Category: Banking & Finance

Banks want debt recast scheme back as Covid wave intensifies, BFSI News, ET BFSI

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Banks have sought an extension of one-time debt recast scheme as the curbs after fresh Covid wave are likely to increase defaults and affect asset quality.

The bank chiefs have petitioned RBI to extend the scheme introduced last year in a meeting with the governor earlier this week, according to reports.

No relief measures

Banks, which got protection and support by a swift moratorium on loans when the pandemic first struck, have no such cover this time.

As the second wave intensifies, most of the relief measures and schemes announced by the government and Reserve Bank of India have expired. On top of it, the central bank is non-committal on moratoriums.

In today’s conditions, there is no need for a moratoriumRBI governor Shaktikanta Das

Also, a spike in overdue loans after the lifting of the moratorium has been worrying analysts.

“The level of loans in overdue categories has increased after the moratorium has been lifted and the impact on asset quality will be spread over FY2021 and FY2022 as various interventions and relief measures have prevented a large one-time hit on profitability and capital of banks,” ratings agency Icra said in a report.

What Fitch says

Banks want debt recast scheme back as Covid wave intensifies

India’s second wave of Covid infections poses increased risks for India’s fragile economic recovery and its banks, says Fitch Ratings. It already expects a moderately worse environment for the Indian banking sector in 2021, but headwinds would intensify should rising infections and follow-up measures to contain the virus further affect business and economic activity.

Fitch forecasts India’s real GDP growth at 12.8% for the financial year ending March 2022 (FY22). This incorporates expectations of a slowdown in 2Q21 due to the flareup in new coronavirus cases but the rising pace of infections poses renewed risks to the forecast. Over 80% of the new infections are in six prominent states, which combined account for roughly 45% of total banking sector loans. Any further disruption in economic activity in these states would pose a setback for fragile business sentiment, even though a stringent pan-India lockdown like the one in 2020 is unlikely.

Challenging environment

The operating environment for banks will most likely remain challenging against this backdrop. This second wave could dent the sluggish recovery in consumer and corporate confidence, and further suppress banks’ prospects for new business (9MFY21 credit growth: +4.5% as per Fitch’s estimate), it said. There are also asset quality concerns since banks’ financial results are yet to fully factor in the first wave’s impact and the stringent 2020 lockdown due to the forbearances in place. We consider the micro, small and medium enterprises (MSME) and retail loans to be most at risk, the rating agency said.

Retail loans have been performing better than our expectations but might see increased stress if renewed restrictions impinge further on individual incomes and savings. MSMEs, however, benefited from state-guaranteed refinancing schemes that prevented stressed exposures from souring.

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NHB launches ₹10,000-crore Special Refinance Facility-SRF 2021

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National Housing Bank (NHB) has rolled out a ₹10,000-crore ‘Special Refinance Facility-2021’ (SRF-2021) to provide short term refinance support to housing finance companies (HFCs) and other eligible Primary Lending Institutions (PLIs).

This facility is expected to meet the short-term liquidity requirements of the PLIs and will also support them for onward lending to individuals to maintain steady growth in the housing finance sector, according to NHB.

This NHB initiative comes on the heels of the Reserve Bank of India (RBI) extending fresh support ( in the recent monetary policy review) under another Special Liquidity Facility-2 (SLF-2) of ₹ 10,000 crore to the NHB for one year to support the housing sector.

RBI to provide ₹50,000-cr refinance to all-India financial institutions

Post Covid -19, the housing finance sector has revived and showed steady improvement in sanctions and disbursements since the second quarter of FY2020- 21.

It may be recalled that last year during May-August 2020, NHB had provided refinance support of ₹ 14,000 crore under the Special Refinance Facility (SRF) and Additional Special Refinance Facility (ASRF).

This short-term liquidity support for a year was part of Special Liquidity Facility (SLF) granted by the RBI at repo rate to NHB under Aatma Nirbhar Bharat Abhiyaan announced by the Finance Minister.

Return of DFIs

During the period April 1, 2020 to March 31, 2021, NHB had extended an amount of ₹ 42,823.93 crore as refinance to PLIs which includes HFCs, Scheduled Commercial Banks including Regional Rural Banks (RRBs), Small Finance Banks (SFBs), under its various refinance Schemes including SRF and ASRF extended by the RBI.

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Bank employees seek to reduce banking hours, BFSI News, ET BFSI

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AHMEDABAD: Members of Maha Gujarat Bank Employees’ Association (MGBEA) on Tuesday made a representation before the state level bankers’ committee (SLBC) seeking to reduce banking hours in the wake of the steep surge in Covid-19 cases.

“All branches can reduce business hours from 10am to 2pm and provide essential services only. Employees should be allowed to go home after the business hours. The purpose is to reduce the exposure of the staff with public,” mentioned a statement released by MGBEA.

In the wake of the prevailing situation in Gujarat, MGBEA has requested the head of SLBC and the state government to issue guideline to banks.

“Bank branches will be vulnerable points for transmission of Coronavirus. Nearly 10,000 bank employees are tested positive in March 2021. Across Gujarat, some 3,718 branches of nationalised banks along with 1,286 branches of State Bank of India and 1,619 of district and state cooperative banks in addition to 769 branches of gramin bank and 2,206 private bank branch have been operational full time,” said Janak Rawal, general secretary, MGBEA.

“After the hearing of a Suo moto public interest litigation on the Covid-19 surge, Gujarat Government issued some guideline related to Covid-control in Gujarat and allowed government offices to work with 50% staff. We have represented the matter before SLBC, Gujarat and to the chief secretary, Gujarat government to issue guideline for the functioning of banks branches in the state,” Rawal further added.

Bank should be advised to work with reduced staff strength which will be helpful to the employees as well as to the bank in implementing business continuity plan, according to MGBEA. “The banks must close the branch for 48 hours, if any employee tests positive for Covid-19.”



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‘Data helped us expand borrower base in supplier finance segment’:

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Mridula Iyer, head – treasury & trade solutions (TTS), Citi South Asia

The use of data and analytics has enabled Citi to expand its borrower base in the supplier finance vertical in India, Mridula Iyer, head – treasury & trade solutions (TTS), Citi South Asia, tells Shritama Bose. The setting up of new umbrella entities (NUEs) should help drive innovation in the business-to-business (B2B) segment, she added. Excerpts:

The digital payments ecosystem in India has greatly evolved over the last decade. While we know about the strides made in consumer payments, have companies been as agile in adapting their systems to the evolving scenario?

Digitisation is now at the core of corporate strategies. It goes beyond cost saves, which corporates were previously focused on, and the focus is now on bringing about efficiencies in their sales and distribution processes as well as in sales enablement, including the way they deliver experience to their customers. Corporates are very open today to leveraging technologies like API and using new channels like UPI, QRs, NACH, etc., in order to digitise their engagement with the entire ecosystem.

In the pandemic, corporates who had digital as part of their core strategies have benefited more than firms that were just starting on their digital journey. Citi’s own experience has been that over the last few years, we have been trying to assist corporates in their whole digital transformation. During the pandemic it was easier for our customers to be up and running as soon as the lockdown was in effect because they were well-integrated with the bank and they had all their digital solutions in place. In our experience, banks are increasingly becoming digital advisors to companies in their digitisation journey.

The payments space in India has become a place where everybody wants a slice of the pie. As licences for NUEs are issued, how do you see the landscape changing? Have you also applied for a licence?

The NUE is a very interesting and innovative initiative and we can say that India today leads the pack in terms of digital solutions, when compared to some of the developed markets, which are trying to emulate what we have done. In spite of that, there is scope for a lot more players and solutions to come in so that we can accelerate the pace of digitisation. The NUEs will bring a lot more innovation into the payment system. Data will be a very big part of how these players build their products. But even beyond data, there will be ample scope for NUEs to work on new payment solutions, especially in the field of business-to-business (B2B) payments. It will be interesting to see how this space evolves.

Citi, like other foreign banks, has traditionally stayed away from lending to very small businesses in India. Do you see that changing with the way data and analytics capabilities are evolving now?

Definitely yes. When I look at Citi’s example, we have dedicated business segments that look after banking needs of MSMEs, partnership and proprietary firms and private limited companies. In addition, we run a strong and successful supplier finance programme. We have also recently launched a distribution finance programme. I believe data and analytics are going to play a very strong role in financing decisions. With so many data points available and the digital repositories such as e-invoicing, GST, etc., there is an opportunity for banks to make underwriting decisions and expand it to a wide range of companies. The payments data available with us, for example, can help in faster onboarding decisions, and we have been able to expand this programme to more suppliers.

Large Indian PSBs are investing in the supply chain financing vertical. Does that mean older players like you are having to do things any differently?

There is a lot of opportunity in the supply chain financing space, given that traditionally there has been a lack of credit to some segments. Even globally, the supply chain finance business is a $3-trillion opportunity and what banks and other players are doing is less than 10%. Likewise, in India, there is tremendous scope. Citi has introduced multiple innovations in our product offering and there are various market firsts that we bring to our clients.

For example, we provide an end-to-end digital platform for supplier financing, seamless paperless onboarding with complete information available online. So the way we are trying to maintain our market leadership is by bringing in more technology innovation into our product offering. Another way is through fintech partnerships. We are actively engaged with fintechs to build differentiated solutions in this space, using some of the new technologies.

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WhatsApp Pay remains in the slow lane four months since November launch

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There has also been little marketing buzz around the payment feature and, not to forget, a majority of WhatsApp’s 400 million-strong user base in India lacks access to it.

Unified Payments Interface (UPI) transactions through WhatsApp remained tepid in March, four months since the feature went live for 20 million users on the messaging app. Despite early predictions that payments via the messaging app would explode once the feature went live, WhatsApp accounted for only 0.02% of UPI volumes and 0.01% of transaction value.

Industry executives FE spoke to said that the limited number of transactions might be attributable to the fact that the Facebook-owned company may not have begun implementing its plans for payments. “They haven’t quite given it a push, at least not yet,” a senior executive with a private bank said on condition of anonymity.

What this means is that they have not aggressively started acquiring merchants to enable peer-to-merchant (P2M) transactions. There has also been little marketing buzz around the payment feature and, not to forget, a majority of WhatsApp’s 400 million-strong user base in India lacks access to it. The company does have about 15 million users on its WhatsApp for Business app, designed specifically for the kirana shop owner. In 2019, the company released catalogues for shop owners to showcase their products to their customers and in 2020, it added more new features to the business app.

An email seeking a response from WhatsApp India on its payments strategy remained unanswered till the time of going to press. In December, the company had announced its plans to enable the sale of “sachet-sized” health insurance products through its platform. The messaging giant is also running pilots in the areas of micro-pension, edtech and agritech, said Abhijit Bose, head of WhatsApp India, speaking at Facebook’s Fuel for India event.

While State Bank of India (SBI), HDFC Bank, ICICI Bank and Axis Bank are WhatsApp’s partners in payments, in the pension and insurance space, the company would be partnering with pinBox Solutions, HDFC Pension Management Company and SBI General Insurance. “WhatsApp has proactively been working on several pilots to help ensure that every adult has access to the most basic and critical financial livelihood services through their mobile device. By the end of this year, we expect that people will be able to buy affordable sachet-sized health insurance through WhatsApp,” Bose had said, adding that the company is also working on pension services for the informal sector in India.

In February 2018, when WhatsApp had gone for a beta launch of its payments facility for 1 million of its 230 million users, Credit Suisse had said that the feature could lead digital payments “to explode” and grow the size of the market to US$1 trillion over a five-year horizon.

In March 2021, PhonePe led the UPI market, processing 44% of all transactions on the channel and crossing the 1 billion-transaction mark during the month. It was followed by Google Pay and Paytm.

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RBI monetary policy: Calms some nerves; just what the doctor ordered

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Through the variable reverse repo, RBI will also manage the lower end of the curve suitably.

By KVS Manian

The Reserve Bank of India (RBI) has clearly kept its ears to the ground in framing the last monetary policy. The surge in Covid-19 cases, leading to a seemingly vicious second wave, has definitely pushed the recovery trajectory by a quarter, if not two.

The pace of the Covid-19 vaccination has been slower than anticipated, adding to the worries on the time frame to get a control over the pandemic. Just now, in the most optimistic scenario, this looks like a 9-10 month vaccination programme to reach the thresholds of comfort. I am sure the government is thinking about speeding up the delivery mechanisms, as also ensuring optimum supply of vaccines itself. So, over the next few months, selective lockdowns/locational disruptions and other constraints will continue. This will lead to some demand disruptions as well as supply disruptions.

All this is bound to have an adverse impact on the economy, with some downside risk to the growth projections we had expected, even a month ago.

In such a scenario, that the RBI stance will be more accommodative and supportive of growth follows quite naturally. As all the countries attempt to do this over the next 12 months, we will see significant difference in the quality of execution amongst them.

Hopefully, India will be one of the countries that will emerge from this year with a strong tailwind ready to launch into a strong positive growth cycle.

Like most other central banks across the world, RBI is also clearly prioritising growth over incipient inflation worries. However, this remains a risk over the period of this financial year. While the headline inflation looks to be under control, the saviour has been the inflation in food prices, and core inflation numbers are already flirting with 6%. The risk to inflation is coming in a complicated manner, both from supply-side constraints in some areas and from demand-side pressures in others. This balancing act between supporting growth and curbing inflation is going to be the key challenge of the central bank this year.

The bond markets were very pleased with the announcement of the Rs 1 lakh crore open market operation (OMO) programme (christened as G-SAP, or the G-Sec Acquisition Programme) for the first quarter of FY22. It was precisely what the doctor ordered. This has cooled the yields over the long end of the curve. Through the variable reverse repo, RBI will also manage the lower end of the curve suitably. This may lead to some increase in yields in the short end, flattening the yield curve. The liquidity in the system will continue to be good, and with the above developments, the expectations of rise in policy rates over this year have significantly receded till late this financial year.

It will be interesting to see how the rupee reacts in the coming months. Global liquidity leading to strong flows into the Indian equity markets has helped bolster the rupee until now. Purportedly, RBI’s announcement of bond purchases and unwinding of positions by traders, who were already nervous due to the emerging Covid-19 second wave data, led to a fall in the value of the rupee. However, in the medium term, signals from the US and European markets on economic recovery and interest rates will be a more important factor. Just now, the US Treasury as well as European central banks seem quite determined to keep liquidity high and bond yields low, almost challenging the bond dealers to trade against them. Given these, the flow into attractive emerging markets is likely to continue, keeping the rupee reasonably stable.

The not-so-great news in all this is that the likely economic disruptions, caused by the next wave of Covid-19, could mute credit growth at a juncture when it was just showing green shoots of recovery. Asset quality issues in the financial sector could re-emerge. Coordinated steps by both the government and RBI through the last year helped ensure flow of credit and financial support to the segments in the economy that were the most susceptible, such as the MSMEs and other Covid-19-impacted sectors, and helped these segments tide through the crisis. Going forward, RBI and the government have to work towards a calibrated and smooth exit from this situation.

Another important announcement from RBI was that of permitting fintech companies to join the digital payment systems of the central bank. This is a progressive step, and will speed up digital adoption in financial transactions. India’s progress in this direction has been particularly noteworthy, and this announcement has signalled RBI’s continued and proactive focus in this area.

Overall, the policy is in sync with the times and recognises the need to navigate this uncertain period with an open mind.

The author is whole-time director and member of Group Management Council at Kotak Mahindra Bank. Views are personal

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Paytm Payments Bank clocks 970 m digital transactions in March

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Paytm Payments Bank Ltd (PPBL), on Tuesday, announced that it has become the top enabler of digital payments in the country by registering over 970 million digital transactions in March.

This achievement has been led by the growth in transactions on Paytm Wallet, Paytm FASTag, Paytm UPI and internet banking over the last several quarters. PPBL, which is rapidly gaining the trust of millions of Indians, is now opening on an average 1 million savings and current accounts a month. With over 64 million accounts, the bank’s total deposits have crossed over ₹3,200 crore.

Satish Kumar Gupta, CEO and Managing Director, Paytm Payments Bank Ltd, said in a statement: “Our leadership in digital banking and payments is a testimony to the trust that the whole country has shown in our services. We will continue to empower more merchants across the country to join the digital payment ecosystem and benefit from our innovative and personalised offerings. We are committed to playing a key role in building Atmanirbhar Bharat.”

Paytm Wallet has strengthened its position as the strongest digital payments service with 325 million wallets. Over 78 per cent of Wallet account holders use it for payments on a daily basis. The massive adoption of Paytm Wallet by the masses can be also be gauged from the fact that 85 per cent of wallet transactions are merchant transactions across online platforms and kirana stores.

Toll payments

Meanwhile, with over 9 million FASTags sold and 42 million monthly issuer transactions, Paytm Payment Bank’s FASTag has become India’s most preferred instrument for digital toll payments as it allows users to directly pay from their Paytm Wallet. It has gained immense popularity among vehicle owners, including commercial transport, due to its seamless onboarding and integration process. Also, PPBL has now enabled cashless toll payments across 270 plazas and registered 57 million monthly acquirer transactions.

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Capri Global launches ‘Prime’ affordable housing loans

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Capri Global Capital Ltd. (CGCL) has launched ‘Prime’ affordable housing loans, carrying interest rate starting from 7.99 per cent for urban and rural customers.

The non-banking finance company, in a statement, said all salaried employees employed with government, public and private firms, with minimum one year of experience and a good credit score, can avail this loan. Further, women applicants will receive an additional 0.10 per cent discount in rate of interest.

Rajesh Sharma, Managing Director, CAGL, said: “We believe, if sufficiently incentivised, the affordable housing sector could benefit substantially from the sheer size of its target group.”

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Pine Labs acquires Malaysia-based fintech platform Fave in $45-m deal

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Our Bureau

Pine Labs, a merchant commerce platform, has acquired Fave, South-East Asia’s fast-growing fintech platform, in a deal valued at over $45 million.

This acquisition marks the entry of Pine Labs into the B2C market and Indian consumers will be able to use the Fave App (a smart payment App) later this year to save across 5 lakh merchant network points powered by Pine Labs across 3,700 cities in India.

Fave, which is headquartered in Malaysia, currently operates in 35 cities across Malaysia, Singapore and Indonesia. The acquisition will help both companies accelerate their growth in the Asia region and unlock massive consumer opportunities across retail, F&B, fashion, and FMCG markets. Joining forces with Pine Labs will reinforce Fave’s market position in South-East Asia. Fave has enabled 6 million consumers in South-East Asia to save over $ 400 million across 40,000 retailers since 2016.

Commenting on the acquisition, B Amrish Rau, CEO, Pine Labs, said in a statement: “Consumers have tremendous choices in their payment types. They want to be sure that they save on every transaction. Fave helps consumers apply their best rewards, coupons, gift cards and cashbacks on all transactions in a seamless manner. Joel and the Fave team have built a loyal consumer base with their smooth checkout experience. We are excited to partner with them in this journey in South East Asia and India.”

Joel Neoh, Co-Founder and CEO of Fave, said: “Really excited to work with Amrish and the Pine Labs team to continue expanding the Fave platform across the Asia region. Pine Labs has been a great partner and investor for us, and it only made sense for us to join our synergies together and work towards our shared vision of building a truly global consumer and merchant platform”.

Fave’s founders will have their roles expanded to lead the overall consumer platform for the group across Asia. Fave will also be hiring over 100 new employees in South-East Asia and India to accelerate cashless payments and smart savings across the region.

Fave will continue to introduce new smart payment features via the Fave platform, unlocking new ways to maximise joy and value in every shopping experience for consumers across Asia.

In August 2020, Fave announced a partnership with Singtel and DBS Bank, that has enabled over half-a-million Singaporeans to use their respective Singtel Dash and Paylah! e-wallet app to pay at Fave partner stores.

In India, the introduction of the Fave app this year comes at an opportune moment, with UPI growing to 2.7 billion transactions in March 2021. Pine Labs also recorded a significant growth of 171 per cent in UPI transactions over the last two quarters. Fave app will be rolled out across all major Indian cities, the statement added.

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