Tag: Centre

DBT, no common IFSC for Kerala Bank cause delay, BFSI News, ET BFSI

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A combination of two factors, the Centre’s decision to disburse crop insurance claims under direct benefit transfer (DBT) mode and delay in Kerala Bank getting its own IFSC code, are delaying the delivery of insurance claims of about 20,000 farmers across the state.

About Rs 21 crore to be disbursed to farmers as insurance claims for 2019-20 was returned by the insurance company as the farmers were unable to submit their account numbers and matching IFSC codes. Claims of Rs 70 crore are pending for 2020-21.

The farmers were getting compensation for crop loss due to adverse weather or other factors under Pradhan Mantri Fasal Bima Yojna (PMFBY). Most farmers (60-80%) have their accounts in primary agriculture cooperative societies (PACS). Earlier, the farmers were made to open mirror accounts in district cooperative banks (DCBs), and agriculture insurance company (AIC) of India was allocating the lumpsum amount of the total claims from a district to the DCB there. The DCB would then transfer the claim amount to the farmers through the mirror accounts. The DCBs were then giving utilisation certificates to AIC .

However, with Centre’s decision to enforce DBT, indirect transfer of insurance claim amounts became impossible. While trying to upload the claims in the DBT portal, the farmers submitted their account number in PACS and the district cooperative bank’s IFSC code. However, their claims bounced as these two data did not match. The compensation to farmers has not been disbursed for the last two years, said K K Kochumuhammed, president of Kole Karshaka Sangam.

Besides, Kerala Bank, formed by merging 13 DCBs, was yet to get a common IFSC code. “Once our software integration is over we will get a common IFSC code. We have requested AIC to retain the earlier practice till then, and clear the pending claims,” said Anita Abraham, DGM, Kerala Bank.

“We had a video conference on Thursday with Union agriculture ministry officials, and requested them to defer DBT implementation till the amalgamation process of DBCs and Kerala Bank are completed, and they have responded positively,” said George Alexander, additional director of agricultural department.



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New IDBI owners may get RBI road map to cut stake, BFSI News, ET BFSI

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NEW DELHI: The Reserve Bank of India (RBI) is expected to provide a road map to the new owners of IDBI Bank for reducing their stake as the government seeks to sell its equity, along with shares held by Life Insurance Corporation (LIC) of India, by the end of the current fiscal year.

Although the RBI has not firmed up its views on new licensing norms for private banks, announcement of the new structure may help generate more interest in the lender, which the Centre has been seeking to reposition for two decades but with little success.

In the past, the RBI had indicated that the government’s stake sale and announcement of the new norms were not linked. Sources, however, said that the government has been in dialogue with the RBI on stake sale and the regulator was aware of the need to provide a road map for comfort to potential buyers.

The current guidelines stipulate 40% minimum shareholding in terms of the paid up capital or voting rights. Over 10 years, this needs to be diluted to 20-30% and further reduced to 15-26% between 12 and 15 years, depending on the licence vintage. An internal group set up by the RBI had proposed reworking these, apart from allowing corporate houses into the space.

Many of the bidders may seek clarity on these aspects. Recently, the department of investment and public asset management had said that the government and LIC would decide on the extent of stake sale during the process of finalising the deal.

Although private investors are keen that the government holds no stake, something that NITI Aayog too had noted in some of its recommendations, government sources said, the idea was to leave it to bidders to decide the best course of action. “Someone may want majority control, while someone may like to do with a lower stake. Let the bidders decide,” said a source.

The government currently holds 45.5% in the financial institution-turned-universal bank with LIC’s shareholding pegged at 49.2%. On Friday, the bank’s share rose 0.4% to close at Rs 37.9 on BSE but is still lower than LIC’s acquisition price. LIC had acquired shares in IDBI Bank in three tranches.



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Centre plans BRICS Bank’s regional office at GIFT SEZ

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The Centre is all set to give a nod to the setting up of the BRICS’ New Development Bank’s Indian regional office at the GIFT SEZ IFSC (International Financial Services Centre), in Gandhinagar, with the proposal scheduled to be taken up by the Board of Approval (BoA) for SEZs in a meeting later this month.

The Department of Economic Affairs (DEA), which has made the proposal, has also sought certain relaxation of SEZ rules for the smooth functioning of the Indian Regional Office (IRO) that will promote “effective and extensive’’ investment operations by NDB in India, as per the agenda of the BoA meeting scheduled on July 29. “Operationalisation of the IRO is one of the important agenda items of BRICS, 2021 under India’s chairship and the announcement of operationalisation of IRO is expected to be made in the BRICS Lenders Summit to be held on September 9,” per the agenda of the meeting scheduled on July 29.

NDB, a multilateral development bank established by Brazil, Russia, India, China and South Africa in 2014, aims at mobilising resources for infrastructure and sustainable development projects in BRICS and other emerging market economies and developing countries.The bank supports its members in infrastructure development through loans, guarantees, equity participation and other financial instruments. “Since India is one of the largest recipients of finances from the NDB, it is important that all measures are taken to ensure smooth functioning of the development bank’s regional office in the country. That is why the DEA and the Development Commissioner (DC) of the GIFT SEZ have also sought certain relaxation of SEZ rules for the functioning of the office,” an official tracking the matter told BusinessLine.

$4.7 billion loan assistance

As many as 15 sovereign projects amounting $4.7 billion of loan assistance have been posed to NDB for financing in different States in India, the agenda note pointed out. Owing to the importance of the project, the DC of the GIFT City SEZ has recommended to the BoA, so that the IRO may be exempted from certain provisions of SEZ rules. These include exemption from providing details on net foreign exchange earning, items of manufacture/service activity, employment, annual report, marketing collaboration and industrial licence, information of bank accounts, PAN, IEC numbers and exemption from application fee.

In July 2020, the Union Cabinet had approved the signing of an agreement between the Gol and NDB on hosting the NDB’s IRO at GIFT SEZ. Consequently, in September 2020, the Board of Directors of NDB accorded approval for signing the Host Country Agreement (HCA) with India. The Host Country Agreement (HCA) on the IRO was signed in December 2020.

In June this year, the Department of Commerce inserted a new rule in the SEZ Rules, 2006 allowing a multilateral agency to set up their local or regional office in the IFSC as a unit.

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MSMEs stare at uncertainty over high debt & delayed payments, BFSI News, ET BFSI

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Pune: Operators of micro, small and medium enterprises (MSMEs) in Maharashtra have sought concrete and comprehensive steps from the Union government to streamline the sector, which was facing a multitude of factors like high levels of indebtedness threatening to sink large parts of it.

The operators of MSMEs, who are the largest industrial employers in Maharashtra, said they were facing other factors like delayed payments and high raw material prices over the past year. The prices for steel, for example, have risen by up to 50% over the past year, with some even accusing steel manufacturers of cartelization.

Recent data released by the Centre showed that Maharashtra, the most industrial state in the country, also had the dubious distinction of being the state with the most number of cases related to delayed payments to MSMEs. These payments are supposed to be released after orders being serviced within 45 days, according to Union government regulations.

“We do not get payments on time anyway, and now because of the pandemic, those payments have been delayed more. Thus, we do not have funds to execute new orders, or even invest in clearing older orders,” said a MSME operator based out of Chinchwad.

Also complicating matters is the fact that only around one of six MSMEs across the country (and a similar level in the state) are unregistered with the government, which makes them unable to access credit with banks, or avail of other government incentive or bailout schemes. The latest signing-up drive by the Union MSME ministry generated a tepid response.

“The registration drive for MSMEs should be carried out like Aadhaar. Only then will more MSMEs register with the government,” said an industry observer based in Pune.



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RBI non-commital on money printing, says handling govt borrowings smoothly, BFSI News, ET BFSI

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Reserve Bank of India is non-committal on printing notes to spur demand as sought by many including former finance minister P Chidambaram and veteran banker Uday Kotak.

“It is a very hypothetical question at this point of time. With regards to printing of notes, the central banks have their own models, own assessments, I have seen many remarks which have come,” RBI governor said responding to a query at the post monetary policy press conference.

Central banks take decisions on so many complex factors, which relate to financial, stability, inflation, stability of exchange rate, he said.

Government borrowings

At the moment the borrowing requirement of states and Centre, the Reserve Bank of India has been able to handle it very successfully last year, he said, adding that the borrowing rates were lowest in 16 years last year. This time also the RBI has taken measures in the form of GSAP I and II. In addition to the GSAP option of Rs 60,000 crore done so far, the RBI has injected Rs 36,400 crore through other operations in the secondary market in the NDS home operations, he said.

The borrowing is going on smoothly and that is how the situation is, he said.

Money printing clamour

Former finance minister P Chidambaram too had advised money printing to fight the crisis. “We have the space and the sovereign right to print money. If at any point the government feels that too much is being printed, it can always stop printing money. But at the moment, I think printing money is clearly advised,” Chidambaram had said

Kotak Mahindra Bank CEO Uday Kotak has said that India needs to expand its balance sheet and print money to support the economy ravaged by the ongoing Covid-19 crisis.

“In my view, this is the time to expand the balance sheet of the government, duly supported by the Reserve Bank of India (RBI) for monetary expansion or printing of money. The time has come for us to be doing some of that. If not now, when?” Kotak had told a television channel last month.



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IBA reaches out to govt for refund of compound interest waiver by banks, BFSI News, ET BFSI

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The Indian Banks‘ Association (IBA) on behalf of lenders has approached the finance ministry to refund the burden fallen on their shoulders due to a recent Supreme Court judgment on the waiver of compound interest on all loan accounts which opted for moratorium during March-August 2020.

The March judgment of the apex court directed the banks to waive off compound interest on loans above Rs 2 crore availing moratorium as loans below this got blanket interest on interest waiver in November last year.

Compound interest support scheme for loan moratorium cost the government Rs 5,500 crore during 2020-21, and the scheme covered all borrowers including the prompt one who did not avail moratorium.

Various banks are at the different stages of executing the order.

Punjab & Sind Bank Managing Director S Krishnan said the burden on the bank due to waiver works out to be around Rs 30 crore.

The issue of reimbursement of the waiver amount by the government is being pursued by IBA on behalf of the banks, he said.

Asked if the finance ministry has responded to their request, he said, “So far, we have not heard anything positive on this.”

The apex court order this time is only limited to those who availed moratorium. So, the liability of the public sector bank should be less than Rs 2,000 crore as per rough calculations, sources had said.

The RBI on March 27 last year announced a loan moratorium on payment of instalments of term loans falling due between March 1 and May 31, 2020, due to the pandemic, later the same was extended to August 31.

The Supreme Court on March 23, 2021, directed that no compound or penal interest shall be charged from borrowers for the six-month loan moratorium period, which was announced last year amid the COVID-19 pandemic, and the amount already charged shall be refunded, credited or adjusted.

The apex court refused to interfere with the Centre and the Reserve Bank of India‘s (RBI) decision to not extend the loan moratorium beyond August 31 last year, saying it is a policy decision.

Rejecting pleas for a complete waiver on interest the court opined that such a move would have consequences on the economy. The bench also said that interest waiver would affect depositors. Along with this, the court also rejected pleas for further relief in the matter.

Soon after the order, the RBI asked banks and NBFCs to immediately put in place a board-approved policy to refund/ adjust the “interest on interest” charged to the borrowers during the six-month moratorium, in conformity with the Supreme Court judgment.

The central bank also asked lending institutions to disclose the aggregate amount to be refunded/ adjusted in respect of their borrowers based on the reliefs in their financial statements for the year ending March 31, 2021.



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Paytm Money opens technology development centre in Pune

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Digital financial services platform Paytm, on Thursday announced that its wholly-owned subsidiary Paytm Money has launched its technology development and innovation centre in Pune.

It also plans to hire over 250 front-end, back-end engineers and data scientists to build new wealth products and services.

A press statement said Paytm Money thrives to simplify investments and wealth creation for retail investors, and the new facility at Pune will focus on driving product innovation, specifically for equity, mutual funds, and digital gold.

Varun Sridhar, CEO – Paytm Money, said in a statement: “We are very excited to launch our Pune tech R&D centre and looking forward to developing new wealth management products and disruptions in Pune. We continue our vision to leverage technology to lower costs for our consumers and provide a solid, innovative and stable platform.”

Also read: Paytm to expand operations in rural areas, smaller towns

He added, “We need solid engineering talent to ensure we meet our ambitions. Pune is famous for its high-quality education and offers a great talent pool along with good infrastructure and great weather. We believe Pune is poised to become an innovation hub for fintech and was a natural choice for Paytm Money’s expansion plans.”

The company has launched a slew of new products and services aimed at empowering seasoned investors as well as new to investment users. It aims to achieve over 10 million users and 75 million yearly transactions in FY21 with the majority of users from small cities and towns.

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SC Verdict: Additional relief of about ₹7,000 crore to borrowers may have to be given

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The Centre may have to allocate an additional ₹7,000 crore as relief to borrowers following the Supreme Court verdict on loan moratorium on Tuesday, according to analysts.

“As per our estimates, the compounded interest for six month of moratorium across all lenders is estimated at ₹13,500 to ₹14,000 crore,” said Anil Gupta, Vice President – Financial Sector Ratings, ICRA.

Pointing out that the Centre has already announced relief for borrowers having borrowings up to ₹2 crore, which was estimated to cost about ₹6,500 crore to the Exchequer, Gupta said, “With announcement of waiver for all borrowers, the additional relief of about ₹7,000 crore to ₹7,500 will need to be provided to borrowers.”

Mahesh Misra, CEO, IMGC welcomed the Supreme Court judgement and said, “The court has limited its scope to judicial review and not opined on the merits of the policy. Any other outcome would have created a potential moral hazard and also penalized conscientious borrowers. This creates the right precedent as well.”

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Tata Asset Management, DSP Investment Managers and Axis Asset Management apply for licences

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Pension regulator PFRDA has received 10 applications including three from new ones for the Request for Proposal (RFP) it had floated for selection of sponsors of pension funds for National Pension System (NPS).

While seven of these are from existing pension fund managers, the three new ones are Tata Asset Management Company, DSP Investment Managers (India) Pvt Ltd and Axis Asset Management, sources close to the development said.

The seven pension fund managers who already manage NPS funds are the pension arms of SBI, UTI, LIC, ICICI, HDFC, Aditya Birla Sun Life and Kotak.

PFRDA issues RFP for selection of pension fund sponsors

It maybe recalled that PFRDA had in December 2020 come out with a new RFP for selection of sponsors of pension funds for NPS, throwing open the door for more pension fund managers with at least five-fold jump in their fees, making it lucrative.

The Pension Fund Regulatory and Development Authority (PFRDA) had taken this big initiative to revamp the pension funds management structure in India and position the industry for strong decadal growth that could take the overall assets under management of NPS to ₹30-lakh crore by 2030.

The main objective behind the RFP is to expand the number of players (only serious) in the pension industry and ensure that existing as well as new players are better remunerated in terms of fund management fees in line with the size of their operations.

This latest RFP had several firsts to its credit. This is the first time PFRDA had come out with a combined RFP — both for the government and private sector. For the government, the last RFP was in 2012 and in 2013-14 for the private sector. They had different structures and restrictions.

Slab structure

The Government was open for certain state-controlled pension fund managers and the private sector was open for all. In April 2019, the government had allowed even private pension fund managers to manage NPS funds of government schemes. Now, there is no distinction between government, PSU or private pension fund managers.

Strong show: Pension assets surge 35.65% as of November 2020

This is also the first RFP where PFRDA had specified a slab structure for investment management fee. In the earlier regime, it was a flat fee. PFRDA has now gone in for a graded slab structure (four slabs from 3 paise to 9 paise) so that the new entrants to this field will not find it difficult to build a corpus. This will help them achieve scale while meeting their early establishment expenses. From a previous regime fee level of 1 paisa for every ₹100 of pension funds managed, PFRDA has now proposed an average fee of 5 paisa per ₹100 of pension monies managed. This is a five-time increase. This effective fee of about 5 paise is the cheapest in the pension world and PFRDA pricing is the most competitive.

With increase in fee structure, it is expected that pension fund managers will make profit while having funds for building infrastructure and support team.

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Plea in Delhi High Court against Lakshmi Vilas Bank-DBS merger say shareholders shortchanged, BFSI News, ET BFSI

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A plea in the Delhi High Court has challenged the scheme of amalgamation of Lakshmi Vilas Bank with Development Bank of Singapore (DBS), contending that its shareholders have been “left in the lurch” and the Centre and the Reserve Bank have failed to protect their interests. The petition was listed before a bench of Chief Justice D N Patel and Justice Jyoti Singh on January 13, but was adjourned to February 19 after the bench was told that the Reserve Bank of India (RBI) has moved a plea in the Supreme Court to transfer all pleas against the amalgamation scheme to the Bombay High Court.

The petition in the Delhi High Court has been filed by lawyer Sudhir Kathpalia, who was also a shareholder in Lakshmi Vilas Bank (LVB) and lost his 20,000 shares in the company due to the amalgamation scheme.

Kathpalia has sought quashing of the clause in the scheme which states that from the date of merger, “the entire amount of the paid-up share capital and reserves and surplus, including the balances in the share/securities premium account of the transferor bank, shall stand written off”.

The petition has said that under the scheme, DBS was not required to give any shares to the LVB investors in return and they were “left in the lurch”.

The amalgamation scheme was approved by the RBI on November 25, 2020 and the merger took place on November 27, 2020.

The petition has contended that the Centre and RBI have failed to protect the interests of the shareholders.

It has also claimed that DBS was chosen for the merger without inviting bids from other banks and financial institutions.

It has alleged that the “scheme of amalgamation was irregular, arbitrary, irrational, unreasonable, illegal and thus, void”.



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