Non-banking finance companies, especially those with an asset base of less than ₹500 crore, have sought relaxation in rules for cancelling National Automated Clearing House (NACH) mandates by their customers. The Finance Industry Development Council (FIDC) has written to the National Payments Corporation of India “to provide cancellation facility through simpler means such as Whatsapp and SMS” in a secure manner.
In a letter to the NPCI Managing Director and CEO, Dilip Asbe, FIDC has said this would enable customers to cancel NACH mandates in a simple manner rather than having to access the companies’ websites to carry out such a request. NACH or “National Automated Clearing House (NACH)” for banks, financial institutions, corporates and government is a web-based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature and bulk payments.
‘Best effort’ basis
It has also requested NPCI to allow small NBFCs (with asset base of less than ₹500 crore – which are categorised by the RBI as non-systemically important) to provide such a facility on a “best effort” basis and not as a mandate.
“Most of our members are small NBFCs that operate in limited geographies and provide the vital last mile credit delivery to unserved and under-served segments of the economy including agriculturists, MSME, small road transport operators,” FIDC said in the letter, adding that many of these NBFCs are very small and do not have a well developed website.
Further, many of their customers are not tech-savvy and are not comfortable with transacting on electronic platforms though they may be comfortable in using SMS or WhatsApp, it has said.
“Small NBFCs have, with great difficulty, convinced their customers to use electronic and non-cash means for EMI payments, but still the prevalence of cash repayments is significant,” FIDC said, adding that the provision of the facility for cancellation of NACH mandates is neither feasible nor effective in achieving the ultimate objective of customer empowerment.
NPCI guidelines
In a circular dated September 11, 2020, NPCI had come out with guidelines to provide customers the facility for online cancellation of NACH mandates.
“In order to faciliate online submission of customer request for mandate cancellation, all the entities that are obtaining the mandates from the customer shall provide an option to the customer to submit the stop/cancellation request through their website or any other electronic channels,” NPCI had said in a circular, noting that customers have to reach out to the company or the bank branch and submit the cancellation request in á physical form.
Kolkata: TPG-backed Jana Small Finance Bank has on Thursday filed its draft red herring prospectus with Securities & Exchange Board of India for an initial public offer, almost a week after missing the listing deadline.
Jana was supposed to be listed on or before March 27, 2021, according to the licensing agreement with Reserve Bank of India.
The bank had applied to the RBI for an extension till March 28, 2022 but the regulator turn it down.
“The RBI may take regulatory action against us, which could include imposition of monetary penalties, revocation of the RBI final approval or such other penal actions”, if it fails to make satisfactory progress towards the listing of equity shares or do not comply with the provisions of the extant RBI guidelines, the bank said in its prospectus.
The regulator has mandated small finance banks to get listed within three years from the date of commencement of our banking business or withing three from reaching a net worth of Rs 500 crore.
Jana received the banking license in 2015 along with nine other financial services firms.
The bank would be looking to raise up to Rs 700 crore through the proposed share sale. The bank may also consider a pre-IPO placement for raising up to Rs 500 crore, the bank said in the prospectus.
The IPO would include an offer for sale of up to 9,253,659 equity shares.
Bajaj Allianz Life Insurance Company, ICICI Prudential Life Insurance, Enam Securities and Hero Ventures will be looking to partly offload their holdings in Jana Small Finance Bank when the bank will float the IPO.
Some 18 existing investors would be looking to sell their holding, the bank said. The selling shareholders includes Gawa Capital, Client Rosehill Ltd, Tree Line Investment Management, North Haven Private Equity Asia Platinum Pte Ltd, QRG Enterprises and Bajaj Allianz General Insurance Company.
North Haven is the biggest shareholder with 8.18% holding who will be looking to sell shares while all the other selling shareholders hold less than 5%.
Promoters hold 42% in the bank while investment firm TPG holds 9.44%. Other investors include HarbourVest, Morgan Stanley and Tata Capital.
The bank’s genesis dates back to 2006 when it was founded as Janalakshmi Financial Services by former Citibank executive Ramesh Ramanathan, who is now non-executive chairman.
Mumbai, Apr 1 () The country’s largest lender State Bank of India’s customers had to face issues on Thursday due to the unavailability of various digital services on account of upgradation of the bank’s digital banking platforms. The bank informed its customers on Thursday morning that it is upgrading its digital banking platforms, including Yono, Yono lite, internet banking, Unified Payments Interface (UPI).
“We will be undertaking maintenance activities between 2:10 PM to 5:40 PM on April 1, 2021. During the period, INB/YONO/YONO Lite/UPI will be unavailable. We regret the inconvenience caused and request you to bear with us,” the bank said on Twitter.
SBI has the largest network with over 22,000 branches and more than 57,889 ATMs across the country. As of December 31, 2020, it had 85 million internet banking and 19 million mobile banking users. The bank’s number of UPI users stood at 135 million at December-end.
At present, the bank has 35 million registered users of Yono, the digital lending platform.
It can be noted that on March 29, customers of the country’s largest private sector lender HDFC Bank faced problems in accessing its services due to glitches in its digital banking platform.
“Some customers are facing intermittent issues accessing our NetBanking /MobileBanking App. We are looking into it on priority for resolution. We apologize for the inconvenience and request you to try again after sometime. Thank you,” HDFC Bank had said in a tweet.
This is not the first time that the customers of HDFC Bank have faced service outage. In fact, the bank has been penalised by the Reserve bank of India (RBI) for two major outages in the past. HV BAL BAL
In the six months to September 2020, payments through UPI-based applications surpassed 50% of total retail digital payments in volume, becoming the most popular transaction method for cashless transactions, Moody’s said in a recent report.
The value of transactions through the Unified Payments Interface (UPI) rose 19% month-on-month (m-o-m) to Rs 5.05 lakh crore. Volumes rose by an equivalent amount to 2.73 billion, according to data released by National Payments Corporation of India (NPCI) on Twitter.
Growth in UPI volumes has been driven over the last year by burgeoning QR-based acceptance points across the country. FE reported last month the value of peer-to-merchant (P2M) transactions through UPI has exceeded that of transactions made using credit cards or debit cards at points of sale (PoS). Such P2M transactions have benefited from the zero-merchant discount rate (MDR) regime. Innovations in merchant alert systems have also done a lot to boost merchant transactions over the channel. In the six months to September 2020, payments through UPI-based applications surpassed 50% of total retail digital payments in volume, becoming the most popular transaction method for cashless transactions, Moody’s said in a recent report.
In the early years of its growth, UPI was growing largely on the back of peer-to-peer (P2P) payments, with the P2M piece accounting for 20-30%. That equation may have changed with the demands of social distancing leading more people to opt for digital payments.
The next phase of growth in UPI transactions could be driven by innovations that are likely to be ushered in by the new umbrella entity (NUE) licensees. NPCI is itself working on developing a platform for feature phones which, too, could have a role in driving growth.
In a recent note, Moody’s said there is still ample room for growth in digital transactions in the Indian context, led by UPI. The Reserve Bank of India (RBI) estimates that the number of digital transactions will jump to 87 billion in 2021 from about 40 billion in 2020. “India has a number of factors favourable for the further development of digital financial services, including a large and growing middle-class population and a well-established digital identification system,” Moody’s said, adding that only State Bank of India (SBI) and a few large private banks have the resources to effectively capitalise on growing preferences for digital services among consumers and businesses.
Sundaram Finance has a balance sheet of Rs 35,000 crore despite not having raised equity in the last 50 years. TT Srinivasaraghavan, who stepped down as managing director after 37 years in the company, tells Ankur Mishra it will continue to pursue prudent and measured growth.Edited excerpts:
For a company that will celebrate 70 years in 2024, you have grown conservatively…
There are two parts to it. First, our growth is not comparable to peers, as you have rightly pointed out. Unlike other NBFCs, we have not raised any equity in the last 50 years, building up a balance sheet of Rs 35,000 crore just through retained earnings. Though there is nothing wrong with raising equity, ours has been a model of steady and sustained growth, without suffering the volatility that often accompanies large investments. We have conducted our business the way we are comfortable. It is a thing of choice.
About 50% of your borrowings are through debentures and 15-16% from banks. Isn’t it cheaper to borrow from banks?
It is not true in our case because, being AAA-rated, we are able to raise money through debentures at rates lower than that offered by banks. One of the reasons for that is that banks need to comply with MCLR norms, and can’t go below the MCLR. The capital market, on the other hand, moves up and down quite smoothly. We might be saving 100 bps or more by borrowing through debentures.
Given the opportunities, do you think it makes sense for Sundaram Finance to step up the pace?
I don’t want to second-guess my successor’s approach but I think as a business philosophy we would like to continue with the present pace of growth. There have been years when, with an opportunity presenting itself, we grew by around 20-25%. On a secular basis, I don’t see the organisation growing dramatically. So, prudent and measured growth is what it is likely to be.
Have you ever considered becoming a bank?
No. We have evaluated the options, in terms of the price to pay for becoming a bank, etc. When RBI opened the window, we did go through the process. But we have not found a compelling reason to acquire a banking licence every time we have looked at it.
What do you feel about regulations being tightened for NBFCs?
As a responsible player in the NBFC space, we have never been averse to stringent regulations. But if there is talk about harmonisation with banks, I would also like to see NBFCs being provided some banking facilities. There has to be a developmental aspect along with the regulatory one. And that is still missing.
In fact, NBFC continue to suffer the most; not the larger ones like us, but those that are small or mid-sized. There is aversion to lending to NBFCs every time there is a problem in the financial market, though, if you look at the track record of the smaller NBFCs, there has been virtually no failure in a long time. Yes, an IL&FS happened, a DHFL happened, but they are exceptions. What I would like to see is a formal funding agency. Just as there is a National Housing Bank to fund housing finance companies, could we have a funding entity for smaller NBFCs please?
Consolidated net profits for the nine months to December 2020 were Rs 895 crore, 50% higher y-o-y and 13% more than in FY20…
We focused more on the lending side of the business. What we did was to reach out to the vulnerable borrowers and ask them to pay a small amount notwithstanding the moratorium, explaining that this would reduce their burden once the moratorium came to an end. So, we actively engaged with our smaller borrowers, advising them, nurturing them. Many of them thanked us when the moratorium ended, as they found themselves better off than those who didn’t pay at all. There is a segment of the economy which got impacted due to Covid-19, like travel, tourism and bus operators. To such borrowers, we have offered restructuring under the Reserve Bank of India’s guidelines. But as restructuring doesn’t come for free, we have had to make provisions. We have restructured 2.5% of our total book.
The other thing is, as the market opened up after the moratorium period, there was pent-up demand. And we focused on the segments in which we saw opportunities for growth. So, it’s been a mix of strategies that has driven our bottomline, though, again, it is not runaway growth we have pursued. We have an internal mantra called GQP, which stands for growth, quality and profitability. That guides our business.
CVs accounted for 29% of your disbursements in the nine-month period, compared with 52% last year. Was that part of a strategy or a fallout of the economic situation?
It was both. There has been a drop in the industry’s sales. In fact, the CV industry has been on a decline since October, 2018, with BSVI norms making things worse. And Covid-19 struck before BS-VI came into effect. So, it’s been a series of events that have hit the CV industry. The risks have gone up significantly, and there is also major overcapacity. These did make us pull back on our CV financing.
Your NIMs are at an eight-quarter high. Is that sustainable?
Due to RBI’s liquidity push, six months of the financial year have been quite easy. Also, there was a flight to safety, as lenders preferred the better-rated NBFCs. We benefited from that, enjoying lower cost of funds. But 10-year bond rates have started moving up now. I think it was a sweet spot we were in and as liquidity starts getting sucked out with higher growth, we will be back to more normal levels.
The bank’s net interest margin (NIM) stood at 9.36% at the end of September 2020, down from 9.81% as on March 31, 2020.
Jana Small Finance Bank (SFB) on Thursday filed a draft red herring prospectus (DRHP) for a fresh issue of shares worth Rs 700 crore, accompanied by a sale of shares by existing investors.
The investors looking to sell shares through the offer for sale (OFS) route include Alpha TC Holdings, Bajaj Allianz General Insurance Company, ICICI Prudential Life Insurance Company and Vallabh Bhanshali. “We intend to utilise the Net Proceeds to augment our Bank’s Tier -I capital base to meet our Bank’s future capital requirements, which are expected to arise out of growth in our Bank’s assets, primarily our Bank’s advances and investment portfolio, and to ensure compliance with applicable RBI regulations and guidelines,” the SFB said in the DRHP.
Jana SFB’s deposits grew at an annual rate of 129.9% and stood at Rs 9,650 crore on March 31, 2020, up from Rs 4,200 crore in the previous year. It claimed to have witnessed the highest disbursement growth rate and assets under management (AUM) growth in FY20 among SFBs. “The asset book of Jana SFB continued to diversify with 25.0% of the book being secured in FY20 as compared to 15.0% in FY19,” the bank said. Its total secured advances rose to Rs 2,860 crore in FY20 from Rs 1,000 crore in FY19.
Its capital adequacy ratio stood at 19.3%, with the tier-I ratio at 13.1%, in FY20.
The bank’s net interest margin (NIM) stood at 9.36% at the end of September 2020, down from 9.81% as on March 31, 2020. As on September 30, 2020, Jana SFB’s gross non-performing assets (NPAs) stood at 2.72%, down from from 42.21% as on March 31, 2018.
The bank attributed the reduction in bad loans to a focus on increasing secured advances to reduce the risk of loan losses and growth in its agricultural and allied loans advances within the unsecured advances.
As on September 30, 2020, of a total of Rs 10,419 crore of gross advances outstanding, Rs 44.37 crore, or 0.43%, were restructured under the Reserve Bank of India’s (RBI) MSME scheme. The actual write-offs for the six months ended September 30, 2020, stood at Rs 12.34 crore, while that for the year ended March 31, 2020 stood at Rs 49.85 crore.
Thrissur (Kerala), headquartered CSB Bank recorded a 21 per cent year-on-year (YoY) increase in total deposits and a 27 per cent YoY rise in gross advances, as per its business updates for the year ended March 31, 2021.
As of March-end 2021, total deposits and gross advances stood at ₹19,140 crore (₹15,791 crore as at March-end 2020) and ₹14,645 crore (₹11,559 crore), respectively, the bank said in a disclosure to the exchanges.
Within total deposits, low-cost current account and savings deposits (CASA) were up 34 per cent YoY to ₹6,162 crore, and term deposits increased by 16 per cent YoY to ₹12,978 crore.
Advances against gold & gold jewellery soared 61.51 per cent YoY to ₹6,121 crore within gross advances.
The private sector bank said data in the business updates is provisional and is subject to audit by the Statutory Auditors.
Customers of public sector banks that got merged with larger peers fear either missing out on dividend payments or facing cheque-bounce charges on post-dated instruments as they have not been able to intimate companies and lenders about the changed IFSC Code of their branches or issue new MICR cheques before the March 31, 2021 deadline.
They want this deadline extended as updating the new Indian Financial System Code in all the mandates given by them and notifying the remitters (of dividend on shares and interest on bonds) and replacing old post-dated MICR cheques given to lenders with new ones will take time.
Six PSBs were amalgamated with four public sector banks with effect from April 1, 2020. Oriental Bank of Commerce and United Bank of India were merged with Punjab National Bank; Andhra Bank and Corporation Bank with Union Bank of India; Syndicate Bank with Canara Bank; and Allahabad Bank with Indian Bank.
Social media consultant Dhimant Bhatt observed that customers of transferor PSBs (that got merged with larger PSBs) may be owning shares in many companies as well as having investments in bonds. Then may also get IT refunds.
Since intimating each company/authority about the change in branch IFSC Code will require some time, the deadline for updating new IFSC Codes and issuing new post-dated MICR cheques needs to be extended by three months, he said.
Trouble merging A/Cs
Indeed, customers of the merged PSBs continue to face issues. Praveen Bhat, a resident of Mangaluru and a customer of both Syndicate Bank (now merged with Canara Bank) and Canara Bank, wanted to merge two accounts in one branch of Canara Bank. When he approached the Canara Bank branch to merge the account from erstwhile Syndicate Bank’s (e-SB), Bhat was asked to visit the latter’s branch.
Since he did not get a satisfactory response to merge the account at e-SB branch, Bhat decided to close the account there. To his surprise, he was charged more than ₹1,000 as closing charges, including for a debit card he did not have. Terming the account closing charges as unethical, he said: “Merger is not my idea. They should not impose closing charges. Banking sector claims to use emerging technologies such as big data. Can’t they use it for identifying the customer having accounts in the same bank, and give him an option to merge or close?”
Bhat, who also has an account with the erstwhile Corporation Bank (e-CB), said he did not face much problem there. However, most of the time the bank (now part of Union Bank of India) sends messages about the non-availability of online banking/ATMs on Sundays due to server upgradation. “I get time to do my personal work on Sundays. That is the time when the online banking facility is not available,” he said.
Issues with app
Fifty-two-year-old Indrajit Haldar used to frequently use the mobile app of the erstwhile Kolkata-headquartered United Bank of India (e-UBI) prior to its merger with Punjab National Bank, for all kinds of transactions. But of late he seldom uses the app as he feels it has become “more complicated” and “very slow”.
It took nearly a month for Subhasis Pal to withdraw money from his father’s Senior Citizens’ Savings Scheme account which was with e-UBI. “After my father expired in February, I approached the bank to close the account and withdraw the funds. However, it took them nearly one month to complete the formalities.
“They were facing severe challenges as there were some technical issues. In fact, the branch manager told me that it was as though the zip of one jacket has been forcibly fixed onto another jacket (referring to the technical difficulties in enabling the transaction post-merger),” he said.
Anil Ambani-backed Reliance Infrastructure Limited has sold its office Reliance Centre at Santacruz, Mumbai to YES Bank for ₹1,200 crore. “Entire proceeds from sale of Reliance Centre, Santacruz is utilised only to repay the debt of YES Bank,” Reliance Infra said in a statement.
The office building is spread over a 21,432.28 square metre plot in Santacruz and housed Anil Ambani group’s headquarters.
Background
Last year, YES Bank had said that it was taking possession of the properties under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act for non-payment of loans amounting to ₹2,892 crore.
YES Bank had then said it had issued a demand notice on May 6, 2020 to Reliance Infrastructure Ltd under the SARFAESI Act to repay the dues within 60 days, which the latter failed to repay. “The bank had taken possession of the building last year. Now the two sides have agreed to formalise this into a sale deal,” said a source.
Prior to this sale, ADAG is estimated to have an exposure of about ₹4,000 crore to YES Bank. Reliance Infra has now closed three asset sale deals in the last 90 days as part of its debt reduction plan. This includes the Delhi-Agra toll road, Parbati Koldam transmission company, and now the Reliance Centre.
Karnataka Bank has planned to grow its business at a moderate 12 per cent to take the total business turnover to ₹1.42 lakh crore, according to Mahabaleshwara MS, Managing Director and Chief Executive Officer of the bank.
Addressing the staff members at the branches and offices across the country through virtual mode on Thursday, he said the CASA (current account savings account) share of the bank reached a new high of 31 per cent and the digital transactions crossed 90 per cent during the just concluded fiscal.
Stating that the bank has planned to grow its business at a moderate 12 per cent to take the total business turnover to ₹1,42,500 crore during the new financial year, he said with a healthy business growth, ‘cost lite’ liability portfolio, strengthened fundamentals etc., the year 2021-22 should be a ‘Year of Excellence’ for Karnataka Bank.
The objective of this virtual address was to give a broad outline of the business goals and strategies for the way forward in 2021-22.
He said Karnataka Bank is at the cusp of engineering a breakthrough in the banking industry as the ground has already been laid to be the ‘digital bank of the future’. Even before Covid-19 outbreak, Indian banking industry had been undergoing a paradigm shift from the traditional ways of banking with digital technology powering this change in all the aspects of banking.
The advent of payment banks and fintech lenders has accelerated this change, he said, adding Karnataka Bank is one of the first banks to acknowledge, accept and adopt this change and took a proactive step as early as 2017 by initiating a holistic transformation journey – ‘Project KBL Vikaas’.
Center of excellence
Establishing a Digital Centre of Excellence (DCoE) in Bengaluru has been the most important outcome of this project. He said DCoE is now the digital innovation hub of the bank powering the launch of various digital products harnessing the latest cutting edge digital technology in the industry.
“As the digital is the way forward, we have placed digital banking on fast forward mode to pursue the concept of ‘KBL NxT’. With many more digital products lined up for this new financial year under this new set up, Karnataka Bank has a business advantage heading into the new financial year 2021-22 in a post-Covid scenario and it is my appeal to each one of you to rise to the occasion,” he said.
Financial Express is now on Telegram. 
