Category: Banking & Finance

NHAI, BFSI News, ET BFSI

Banking & Finance

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The amount of fraudulent transactions from the NHAI accounts with Kotak Mahindra Bank’s Exhibition Road branch in Patna has increased to Rs 32 crore and may be more against the initial claim of Rs15 crore by Patna police, sources said.

However, Patna police officers are tight-lipped on the matter. More than a month have passed since the fraud was detected on January 2. Only four persons, including former manager of Exhibition Road branch, Sumit Kumar, have been arrested so far.

The fraudulent transactions came to light after one Shubham Kumar Gupta (28) of Jehanabad the branch on January 2 to make an RTGS transfer of Rs11.73 crore from the NHAI account to another bank account.

But the Patna police is still not clear about the total amount of fraudulent withdrawal or the time period of the fraud. When asked, Town DSP Suresh Kumar told TOI over the phone on Saturday that as per his information, the amount transacted fraudulently from the NHAI bank account is Rs28 crore.

“Bank authorities are conducting internal audit after which police will get to know the complete details. However, I have asked the bank to provide a report by Monday,” he said, adding that the bank authorities are expert of audit and not the police.

NHAI regional officer Colonel (retired) Chanda Vats told TOI that fraudulent transactions of Rs32 crore from NHAI accounts have come to light. He said Rs32 crore might only be a tip of the total amount withdrawn fraudulently and more could come to light in future.

“The bank authorities are not cooperating with us. They have not provided us reconciliation statement yet, even though we have sought it,” he said.

Vats also said the fraudulent transactions had taken place actually from two separate NHAI accounts, both with Kotak Mahindra Bank’s Exhibition Road branch. He said one account is for Mokama-Bakhtiyarpur national highways project and another is for Patna-Gaya NH project.

“These bank accounts are opened by joint signature of the project director and the district land acquisition officer (DLAO) concerned. The account is later handled by the DLAO. All disbursals to the beneficiaries concerned against their acquired land are made by the DLAO’s signature,” Vats said.

Vats said he will call the bank’s higher authorities to cooperate with NHAI and give details of all transactions or “we would write to NHAI headquarters urging not to do business with them in future”.

Patna DM Chandrashekhar Singh, when contacted, had found no discrepancies from the district administration side. “DLAO transferred from the bank account only to the beneficiaries against land acquisition,” he had said and added: “Report could be taken from NHAI. Only they can tell what has happened with the accounts.”



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PNB expects Rs 3,800 cr recovery from Bhushan Power resolution; sees good amount from DHFL too, BFSI News, ET BFSI

Banking & Finance

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State-owned Punjab National Bank (PNB) is expecting to recover a substantial Rs 3,800 crore from Bhushan Power and Steel under debt resolution in NCLT, which will help it achieve the target of Rs 8,000 crore cash recoveries during this fiscal, its managing director and CEO S S Mallikarjuna Rao said.

Besides, the city-based lender also hopes to make good recovery of its exposure in crisis-hit DHFL, which is undergoing a resolution process currently.

Sticking to the bank’s previous guidance on restricting the gross NPAs below 14 per cent and net NPAs lower than 5 per cent by the end of the current fiscal, Rao said there has been an improvement in collection efficiency as well in January after a dampened December.

Across the banking industry, the collections were much better in October and November, before dampening again in December because of lack of clarity on NPA recognition from the Supreme Court, he added.

In response to a public interest litigation during Covid times, the Supreme Court had passed an interim order in September, directing banks not to declare accounts as NPA, which otherwise would have turned dud, during March-August till further orders.

“So there was an impulse on identification on NPA. However, the collections have again improved in the month of January across the banking industry, including our bank. Considering, these factors, we are very confident that there won’t be any further increase (of bad loans). About pro-forma NPA, we have already marked them, we have identified and have done the complete provisioning, so there won’t be any impact in Q4 (FY21),” Rao said in a conference post bank’s December quarter results.

“On the contrary, I am expecting reduction of the proforma NPA what we have declared as on December 31, 2020.”

The bank has posted a net profit of Rs 506 crore on a standalone basis in the quarter ended December 2020 of this fiscal. It had posted a net loss of Rs 492.28 crore in the year-ago period.

The lender also cut down on its gross non-performing assets (NPAs) to 12.99 per cent by the end of the December quarter from 16.30 per cent in the year-ago period. While, net NPAs reduced to 4.03 per cent from 7.18 per cent.

Rao said the recovery from smaller accounts have been better, if not very good, as there was a dampening spirit in December.

“Recoveries are better in January, it will be definitely on the expected lines up to March. Last time, I had given guidance of recovery of about Rs 8,000 crore through reduction (by way of resolution) in NCLT cases. So we will await as there are big accounts… Bhushan Power is one account where we are anticipating cash recovery of Rs 3,800 crore. And DHFL is also there where bidding (for resolution of NPA) has been completed very recently. There also we expect a good amount of recovery,” Rao said.

So these two things (Bhushan Power & Steel Ltd and DHFL) together will be able to achieve the expected target what we were anticipating in terms of NCLT (National Company Law Tribunal), he added.

In June, the chief of the country’s second largest public sector lender had said that PNB expects to make recoveries worth Rs 8,000 crore in 2020-21.

On the NPA situation, Rao said as the bank has already identified those accounts which otherwise could fall into NPA category and its bad asset numbers would have been different and has made provision accordingly, there won’t be any change in its earlier stance of restricting gross and bad loan ratios below 14 per cent and 5 per cent, respectively.

“So, our guidance is what we have given last time also. We would like to retain the net NPA below 5 per cent by March and we would like to retain the gross NPA 14 per cent… January appears to be much better in terms of collections. So I am very confident that we will be able to control the NPA,” Rao said.



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Early identification of stress, capitalisation augur well for banks, BFSI News, ET BFSI

Banking & Finance

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Somasekhar Vemuri, Senior Director, CRISIL Ratings

Banks have improved the granularity of their loan books by focusing more on retail asset classes and reducing potential asset-quality shocks due to defaults by large entities. The share of medium and large industries in non-food credit of banks fell from ~40% in fiscal 2012 to ~27% in fiscal 2020, while that of personal loans rose from 18% to 28%.

While granular loans to retail borrowers and micro, small and medium enterprises (MSMEs) can result in elevated stress during the pandemic, given the unprecedented impact on household incomes and small businesses, policy mitigations announced would limit the impact to some extent.

Rama Patel, Director, CRISIL Ratings
Rama Patel, Director, CRISIL Ratings

Crucially, measures such as moratorium on loans, relief in interest on interest, one-time debt restructuring, and emergency credit line guarantee schemes have thrown many a lifeline to businesses and households. They also helped banks, especially those with diversified portfolios, thwart significant slippages.

The other major reason for systemic resilience is capital infusion. Public sector banks (PSBs) have raised ~Rs 3.4 lakh crore of equity in the past five years, bulk of it from the government.

That has shored up systemic capital adequacy ratio to 14.7% last fiscal and further to 15.8% as of September 2020 – almost on a par with advanced economies such as the US (15.9%) and South Korea (15.3%). Private sector banks are in a better position, reflected in their capital adequacy ratio of 16.7%, compared with 13.1% for PSBs as of March 2020.

To be sure, NPAs would rise in the pandemic aftermath and necessitate high capitalisation levels.

Robust capitalisation facilitates timely recognition and quick resolution of pandemic-related stress and faster recovery of credit growth. The different trajectories of banking systems in the US and the euro area after the GFC demonstrate this. Higher recapitalisation of US banks compared with the euro area enabled faster resolution of stress and facilitated quicker recovery of credit growth after the GFC in the US.

While it is natural for credit growth to be muted during a crisis due to lower demand and risk aversion, it is important that the pace improves once uncertainty abates and demand returns.

There are two reasons for this. One, bank credit growth significantly influences the growth trajectory of a developing country like India where credit to the private non-financial sector is underpenetrated at ~58% of GDP, compared with over 150% in the US, euro area, South Korea or even China.

Two, it is an essential condition for banking system resilience. Banks need to grow and diversify their loan books to enhance profitability that, in turn, is the key to building capital buffers against future risks and growth. Profitability can be sustained only through credit growth, backed by robust risk management and appropriate pricing.

As the pandemic-related stress continues to unfold, the improved resilience of Indian banks will be tested. A continued focus on shoring up capital to withstand asset-quality pressures will pave the way for credit growth as recovery gathers pace.

Click here to read all ETBFSI blogs.

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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Reports, BFSI News, ET BFSI

Banking & Finance

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Development Finance Institution (DFI) is expected to be set up with India Infrastructure Finance Company’s (IIFCL) paid-up capital of Rs 10,000 crore and an additional provision of Rs 10,000 crore announced in the Budget 2021, reported Business Standard.

As per the draft note, the Cabinet said that the Reserve Bank of India (RBI) Act and the Banking Regulation Act may be amended to set up the DFI for enabling it access to a line of credit, said BS. quoting sources.

“With an initial capital infusion of Rs 20,000 crore, the government or other investors may infuse up to Rs 1 trillion in the DFI at a later stage. The government’s part will come through the supplementary demand for grants.Prior to subsuming the infrastructure company with the DFI, it will clean up its books by providing for outstanding bad loans worth Rs 4,500 crore.”

It is also expected that the entity may have a lower minimum capital adequacy ratio of 9%, compared to 12-15% for NBFCs. The draft also proposes transfer of the assets and liabilities of IIFCL to National Bank for Financing Infrastructure and Development (NaBFID).

Post the transfer, IIFCL shall fully provide for all its outstanding bad assets, so that the new institution will have a clean book. It also said any additional requirement of money will be given through demand for grants subsequently, said BS.

Banks have been facing the challenge of an asset-liability mismatch in funding infrastructure projects or other projects with a long gestation period, and this gave the rise to the idea of setting up of a DFI, which will include access to low-cost funds from a priority-sector shortfall and greater headroom for borrowing, compared to other NBFCs.

Currently, there are some financial institutions — Indian Railway Finance Corporation, National Bank for Agriculture and Rural Development, and the Small Industries Development Bank of India — are working like the DFI.

Meanwhile, the proposal is likely to get a nod from the Cabinet soon.



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PNB convenes EGM to elect a 2nd shareholder director to its Board

Banking & Finance

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Punjab National Bank (PNB), the country’s second largest public sector bank, has convened an extraordinary general meeting (EGM) on March 17 to elect ‘one shareholder director’. This will be a virtual meeting of shareholders.

This move is significant as the bank is now looking to rope in its second shareholder director on the strength of a recent Finance Ministry decision empowering Public Sector Banks ( PSB) boards to act on the decisions that remained held up at various board-level committees due to lack of quorum arising from vacancies or recusal by existing directors.

A shareholder director is one who is elected from among shareholders other than central government. A public sector bank has two main categories of shareholders— central government and ‘other shareholders’ (public shareholders). In India, all the public sector banks are listed entities although none of them are registered as companies under the Companies Act. There are separate legislations that govern the Board composition of such PSBs.

 

The elected shareholder director is finally appointed by the Nomination and Remuneration Committee (NRC) of the bank Board concerned. PNB currently does not have the requisite NRC strength and is therefore looking to get another shareholder director through Board approval route after election of such a director by the shareholders of the bank at an EGM.

PNB has moved to get another shareholder director after its recent nearly ₹3,788 crore qualified institutional placement (QIP), which saw the centre’s shareholding in the bank drop from 85.59 per cent to 76.87 per cent. With the Centre’s shareholding coming down, PNB became technically eligible to have two shareholder directors.

Having an additional shareholder director on a Board is useful for Banks like PNB as all shareholder directors are counted as independent directors for the purpose of compliance with SEBI regulations for listed entities.

In Boards of public sector banks, there are executive directors appointed by central government, there is government nominee director (official of central government), there is a RBI nominee director, two employee directors ( representing workmen and officers) and other directors (shareholder directors).

This will be the second shareholder director for PNB besides Asha Bhandarker, who was elected on September 12,2018 for a period of three years.

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Why is it so annoying to send money abroad?, BFSI News, ET BFSI

Banking & Finance

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If you’ve ever spent significant time abroad, or tried supporting family overseas, you know that the process of sending money internationally can be stressful. It costs time and money — often too much of both. There’s hope that global crypto currencies will make this process easier, but until those become more accepted, you’ll have to find other ways to save.

I remember returning to New Delhi after a semester at Yale University in Connecticut some years back and trying to move what I had in U.S. dollars to my bank account in India. The process of remitting these savings was so clunky – involving applications in banks in both countries — that I just used my U.S. debit card until the account ran dry. I’m sure I paid a bunch of fees and got short-changed on currency conversion costs, but I found it easier to spend this money rather than spending time trying to find a cheaper way.

Although the costs of remitting have fallen in recent years, they’re still above the United Nations’ Sustainable Development Goal of 3% per transaction by 2030. A world bank study shows that the overall average costs of transmission were 6.5% in 2020, with sending money digitally costing slightly less and sending via bank transfer slightly more.

That means for every $100 you want to remit abroad, you really only send around $93 on average. This varies depending on how you move your money and by where you’re sending money to and from. For example, remitting from a Group of Twenty (G20) country will on average cost just more than 3% if it’s going to India, but more than 6% if it’s going to South Africa. When money is sent within Sub-Saharan Africa, fees can into as much as 20% of the amount.

That’s a heavy cost for what should be a simple transaction. According to the World Bank, global citizens sent and received more than $650 billion in personal remittances in 2019. That means we lost around $45 billion to costs alone.

Fortunately, there are a few things you can do to lower your own costs when trundling money around the world. But keep in mind that exact costs will depend on where you are and where you’re remitting to.

First, it helps to know that there are two main components of the cost in sending money abroad: the fees of the bank or transmitting entity you use, and the foreign exchange margin they make when they buy at the lower end of the currency exchange rate and sell at the higher end. You should check both before you move any money. You’re getting a good deal if your total cost — fees plus the currency exchange margin — is lower than 5% of the transaction amount. If you’re being offered 8% of the amount, that’s generally too much.

You should also consider where you go. There are four entities that will do the job: banks, credit and debit cards, traditional money transfer firms and fintechs. No surprises here that the banks and cash transfers cost the most and fintech firms the least.

If the country you’re remitting to allows for exchanging mobile money through e-wallets, then that’s likely to be the cheapest way to send and receive money. Find a licensed, regulated entity that works between the geographies you want to move money between, and check if the total cost is less than 5%. But keep in mind that certain places don’t have wallets that work with each other, and that there may be country specific rules around the movement of money.

Cost isn’t the only consideration either. Perhaps it’s worth paying the higher bank transfer fees because you get the greatest sense of security from going through that institution. It usually helps to find others you who have made similar payments and see what worked best for them.

Of course, what you decide to use will ultimately depend on your goals. Are you trying to set up a child who’s just moved abroad? If so, going through a bank is still your best bet. And you’ll want to make sure they have at least two months of rent, food and other expenses in cash since setting up cross-border bank accounts takes time.

Are you sending money back to your family on a regular basis? Then you’ll want a cheaper fintech solution if possible, otherwise a bank will remain your friend. If you’re just traveling for a short period (once we’re traveling again), you can simply use your debit or credit cards to get access to your own money — check with your card company, though, about any foreign transaction fees — or you can use mobile money in the form of e-wallets.

No, these solutions aren’t perfect, and yes, the remittance system remains a headache. We can only hope that as crypto currencies gain acceptance, moving money across countries will become as fast, easy and cheap as moving money within them.



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CARE Ratings standalone profit drops 4% at ₹15.81 crore in December quarter

Banking & Finance

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CARE Ratings reported a 4 per cent decline in standalone net profit at ₹15.81 crore in the third quarter ended December 31, against Rs 16.47 crore in the year ago quarter.

The Board of Directors of the credit rating agency declared an interim dividend of ₹3 per share having a nominal value of ₹10 each.

Revenue from operations in the reporting quarter was at ₹46.50 crore, declined about 7 per cent year-on-year (yoy). Other income at ₹8.32 crore was up about 12 per cent yoy.

Employee benefit expenses were at ₹26.06 crore, rose about 12 per cent yoy. Other expenses at ₹5.79 crore were down about 46 per cent yoy.

CARE Ratings reported an 8 per cent yoy increase in consolidated net profit at ₹18.93 crore in the reporting quarter against ₹17.57 crore in the year ago period.

The consolidated financial results include results of CARE Ratings and its subsidiaries — CARE Risk Solutions, CARE Advisory Research and Training, CARE Ratings (Africa)and CARE Ratings Nepal.

“The Company has assessed the impact of COVID-19 pandemic on its financial results based on the internal and external information up to the date of approval of these financial results and the Company expects to recover the carrying amounts of its investments, intangible assets, trade receivables & other assets. The Company will continue to closely monitor the future economic conditions and assess its impact on its financial results,” according to the notes to accounts.

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NABARD disburses ₹16,500 cr under rural infra fund till Jan 31 this fiscal

Banking & Finance

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The National Bank for Agriculture and Rural Development (NABARD) has disbursed ₹16,500 crore under the Rural Infrastructure Development Fund (RIDF) during the current financial year so far (up to January 31, 2021).

Cumulative disbursements under the fund, which was started in 1995 to create social assets in rural India, stood at ₹3,10,849 crore as on January 31, 2021, NABARD said in a statement.

Also read: Enhanced MIF to support irrigation coverage for 1 crore ha

Disbursements in financial year ending 2020 under the ongoing tranches of RIDF aggregated ₹26,266 crore, according to NABARD’s annual report.

Under RIDF, low-cost funds are provided to States to facilitate completion of incomplete rural infrastructure projects.

The eligible activities under RIDF cover 37 activities of rural life, broadly categorised under Agriculture and Irrigation, Rural Connectivity and Social Sector, including drinking water, primary health and education.

Also read: IIT-Kharagpur, NABARD to organise Agri-Food Techathon event

GR Chintala, Chairman, NABARD, said: “The increased allocations (in the Union Budget for 2021-22) to RIDF and Micro Irrigation Fund (MIF) at ₹40,000 crore (from ₹30,000 crore) and ₹10,000 crore (from ₹5,000 crore) respectively, will help push rural infrastructure projects across States.”

As per the statement, doubling the MIF to ₹10,000 crore will promote water use efficiency in agriculture.

NABARD said, over the last two years, an amount of ₹3,970 crore has been sanctioned to seven States — Andhra Pradesh, Gujarat, Tamil Nadu, Haryana, West Bengal, Punjab and Uttarakhand, which would help bring around 13 lakh hectares of land under micro irrigation.

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PNB on track to achieving proit of ₹ 2,000 crore this fiscal despite Covid-19 challenges

Banking & Finance

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Punjab National Bank, Inida’s second largest public sector bank, is confident of recording profits in the fourth quarter as well as achieving the overall indicated profit of ₹2,000 crore for the current fiscal despite pandemic induced challenges, Ch. SS Mallikarjuna Rao, Managing Director & CEO, has said.

The public sector bank is also confident of keeping the gross NPA level as a percentage of advances below 14 per cent and net NPA level below 5 per cent by end-March this fiscal, Rao told a virtual press conference on Saturday, after the announcement of the Q3 financial performance.

It maybe recalled that PNB senior management had at end of September this fiscal guided for gross NPA of less than 14 per cent and net NPA of 5 per cent by end March 2021.

“We still retain that (guidance). While challenge has been there for Q3 and SC judgement is holding back on identification of NPA, January 2021 appears to be better in terms of collections. We are very confident we will be able to control. Our effort will be to maintain at the same level as we have declared today…but the stress in the system for which we have done provisioning, we would like to see that stress removed in Q4,” he said.

Although the Supreme Court is yet to pronounce final judegment on the NPA recognition matter, PNB has made an assessment, and based on that made adequate provisioning in the financial statements for the quarter ended December 31, 2020, he said.

As of end December 2020, PNB had gross NPA of 12.99 per cent and net NPA of 4.03 per cent. This was lower than the gross NPA of 13.43 per cent and net NPA of 4.75 per cent in September 2020.

On Friday, PNB reported a net profit of ₹506 crore for the third quarter ended December 31, 2020. For the first half this fiscal, PNB had reported a net profit of ₹929 crore.

“We are looking at market conditions to optimise the profitability in terms of credit and treasury,” he said, exuding confidence of good fourth quarter performance. “If you look at the performance of PNB in last three years, it is slowly and steadily coming to profitability in terms of business and strengthening of asset quality,” he said.

Bad bank

Rao said that the concept of a bad bank was welcome initiative. He that the proposed initiative is going to be a facilitator to bring all the approvals for the bidder at one go and that it is going to be a single window process.

In his view, the bad bank at the initial stage will only see “transfer” of assets from the lender and will not be a “purchase” transaction. “Because this is only a transfer of assets, I don’t expect any bottlenecks. Within one year bad bank will get settled and attain maturity,” he said.

Although the Finance Ministry has categorically said that government will not infuse any capital in the bad bank, Rao felt that capital requirement will only be moderate and the banks themselves will be able to fork this out. “Capital requirement will arise only when bad bank purchases from the banks. It will not be a purchase as I understand it will be a transfer which will not require capital at the higher level. It will require moderate capital,” he said.

Engaging with investors

Rao indicated that PNB would begin engaging with investors to gauge the appetite for further qualified institutional placement (QIP) from Monday. It maybe recalled that PNB had in December 2020 raised ₹3,788 crore via QIP, which fell short of the announced targeted mop up of ₹7,000 crore. “We will do the remaining portion of QIP at an appropriate time. It could happen even before this fiscal end,” he said.

Rao also said that PNB would raise Additional Tier 1 (AT-1) capital of ₹2,500 crore before end March.

Till date, PNB has raised ₹8,283 crore out of the ₹14,000 crore capital that it last year set out to raise from the market. Rao also said that PNB is not looking to seek any capital support from the government and would look to “stand on its own legs” and mobilise capital from the market.

As regards plans for life insurance companies which it has invested in and whether the bank would review shareholding now that FDI limit has been raised to 74 per cent in budget, Rao said that no such immediate plans are there on this front.

PNB chief pointed out that both PNB MetLife (PNB holds 30 per cent) and CHOICE (PNB holds 23 per cent) are unlisted companies, and would first be required to be listed to discover the right enterprise valuation.

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What are Indians buying with Buy Now Pay Later?, BFSI News, ET BFSI

Banking & Finance

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The ‘Buy Now Pay Later’ segment is seeing larger adoption across different geographies and product segments from earlier dominated by smartphone purchases on BNPL mode.

On assessing the BNPL transactions on its Brand EMI platform, leading POS player Mswipe said they’re witnessing BNPL mechanism being used to purchase musical instruments, mechanization of kitchen, hair treatment, Mobiles, Consumer Durables, Education, Health, Furniture, Wellness and Luxury segments.

Leading digital consumer lender Zest Money on its platform saw the demand for credit in BNPL with 20% growth in women customer base with spends on Edtech and men splurging on fashion, high end smartphones, laptops, fitness watches, electric vehicles were driving the larger transactions.

Geographically, Zest Money saw a demand for BNPL across 18,921 pin codes with customers in Bengaluru looking for online electronics and fashion, Mumbai – Education & Travel, Delhi NCR- Fashion & Travel, Hyderabad – Offline Electronics & Personal Loans, Pune: Fashion & Education, Chennai: Education & offline-electronics.

Mswipe on its platform saw a unique trend with customers in Mumbai, Bengaluru & Delhi saw a growing use of BNPL for hair loss and thinning treatment and the average transaction size at Rs 43,000.

On the western part of the country M-swipe observe people are using BNPL to buy musical instruments like Guitar and Piano, whereas in the North and Eastern parts of India, BNPL is being used to BNPL for mechanisation of the kitchen with customers buying Chimney, Cooktops, Hobs, Built-in Oven, Cooking Range among others. Mswipe saw an average ticket size of INR 20, 000 for these products purchased on BNPL.

In the South, especially in cities of Chennai, Coimbatore and Erode in Tamil Nadu and Trivandrum, Ernakulam, Angamaly, Calicut and Kannur in Kerala, BNPL was used to purchase formal clothing.

Manish Patel, Founder and CEO, Mswipe said, “The insights reveal a fundamental shift in the behaviour of consumers both in terms of their lifestyle choices and their financing preferences. The growing EMI economy creates opportunities for small businesses that have not been using checkout finance as an incentive for their customers up until now.

According to Zest Money, the BNPL option offers greater flexibility to spread the cost and has noticed that the average ticket size for BNPL is higher and it plays a crucial role in reviving consumer demand, especially for large ticket products. It also observed that the highest volume of premium products were purchased on Fridays. High end smartphones, laptops, large appliances, and fitness watches drove demand in the category.

Lizzie Chapman, CEO and Co-Founder ZestMoney said, “2020 will be remembered as one of the most pivotal years in the adoption of Buy Now, Pay Later in India. We saw an increased trend of digitally savvy customers who prefer transparent financing options like BNPL over unfair and hidden fees associated with traditional products. The category is poised for massive growth this year as the consumer habit is here to stay. Consumers are clearly loving the all-digital experience for credit. We strongly feel India will emerge as the largest market for BNPL and will leapfrog credit cards entirely.”

Zest Money is looking to ramp up their BNPL presence to 400,000 touch points in 2021 from current 15,000.

The Other Side

On a different note, BNPL has grown exponentially in United Kingdom . UK’s Financial Conduct Authority is set to regulate the BNPL segment with new rules as fears mount over the growing debt burden for cash-strapped consumers and shoppers.

The use of BNPL has grown four times in 2020 and is now at £2.7 billion in UK over 5 million people using the product since the onset of Covid-19 pandemic. Early trends show that consumers are taking on debt which they cannot afford.

The exponential growth of BNPL has given consumers a significant alternative to a more expensive credit as per the FCA but it also has “significant potential for consumer harm”.

According to FCA one in ten customer of a major bank using BNPL are already failing to clear their dues.

“Changes are urgently need to bring BNPL into regulation to protect consumers to ensure that there is a secure provision of debt advice to help all those who may need it and to maintain a sustained regulatory response to the pandemic,” states Chritopher Woolard, chairing a review into the unsecured credit market at the FCA.



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