenders will take a lead in creation of the bad bank, but the sick asset resolution platform needs the support of private banks and other lenders to be successful, State Bank of India Managing Director Swaminathan J said on Thursday. If all lenders come on board, the National Asset Reconstruction Company (NARC) announced in the budget will be able to aggregate 100 per cent of a sick company’s outstanding loans, which shall ultimately lead to better resolution of the asset quality stress for all.

The government is yet to announce the specific contours of the NARC or the bad bank and has also only said that it is willing to provide some sovereign guarantee to help the platform.

“For this model to succeed, it cannot just be mostly for public sector banks. Yes, they will take a lead role in this but as we understand at this point of time, NARC will be all encompassing. It will take into account PSBs, private sector banks and for that matter any financial institution which has an exposure to the identified account,” Swaminathan said, speaking at an online seminar.

The present set of over two dozen ARCs have not been able to achieve decent numbers on debt aggregation and get stuck under 40 per cent in many cases, which has a bearing on the final resolution as well, he said.

“This ARC (the bad bank), since it is mandated and backed by the government, it is going to be a smoother affair in terms of all the banks deciding together to transfer the entire asset. Which means that the aggregation is going to be near 100 pc and there is going to be an AMC structure. So, together, we expect this to be a winning formula,” the confident SBI executive said.

“We are ‘very close’ for the bad bank to be a reality” and added that the dual structure of being both an asset reconstruction company as well as an asset management company will be of help, he said.

At present, financial industry stakeholders are being reached out to gauge their interest and one of the entities will take the lead once the potential shareholders are in place.

The lead bank or financier will have a stake of over 100 per cent, and apply to the RBI for licence to operate as an ARC, he said, stressing that funding or capital is not a problem for the bad bank.

The bad bank will operate on the prevalent 15:85 structure, where only 15 per cent will be paid as cash and the rest would be security receipts, he said, adding that this model will ensure that the fund initial fund requirements are not very high.

He said there is a group within the country’s largest lender working out a slew of modalities, including the potential assets which can be transferred to the NARC, capital required etc.

One of the unanswered aspects which will eventually get solved is the ways to put a value to the government guarantee which will ride alongside the security receipts.

Explaining the ways of working, he said NARC will offer a specific price for an asset to the banks and await the nod from the joint lenders forum to go ahead with a resolution. Once the amount is quoted, the lenders can reach out to other ARCs in the system and NARC will have the opportunity to revise its bid as well, he said, adding that there is a scope for price discovery.

A majority of lenders will have to be on board before the asset is transferred to NARC, he said, adding that the definition of ‘majority’ is likely to be the one as done by the Insolvency and Bankruptcy Code.



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PSBs form ‘Alliance’ to provide door step banking, BFSI News, ET BFSI

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Public sector banks (PSBs) have come together to form a new company in an attempt to take banking services to the doorsteps of their customers as they battle the challenges posed by the Covid 19 pandemic.

The new company called PSB Alliance Pvt Ltd will engage banking correspondents on behalf of the 12 public sector banks under a common standard operating precedure (SoP) to provide financial and non financial services directly to customer homes.

Former State Bank of India (SBI) chief general manager and deputy CEO of Reliance Jio Payments Bank, Rajinder Mirakhur has been appointed as CEO of the new company.

“Currrently, different PSBs engage different banking correspondents (BCs) for their doorstep banking services. With this company we are hoping to provide resources which can be used by all PSBs at a low cost,” Mirakhur told ET.

Currently eleven non financial services like pick up of cheques, request for an account statement, request for income tax documents like TDS certificates, delivery of payorders etc can done through this facility. Customers can also request a digital life certificate. Cash withdrawal is the only financial service currently provided. PSB customers can request the services through the web, mobile app or phone after an OTP based verification process.

Customers will have to pay a fee of about Rs 88 per service including GST. A part of this fee will go to the vendor providing the service and rest to the bank.

“We are still finalising the model to scale up. We can either hire different BCs and use their technology and manpower or create our own application to be used pan India by all BCs servicing PSBs which will create standardisation and ensure all can plug into the system, which is more feasible,” Mirakhur said.

Two service providers, Atyati Technologies and Integra Microsystem have already been hired by PSB Alliance as service providers.

PSB Alliance has a capital base of Rs 14 crore and has emerged out of another PSB promoted company Cordex India which was formed in 2010 to study operational risk in banks. The articles of association of Cordex were changed to include door step banking services on 29 April when it received approval from the registrar of companies as PSB Alliance.

Besides public sector banks, two private sector lenders IDBI Bank and ICICI Bank were also shareholders in Cordex but will surrender their stake in favour of PSBs.

“This entity is now one promoted by PSBs but all individually hold less than 10%. Each PSB has deputy one person as employee of this company right now and we will see how much personnel we need going forward,” Mirakhur said.

Bankers said the model provides banks with various benefits besides cost savings.

“It gives us economies of scale, collective bargaining and polling of resources. But most of all it gives us a collective knowledge pool which will help us to benefit from each others experiences,” said Rajkiran Rai, MD at Union Bank of India.

Bankers are hoping that by providing some services at homes they can wean away customers from branches which will help reduce the risk of spreading infections and free staff from routine work to focus on revenue earning opportunities.



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Fincare SFB to file IPO papers this week, BFSI News, ET BFSI

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Mumbai: Bengaluru-based Fincare Small Finance Bank will file its draft red herring prospectus (DRHP) with the market regulator Sebi for an initial public offer (IPO) this week.

The issue size is said to be in the range of Rs 1,200-Rs 1,400 crore and would comprise of a fresh issue and offer for sale by the existing shareholders, according to market sources. Fincare SFB backed by investors such as True North, TA Associates, Tata Opportunities Fund and SIDBI, is the latest small finance bank (SFB) to announce plans to go for initial public offering.

ICICI Securities, Axis Capital, and Ambit Capital are the book running lead managers for the issue.

TPG-backed Jana Small Finance Bank, ESAF Small Finance Bank and Utkarsh Small Finance Bank have already filed DRHP with the regulator for IPOs and are expected to hit the market over the next couple of months.

Fincare SFB was one of the 10 micro finance institutions that received RBI permission to convert into a small finance bank. Under RBI norms, SFBs are required to list within three years of reaching a net worth of Rs 500 crore and Fincare SFB has to list before September 2021 as per RBI rules for small finance banks.

SFBs were in the limelight recently as RBI has decided to allow the classification of priority sector lending for loans given by small finance banks to micro-finance institutions (MFI) for on-lending to individuals. The decision has been taken to address the liquidity issues amid the severe Covid crisis. SFB stocks like Ujjivan Small Finance Bank and Equitas Small Finance Bank have been performing well on the bourses on the back of strong investor interest in the sector.



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Op Twist: Banks’ offer to sell 6.3 times the ₹10,000-crore notified amount of G-Secs to RBI

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Banks on Thursday offered to sell three Government Securities (G-Sec) aggregating ₹63,012 crore to the Reserve Bank of India (RBI) against the notified amount of ₹10,000 crore at the first special Open Market Operation (OMO) — simultaneous purchase and sale auction of G-Secs — of FY22.

Of the three G-Secs the RBI intended to purchase under OMO Purchase and Sale (Operation Twist), it accepted offers aggregating ₹10,000 crore only for the benchmark 2030 G-Sec (coupon rate: 5.85 per cent).

The central bank jad rejected all the offers it received for the 2026 G-Sec (6.97 per cent) and 2028 G-Sec (7.17 per cent).

RBI set the cut-off price for the purchase of the 2030 G-Sec at ₹99.10 (previous closing price: ₹99.07), with the cut-off yield coming in at 5.9742 per cent (5.9783 per cent).

The central bank received bids aggregating ₹36,471 crore at the sale of two 182 day Treasury Bills under the Operation Twist against the notified amount of ₹10,000 crore. It accepted bids for the notified amount.

Under Operation Twist, RBI simultaneously buys long-term G-Secs and sells Treasury Bills to lower longer-term interest rates.

G-Sec prices moved in a narrow band in the secondary market as auction of four G-Secs aggregating ₹32,000 crore is scheduled on May 7.

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Bank unions term Govt’s move to divest stake in IDBI Bank as retrograde

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Bank unions said the Cabinet approval for strategic disinvestment of the Government’s stake in IDBI Bank and transfer of management control to a strategic buyer is a retrograde step.

“The decision to disinvest in a depressing scenario would lead to underselling and passing the benefits to the private investors. It may also lead to whitewashing the bad loans from the balance sheet,” said S Nagarajan, General Secretary, All India Bank Officers’ Association (AIBOA), in a letter to the President of India, Prime Minister, RBI Governor, and Chiefs of IDBI Bank and LIC.

Staff rationalisation fears

Nagarajan feared that the profit greed of investors will lead to closure of branches/offices, restrict banking activities, lead to staff rationalisation and adverse staff service conditions, which will be counter-productive to the entire workforce.

“When the nation is reeling under health emergency, such an announcement emerging from the corridors of power is really shocking and disturbing,” he said. Nagarajan emphasised that IDBI Bank recently turned the corner after lots of effort put-in by the workforce coupled with the management’s approach to hive-off certain ancillary activities.

“The structural change brought-in by the Government through conversion of IDBI (a development financial institution/DFI) into IDBI Bank (a universal bank) in 2004 was certainly a mistaken step. …the Government’s decision to sell its stake in IDBI Bank is certainly a retrograde step… Side by side, the Government promoting an Infra Bank with huge capital is certainly intriguing,” Nagarajan said.

Appeal to the President

The Association appealed to the President, who is the Custodian of public sector undertakings and public wealth, to counsel the authorities to halt the move to disinvest the Government’s and LIC’s stake in the bank.

In addition, AIBOA sought an immediate intervention to initiate steps to recover the bad loans (at ₹36,212 crore as at March-end 2021) in a fast-track manner lest corporate defaulters acquire this great time-tested institution.

CH Venkatachalam, General Secretary, All India Bank Employees’ Association, said: “IDBI played a leading role in financing industrial development in our country. Because some private corporate houses have cheated the Bank by not repaying the loans, IDBI Bank came into problem.”

IDBI Bank’s shares on Thursday ended 6.72 per cent higher at ₹40.50 apiece. During the day, the bank’s shares rose almost 15 per cent to ₹43.50.

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Secured vs Unsecured Loans, BFSI News, ET BFSI

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It’s been a rather exciting year for Indian financial services – and not necessarily in a positive way. The pandemic did hit us hard in March last year, but its effects, particularly on our consumer financial markets, have lingered on. Unsurprisingly, we’ve seen an increase in unsecured loans, and correspondingly, in defaults and stressed assets – projected to reach Rs 1.8 trillion.

But let’s focus on the first half of that statement – it’s obvious that it’s unsecured loans that have rushed to fill in the void for many of us.

While some live a cash-only lifestyle, the truth is, we rely on credit to pay for life’s big expenses. Big-ticket items like a car, house, new business, education, etc, typically require a loan. And when we’re considering credit options, we often have to decide between a secured and an unsecured loan. Having been through this journey myself quite a few times, I do understand how important it is to understand these two types of loans are, how they are differentiated, and what are their pros and cons. It helps us better understand why one type of loan succeeds.

A loan that is backed by collateral, is called a secured loan. Collateral can be any kind of financial asset that you own – a house, car, etc. In case you fail to repay the loan, the bank can seize the collateral as payment, and the repossession stays on your credit report for up to 7 years.

A loan that doesn’t require any collateral is called an unsecured loan. Since no collateral is required for such loans, some might charge a higher interest rate. Because of their benefits, unsecured personal loans are exploding in popularity. You can take out an unsecured loan for nearly any purpose, whether that’s to renovate your house, pay for your education, or buy a new vehicle, all at the cost of not losing any of your existing assets.

Why are Unsecured Loans Filling the Void?

Available To Anyone

Not everyone owns a car or a property that they can use as collateral and get a loan. An unsecured loan lets you borrow money under such circumstances. Even if your credit score isn’t up to the mark, you don’t have to worry, as many lenders provide loans to individuals with bad credit ratings too.

No-Risk To Your Property

As a borrower, you may not have to lose any of your properties or valuables with unsecured loans. Naturally, the market is migrating to the seemingly lower risk option. However, it doesn’t mean that you’re free from any responsibility in case you fail to pay off an unsecured loan.

Quick Loan Approval

An unsecured loan can be availed quickly and with lesser hassle. There is no necessity of reporting any ownership documents as there is no collateral involved. You just have to fill out the application form and wait for your loan proceedings to get started. The lender checks your financial condition, creditworthiness, and other factors to decide whether you are eligible for a loan.

Less Risky For The Lender

Unsecured loans are also less risky for the lender. If you have a bad credit score, lenders may decide to give you a high interest rate for the loan. Although you may be approved for a loan with high interest rates, you get access to the extra funds that you need.

Improve Your Credit RatingA credit score is a factor that can influence a lender’s decision to approve or deny a loan request. If you’re somebody who has a bad score, you’ll be glad to know that taking out a loan can help in repairing your credit score by being responsible with repayments.

A Word of Caution

While there are so many benefits of an unsecured loan, there has to be a risk associated with not using assets as collateral.

Since there is no collateral or “guarantee” involved in unsecured loans, they generally come with a cap. There is a limit on how much you can typically borrow from the lender. Well, this can be avoided if you have an extremely good credit score. A good credit score indicates healthy credit behavior and timely repayments of credits. This can be accepted by the lender in return for increasing your borrowing amount cap.

As discussed before, the rate of interest on unsecured loans is higher than on secured loans, because of the absence of collateral. Again, there is nothing a credit score can’t change. With the help of a good credit score, the high interest rate on your loan can be negotiated. You just have to make sure your timely payments are going to be done accordingly.

Several lenders also lets you repay early at no additional cost, and without any upfront fees. Flexibility on repayment terms will also be offered, with the added benefits of top-ups and repayment holidays, which won’t normally impact any future borrowing.

The blog has been authored by Tushar Aggarwal, Founder & CEO, StashFin

DISCLAIMER: The views expressed are solely of the author and ETBFSI.com does not necessarily subscribe to it. ETBFSI.com shall not be responsible for any damage caused to any person/organisation directly or indirectly



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KVG Bank bags PFRDA awards

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Karnataka Vikas Grameen Bank (KVGB), a regional rural bank headquartered in Dharwad, has bagged five awards (Lead to Leap, APY Makers of Excellence, Game Changers, Leadership Capital and Amazing Achievers) under various campaigns held for enrolment of Atal Pension Yojana (APY) from the Pension Fund Regulatory and Development Authority (PFRDA).

Quoting P Gopi Krishna, Chairman of KVGB, a press statement said that the bank is playing a pivotal role in implementation of social security schemes such as Atal Pension Yojana (APY), Prime Minister Jeevan Jyothi Bima Yojana (PMJJBY), and Prime Minister Suraksha Bima Yojana (PMSBY).

KVG Bank inks pact with fintech platform

Financial services at affordable cost

The bank enrolled 78,129 policies under PMJJBY, 94,658 policies under PMSBY, and 68,961 accounts under APY during the financial year 2020-21.

KVGB launches loan scheme for women entrepreneurs

The bank has enrolled a cumulative of 51,41,524 policies under PMJJBY, 11,89,321 policies under PMSBY, and 2,06,214 accounts under APY since the introduction of these schemes, he said.

The bank has so far settled 3,809 claims (₹76.18 crore) under PMJJBY, and 706 claims (₹13 crore) under PMSBY.

The bank firmly believes that delivery of financial services at an affordable cost to the vast sections of disadvantaged and low-income groups is a national priority, he added.

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Covid-19 excluded from risk cover for IPL

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All stakeholders affected by the postponement of the Indian Premier League, from the sponsors to the organisers, are unlikely to get any relief through insurance claims as the Covid-19 pandemic is excluded from the risk covers.

According to insurance industry sources, the abrupt end to the IPL amidst reported Covid infections amongst players and support staff, would not translate into any insurance claims being paid.

The total risk across the 16 games is estimated at about ₹5,000 crore, amounting to about ₹80 crore to ₹90 crore per match. “Almost 90 per cent in terms of the value of the insurance across all these stakeholders is at risk,” Aatur Thakkar, Co-Founder and Director, Alliance Insurance Brokers.

“Comprehensive sports insurance cover like event cancellation insurance, players’ loss of fee insurance usually come under the gamut of sports insurance. League organisers, television broadcasters, franchisees, sponsors, are some of the stakeholders in the event that have a huge stake which will be impacted in case of an uncertain eventuality of an event being impacted,” Thakkar said.

Also read: IPL 2021 suspended | What next?

The Board of of Control for Cricket in India (BCCI), the broadcaster – STAR India, the sponsors and the teams purchase their own insurance covers. Gate money was not involved this year as there were no spectators in the stadium.

Claims under the policies are usually triggered if matches are cancelled due to events like a natural catastrophe, riots, civil commotion or act of terrorism.

State-run New India Assurance and National Insurance are understood to have exposure to a large part of the policies, while some private sector general insurers also have some exposure.“The BCCI generally buys insurance cover for a catastrophic risk, which can lead to the cancellation of the event. Once the tournament begins, then the respective stakeholders based on their exposure buy their own policies,” noted an insurance executive.

Since the outbreak of the pandemic, or communicable disease that is Covid-19, had started before the IPL in UAE last year, none of the insurance policies cover this exposure he said. “It is an absolute exclusion,” he explained, adding that no one would insure when an outbreak was already happening.“The press release is worded to say that it has been postponed due to the health and safety of players. But Covid is the underlying cause for this. Under this circumstance, none of the policies will respond,” he further said, adding that since the IPL has been postponed midway and if re-started at a later date, then the stakeholders would ask the insurers for an extension.

Depending on the location and timing, the insurance company may choose to extend the policies. “The Indian Premier League Governing Council (IPL GC) and BCCI in an emergency meeting has unanimously decided to postpone IPL 2021 season, with immediate effect,” said a statement on May 4.

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