Ezeepay, a fintech start-up focussed on financial inclusion and promoting digital transactions in rural and semi-urban areas, is planning to expand its services in the southern market over the next few months, a senior official of the company said.
“After a survey, we found that companies are unable to take up their services in the rural markets of south India because of the language barrier but we have found a solution. For instance, in Odisha, we started our services by creating Ezeepay touch points with a network base of locally hired people,” Shams Tabrej, Founder and CEO, Ezeepay told BusinessLine.
“We are now expanding our presence in south India. To start with, we will hire 200 people (in the company’s role) in the five southern States. These employees will build our network base of agents and distributors. In the next 6 months, we are aiming to have over 50,000 members,” he added.
Doorstep Digital Services
Started in August 2018, the Delhi-based Ezeepay offers a range of banking and digital services to rural India including Aeps service, Aadhaar Pay, Money transfer, Micro ATM, Bank account opening. It also offers online utility services including mobile recharge, travel and hotel booking and LIC premium payment besides compliance services such as ITR filing, GST registration, MSME registration among other services.
Doorstep Digital Services (DDS) is the flagship product of Ezeepay under which it takes these digital services and banking products to the hinterlands of the country. It currently operates in Uttar Pradesh, Bihar, West Bengal, Madhya Pradesh and Jharkhand.
“We have a network of 1.78 lakh agents and distributors in the North. Our total business in the North, across all services, is about ₹800 crore. We aim to garner a monthly business of ₹500-600 crore in the southern market,” Tabrej said.
Ezeepay earns commission on each digital transaction, which is shared between the company and agents.
Target areas
Kottayam and Malappuram in Kerala, West Godavari, East Godavari and Kurnool in Andhra Pradesh, Mysuru, Belgaum and Bellary in Karnataka, Madurai, Tiruchirappalli and Vellore in Tamil Nadu and Mancherial, Nirmal and Sircilla in Telangana are some of the target areas in south for Ezeepay.
Finance Minister Nirmala Sitharaman on Thursday announced that the Union government will guarantee Rs 30,600 worth of security receipts issued by the National Asset Reconstruction Company.
The Bad Bank is finally here, after a decade of discourse. It aims to help clean up banks’ books by taking over Rs 2 lakh crore bad loans. If it works as intended, Bad Bank may help cut system-wide bank NPAs (non-performing assets) by over 1%, and help recover some of bad debts too, analysts say. The National Asset Reconstruction Company (NARCL), as it is officially named, will acquire banks’ bad debt to resolve or liquidate. It will buy these stressed assets for a mix of cash, and government-guaranteed security receipts.
Finance Minister Nirmala Sitharaman on Thursday announced that the Union government will guarantee Rs 30,600 worth of security receipts issued by the National Asset Reconstruction Company (NARCL). “NARCL will acquire stressed assets through 15% cash payment to banks based on valuation and the rest 85% will be given as security receipts,” Nirmala Sitharaman said. The government-backed security receipts can only be invoked on resolution or liquidation.
What is NARCL? Why is it needed?
The National Asset Reconstruction Company (NARCL) was proposed by the Finance Minister in her Union Budget speech. NARCL, popularly known as Bad Bank, will function as an asset reconstruction company set up by banks to resolve stressed assets for smoother functioning. Public sector banks will have 51% ownership in NARCL. The bad bank intends to resolve stressed loan assets above Rs 500 crore each.
How the Bad Bank will work
Bad loan transfer: NARCL will take over bad loans worth Rs 2 lakh crore from banks, of which Rs 90,000 crore will be taken over in the first phase. The Ministry of Finance said that NARCL will acquire bad loans from banks for a mutually agreed-upon value (understandably, a net value after a haircut). NARCL will pay 15% of the agreed net value of the bad debt upfront in cash and the remaining 85% in form of security receipts. The banks would use this 15% cash upfront to reverse the debt write down. As for the security receipts for the remaining 85%, the bank would redeem those when the bad bank resolves or liquidates the bad debt; or, the bank may also trade these securities for cash.
Provision write-back: “These loans are fully provided in the books of the bank. The upfront cash received, 15% of the written-down value, would be reversed while the provisions for the balance (value of security receipts) are unlikely to be reversed even if it is fully provided,” analysts at Kotak Securities wrote in a note. “The larger release of provisions, if any, would be made as and when the cash is received on sale of these receipts or redemption of security receipts. The government guarantee on SRs can enable trading of these securities,” Kotak Securities added.
Government guarantee: The security receipts issued by NARCL are backed by the Union government guarantee. The government guarantee will cover any shortfall between the face value of the receipts and the actual realisation value of the bad loan.
Resolution is key
“How efficiently the professionals are resolving the stressed assets is to be monitored. One can argue that bad bank is likely to become a warehouse for stressed loans without expected recovery as it will be difficult to find buyers for legacy assets,” ICICI Securities said in a note. The Resolution of the proposed Rs 2 lakh crore of legacy stressed assets will lower GNPLs (gross non performing loans) by more than 2%, the note said. The estimated realisable value of 18% will lead to provisioning write-back of Rs 36,000 crore. “Through successful execution of phase-1, one can expect near term NPA reduction of >1% and NPA recoveries equivalent to 10bps of system credit,” ICICI Securities said.
Why is government guarantee needed?
The government said that resolution mechanisms of dealing with a backlog of NPAs typically require a backstop from the Government. “This imparts credibility and provides for contingency buffers. Hence, a Government Guarantee of up to Rs 30,600 crore will back Security Receipts (SRs) issued by NARCL. The guarantee will be valid for 5 years. The condition precedent for invocation of guarantee would be resolution or liquidation,” the finance ministry said.
The Reserve Bank has given its go-ahead to Ujjivan Small Finance Bank (SFB) to form a special committee of directors to oversee operations in the absence of an MD and CEO. The Reserve Bank of India (RBI) in a letter dated September 15, 2021, has approved the constitution of ‘Special Committee of Directors’ with three independent directors as its members, Ujjivan SFB said in a regulatory filing on Thursday.
The committee will “oversee the operations and administration of the bank in the absence of the Managing Director and CEO with effect from September 16, 2021,” it said.
Last month, the Bengaluru-based company had appointed old hand Carol Furtado to take charge as officer on special duty (OSD) till September 30, 2021, following the resignation of Nitin Chugh as MD and CEO.
She will take charge as the interim CEO from October.
“The board of Ujjivan SFB, in parallel, will evaluate suitable candidates for the MD & CEO position, and submit two names to RBI for approval,” the lender had said.
Furtado has been associated with Ujjivan SFB since inception and has spearheaded the organisation on numerous occasions, playing critical roles.
She is the head of operations of the bank.
Ujjivan SFB, which began operations from February 2017, recently saw some top-level exits amid high level of bad assets and management issues, among others.
The lender’s overall recognised stressed pool stands at 15.6 per cent of the loan book. This includes gross non-performing assets of 9.8 per cent and restructured loans of 5.8 per cent.
Also, the portfolio-at-risk has swelled to 30 per cent as of June 2021.
The bank’s early-stage strategy to mobilise deposits from microfinance customers, higher dependence on the vulnerable microfinance business, among others, have led to the current troubles, according to experts.
Ujjivan SFB stock closed at Rs 20.60 apiece on BSE, up 1.23 per cent from the previous close.
The uptick in the credit growth in the recent months notwithstanding the second COVID-19 wave augurs well for the economy, said an article published in the RBI’s latest bulletin. Bank credit growth has witnessed significant fluctuations in the past one and a half decades.
The period between 2007-08 and 2013-14 could be characterised as a bank credit boom period in the Indian economy, as non-food credit registered double-digit growth, primarily driven by robust credit growth to the industrial sector, the article said.
“Both dominant-group and other-group of banks lent aggressively to the industrial as well as other sectors,” it said adding that within industries, infrastructure, and basic metal and metal product industries accounted for a major portion of credit offtake from both the bank groups during the credit boom period.
Thereafter, however, the credit cycle reversed along with a shift in the sectoral deployment of bank credit.
The article said that during 2014-15 to 2020-21, overall credit growth decelerated, primarily driven down by a reversal in credit growth to the industrial sector.
The overall non-food credit growth during 2014-15 to 2020-21 was almost entirely driven by the expansion of credit to the non-industrial sectors, particularly lending to the retail segment in the form of personal loans.
Active participation of both the dominant-group and the other-group of banks is driving credit growth to the non-industrial sectors, the article said.
The sharp slowdown in industrial credit warrants attention and steps to step up credit offtake commensurate with appropriate risk-taking, a number of which have already been taken by the government and the RBI, could de-freeze the credit market for the industrial sector. It can help in reviving the growth momentum derailed by the COVID-19 pandemic, it said.
“After witnessing a significant slowdown in credit offtake during 2019-20 and 2020-21, there has been some uptick in credit growth in the recent months notwithstanding the second COVID-19 wave, which augurs well for the economy,” the article said.
Another article published in the bulletin titled ‘Private Corporate Investment: Growth in 2020-21 and Outlook for 2021-22′ said the investment intentions of the Indian private corporates remained sluggish as reflected by lower numbers of new announcements and completions of projects.
The article highlighted that the pandemic uncertainties adversely impacted appetite for new projects during 2020-21 and posed impediments to the timely completion of pipeline projects.
In 2021-22, demand for new projects would shape the private investment outlook, along with the progress of the projects already in the pipeline, it added.
The central bank, however, said the views in the articles are of the authors and do not represent the views of the Reserve Bank of India.
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J.P. Morgan Monday launched of its new campus in Hyderabad, which is spread across 822,000 square feet at Salarpuria Sattva Knowledge City and will consolidate the bank’s global operations, it said in a release Monday.
Employees across technology, risk, operations and support services will work out the new centre.
“The new, integrated campus is a strong testament of our commitment to continue to meet our clients’ needs while ensuring a world-class work environment for our employees, as well as tap the incredible talent pool that the city offers,” said Daniel Wilkening, Chief Administrative Officer, Commercial Banking and Head of Global Services, JPMorgan Chase.
This is one of JPMorgan Chase’s key campuses globally and its largest in Asia Pacific.
The campus has been built to create a healthier and safer workplace. It includes wellness zones, dedicated relaxation and reflection zones, a crèche as well as a fully equipped medical center, the bank said
The centre has an innovation lab, a tech bar, training and conference center facilities, open work cafes on every work floor, and a library.
“Every decision made regarding its design and construction prioritizes the needs of our employees, as well as how the work-place environment will continue to evolve in the future,” said Deepak Mangla, CEO, Corporate Centers, India & Philippines, JPMorgan Chase.
In keeping with J.P. Morgan’s commitment to advance sustainability and maintain carbon neutrality across its operations, the campus has been awarded the Leadership in Energy and Environment Design (LEED – U.S. Green Building Council) fit-out gold standard and sets new benchmarks in sustainability.
Some key features include an energy-efficient building management system to better control and monitor energy use, charging points for electric vehicles and paperless and digitization initiatives.
Finance Minister Nirmala Sitharaman on Sunday said banks, including private sector should embrace digitisation towards ensuring that government schemes reach the poor and downtrodden, besides adopting financial inclusion for a wider reach.
Delivering her address at the centenary celebrations of the city-based Tamilnad Mercantile Bank here, Sitharaman said even during Covid-19 pandemic with the use of digitisation through banking correspondents, the government’s financial disbursements were distributed to the needy after verifying their details.
“Prime Minister (Narendra Modi) was clearly aware that banking is important and did not hesitate that there can be accounts with zero balance, if they were opened under the Jandhan Yojana scheme (launched in 2014). But he ensured that every one must hold a bank account and be able to transact through a RuPay card,” she said.
Stating that the government distributed Rs 1,500 in three installments to the needy through their bank accounts during the Covid-19 outbreak, she said there are lot of changes happening in the banking sector at a “fast pace” through digitisation.
“There is no necessity to open a branch in a place which does not have a bank. Today, to reach a bank account of the people who live there, all kinds of technologies are available…Even sitting from Tuticorin one can serve the banking requirements of people living in small villages through technology”, she said.
“The way forward for any bank, particularly for a bank like Tamilnad Mercantile Bank, to be more efficient, is to adopt complete technology related solutions’ ‘, she said.
“Today financial technology is the biggest area and using that we can able to populate data into forms. It may be Income Tax or GST related. Auto-populating data (of a consumer) has been very useful (today),” she said.
Auto-populating data can be done only through ‘digitisation’ and the management of TMB should think of greater use of digitisation, she said.
“There are a lot of prospects for banking…I think it is important for digitisation to be completely brought in. Digitisation cannot be avoided for your own good and for the sake of customers,” she said, adding TMB should onboard all its customers and ensure Financial Inclusion is implemented.
Sitharaman after presenting a financial assistance to a beneficiary of the Tamilnad Mercantile Bank under the ‘PM Svanidhi scheme’, said today you are presenting a cheque to a woman who runs a business by selling ‘idlies’ in her pushcart, you are able to distribute the financial assistance because there is a scheme like PM Jandhan Yojana (financial inclusion scheme).
“If that scheme was not available, today you would not have been able to distribute the assistance to the woman. It would not have been possible if PM Jandhan Yojana was not launched in 2014,” she said.
Tamilnad Mercantile Bank’s 74 per cent of business was through “priority” sector lending and through this banks were able to expand into rural areas. During the Covid-19 outbreak, the Centre introduced the Emergency Credit Guarantee Liquidity Scheme towards enabling MSMEs to do business without collecting any additional collateral required, she said.
Despite two waves of the Coronavirus pandemic that unleashed devastation across most areas, India has an 87% Fintech adoption rate that is substantially more than the world’s average adoption rate of 64%.
By Kapil Rana
Fintech organizations have a wide scope of business in India, particularly around payment lending, personal finance management, and regulation technologies. Needless to say, that nations’ immense population, expanding the number of web users, and the government’s endeavours to make the nation digital are bringing numerous new opportunities for Fintech and new companies. Financial organizations, new businesses, investors, and controllers are accepting Fintech and utilizing those opportunities to stand in the competition and grow fast. In recent years, India has seen the development of various new start-ups, regulators, the public and private financial institutions that have made the Indian Fintech market the fastest developing business sector in the world.
Despite two waves of the Coronavirus pandemic that unleashed devastation across most areas, India has an 87% Fintech adoption rate that is substantially more than the world’s average adoption rate of 64%. India has witnessed 2.7 billion dollars of Fintech investment last year. This was the second largest investment close to 3.5 billion dollars in 2019 as confirmed by Professional Service Firm KPMG. Likewise, the report of Florida-headquartered ACI worldwide uncovered that 25.5 Billion constant exchanges were made in India in 2020 that is the highest in the world.
It goes without saying that the increased adoption of Fintech technologies powered by artificial intelligence (AI), machine learning (ML), data analytics, process automation, and Blockchain has transformed the financial world. These advancements empower Fintech to run colossal measures of information through calculations designed to distinguish patterns and risk, fake practices, spam information, and make or suggest the right moves.
FinTech organizations utilizing these innovations to assist organizations to manage and control activities like managing and controlling their finance, fulfilling tax compliance, paying and accepting bills, and utilizing other financial administrations according to the requirements. They additionally empower customers, organizations, and entrepreneurs to have a superior comprehension of investment and purchasing risk. Till today, countless new businesses and financial institutions are accepting Fintech to control and manage their financial operation and decrease their functional expense. However, still there are many difficulties and bottlenecks in the adoption of financial technologies, which are making it hard for organizations to use its benefits entirely.
Key Challenges for Fintech Start-ups Companies
Cyber security is the biggest challenge for Fintech businesses. The risk of information leakage, malware, security break, cloud-based security risk, phishing, and identity threat is making the Fintech businesses helpless at some point or others. Such dangers are unwarranted by clients, therefore, Fintech associations need to advance their technologies, teach customers, and make powerful policies to eliminate such dangers.
Fintech organizations work in a joint effort with traditional financial institutions in different manners like association, incubation, and acquisition, and so on. This joint effort poses many obstacles like the two players have their own arrangement of rules relating to size, productivity, and acknowledgments. Likewise, Fintech organizations are essentially intended to work with a modern working model. So, it is a bit hard for them to keep a smooth relationship with traditional banks and other financial institutions. Also, Banks fear working with Fintech as they risk losing their reliability.
Further, banking and other monetary foundations are strictly regulated. Similarly, Fintech organizations in India should be intensely managed with policies that will assist them with moderating the possible dangers of network safety. However, many existing monetary laws and government strategies are not completely favorable for Fintech start-ups in the Indian financial sectors.
Most of the Indian clients are still utilizing cash rather than tech-driven options like UPI transactions. Fintech is attempting to assemble a credit-only economy and this will be a significant snag for them to handle, particularly to push conventional Indian buyers to embrace digital payments. Dependency on cash, cybercrime, and poor internet services are a couple of obstacles among others that are making it hard for Fintech organizations to do business in India.
Summarizing
Post demonetization, the number of Fintech businesses in India has been substantially increased. These businesses are vivaciously working on different sub-areas like mobile POS (point of sale), internet banking solutions through neo banking, managing compliance-related issues on a solitary platform, credit management, and so on. Thanks to the innovative Fintech plan of action that is bringing great advancements in the fields of finance and technology to help organizations and small businesses in their processes.
The fintech business model is working with a remarkable and consistent framework that permits entrepreneurs, business owners, and proprietors to go through huge information and make better choices in their businesses. There is no denying that Fintech is forming the future of next-generation financial solutions, and despite the way that there are a few obstacles that Fintech companies are coming across in the current business landscape, they have certainly a thriving future in India.
(The author is founder and chairman Hostbooks. Views are personal and not necessarily that of Financial Express Online.)
The central bank lifted the PCA on Uco Bank following improvement in various parameters and a written commitment that the state-owned lender will comply with the minimum capital.
However, RBI had reservations over the capital adequacy levels of the banks under PCA.
Interestingly, Indian Overseas Bank and Central Bank were reported to be among the four banks shortlisted by the government for privatisation.
The RBI objection
In FY21, the government infused Rs 20,000 crore in ve banks through the instruments. Central Bank of India was the biggest beneficiary with Rs 4,800 crore, followed by Indian Overseas (Rs 4,100 crore), UCO Bank (Rs 2,600 crore).
However, the RBI had raised questions over the government’s bank capital infusion programme through non-interest-bearing bonds, according to a report.
The RBI reasoned that capital infusion through bonds cannot be taken at face value and, therefore, these banks may still be short of regulatory capital, they said. In such a situation, they will continue under the PCA framework. Under the PCA regime, business restraints are imposed on struggling banks until they regain health.
The government went ahead despite RBI’s initial reservations and now the regulator had expressed serious concerns. The entire fund infusion through such bonds will then not count toward regulatory capital.
RBI is not inclined to pull these lenders out of the PCA framework based on such capital infusion and may further direct lenders to recalculate their capital adequacy ratio based on the actual value of the bonds.
The PCA status
Indian Overseas Bank, Central Bank have reported net non-performing assets (NPAs) below levels that trigger PCA. However, on the proforma net NPA front, Central Bank falls short as its NNPA is 6.58% against the 6% required to be out of PCA.
Even after PCA exit, these banks may still be under RBI watch. In the case of IDBI Bank, which has committed to comply with the norms of minimum regulatory capital, net NPA and leverage ratio on an ongoing basis, RBI has said the lender would be under continuous monitoring. “It has been decided that IDBI Bank be taken out of PCA framework, subject to certain conditions and continuous monitoring,” RBI had said.
Privatisation bid
Four banks on the privatisation shortlist included Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India.
Two public sector banks and one general insurance company are expected to be disinvested this year in addition to the divestment of IDBI Bank, Finance Minister Nirmala Sitharaman had announced during the Union Budget presentation.
Bringing the banks out of PCA could boost their valuations in the event of privatisation.
A group of bank supervisors from across the European Union called on Tuesday for the bloc to implement global banking rules agreed to prevent a repeat of the global financial crisis.
In an open letter to the European Commission, nearly two dozens central banks and regulators defended the Basel III rules, which have been the object of intense lobbying from a banking industry keen to reduce its capital requirements.
“We, as prudential supervisors and central banks in the EU, very much support a full, timely and consistent implementation of all aspects of this framework,” the signatories said.
“The pandemic shows that more resilient banks are better able to support the real economy, even during times of crisis.”
The signatories came out in defence of the “output floor”, which limits banks’ discretion in setting their own capital requirements and of a standardised approach to credit risk, while adding that EU-specific deviations should be minimised.
Signatories included institutions from all large EU countries with the exception of France. (Reporting By Francesco Canepa Editing by Balazs Koranyi)
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