Category: Banking & Finance

The Reserve Bank of India (RBI) wants regulated entities (REs) to make it mandatory for the consumer to go through secure usage guidelines vis-a-vis digital payment applications.

REs (all Scheduled Commercial Banks,excluding Regional Rural Banks/ Small Finance Banks/Payments Banks/ Credit Card issuing non-banking finance companies) should incorporate secure, safe and responsible usage guidelines and training materials for end users within the digital payment applications, the central bank said.

The regulated entities should also make it mandatory (that is not providing any option to circumvent/ avoid the material) for the consumer to go through secure usage guidelines (even in the consumer’s preferred language), per the RBI’s ‘Master Direction on Digital Payment Security Controls’.

The aforementioned step needs to be taken while obtaining and recording confirmation during the on-boarding procedure in the first instance and first use after each update of the digital payment application or after major updates to secure and safe usage guidelines.

Consumer grievances

The RBI asked REs to mention/ incorporate a section on the digital payment application clearly specifying the process and procedure (with forms/ contact information) to lodge consumer grievances. A mechanism to keep this information periodically updated should also be put in place. The reporting facility on the application should provide an option for registering a grievance.

The RBI wants customer dispute handling, reporting and resolution procedures, including the expected timelines for the RE’s response, to be clearly defined.

REs have to ensure that their customers are provided information about the risks, benefits and liabilities of using digital payment products and its related services before they subscribe to them.

“Customers shall also be informed clearly and precisely on their rights, obligations and responsibilities on matters relating to digital payments, and, any problems that may arise from its service unavailability, processing errors and security breaches.

“The terms and conditions, including customer privacy and security policy applying to digital payment products and services, shall be readily available to customers within the product,” according to the Master Directions

The RBI underscored that all digital channels are to be offered on express willingness of customers and shall not be bundled without their knowledge.

Fraudulent transactions

REs are required to provide a mechanism on their mobile and internet banking application for their customers to, with necessary authentication, identify/ mark a transaction as fraudulent for seamless and immediate notification to his RE.

On such notification by the customer, the REs may endeavour to build the capability for seamless/ instant reporting of fraudulent transactions to the corresponding beneficiary/ counterparty’s RE; vice-versa have mechanism to receive such fraudulent transactions reported from other REs.

The objective of this mechanism is to accelerate early detection and enable the banking/ payment system to trace the transaction trail and mitigate the loss to the defrauded customer at the earliest possible time.

RBI said the alerts and OTPs received by the customer for online transactions shall identify the merchant name, wherever applicable, rather than the payment aggregator through which the transaction was effected.

Per the Directions, REs should set down the maximum number of failed log-in or authentication attempts, after which access to the digital payment product/ service is blocked.

They should have a secure procedure in place to re-activate the access to blocked product/ service. The customer shall be notified for failed log-in or authentication attempts.

Shobha Roy

Magma Housing Finance, which has been growing at nearly 17-18 per cent during the pandemic, is looking to grow by nearly 20-25 per cent in 2021-22, backed by a steady rise in demand.

The company, which is a wholly-owned subsidiary of Magma Fincorp Ltd, is looking to ramp up distribution and introduce a slew of digital initiatives, including artificial intelligence and machine learning, to improve efficiency in terms of customer acquisition and enhance productivity while bringing down costs.

According to Manish Jaiswal, MD and CEO, Magma Housing Finance, the company has reached the pre-pandemic levels of normalcy, both in terms of disbursals and collections. It expects its growth rate to be accelerated moving forward.

“Looking at our track record even in pandemic times we have grown by 18 per cent, so we are looking to grow substantially higher. We will close this year on a strong note and the momentum for next year; given the economic reforms announced by the Finance Minister and with the GDP growth, we expect to grow by around 20-25 per cent,” Jaiswal told BusinessLine.

Magma Housing, which operates in the low-ticket segment of around ₹10-12 lakh, has been witnessing an improvement in collection efficiency. The collection efficiency in bucket 0 is back to pre-pandemic levels at 98.8 per cent in January. Overall collection efficiency, which used to be 97-98 per cent, is currently around 95-96 per cent. The company is hopeful of improving its collection efficiency to 97-98 per cent in the next three-to-six months.

“The segment is on revival path so we are positive about the growth,” he said.

The Adar Poonawalla-controlled Rising Sun Holdings had recently announced that it would take a 60 per cent stake in Magma Fincorp by subscribing to a preferential issue for ₹3,456 crore, triggering an open offer for 26 per cent.

Even before Poonawala’s investment was announced, Magma Housing had informed the stock exchanges and had circulated a memorandum through merchant bankers for a capital raise of ₹400-500 crore.

Digital initiatives

The company, which went completely digital during the pandemic, is now betting big on AI and machine learning to use the data points to stress test its customers and analyse the data structure to get an overview of the customer across the loan lifecycle.

Nearly 87 per cent of the company’s files are now processed digitally. This not only helps it to to get business, but also be asset light as there is no need to push people to come to office or branch every morning.

“We have embarked on our journey on AI and tied up with a Bangalore-based company. The initiative will help improve the ability of field team to serve customers efficiently, take prompt decisions, and get even more efficient and productive, so we can take higher quality decision at a faster convenience rate both for customers and employees,” he said.

On the cost front, the company’s OPEX (operating expenses) to AUM, which was at 3.6 per cent, has already come down to 3.2 per cent. The company aims to bring it down further to 2.8-2.5 per cent in the next two to three years by deploying these tools and technology.

“Our productivity right now is 2.3 customers per frontline officer per month; this can further improve by 10-20 per cent in the next two to three years once we are able to put to use this AI and ML,” he said.