Category: Banking & Finance

Surabhi

Even as the Reserve Bank of India extended the timeline to apply for a licence as a pan-India umbrella entity for retail payments to March 31,at least four to five consortiums of banks, fintechs and companies are drawing up plans to compete with the National Payments Corporation of India

“Requests have been received from various stakeholders, including Indian Banks’ Association, for extending the timeline, keeping in view the Covid-19-related disruptions and inconveniences. It has been accordingly decided to extend the timeline for making the application up to March 31, 2021,” the RBI said on Friday.

The RBI had earlier set February 26 as the last date for submitting applications.

Industry sources welcomed the extension, and said it would enable at least three to four more players to apply for the licence.

“This is more than ample time. Many players are still finalising plans, and now they, too, will be able to apply,” noted a source.

As of now, at least some players have started indicating their plans.

On Thursday, two leading private sector banks – Kotak Mahindra Bank and HDFC Bank – outlined investment plans in Ferbine Private Limited, which is promoted by Tata Sons Private Ltd, and was incorporated on January 18to make an application to the RBI for the PUE licence.

While HDFC Bank said it has executed an agreement for subscribing to 4,995 equity shares of the face value of ₹10 each fully paid-up issued by Ferbine, Kotak Mahindra Bank said it has picked up a 9.99 per cent stake in the company.

Earlier, So Hum Bharat Digital Payments had announced that it is in talks with private sector lender YES Bank for a 9.99 per cent equity investment and will work together on the proposed new umbrella entity (NUE).

At least, half a dozen more banks, corporates and fintechs are also finalising plans to apply for NUEs.

Private banks

While State Bank of India has been eyeing a licence and has been working out plans to apply to the RBI, private sector banks, including ICICI Bank and Axis Bank, are also understood to be working as a consortium are also understood to be readying plans.

Reliance Industries, through Reliance Jio Infocomm, is also working on similar plans to apply for an NUE, according to sources.

Fintechs and payment companies too are understood to be working with some of the banks as part of the consortium.

Email queries sent by BusinessLine to SBI, ICICI Bank, Axis Bank and Reliance on the issue did not elicit a response.

The RBI had, on August 18, 2020, released the framework for the umbrella entity for retail payments. It aims to help entities to set-up, manage and operate new payment systems in the retail space through means such as ATMs, White Label PoS; Aadhaar based payments and remittance services; newer payment methods, standards and technologies; and also operate clearing and settlement systems for participating banks and non-banks.

The guidelines also said the umbrella entity shall have a minimum paid-up capital of ₹500 crore and no single Promoter or Promoter Group shall have more than 40 per cent investment in the capital of the umbrella entity.

Surabhi

The Delhi High Court, on Thursday, issued notice to the Reserve Bank of India, Union of India and other respondents in the urgent application filed by Sasakawa-India Leprosy Foundation relating to Dewan Housing Finance Corporation Ltd.

The case will be heard on March 5, along with the main Writ Petition filed by the foundation.

Resolution plan

The urgent application, which came soon after the RBI approved the resolution plan by Piramal Group for DHFL, was taken up for hearing on Friday.

It has sought relief for setting aside the fixed deposit amount based on the same relief given to the National Housing Bank, and has sought that the funds should not be made part of the insolvency process.

Sasakawa-India Leprosy Foundation has over ₹8 crore stuck in fixed deposits of DHFL.

The FD holders of DHFL have been opposing the resolution plan as many of them would only back a get negligible amount of their investments. According to the plan, FD holders of up to ₹2 lakh will get their entire money back. But of those above ₹2 lakh, only 25 per cent of the money due will be paid.

A host of petitions filed by fixed deposit holders of DHFL for full repayment of their investments are set to be heard by the courts in the coming weeks, even as the resolution process of the housing finance company is at the final stages.

Meanwhile, the Administrator of Dewan Housing Finance Corporation Limited, has filed an application for submission of resolution plan of Piramal Capital and Housing Finance Limited, which was approved by the Committee of Creditors with the National Company Law Tribunal (NCLT), Mumbai Bench. This was filed on February 24.

The National Company Law Tribunal, Mumbai Bench, has also clubbed all petitions pending for dues in the DHFL resolution plan and has listed it for March 15.

“All petitions have been tagged together and will be considered as objection to the resolution plan,” said Vinay Kumar Mittal, a lead petitioner in the court on behalf of the FD holders of DHFL.

Three separate petitions by Mittal, Army Group Insurance Fund, Uttar Pradesh State Power Sector Employees Trust and Board of Trustees of Uttar Pradesh Power Corporation Contributory Provident Fund Trust were listed for hearing before the NCLT, Mumbai, on February 25 on DHFL resolution plan.

DHFL scrip closed 4.76 per cent higher on BSE on Friday at ₹19.8 apiece.

The Reserve Bank of India on Friday extended the time to make application for authorisation as a pan-India new umbrella entity for retail payments to March 31, 2021.

“Requests have been received from various stakeholders including Indian Banks’ Association for extending the timeline, keeping in view the Covid-19 related disruptions and inconveniences. It has been accordingly decided to extend the timeline for making the application up to March 31, 2021,” the RBI said.

The earlier due date was today (February 26).

Our Bureau

Maintaining the inflation target at 4 per cent into the medium-term is appropriate, according to the Reserve Bank of India’s Report on Currency and Finance (RCF) for the year 2020-21.

Trend inflation

The aforementioned comment is based on the observed decline in trend inflation since 2014 and a decline in inflation persistence.

This observation is significant as it comes in the backdrop of the upcoming review of the inflation target of 4 per cent, with upper tolerance level of 6 per cent and lower tolerance level of 2 per cent.

“Threshold inflation above which growth is unambiguously impaired ranges between 5 and 6 per cent in India, indicating that an inflation rate of 6 per cent is the appropriate upper tolerance limit for the inflation target.

“On the other hand, a lower bound above 2 per cent can lead to actual inflation frequently dipping below the tolerance band while a lower bound below 2 per cent will hamper growth, indicating that an inflation rate of 2 per cent is the appropriate lower tolerance bound.” the report said.

Under section 45ZA of the RBI Act1934, the Central Government, in consultation with the RBI, fixed the inflation target/ Flexible Inflation Target (FIT) for the period between August 5, 2016 and March 31, 2021, as 4 per cent, with upper tolerance level of 6 per cent and lower tolerance level of 2 per cent.

“Trend inflation to which actual inflation converges after a shock provides an appropriate benchmark for the inflation target; trend inflation has fallen from above 9 per cent before FIT to a range of 3.8 to 4.3 per cent during FIT, indicating that 4 per cent is the appropriate level of the inflation target for India,” the report emphasised.

Monetary policy

Batting for the continuation of the existing monetary policy framework, the report underscored that the institutional architecture of FIT in India, including the size of the monetary policy committee (MPC) and its composition, the decision-making process, communication practices and accountability mechanisms is in line with international best practices.

However, the definition of the time horizon of failure (defined as three consecutive quarters of average headline inflation overshooting/undershooting the upper and lower tolerance levels around the target), processes of onboarding of MPC members, some aspects of forward guidance and timings relating to release of minutes, shut periods and release of transcripts warrant a review.