Mumbai: IndusInd Bank on Monday said that two senior executives of its microfinance institution (MFI) arm Bharat Financial Inclusion — MD & CEO Shalabh Saxena, and ED & CFO Ashish Damani — have resigned. The bank has appointed an executive director and another senior executive to hold fort until a new management is in place.
The announcement appears to indicate a resolution of the row between the bank and Spandana Sphoorty Financial Services. Last week, the bank had said that Saxena and Damani were not relieved from their positions and they needed to continue in order to be part of a review of certain transactions. The announcement was in response to Spandana Sphoorty Financial declaring the appointments of Saxena and Damani. On Monday, IndusInd Bank said that both the executives had tendered their resignations to the chairman of the board. The bank also said that they have offered their assistance in the ongoing review of transactions related to Bharat Financial, for which the bank has appointed a “renowned international audit firm” to conduct independent review and ascertain the veracity of the anonymous complaints.
Shares of IndusInd Bank rose in early trade but closed marginally in the red, ending at Rs 895 on Monday. Last weekend, the RBI announced that it would allow promoters of private banks to hold up to 26%. It added that it would permit those promoters who have already diluted stake to increase it up to the new limit. “We eagerly await the operating guidelines as it gives the promoters an opportunity to inject capital to increase stake up to 26%,” Ashok Hinduja, chairman of IIHL, Mauritius, promoter entity of IndusInd Bank, had said.
With upcoming festivities like Christmas and New Year’s celebrations, a total of seven holidays, apart from Sundays and second and fourth Saturdays, have been announced for next month. Shillong has as many as four holidays, apart from weekend leaves.
The Reserve Bank of India has issued the list of holidays for 2021 in its annual list. Accordingly, all public and private sector banks across India will remain closed for up to 12 days in December, including weekend leaves.
Here is the full list of holidays for the month of December 2021:
December 3: Feast of St. Francis Xavier — Goa
December 18: Death Anniversary of U SoSo Tham — Shillong
December 24: Christmas Festival (Christmas Eve) — Aizawl, Shillong
Apart from this list of leaves as per the Holiday Under Negotiable Instruments Act, banks will also remain closed on some of the days of the weekends. These are mentioned below:
December 5: Sunday
December 11: Second Saturday of the month
December 12: Sunday
December 19: Sunday
December 25: Fourth Saturday of the month and Christmas
The Reserve Bank of India has disappointed big corporates that are looking to enter the banking sector, as it kept in abeyance the proposal of its internal working group to allow large industrial houses in the sector.
RBI said it had accepted 21 recommendations with some modifications of the 33 proposed by the committee in November last year. The most contentious proposal by the five-member panel was to allow large corporate houses as promoters of banks after amendments to the Banking Regulation Act. Experts pointed that RBI would face challenges in supervising non-financial sector entities, and supervisory resources could be further strained.
Former RBI governor Raghuram Rajan and deputy governor Viral Acharya were foremost among the experts who had opposed the proposed move last year.
“The history of such connected lending is invariably disastrous – how can the bank make good loans when it is owned by the borrower? Even an independent regulator, with all the information in the world, finds it difficult to be in every nook and corner of the financial system to stop poor lending,” they said in a joint article. In August 2011, the then RBI Governor D. Subbarao said in one of his speeches, “by far the biggest apprehension is about self-dealing — that companies will use the bank as a private pool of readily available funds.”
The argument against
While corporates can bring in capital, business experience and managerial competence, the biggest risk of allowing industrial houses to promote banks is the conflict of interest. A bank is an intermediary which channels public deposits to borrowers. It was not easy for supervisors to prevent or detect self-dealing or connected lending as banks could hide connected party or related party lending behind complex company structures and subsidiaries or through lending to suppliers of promoters and their group companies. RBI also has had an unsatisfactory record in its role as the banking supervisor. Recent governance failures in private banks can be traced to a lack of independence within the board.
The current status
Individuals and companies, directly or indirectly connected with large industrial houses, can participate in the equity of a new private sector bank up to 10 per cent but without controlling interest in the bank. Such shareholders are not allowed to have any Director on the board of the bank on account of shareholder agreements or otherwise, according to the RBI Guidelines for ‘on tap’ Licensing of Universal Banks in the Private Sector issued in August 2016. A group with assets of Rs 5,000 crore or more with the non-financial business of the group accounting for 40 per cent or more in terms of total assets or in terms of gross income, will be treated as a large industrial house, the RBI said.
Tech disruption
The real transformation in banking is coming from tech companies. A core function of traditional banking, payments, has already been disrupted by fintech. Now, Big Tech is pushing the envelope in financial intermediation. Data is central to the digital economy. It’s given Big Tech an opening, leading to the so-called DNA (data-network-activities feedback loop) advantage. Navigating the risks here is the emerging regulatory challenge. In this situation, there’s no pressing need to add another risk in terms of allowing industrial houses to promote banks.
New Delhi, Centre’s specialised groups will address banking challenges faced by exporters, said Union Minister of State for Finance, Dr Bhagwat Kishanrao Karad.
Speaking at the ‘Banking Conclave on Exports’ organised by FIEO in Mumbai on Friday, the minister announced formation of various groups to address the problems raised by exporters and other stakeholders consisting of FIEO, leading banks, IBA, Ministry of Commerce and Ministry of Finance including one on challenges of e-commerce retail exports.
He highlighted the importance of banking sector in promoting and facilitating exports.
He informed that several reforms related to the banking sector have taken place in the recent past, and all the banks have implemented it in a successful manner.
Besides, he said that the Centre is keen on extending the due support to the trade, and therefore the decision on the extension of Emergency Credit Line Guarantee Scheme (ECLGS) was taken “well in time”.
Furthermore, he assured the government is open for discussions and meetings to understand the challenges faced by the exporters, so as to strengthen and support the export trade.
New Delhi, Nov 26 (PTI) HDFC Bank on Friday said its board has approved the appointment of former RBI executive director Lily Vadera as independent director. The board of directors of the bank approved the appointment of Lily Vadera as an additional independent director of the bank for a period of five years effective from November 26, 2021, subject to the approval of the shareholders, HDFC Bank said in a regulatory filing.
Vadera, 61, has 33 years of experience in central banking. She retired as Executive Director from the Reserve Bank of India in October 2020.
As an ED of the RBI, she was in-charge of the Department of Regulation (DoR) where she dealt with the regulatory framework for various entities in the financial sector, covering all categories of banks and non-banking finance companies.
She was instrumental in putting in place a framework for a regulatory Sandbox to provide an enabling environment for fintech players to foster innovation in financial services and played a significant role in the amalgamation of banks in stress, the bank said.
She also represented RBI and played an important role as a member of the Insolvency Law Committee set up by the Ministry of Corporate Affairs. PTI KPM MR MR
New Delhi, The Reserve Bank of India has accepted 21 out of the 33 recommendations submitted by an internal working group on the ownership and corporate structure of India’s private sector banks.
The internal group was constituted by the central bank on June 12, 2020 to review the extant guidelines on ownership and corporate structure for Indian private sector banks.
“After examining the comments and suggestions received from the stakeholders and members of the public, it has been decided to accept 21 recommendations (some with partial modifications, where considered necessary). The remaining recommendations are under examination,” the RBI said.
Among the recommendations that were accepted by the central bank was that the cap on promoters’ stake in the long run of 15 years may be raised from the current levels of 15 per cent to 26 per cent of the paid-up voting equity share capital of the bank.
“This stipulation should be uniform for all types of promoters and would not mean that promoters, who have already diluted their holdings to below 26 per cent, will not be permitted to raise it to 26 per cent of the paid-up voting equity share capital of the bank,” the RBI said.
The working group had also recommended a monitoring mechanism that may be devised to ensure that control of promoting the entity or major shareholder of the bank, does not fall in the hands of persons who are not found to be fit and proper. This recommendation was also accepted by the RBI.
FILE PHOTO: An India Rupee note is seen in this illustration photo June 1, 2017. REUTERS/Thomas White/Illustration/File Photo
Lenders may soon be able to lay their hands on overseas assets of defaulting firms and personal guarantors.
The government has proposed adopting a global model law that will enable lenders to apply the Insolvency and Bankruptcy Code to defaulters’ assets lying overseas. These will include the offshore personal assets of the promoter if they have issued a personal guarantee. The changes would also allow the execution of orders against defaulters by overseas courts that have adopted the model law.
The government has invited public comments on the proposed modifications by December 15.
The model law lays down the basic framework for cooperation between domestic and foreign courts and domestic and foreign insolvency professionals.
Personal guarantors
In the case of a personal guarantor, their ‘habitual’ place of residence will be taken into account to decide the jurisdiction where the main bankruptcy proceedings will happen. Debt recovery tribunals and the National Company Law Tribunal (NCLT) benches and their appellate tribunals are platforms where overseas creditors could initiate or participate in proceedings against personal guarantors in India.
The introduction of a cross-border insolvency law in the IBC, that is in line with international best practices and suitable for the Indian context, may be beneficial to all stakeholders. Draft part Z, as recommended by the insolvency law committee, is under consideration for enactment,” the ministry said, while proposing the additional measures regarding personal guarantors.
The changes were proposed after the ILC, constituted under the corporate affairs ministry to review the implementation of the IBC, noted the lack of a framework for cross-border insolvency. The government has decided to put in place a comprehensive framework for this purpose based on UNCITRAL model law on cross-border insolvency, which could be made a part of the IBC by inserting a separate chapter for this purpose.
In January 2020, the government had constituted a crossborder insolvency rules/regulations committee to recommend subordinate legislation.
Banks have approached the National Company Law Tribunal for invoking personal guarantees of promoters of 17 defaulting companies.
The defaulting promoters include those of Punj Lloyd, Amtek Auto, ABG Shipyard, Videocon, Varun Shipping, and Lanco, according to reports.
Armed with a Supreme Court order, banks are looking to invoke personal guarantees of tycoons from Venugopal Dhoot to Kapil Wadhawan to recover unpaid loans from their delinquent firms
The guaranteed debt
According to an estimate, the top 10 personal guarantors have guaranteed debt of over Rs 1.6 lakh crore. Among the big names, former promoters of Bhushan Steel and Power Sanjay Singhal and his wife Aarti Singhal had furnished personal guarantees worth up to Rs 24,550 crore to take loans from a consortium of bank led by State Bank of India.
The former promoter of Reliance Communications, Anil Ambani, has also given a personal guarantee against the loan taken. Erstwhile promoter Wadhawan stands guarantee to loans taken by DHFL, which is sitting on debt of about Rs 90,000 crore, while Dhoot has also given a personal guarantee to a portion of Rs 22,000 crore loan to Videocon.
New Delhi, The Central Bureau of Investigation has registered a case against seven accused, including private firms, for perpetrating a fraud at Punjab National Bank (PNB) and Allahabad Bank in credit facilities and term loans to the tune of nearly Rs 73 crore during 2013.
The accused were identified as S.R. Alcobev Pvt. Ltd, New Industrial Estate, Jagatpur, Cuttack, its Managing Director Ranjan Kumar Padhi and Director Saina Kar; Naina Devi Suppliers Pvt. Ltd, Sainagoue Street, Kolkata, West Bengal (Corporate Guarantor), Chandraghanta Iron and Steel Traders Pvt. Ltd., Shyam Bazar Street, Kolkata, West Bengal (Corporate Guarantor), Brewforce Technologies, East Patel Nagar, New Delhi or Dehradun, Uttarakhand (Supplier) and a civil contractor named Sukanta Kumar Lenka, a resident of Cuttack.
According to the CBI, there is involvement of unknown public servants of Punjab National Bank, among others.
“The accused committed a fraud at Punjab National Bank, main branch, Buxi Bazar, Cuttack and Allahabad Bank, Bhubaneswar branch, in a matter of credit facilities or term loans to the tune of around Rs 73 crore (Rs 40 crore by PNB and Rs 33 crore by Indian Bank, formerly Allahabad Bank) during 2013,” the probe agency said in a statement.
After disbursal of the loan proceeds, the borrowers and guarantors allegedly violated the terms and conditions of the sanction and they neither procured the machineries nor deposited the instalments in time and the account turned into a non-performing asset (NPA).
It was further alleged that the accused, including promoters, directors, guarantors and suppliers, had misappropriated and diverted the loan proceeds with the ulterior motive to defraud the banks to the tune of nearly Rs 140.48 crore (principal amount plus interest as on September 30, 2021).
The CBI conducted searches at the premises of the accused situated at Cuttack (Odisha) and Dehradun (Uttarakhand).
Zuzar Tinwalla and Charu Mathur were part of a fireside chat, moderated by Amol Dethe, Editor, ETBFSI.
BFSI companies have been undergoing rapid digitisation for some years now. While many organisations had already been at the forefront in digitisation, the COVID-19 pandemic further amplified this adoption of new technologies.
“Pandemic has presented us with both difficulties and opportunities,” said Zuzar Tinwalla, COO-India & South Asia, Standard Chartered Bank at a fireside chat of ETBFSI Converge, titled ‘Crafting Tailor Made Products for Customers’.
Customer centric models
“Earlier, technologies were designed by keeping the internal processes guidelines and efficiency in mind, but that’s no longer the reality. Now, to be relevant, you have to keep the customer’s needs in mind.” he said, while elaborating on digitisation and how banks are catching up with it.
Charu Mathur, CDO & Head-Business Strategy of IndusInd Bank, adding to this, explained how banks have to be customer centric and not just process centric.
“It is extremely important for us now to understand our clients very deeply and keep our ears close to them,” she added.
Zuzar Tinwalla and Charu Mathur were part of a fireside chat, moderated by Amol Dethe, Editor, ETBFSI.
Adopting technology: Data science, AI & ML
Banks are rapidly adopting new technologies like data and analytics, AI & ML, bots and robots. Tinwalla said, “ Anything more than 90 days is now considered obsolete.”
“We are investing capabilities in building the basic data foundation, and that’s a very critical function as you go along. And then sitting on top of that, you need an intelligent modeling capability or a data science function as we call it. Leveraging machine learning and artificial intelligence, and connecting dots and making logical sense out of it is important. And then at the top, you need a delivery mechanism,” said Mathur.
Although AI will progress, it will never replace human intelligence, Tinwalla said. “What is going to be appropriate for the organisation is still a human decision,” Zuzar added.
What does the future look like?
The panelists agree that many collaborations with fintechs are going to be witnessed in the coming years.
“There’s a lot to learn from fintechs,” said Tinwalla, while explaining how fintechs complement and compete with banks.
On the innovation front, Mathur said, “Personalisation aspect will play a major role in driving customer experience. We see brands like Amazon and Netflix doing it quite well. I think more and more banks will probably start delivering something on the personalisation aspect, and demonstrate their ability of understanding the customer much deeper than what we do today.”
Furthermore, she believes that composable systems, which are completely API native to the core, will allow the banks to create products and services completely tailor made to a client’s unique requirements.
Automation will become an imperative rather than a good-to-have in the next 2-3 years while hyper-personalisation will see a lot of innovations after six to eight months, according to Mahesh Ramamoorthy, Chief Information Officer, Yes Bank.
If any bank wants to get into new service or product enhancements it will need straight-through processing or zero ops. A lot of learning will come from some of the good fintech companies that have enabled themselves and have dedicated to building the scale at a very low human footprintMahesh Ramamoorthy, Chief Information Officer, YES Bank, at the Fireside Chat during ETBFSI Converge.
Hyper-personalisation
Hyper-personalisation, he said, was at a nascent stage and a lot of banks are on that journey. There are a lot used cases for hyper-personalisation such as if a customer is doing a purchase and wants money, the bank should be able to triage customer location, profile request along with banking risk and give the customer the money. Another use case is the dispute journey where the transaction could be invalid, incorrect leading to reversal. If we could service the customer using automation or give the customer the progress of the dispute giving another self-experience it would be a defining moment, he said
Saving costs
With automation banks can, on one hand, save costs on the other drive the business. It creates more availability for the customer that increases the standing of the bank in the market. Creating efficiencies in the back office leads to more business in the front office, which leads to driving growth of not just accounts but also balances, Ramamoorthy said.
Despite automation, there are instances where manual intervention is needed, such as customer queries where multiple touchpoints are needed to be addressed, the banking could pull in the information but the service would be needed to be done manually.
He said the bank is open to understanding how fintech firms create accelerated journeys, deployments, service enhancement. “We have a huge focus on partnerships. most of the automation that the fintechs have brought to the table especially when thy use latest tools there have been good learnings,” he said.
Automation’s objective is to move to zero ops, with effective means and very minimum manual intervention. identifying critical processes, to create customer experience, efficiency with a sufficient amount of risk control.
