Tag: finance and banking

Three things banks need to keep in mind before leading a digital transformation, BFSI News, ET BFSI

Banking & Finance

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The fintech revolution is here and banks need to build innovative digital-first products to survive it, Sudipta Kumar Ghosh who is a thought leader in the fintech space tells us why

In financial services, fintechs are promoting a vision of a world without banks. Blockchains and cryptocurrencies have taken over paper money or credit cards. Portfolio management is conducted in an AI setting without managers. Mobile and online payments are turning into debit and credit cards. In short, fintechs are facilitating a fast, seamless, immersive, cross-channel digital experience that customers have always wanted. It is satisfying their needs and bringing to them so much more that they can anticipate. For millennials, this is incredibly good news. As a dominant demographic, millennials’ expectations of brands are increasingly changing and they have fundamentally different banking and investing habits, making it clear that banks must adapt.

To understand how traditional banks can compete with fintechs, we caught up with Sudipta Kumar Ghosh. He has over a decade of experience in the fintech space and is one of the few leaders to lead technology transformation for large banks. He holds an MBA from Kellogg School of Management at Northwestern University.

  • Tell us why the adaptation to fintech is the need of the hour for banks?
    The traditional banking system will not survive if it doesn’t adapt to the fintech revolution quickly. After the Covid-19 pandemic set in, it forced the entire industry to provide consumers digital options where they did not exist previously. The consumer’s daily life was suddenly digitized and their expectations for digital experiences hit the ceiling. It also became clear that simply going digital capabilities was not enough as consumers also required the technologies they were using to be as swift and easy as the leading big tech and fintech companies. This makes it very important for banks to build innovative products that can provide a superior customer experience. Unlike before, having digital functionality is not an option anymore – it’s a must.
  • Do you think banks are working on any transformational strategy?
    Yes, of course. Banks are aware of this need to rejig themselves and they are already working on actionable strategies. In a recent study conducted by Microsoft on the financial sector, 73% of the survey respondents said at least 50% of their customers’ financial activities switched from in-person services to digital services in 2020. Most of the respondents to this survey also said their organizations not only used several CX technologies during the COVID-19 pandemic but also plan to continue using them. Smartphone apps and mobile responsive websites (81%), customer onboarding and feedback automation (62%), and AI-powered predictive analytics (51%) are some of these technologies.
  • So, from your experience leading digital transformation for banks, what are the things banks should think about when building digital-first products?
    Three things should be kept in mind here.

The first is making banking personal and seamless. Customers will use various channels such as mobile, web, touch-free to interact with the bank. That means there has to be fluid, streamlined, integrated, seamless, and personalized consistency for the customer at all touchpoints. Also, cross-channel consistency is critical for meeting (or surpassing) customer expectations and cultivating loyalty. Secondly, banks need to make use of the cutting edge technologies available. They should use cloud delivery platforms to ensure that websites and apps are always available and that every customer will enjoy optimal performance, regardless of location or device type. Using the latest tools and techniques to gather data from cross-channel and multi-device interactions for analysis, recognizing recent activity and delivering personalized services, and also offering promotions in every session is the need of the hour.

The third is to mitigate cybersecurity threats. Today’s online threats continue to grow in size, frequency, and sophistication, putting banks at tremendous risk of reputational damage, diminished IT productivity, and revenue loss. Think about encrypting and tokenizing sensitive data, proper governance model for data on the cloud.



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YES Bank | Dish TV: Freeze on Yes Bank’s 25.6% stake in Dish TV spooks private lenders, BFSI News, ET BFSI

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Private credit lenders who often provide finance against pledge of shares are rattled that they will not be able to exercise their rights as lenders, if a police move freezing Yes Bank’s 25.6% stake in Dish TV sets a precedent.

On Tuesday, the Supreme Court will hear Yes Bank’s appeal against an Allahabad High Court order that dismissed the lender’s plea seeking to lift the freeze on its voting rights in Dish TV, which is operated by Subhash Chandra’s Essel Group. At the high court, Yes Bank had challenged a move by Uttar Pradesh’s Gautam Buddh Nagar crime branch last week to freeze its voting rights in Dish TV.

Dish TV has scheduled an annual general meeting on Tuesday (November 30) to seek shareholders’ consent to its Rs 1,000 crore rights issue – a move that is opposed by Yes Bank, the largest shareholder. “The private lender will not be able to exercise its voting rights if the Supreme Court does not restore it,” said one of the lenders.

The court is likely to hear the matter in the first half of the day, while the AGM is scheduled at 3.00 pm.

Yes Bank on September 3 had suggested reconstitution of Dish TV’s board and opposed the proposed rights issue as it would dilute its holding in the company.

Private equity lenders say equity pledge is one of the most liquid collateral and freezing it is a major setback.

“The courts in India might eventually resolve this issue. However, if the police interfere and even cause a few months delay in enforcing security, then the value of the debt gets significantly eroded,” said one of the lenders, who did not want to be named.

Private credit providers are also rattled that a police complaint was filed when there are well-established procedures for dispute resolution, such as the National Company Law Tribunal. Further, the case was registered at the crime branch in Uttar Pradesh when both Yes Bank and Dish TV have their registered offices in Mumbai.

One of the lawyers present at the Allahabad High Court said Yes Bank’s senior counsel, Abhishek Manu Singhvi, pointed out that “the UP sub-inspector will become supreme and can tomorrow attach paintings in Kerala and homes in Mumbai based on frivolous complaints filed by defaulting borrowers”.

The UP crime branch order follows a complaint by Subhash Chandra against the bank, accusing its former chief executive, Rana Kapoor, of fraud in brokering a merger between Videocon D2H and Dish TV. Kapoor is facing allegations of financial irregularities at the bank and is currently in jail.

Yes Bank had provided a Rs 5,270 crore loan to Essel group of companies against the pledge of Dish TV shares in 2016. After the group companies of Essel started defaulting, Yes Bank invoked the shares in June 2020 and recalled the loan the following month. IndusInd Bank, L&T Finance, housing finance company, HDFC Ltd and Clix Capital are among other lenders to have invoked the share pledge of Dish TV.

Subhash Chandra first filed an FIR against Yes Bank at Greater Noida in September 2020 and initiated a civil proceeding against the bank at Delhi’s Saket District Court for invocation of shares. The Saket court initially restrained Yes Bank from selling the shares but withdrew the proceedings in August 2021.

On November 6, Dish TV informed the stock exchange that it has received orders from the UP-crime branch to restrict Yes Bank from the dealing with 445.3 million shares (amounting to a 25.6% stake) of Dish TV until the investigation is completed or further order. On November 7, Dish TV informed the exchanges about the proposed EGM on November 30.



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RBI imposes Rs 1 cr penalty on Union Bank of India, BFSI News, ET BFSI

Banking & Finance

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Mumbai, The Reserve Bank of India (RBI) on Monday said it has imposed a penalty of Rs 1 crore on Union Bank of India for deficiencies in regulatory compliance. The penalty was imposed by an order dated November 25 for non-compliance with the certain provisions of directions issued by the RBI contained in “Reserve Bank of India (Fraud – Classification and Reporting by commercial banks and select FIs) Directions 2016” and “Guidelines on Sale of Stressed Assets by Banks”.

Giving details, the RBI in a statement said the statutory inspection for supervisory evaluation (ISE) of the bank was conducted by it with reference to its financial position as of March 31, 2019.

Examination of the risk assessment report, inspection report and all the related correspondences revealed, inter alia, non-compliance with certain directions to the extent of failure to classify an account as a Red Flag Account despite the presence of early warning signals and failure to disclose ageing of and provisioning for security receipts (SRs) in its annual report, the RBI said.

The central bank, however, added that the penalty is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.



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IndusInd Bank micro fin arm’s CEO, ED exit, BFSI News, ET BFSI

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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.

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Get the full list here, BFSI News, ET BFSI

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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

December 25: Christmas — Guwahati, Hyderabad, Imphal, Jaipur, Jammu, Kanpur, Kochi, Kolkata, Lucknow, Mumbai, Nagpur, New Delhi, Panaji, Patna, Raipur, Ranchi, Shillong, Shimla, Srinagar, Thiruvananthapuram

December 27: Christmas Celebration — Aizawl

December 30: U Kiang Nangbah — Shillong

December 31: New Year’s Eve — Aizawl

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

December 26: Sunday



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SBI enters co-lending agreement with Capri Global Capital Ltd, BFSI News, ET BFSI

Personal Finance

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State Bank of India has entered into a co-lending agreement with Capri Global Capital Ltd (CGCL) to boost MSME lending. The two parties have signed a Memorandum of Understanding to create multiple co-lending opportunities for the financial empowerment of the MSMEs, which aims to provide further impetus to financial inclusion in the country, the bank said in a release.

Dinesh Khara, Chairman, SBI said, “To improve the credit to the underserved and unserved, we are happy to associate with Capri Global Capital. We believe this collaboration will provide the nimble footedness of NBFC and quality credit to the right set of the population which will further deepen lending to MSMEs through the last mile connect.”

RBI had issued guidelines on the co-lending scheme for banks and NBFCs for priority sector lending to improve the flow of credit to unserved and underserved sectors of the economy, and make funds available to borrowers at an affordable cost.

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UBS revises GDP forecast to 9.5% from 8.9% for FY22, BFSI News, ET BFSI

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Mumbai, Nov 17 (PTI) Citing faster-than-expected recovery, rising consumer confidence and the resultant spending spike, Swiss brokerage UBS Securities has revised upwards its growth forecast for the current fiscal to 9.5 per cent from 8.9 per cent in September. The brokerage also sees the economy clipping at 7.7 per cent in FY23 but moderating to 6 per cent in FY24, as it expects the benefit of the low-interest rate regime to end by the end of FY23, and it sees the central bank hiking policy rates by 50 bps in the second half of the next fiscal.

The Reserve Bank also forecasts 9.5 per cent GDP growth this fiscal while the average projection ranges from 8.5 to 10 per cent. The government projection is around 10 per cent.

The GDP grew 20.1 per cent in the June quarter of FY22.

In its September review, UBS said on a seasonally adjusted sequential basis, the real GDP declined by 12.4 per cent in the June quarter against the -26 per cent in the same period last year.

Therefore, we maintain the base case estimate of GDP growth at 8.9 per cent in FY22 compared to the consensus of 9.2 per cent against the deeper 7.3 per cent contraction in FY21, UBS Securities said.

The economy is bouncing back on progressive reopening, and the recovery from the second wave has been more pronounced than what we anticipated, Tanvee Gupta Jain, the chief economist at UBS Securities India said on Wednesday. Therefore pencilled in a higher-than-expected GDP run this fiscal.

Without giving an exact number, she said the economy will grow by 9-10 per cent in Q3 and 6-6.5 per cent in Q4 this fiscal, leading to higher overall full-year growth.

Gupta-Jain told reporters in a concall that she sees real GDP clipping at 9.5 per cent this fiscal, up from 8.9 per cent forecast earlier, 7.7 per cent in FY23 — which is more optimistic than the consensus 7.4 per cent for the year, but the growth momentum will moderate to 6 per cent in FY24 as the output gap will remain negative amidst the global growth engine slowing down.

Their optimism comes from their internal UBS India Activity Indicator data, which suggest economic activity has improved sequentially by an average of 16.8 per cent in the September quarter after contracting 11 per cent in the June quarter. Even for October, the indicator was up 3.1 per cent month-on-month on the festive demand bounce.

The brokerage bases the more-than-consensus growth optimism on the following: though consumption growth may moderate measures to boost public Capex and early signs of a recovery in the residential real estate sector may offset some of the adverse impacts.

Similarly, exports could also moderate next year from the very high rates this year due to a shift from goods to service consumption at the global level as the pandemic recedes.

They also see a potential credit accelerator effect in the country aiding the recovery. The baseline assumption is that activity continues to normalise, and remaining mobility restrictions are gradually removed.

Downside risks to the outlook include the following: a mutant virus that is resistant to vaccines is the biggest downside risk, as it may leave the government no choice but to begin new mobility restrictions, another could be a more than the expected spike in inflation and the resultant hike in repo rates to the tune of 75 bps next fiscal. If both materialise, then FY23 growth will be much lower at 5 per cent, she said.

And the upsides would be a successful and timely implementation of the recently announced structural reforms boosting growth beyond our baseline forecast, which will also lead to the economy closing the output gap faster.

According to the brokerage, potential growth has slowed to 5.75-6.25 per cent currently compared to over 7 per cent in 2017, due to longer-than-expected disruption caused by the pandemic and balance sheet concerns faced by economic agents.

Beyond FY22, Gupta-Jain believes Capex, especially infrastructure spending, manufacturing and exports will be the next key growth drivers.

On inflation, she expects CPI to decelerate to 4.8 per cent in FY23 from 5.4 per cent in FY22, assuming the RBI gradually starts unwinding its ultra-easy policy as the economic recovery gains momentum. In a base case scenario, she expects a policy rate hike of 50 bps in H2 FY23.

On the fiscal front, she expects the government to remain committed to fiscal consolidation and narrow the deficit to 8.8 per cent in FY23 from 10.1 per cent in FY22.



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SBI Report, BFSI News, ET BFSI

Banking & Finance

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People may be holding as much as Rs. 3.3 lakh crores in cash for emergency purposes due to the Covid related dislocation in their income expectations, estimates SBI. The rise in cash to GDP ratio may be misleading due to this factor. If one adjusts for the emergency, the cash to GDP ratio may be lower than the pre-demonetisation level.

“Our estimate also shows that because of the pandemic people may have been holding as much as Rs 3.3 lakh crores in cash for precautionary motive beginning FY21″ said SBI Research team’s report titled “A Guide to Formalisation of Economy since FY18”.It adds that “If we adjust for such currency transactions, the currency to GDP ratio for pure payment purposes may have actually declined in FY21 compared to earlier years.”

The formalization efforts are bearing major fruit in terms of currency /GDP ratio. The research report by the country’s largest lender estimates that without pandemic GDP collapse, CIC/GDP ratio would have been 12.7% in FY21, as against 12.4% in FY11.

Indian consumers are migrating to high end technology platforms like UPI- Unified payments interface- that does not require the intervention of a POS or a point of sale machine and factor authentications: UPI transactions have jumped 70 times in last 4 years.

Latest currency in circulation data reveals that it has remained constant over the previous year even as record purchases happened during Diwali at Rs 1.25 lakh crores. The latest RBI data show that currency in circulation rose Rs 43,892 crore during the festival weekend, almost the same as the previous year’s Diwali week when the festival spends were lacklustre. “This happened for the first time since 2014” said S K Ghosh, SBI’s group chief economic advisor, who has authored the report.

“Indian consumers now prefer convenience in payments through the click of a button. The vast quantity of information that is produced as a passive by-product of the use of such UPI transactions holds a great promise as a transformative resource for real time policy and evidence based policy making” Ghosh said.

As this would need use of huge swaths of data and use of artificial intellegence by banks, the report recommends scaling up of large investment in cloud platforms by banks. “This might also necessitate regulatory interventions of both Central Banks and Government so that database can be harnessed and stored and also used for real time policy making” Ghosh said.



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HDFC Bank to hold 2,000 workshops to prevent fin frauds, BFSI News, ET BFSI

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Mumbai, Nov 15 (PTI) Largest private sector lender HDFC bank on Monday said it will be organising 2,000 workshops over the next four months for preventing financial frauds. The campaign will tell the customers about ways to safeguard themselves against financial fraud, starting with not disclosing any information on banking details.

A special focus is being given to the youth segment, where the bank will be targeting Senior Secondary Schools and Colleges, so that the awareness is ingrained, as per an official statement.

“Digitalization offers customers unparalleled convenience and access to banking services. With these conveniences comes a lot of risks of cyber frauds as well. The fraudsters are constantly on the prowl looking out for gullible customers,” it’s managing director and chief executive Sashidhar Jagdishan said.

The second edition of the campaign titled ‘Mooh Band Rakho’ was launched by K. Rajeswara Rao, Special Secretary, NITI Aayog. Lt General Dr Rajesh Pant, National Cyber Security Co-ordinator, was also present.



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UCO Bank enters co-lending agreement with Aadhar Housing Finance, BFSI News, ET BFSI

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KOLKATA: Kolkata-based UCO Bank on Wednesday entered into a co-lending agreement with Aadhar Housing Finance to offer home loans at competitive rates, a bank spokesman said.

The partnership aims at providing easy and convenient home finance solutions to customers from the economically weaker sections of society, he said.

The co-lending framework of the Reserve Bank of India provides a tool for banks and non-banks to collaborate, leverage on their respective strengths to give an affordable solution to the unserved and underserved sections.

Speaking on the occasion, UCO Bank MD and CEO Atul Kumar Goel said, “Home loan penetration in India at around 10 per cent is one of the lowest globally.”

Pandemic induced demographic changes, initiatives taken by central and state governments such as Pradhan Mantri Awas Yojana, reduction in GST on affordable housing and stamp duty cuts are expected to give a fillip to the affordable housing sector especially in Tier-2 and smaller centres, he said.



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