Tag: banking

Can’t wrap head around not having U.S. central bank digital currency, BFSI News, ET BFSI

Personal Finance

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Federal Reserve Governor Lael Brainard laid out a range of reasons for “urgency” around the issue of developing a U.S. central bank digital currency, including the fact that other countries such as China are moving ahead with their own.

“The dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency, a CBDC (central bank digital currency)offering, and the U.S. doesn’t have one, I just, I can’t wrap my head around that,” Brainard told the Aspen Institute Economic Strategy Group. “That just doesn’t sound like a sustainable future to me.”

Fed officials are taking a deep dive into the digital payments universe, collecting public feedback on the potential costs and benefits as well as design considerations with a view to publishing a discussion paper in early September.

Fed Chair Jerome Powell in comments earlier this month described the analysis as a key step in accelerating the Fed’s efforts to determine if it should issue its own CDBC.

“One of the most compelling use cases is in the international realm, where intermediation chains are opaque and long and costly,” Brainard said on Friday.

But there are domestic reasons too for a U.S.-backed digital currency, she said: the dramatic rise in stable coins, a form of cryptocurrency pegged to a conventional currency such as the U.S. dollar but not backed by any government.

Stable coins could proliferate and fragment the payment system, or one or two could emerge as dominant, she said. Either way, “in a world of stable coins you could imagine that households and businesses, if the migration away from the currency is really very intense, they would simply lose access to a safe government-backed settlement asset, which is of course what currency has always provided.”

A CBDC could also help solve other problems, she suggested, including the difficulty during the pandemic of getting government payments to people without bank accounts, who also tend to be the very people who need the payments the most.



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S&P, BFSI News, ET BFSI

Banking & Finance

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Global ratings agency S&P said has said its base case is that the global banking sector will continue to slowly stabilise as the economic rebound gains momentum and as support is gradually withdrawn. Should a re-intensification of risks occur, this will require more support from public authorities for the real economy.

For 11 of the top 20 banking jurisdictions, S&P estimates that a return to pre-Covid-19 levels of financial strength will not occur until 2023 or beyond. For the other nine, it estimates that recovery may occur by year-end 2022.

Strong support

The strong support by authorities for households and corporates over the course of Covid-19 has clearly helped banks, it said.
Lenders were also well-positioned going into the pandemic after banks bolstered their capital, provisioning, funding and liquidity buffers in the wake of the global financial crisis. S&P Global Ratings expects normalisation to be the dominant theme of the next 12 months as rebounding economies, vaccinations and state measures help banks bounce back much more quickly than was conceivable in the dark days of 2020.

“We see less downside risk for banks as economies rebound, vaccinations kick in and banks feel the stabilising effects of state intervention,” said S&P Global Ratings credit analyst Gavin Gunning.

“With no vaccine in October 2020, we believed at the time that 2021 could be a very difficult year for banks. State intervention on behalf of corporates and households — including significant fiscal and monetary policy support — is working and banks have benefited,” said Gunning.

Improving outlook

S&P’s net negative outlook for the global banking sector improved to 1 per cent in June from 31 per cent in October 2020. As at June 25, about 13 per cent of bank outlooks were negative. This is significantly lower than October 2020 when about one-third of rating outlooks on banks were negative.

Credit losses

Credit losses for Asia-Pacific banks could reach $585 billion by 2022, or nearly double the pre-Covid level raising credit costs for banks, S&P Global had said in June.

The credit costs of the Indian banking system may rise to 2.4 per cent by March 2022, compared to a base case of 2.2 per cent, according to the S&P report, “Intervention Worked: Credit Losses Set To Decline For Most Asia-Pacific Banks”.

“In India and Indonesia, where banks have suffered higher asset distress in recent years, the credit losses are set to trend closer to our expected long-term average in the coming years,” S&P had said.

Moratorium cushions blow

S&P had said moratoriums on loan repayments–together with fiscal, monetary, and policy support–have helped cushion the blow to borrowers in Asia-Pacific from the Covid outbreak and containment measures.

Credit losses are set to fall across most Asia-Pacific banking systems over the next two years, partly because targeted assistance to stretched borrowers will likely continue in many places until pandemic-related challenges substantially abate, it had said.



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We have a deep conviction in the India growth story: Uday Kotak

Banking & Finance

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Private sector lender Kotak Mahindra Bank is ready to grow at a substantially faster pace and plans to invest more in technology and digital platforms, and also look at opportunities in the unsecured retail finance.

In his message to shareholders in the bank’s annual report, Uday Kotak, Managing Director and CEO, Kotak Mahindra Bank said the lender has undertaken a mindset shift to make retail and commercial lending the focus, in addition to the corporate and deposit franchise.

Home loans

“For example, we are leveraging our low cost of funds to offer a competitive interest rate on home loans. Home loans give us an opportunity to build a longer-term relationship with customers,” he said, adding that the bank will get bolder in unsecured retail finance too. The bank will hold its AGM on August 25.

Also read: Strata raises $6-mn Series A from Kotak Investment Advisors, et al

Kotak further said that the bank “will not shy away” from taking bolder bets. “Today, we have a much lighter balance sheet and with sufficient capital in our hands, we are ready to grow substantially faster, but on our terms,” he said, adding that it has a deep conviction in the India growth story and confidence in risk management capabilities.

Emphasising on the importance of technology, he said it is the epicenter around which businesses will revolve and so needs more investments.

“The other area that takes precedence for us is higher investments in strengthening our digital and technology platforms and offerings. The future may be uncertain, but we can be confident that it belongs to technology,” he said.

‘Customer-centric’

The bank will also shift its business model towards being even more customer-centric.

“While customer-first was always the byword that we lived by, the needs of the customer are now even more front and centre. Our model will revolve principally around customers and business decisions will be taken with the customer at the core,” he said.

Also read:Kotak Mahindra Bank launches emergency personal loans for Covid treatment

He also stressed on the need for inclusive and sustainable growth. “Growth that is inclusive and that takes into account the environment, is socially responsible and scores high on governance and ethics. Doing good and doing well go hand in hand,” he said.

He also underlined that for the financial sector, the disproportionate importance of risk management has come to the fore.

“The industry also needs to stop postponing the inevitable and kicking the can down the road,” he said, adding that upfront action with an eye on enduring, sustainable growth, not swayed by quarterly, short-term results is a must for the future of a healthy Indian financial sector.

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RBI to HC, BFSI News, ET BFSI

Banking & Finance

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In a revelation, the Reserve Bank of India (RBI) has clarified that banks all over the country are witnessing increasing incidents of fraud due to their failure to adhere to its directives issued from time to time. In an affidavit submitted to the Nagpur bench of Bombay high court, the apex bank further disclosed that it doesn’t have the power to conduct investigations in banking frauds, nor does it have the machinery to do it.

The affidavit was filed while hearing a suo moto PIL for Rs25 crore losses caused to UCO Bank. Rajnish Vyas has been appointed as amicus curiae in the PIL. The embezzlement had taken place due to alleged forgery committed by a bank officer at its Wardha and Hinganghat branches. A division bench comprising justices Vinay Deshpande and Amit Borkar adjourned the hearing by six weeks.

Filed by RBI’s counsel SN Kumar, the affidavit added that as a regulator of the banking system in the country, it issued ‘Master Circular of Frauds’ to sensitize banks against scams and to have deterrent systems. “In spite of guidelines issued from time to time, it was observed that the frauds perpetrated in banks showed an increasing trend, mainly on account of non-adherence or improper implementation of circular directives issued by us. To enable the banks to have all current instructions in one place, a master circular incorporating all guidelines, instructions and directives on the subject was issued on August 1, 2001,” the affidavit mentioned.

Moreover, to enable the Government of India to have the required information on frauds, a suitable reporting system was introduced. Though the circular of March 22, 2002, has prescribed the period of reporting of frauds, it was realized that the banks aren’t following it scrupulously, the apex bank said.

At the RBI governor’s instance, the Central Vigilance Commission (CVC) has set up a high-level group to study incidents of fraud and suggest measures to prevent them. “This group observed that banks are not adhering to the time frame stipulated by RBI for reporting fraud cases. It has suggested that suitable penal action should be taken against defaulting banks. The banks are supposed to report frauds within a week of their detection and then a detailed report needs to be submitted in the prescribed format in the next three weeks,” the affidavit said.

The top bank added that to minimize incidents of fraud in the banking system, it has been making continuous efforts and regularly issuing circulars directing the banks to initiate appropriate action to contain them. “The Banking Regulation Act doesn’t empower RBI to conduct any investigations. The action may be initiated only after the offence is established by the law enforcement agencies. It’s mandatory for the banks to lodge a complaint of frauds with the police,” Kumar said.



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SBI reshuffles roles at HR and Tech verticals, BFSI News, ET BFSI

Banking & Finance

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State bank of India (SBI) has announced a few key reshuffling in the bank’s HR and Technology departments.

Om Prakash Mishra who was elevated to the post of Deputy Managing Director (DMD) in May 2021, is now designated as DMD (HR) & Corporate Development Officer (CDO).

Prior to becoming the DMD, Om Prakash Mishra has held the position of Chief General Manager (CGM) of SBI Hyderabad Circle.

He has taken over from Rana Ashutosh Kumar Singh who is now holding the portfolio of DMD (Strategy) & Chief Digital Officer.

Rana Ashutosh Kumar Singh, who has been associated with SBI for nearly three decades, has handled important assignments in Retail Banking, Credit, HR and International Banking.

Ravindra Pandey who was serving as DMD (Strategy) & Chief Digital Officer, has now taken charge as DMD and Chief Information Officer (CIO).

In his new role, he is leading the entire IT Ecosystem of the Bank including the running of SBI’s Core Banking System, Digital Channels as well as 400+ applications. He is working towards future-proofing SBI by implementing emerging technologies like AI, ML, Analytics, Robotics, Blockchain etc. He has also had the international experience of heading SBI’s Paris (France) operations as CEO.



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HDFC Bank’s Puri top earner among bankers in FY21; ICICI Bank’s Bakhshi forgoes salary in COVID year, BFSI News, ET BFSI

Banking & Finance

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HDFC Bank‘s Aditya Puri emerged as the highest grossing banker among the top three private sector lenders in his retirement year with total emoluments of Rs 13.82 crore. His successor Sashidhar Jagdishan, who took over as the chief executive and managing director of the largest private sector lender on October 27, 2020 grossed a salary of Rs 4.77 crore for the fiscal year, which included payments as a group head till his elevation. Puri’s overall payments included Rs 3.5 crore as post-retirement benefits.

Its immediate rival ICICI Bank‘s MD and CEO Sandeep Bakhshi “voluntarily relinquished” his fixed compensation of basic and supplementary allowances for FY21, which had seen wide-scale impact of the COVID pandemic, as per the second largest lender’s annual report.

Bakhshi, however, did receive allowances and perquisites amounting to Rs 38.38 lakh, the document said, adding he also got Rs 63.60 lakh as performance bonus from ICICI Prudential Life Insurance Company as deferred variable pay for FY17 and FY18.

Amitabh Chaudhry, who has been leading the third largest private sector lender Axis Bank, got paid Rs 6.52 crore, the bank’s annual report said, adding that the top management was not given any salary increment in FY21.

In the case of ICICI Bank, material risk takers including executive directors, chief financial officer and company secretary voluntarily opted for a 10 per cent salary reduction from May 1 in their payments, possibly because of the impact of COVID. Its executive director in-charge of wholesale banking Vishakha Mulye grossed Rs 5.64 crore, as per the annual report.

When compared with the bank’s median salary, the allowances drawn by Jagdishan were the highest at 139 times the median salary of a bank employee, while Chaudhry earned 104 times the median and ICICI Bank executive directors drew 96 times the median salary.

Data available for ‘crorepati’ bankers, or those earning above Rs 8.5 lakh a month, revealed that HDFC Bank had 200 executives in this exclusive club, including key management personnel, serving officials and those who left the lender midway through the fiscal year.

In comparison, Axis Bank had 69 bankers in the category who served throughout the year, while 17 employees who would otherwise have been in the club left it midway through the year, as per the annual report.



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Banks closing thousands of branches in US, UK as customers go digital, BFSI News, ET BFSI

Banking & Finance

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Retail banks are shutting thousands of branches and reducing staff in the US and the UK as they see most of the branch visitors who went digital during lockdowns may not come bank.

Fears among employees and customers of contracting Covid has also shut down many bank branches in the US.

Marquee banks

Wells Fargo, Citigroup and JPMorgan closed more than 250 branches in the first half of the year, which accounted for 1 to 5 per cent of their networks. The banks plan more reductions.

Wells Fargo, which had the highest branch count in the US at the start of the year, closed 154 branches, or 3 per cent of its domestic network, and reducing headcount by 6 per cent.

Citigroup cut its global branch count by roughly 100, or 4 per cent, with the closures spread across the US, Mexico and Asia. JPMorgan closed about 40 branches, or 1 per cent of its network.

The cuts represent a shift from the years leading up to the pandemic, when large US banks started opening new branches in a bid to grow their deposits after nearly a decade of cutbacks following the last financial crisis.

Other bank closures

New Jersey-based TD Bank had said earlier this year it will close 81 of its 1,223 retail branches in the US by April.

Cleveland-based KeyCorp said it will close at least 70 branches, about 7% of its total network, by mid-year, as more customers switch to digital transactions.

Huntington Bancshares of Ohio will close 198 branches in connection with its planned acquisition of TCF Financial Corp. of Detroit, by the second quarter of this year.

Bank of Hawaii recently announced the closure of 12 branches, while National Bank Holdings of Colorado will shutter seven branches by June 30.

Why are they shutting shop?

Low interest rates have also squeezed banks’ net interest margins, prompting them to cut operational costs elsewhere.

Banks are seeing the percentage of transactions being completed digitally constantly rising and have to think about how many branches they have. The pandemic has speeded up the shift to digital services.

The UK

More than 4,000 bank branches in the UK have closed in the past six years as lenders increase digital services for customers, said S&P Global Market Intelligence, citing data from UK consumer advocacy group Which.

In 2020, 368 bank branches alone shut down in the UK, led by Barclays which closed 105.

Already in 2021, TSB Bank plans to close 155 branches, Santander UK will shutter 111, HSBC Holdings, 82 and Barclays, 63.

Staring at extinction?

A report from Self Financial, a fintech firm, has a dire forecast for US bank branches last year. It predicts branches may become extinct by 2034. Based on trends, including the doubling of the rate of bank closures every three years, Self said the number of bank branches could fall to 40,000 by 2027 and then plunge to as low as 16,000 by 2030, the same level as in 1965. By 2034, Self all branches may be gone, it said.



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Banks closing thousands of branches in US, UK as customers go digital, BFSI News, ET BFSI

Banking & Finance

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Retail banks are shutting thousands of branches and reducing staff in the US and the UK as they see most of the branch visitors who went digital during lockdowns may not come bank.

Fears among employees and customers of contracting Covid has also shut down many bank branches in the US.

Marquee banks

Wells Fargo, Citigroup and JPMorgan closed more than 250 branches in the first half of the year, which accounted for 1 to 5 per cent of their networks. The banks plan more reductions.

Wells Fargo, which had the highest branch count in the US at the start of the year, closed 154 branches, or 3 per cent of its domestic network, and reducing headcount by 6 per cent.

Citigroup cut its global branch count by roughly 100, or 4 per cent, with the closures spread across the US, Mexico and Asia. JPMorgan closed about 40 branches, or 1 per cent of its network.

The cuts represent a shift from the years leading up to the pandemic, when large US banks started opening new branches in a bid to grow their deposits after nearly a decade of cutbacks following the last financial crisis.

Other bank closures

New Jersey-based TD Bank had said earlier this year it will close 81 of its 1,223 retail branches in the US by April.

Cleveland-based KeyCorp said it will close at least 70 branches, about 7% of its total network, by mid-year, as more customers switch to digital transactions.

Huntington Bancshares of Ohio will close 198 branches in connection with its planned acquisition of TCF Financial Corp. of Detroit, by the second quarter of this year.

Bank of Hawaii recently announced the closure of 12 branches, while National Bank Holdings of Colorado will shutter seven branches by June 30.

Why are they shutting shop?

Low interest rates have also squeezed banks’ net interest margins, prompting them to cut operational costs elsewhere.

Banks are seeing the percentage of transactions being completed digitally constantly rising and have to think about how many branches they have. The pandemic has speeded up the shift to digital services.

The UK

More than 4,000 bank branches in the UK have closed in the past six years as lenders increase digital services for customers, said S&P Global Market Intelligence, citing data from UK consumer advocacy group Which.

In 2020, 368 bank branches alone shut down in the UK, led by Barclays which closed 105.

Already in 2021, TSB Bank plans to close 155 branches, Santander UK will shutter 111, HSBC Holdings, 82 and Barclays, 63.

Staring at extinction?

A report from Self Financial, a fintech firm, has a dire forecast for US bank branches last year. It predicts branches may become extinct by 2034. Based on trends, including the doubling of the rate of bank closures every three years, Self said the number of bank branches could fall to 40,000 by 2027 and then plunge to as low as 16,000 by 2030, the same level as in 1965. By 2034, Self all branches may be gone, it said.



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SBM Bank ties up with 30 FinTechs to grow deposits, BFSI News, ET BFSI

Banking & Finance

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Mumbai: SBM Bank, a wholly-owned subsidiary of State Bank of Mauritius, has partnered with 30 fintech firms as a part of its strategy to acquire customers using the ‘banking as a service’ model.

Under this, the FinTechs provide an interface for customers, and the bank delivers the network effect by providing not just the banking platform but also access to other fintech services that it has partnered with.

SBM earlier operated as an Indian branch of its parent doing wholesale banking and did not have any electronic interface like internet or mobile banking. In end-2018, the bank got a full-fledged bank licence. “This enabled us to leapfrog in terms of IT and provide a new technology stack to the customer,” said MD & CEO Sidharth Rath. According to him, the bank took a call to build a liability (deposit) franchise first. “Building a branch network is expensive and it costs as much as Rs 1-1.5 crore to set up a branch. For us, the lockdown was a blessing as it hastened the move to digital,” he added.

The FinTechs the bank has partnered with include Paisabazaar, through which it issues innovative products like a secured credit card. Young people and others who are otherwise ineligible for credit cards can instantly open a fixed deposit online and get a secured credit card. Once they build a track record of paying bills in time, they are eligible for a regular card.

Similarly, through a partnership with PayNearby, the bank can get small recurring deposits through the ‘Bachat Khata’ offered by the FinTech, which offers business correspondent services on the digital platform. The bank can offer customers immediate cross-border payments through its partnership with Nium. Other partners include RedCarpet, EnKash, Karbon, Finin, Open and Kodo.

“While we are present in only eight cities with physical branches, we have opened accounts in 500 cities with these digital accounts. This will continue to grow because the relationships have just about started,” said Neeraj Sinha, head (consumer & retail banking). Another advantage that SBM is exploiting is that of its offshore parent, which enables the bank to facilitate remittances under the RBI’s Liberalised Remittance Scheme for purchasing shares or other assets through a foreign currency account. Additionally, SBM’s model gains from the fact that it is not capital-intensive. The bank, which started out with Rs 500 crore, has added another Rs 100 crore to its capital base and has managed to generate profits from its first year of business.



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Bandhan Bank appoints Kamal Batra as Head–Assets

Banking & Finance

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Bandhan Bank has appointed Kamal Batra as Head – Assets to bolster its goal of building a robust and granular retail assets franchise.

The bank’s ‘Vision 2025’ envisages a well-diversified and high-quality asset portfolio, strategically spread across secured and unsecured advances. This appointment is aimed at providing the necessary leadership direction and support towards the same, said a press statement issued by the bank.

The four pillars of the bank’s asset base would comprise Emerging Entrepreneurs Business (erstwhile known as microbanking), housing finance, commercial banking and other retail assets.

Also read: Bandhan Bank acquires branding rights of Kolkata metro station

New focus

Batra will assume the responsibility for growing the bank’s commercial banking (comprising SME lending and NBFC lending) business and retail assets (comprising gold loans, personal loans, auto loans, among others) portfolios.

The growth of these verticals will help the bank capitalise on its robust liabilities franchise and cater to the needs of all customers through an entire suite of offerings spanning deposits, business and retail loans, and third-party products such as mutual funds and insurance, across physical and digital banking.

A veteran of the financial services sector with over twenty five years of experience, Batra, in his last role, was Executive Vice President and Head, Business Banking and Secured Assets at IndusInd Bank. His responsibilities included establishing the SME lending business and scaling up other businesses, including Loan Against Property, unsecured business loans, channel finance, warehouse finance and gold loans among others.

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