Tag: India

SBI and Indian Navy launch NAV-eCash Card, BFSI News, ET BFSI

Banking & Finance

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The Indian Navy and State Bank of India (SBI) has launched SBI’s NAV-eCash Card onboard India’s largest Naval Aircraft Carrier INS Vikramaditya.

The launch of SBI’s NAV-eCash Card is in view SBI’s efforts towards the GOI’s vision of Digital India and a conscious shift towards less-cash economy. The unique infrastructure at naval ships inhibits traditional payment solutions particularly when the ship is in high seas where there is no connectivity. NAV-eCash Card with its dual-chip technology will facilitate both online as well as offline transactions.

The Card will obviate the difficulties faced by personnel onboard in handling physical cash during deployment of the ship at high seas. The card takes care of the requirements of Navy to provide a seamless onboard experience. The NAV- eCash Card will change the payment ecosystem while the ship is sailing with no dependency on cash for utilization of any of the services onboard.

Shri CS Setty, MD (Retail & Digital Banking), SBI, emphasized upon the Bank’s commitment towards defence forces and the long relationship with the armed forces of India. He also expressed the feeling of pride on being associated with defence forces. The concept will be replicated at other naval ships and various defence establishments for creating a secured, convenient and sustainable payment ecosystem.

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RBI may signal policy normalisation on Oct. 8, StanChart says, BFSI News, ET BFSI

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The Reserve Bank of India is likely to signal the start of an unwinding of its accommodative monetary policy, introduced to cushion the economic impact of the pandemic, at a meeting next week, economists at Standard Chartered Bank wrote in a research note on Friday.

The consensus view is that the RBI will leave interest rates unchanged at its Oct. 8 MPC meeting and only start to unwind its accommodative monetary policy by reducing the gap between the repo and reverse repo rates early next year.

Some economists, including those at StanChart, however have brought forward their policy normalisation expectations amid concerns of rising domestic inflation from high oil and global commodity prices and a sharp increase in the pace of vaccination.

“We now expect India‘s Monetary Policy Committee (MPC) to hike the reverse repo rate by 40 basis points to 3.75% at the December 2021 and February 2022 policy meetings; we had earlier expected the hikes in February and April 2022,” the Standard Chartered economists said.

They expect the MPC to raise the key repo rate only in August 2022 but said the risk of an earlier hike has increased. They also acknowledged the risk of a nominal increase in the reverse repo rate on Oct. 8, on account of the higher cut-offs at recent variable rate reverse repo auctions.

“Unlike VRRR cut-offs/sizes and tenor, a reverse repo rate hike is a firmer signal of policy normalisation, in our view,” the economists said.

“We think a firmer signal is warranted when the risk of another surge in infections is largely ruled out. Additionally, with India entering the festival season, supportive monetary policy is likely to help sentiment and demand,” they added.

Nomura also expects a 40 bps reserve repo rate hike in December and a total of 75 bps repo and reverse repo rate hikes throughout 2022.

“We still believe that RBI’s normalisation strategy will hinge upon the growth outlook, and not inflation,” Rahul Bajoria, economist at Barclays said in a research note.

“Macro indicators show that India’s activity levels have begun to normalise, and with the economy recovering faster than anticipated, the RBI has more options to calibrate an exit, both through communication and actions, in our view,” he added. (Reporting by Swati Bhat. Editing by Jane Merriman)



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HSBC, Yes Bank join rate cut war; foreign lender to offer mortgage from 6.45%, BFSI News, ET BFSI

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Mumbai, HSBC on Friday reduced rates on its home loan products, offering mortgages at 6.45 per cent – one of the lowest in the industry – for balance transfers. For fresh loans, the British lender’s local branches will offer lending at 6.70 per cent, which is at par with sector leaders like SBI and HDFC.

Yes Bank also cut its rate to the same level in a review and is aiming for doubling the book size during the limited period offer.

Last month, private sector lender Kotak Mahindra Bank cut its interest rates to offer home loans from 6.50 per cent onwards, forcing others to also review their rates. Credit growth is at low levels amid a flush of liquidity which is leading to the rate cuts.

HSBC India said its rate has been reduced by 0.10 per cent to 6.45 per cent for balance transfers, wherein existing borrowers being served by rivals are enticed to switch the remaining loan amounts to a newer lender by aggressive offerings.

Home loans are generally considered safer bets because of the underlying security, and waning of COVID infections has also prompted healthy pick-up in home buys.

In a statement, the bank said it has also waived the processing fee for these loans and added that the rate offering will be applicable only till December 31.

“We believe this reduction in the home loans rates will help reduce the interest burden of customers and make homeownership more affordable,” its head of wealth and personal banking, Raghujit Narula said.

The bank currently offers home loans of up to Rs 30 crore to all customer at 6.70 per cent.

Meanwhile, private sector lender Yes Bank also announce a cut in its offering to 6.70 per cent, as per a statement, which also said salaried women will get credit at 6.65 per cent.

“Given our focus on further building the retail book, home loan is segment we are looking at expanding and envisage growing the book size by 2X over the next three months,” its chief executive and managing director Prashant Kumar said. PTI AA ANU ANU



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Bank credit gathers pace in Aug 2020, led by retail, industrial sectors, BFSI News, ET BFSI

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As India‘s economic activity revives, bank credit has expanded to various sectors, led by retail and industrial sectors, in August 2021.

According to the Reserve Bank of India data, retail segment showed an accelerated growth of 12.1% in August 2021, compared with 8.5 % a year ago, on higher volume in housing and vehicle credit.

However, credit growth in services sector fell to 3.5% in August 2021 compared with 10.9% a year ago, mainly due to contraction in credit growth to NBFCs and commercial real estate.

Credit to industry rose to 2.3% in August 2021, from 0.4% in August 2020. Loans to medium size units rose to 63.4% in August 2021 against 4.4% last year, RBI said.

Credit to micro and small industries stood at 10.1% in August 2021, from a contraction of 1.1% a year ago, and credit to large industries shrunk by 1.7% in August 2021 compared with a growth of 0.5% a year ago.

Credit to engineering, chemical and chemical products, gems and jewellery, infrastructure, mining and quarrying accelerated in August 2021 as against a year ago, and credit to basic metal, cement & cement products, construction, vehicles, vehicles parts and transport equipment’ either decelerated or contracted, RBI said.



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A guide to navigating the new auto debit rules

Personal Finance

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New regulations that require a second factor authentication for certain auto debit transactions are becoming operational from October 1, 2021. How will this impact all your automated transactions such as EMIs, phone, gas and electricity bill payments and SIPs? How can you work around the new rules if your bank or merchant is not yet compliant? Read on to know.

Affected transactions

To begin with, not all your automated payments will be affected. RBI’s new guidelines will impact only all recurring contactless payments made through debit/credit cards, UPI and prepaid instruments and this, when done from third party websites and apps.

Transactions initiated on the bank’s website or app will continue hassle-free. For example, if you have automated a payment on your HDFC Bank debit/credit card through their BillPay Service, this can go on.

Also read: Auto debit norms: Payments Council of India seeks extension for smooth transition

Payments initiated through third party apps, that do not comply with RBI’s guidelines may not go through henceforth. This is because the new RBI guidelines mandate such transactions to undergo additional factor authentication. This means that every recurring transaction automated from outside a bank’s portal will now require a second factor authentication by way of an OTP.

For all your automated debits exceeding ₹5,000 per transaction, you will henceforth be required to authorise the banks to carry out the transaction every time the transaction falls due. An OTP will be sent to you 24 hours prior to the transaction, for every payment to go through.

The OTP will be sent on your registered email address and phone number, along with details of the merchant, transaction amount. A link that enables you to modify or cancel the transaction or the recurring mandate itself will also be sent alongside.

Additional factor authentication will only be one-time in nature for payments below ₹5,000 (required at the time of registering the mandate). If you have already registered such mandates with third party apps/websites that are compliant with the new guidelines, your payments will continue hassle free. In case the merchant is not compliant, banks will intimate you to give the one-time additional authentication for such transactions.

It is noteworthy that large private banks, such as HDFC Bank, ICICI Bank, and Axis Bank have been enabling automated payments with additional factor authentication, for e-mandates across various merchants.

In many other banks, this was only available for transactions or standing instructions placed through bank’s net banking, phone banking or UPI portal. Examples for these include your loan EMIs and monthly investments such as SIPs, where in you either signed the NACH/ECS mandate or providing a standing instruction through the bank’s net banking portal.

Following the October 1 deadline, more banks have tied up with select merchants to enable such two-factor authentication as mandated by the RBI. But some are yet to comply.

Tackling non-compliant transactions

Transactions initiated with non-compliant merchants may not go through, starting October 1, 2021. You can make direct payments on the app/ website of the merchant or choose the merchant under your UPI, net banking or card account and pay them when the dues come up.

However, if you want to continue automating transactions with such non-compliant merchants, banks may require you to register the recurring payments on the bank’s portal.

For instance, if you opted for an auto-renewal of your OTT platform subscription, the same may not go through starting October 1, if the same is not compliant with the new guidelines issued by RBI. Do note that while Amazon Prime, Netflix and Hotstar are currently integrated into the common platform, other OTTs haven’t.

How will you know whether your merchant is compliant or not? Fret not. Banks will intimate customers regarding the same through text and email. Customers can then issue the standing instructions afresh to banks, to continue automating the transactions, hassle free.

Leave alone non-compliant merchants, many banks themselves have not yet upgraded their software to comply with the new guidelines. Customers of such banks who have authorised automated payments to merchants need to check with their banks on the status recurring payments.

In the interim, you can make direct payments on the app/ website or choose the merchant under your UPI /net banking/card account and make the payment each time the payment it is due.

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Lenders approach RBI after Rs 30,000 crore Srei loans turn NPA, BFSI News, ET BFSI

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A consortium of lenders led by UCO Bank has sought central bank directions on pursuing recovery of dues from the Srei Group after loans worth about ₹30,000 crore to the Kolkata-based financier officially qualified to be moved to the list of non-performing assets (NPA) this quarter, two people aware of the development told ET.

The Srei Group, however, said it expects banks to chalk out a debt recast plan that will map repayment milestones to future cash flows.

Since the group entities involved are non-banking financial companies (NBFC), the lenders concerned compulsorily need the Reserve Bank of India‘s (RBI) approval to take the Srei Group to the National Company Law Tribunal (NCLT) for insolvency proceedings.

In response to a query from ET, a Srei Group spokesperson said the economic downturn and loan moratoriums provided by the regulator had affected operations. The group is now in discussions with banks to implement a restructuring scheme.

‘NPA Ratio to Take a Hit’
“We hope banks will decide on the debt realignment at the earliest so that the company can pay all its bondholders and other creditors,” a Srei spokesperson said in the mailed response to ET. “We are very hopeful that banks will propose a payment schedule in consonance with the company’s cash flow that will enable payments to all creditors and help run the company smoothly.”

To be sure, Srei Infrastructure Finance may become the next big bankruptcy candidate from the financial services space after Dewan Housing Finance (DHFL). Banks are free to classify loans to Srei Group as NPAs after the National Company Law Appellate Tribunal (NCLAT) lifted a stay earlier this month on marking such exposure as bad, setting aside a lower bench order.

  • Srei Infra and its unit Srei Equipment Finance together owe lenders and debenture holders Rs 30,000 cr
  • UCO Bank, SBI have exposure of more than Rs 2,000 cr each
  • Srei Infra reported a loss of Rs 971 cr in the June quarter
  • Provisions on loans surged to Rs 439 cr from Rs 67 cr a year ago
  • In July, Srei disclosed that a RBI-directed audit had flagged Rs 8,576 cr of lending to ‘probable’ related parties of the group

“All banks will have to classify loans to Srei as NPAs this quarter and make the minimum provisions required,” said a person familiar with banking-sector exposure to the Srei Group. “Many banks have excess provisions; so, that should not be a cause for concern. But with such a big loan account slipping, the gross NPA ratio of some banks will increase at the end of the quarter.”Srei Infrastructure, and its subsidiary Srei Equipment Finance, together owe lenders and debenture holders a total of ₹30,000 crore. Kolkata-based UCO Bank is the lead lender, with more than ₹2,000 crore of exposure. State Bank of India (SBI)’s exposure to the group is also more than ₹2,000 crore.

Bankers say they have already set the ball rolling for recovery of loans by writing to the RBI and a regulatory nod to take the company through the bankruptcy courts could mean another DHFL-type insolvency process.

“Already two letters have been sent to apprise RBI of the conditions. If the central bank gives the permission, banks will go ahead with a court monitored process,” said a second person aware of the Srei-related banking-sector exposures. “It remains to be seen what the central bank’s response is.”



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UPI transaction value doubled to Rs 6.06 lakh crore in July, BFSI News, ET BFSI

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Unified Payments Interface (UPI) transactions more than doubled in value in July over the year-ago period, outstripping payment by cards, which went up 42%, according to the latest Reserve Bank of India (RBI) data.

UPI transactions by value touched their highest ever in July at Rs 6.06 lakh crore, surpassing the previous record of Rs 5.47 lakh crore in June and up from Rs 2.91 lakh crore a year ago. Card spending at Rs 1.36 lakh crore in July, on the other hand, was the highest since April and rose from Rs 95,883 crore in the year earlier as the economy recovered.

UPI platforms saw a 109% jump as consumers took to digital payments for daily essentials at local stores as well as premium purchases.

“We are observing that a majority of online payments are through UPI platforms and apps such as Cred,” said Riyaaz Amlani, chief executive of Impresario Handmade Restaurants, which runs the Social, Smoke House Deli and Salt Water Café chains. Amlani said UPI adoption is rising as average order value at outlets has increased 20% after the pandemic’s second wave.

While the economy shows signs of recovery, discretionary spending using cards has grown but couldn’t match UPI, executives said.

Banks, Retailers Note Trend

Digital payments made on wallets and UPI platforms by volume rose to about 3.25 billion in July, from 1.5 billion a year ago. The number of payments using cards was 520 million, compared with 450 million a year earlier.

Le Marche Retail chief executive Amit Dutta said the premium grocery chain has observed the trend within stores as well as in-home transactions. “UPI payments are showing increased traction in the past year, driven by convenience and the transactions being contactless, compared to card swiping, where contact points are higher,” he said. Consumers not previously comfortable with UPI payments have overcome their initial hesitation, Dutta said.

Banks executives said card payments are also growing, though UPI platforms are growing faster.

“UPI growth rate is and will outstrip cards, and it comprises both peer-to-peer and merchants payments,” said Axis Bank head for cards and payments Sanjeev Moghe. “Cards are only for payment to merchants. As long as the cards segment is growing at over 30-40%, it is quite healthy.”

UPI, payment platforms and wallets account for 10-15% of sales at leading electronics retail chain Vijay Sales, said its director Nilesh Gupta, up from almost nil just a year ago. “Consumers are even buying high-ticket items through such modes. These platforms often offer cashback incentives to entice customers,” he said.

Digital Adoption

The government and the RBI have been focusing on facilitating digital adoption by enhancing acceptance infrastructure and introducing innovative payment options to deepen the reach of payment systems.

“UPI transactions have moved the needle substantially in the past 12-15 months for neighbourhood grocery stores, riding on three reasons — convenience, instant credit and contactless transactions,” said Prem Kumar, founder of Ratan Tata-backed retail tech company SnapBizz, which devises technology for over 30,000 kirana stores and does business transactions of over $1 billion a year.

RBI said in its latest annual report that efforts were also directed toward ensuring smooth functioning of all payment systems despite disruptions in movement and access to infrastructure caused by the Covid-19 lockdown, with varying intensity and duration across various locations in the country.

Remittances also contributed a chunk of UPI volume. The platform is expected to see more traction once all banks develop systems to support inward remittances on UPI platform, said Emil Ruban, country manager India at Ria Money Transfer. “Many banks are yet to develop cross-border money transfer facilities,” he said.

A Euromonitor report said the trend is expected to continue, with increasing acceptance of UPI. “A large number of consumers started using UPI transactions for daily shopping activities especially at local retail stores, with the outbreak of the pandemic,” said Euromonitor consultant Vishnu Vardhan.



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Emerging Asia-Pacific markets incline towards cashless payments, shows McKinsey survey, BFSI News, ET BFSI

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The number of users in emerging markets in Asia-Pacific, which includes India, has increased from 65% in 2017 to 88% in 2021, according to a survey by consultancy firm McKinsey.

The shift to digital banking was likely accelerated by existing trends such as increasing use of digital channels, including banking, broader use of video calls in place of face-to-face meetings, etc. These trends have intensified during the COVID-19 pandemic, and high levels of digital adoption are likely to hold even as the pandemic subsides, the survey suggests.

In emerging markets, FinTech apps and e-wallet penetration reached 54% in 2021, compared with 43% in developed Asia–Pacific. In 2017, the penetration was just 38% in emerging markets.

More than half of the respondents in most Asia–Pacific markets report that cash is used for less than 30% of weekly spending, the survey said.

The survey results indicate that banks can expand their digital offering, by leveraging existing assets. According to McKinskey, banks will need to reinvent its business and delivery models by focusing on three key areas – value of branches, customer engagement, and overall competitive positioning.

Approximately 97% of all Asia–Pacific consumers favour mobile and online banking, and 2% of consumers in developed Asia–Pacific and 3% in emerging Asia–Pacific continue to conduct most of their bank business at the branch.

With digital banking becoming more and more popular, the question of functionalities of bank branches arises. However, despite these numbers, McKinsey says that bank branches will continue to be consumers’ primary partner in managing money. Banks can make sure that branch staff have time to concentrate on activities like advising on loans, insurance, or investments to customers, and digitise other processes, it said.

To further engage customers in digital banking, McKinsey’s research suggests that banks should urge customers to buy banking products online. Even though 70% of respondents expressed openness for using digital channels for services beyond transactions, only 20-30% said they were comfortable to buy online banking products like savings accounts, loans, or credit cards.

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HDFC to double its rural reach to 2 lakh villages in the next 18-24 months

Banking & Finance

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Private sector lender HDFC Bank plans to expand its reach to 2 lakh villages over the next 18 to 24 months.

“The bank plans this expansion through a combination of branch network, business correspondents, business facilitators, CSC partners, virtual relationship management and digital outreach platforms,” it said in a statement on Sunday, adding this would increase its rural outreach to about a third of the country’s villages.

HDFC Bank currently offers its products and services to MSMEs in over 550 districts and its rural banking services extend to 1,00,000 villages. It aims to double this to 2,00,000 villages. As a part of this plan, it plans to hire 2,500 more people in the next six months.

“India’s rural and semi-urban markets are under-served in credit extension. They present sustainable long-term growth opportunities for the Indian banking system. Going forward we dream of making ourselves accessible in every pin code,” said Rahul Shukla, Group Head – Commercial and Rural Banking, HDFC Bank.

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Short of lending targets, banks seek priority sector tag for retail, infrastructure, BFSI News, ET BFSI

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Banks have reached out to the government seeking priority sector tag for retail trade and infrastructure.

This comes as most lenders are struggling to meet their priority sector targets with premium on lending certificates rising by almost 200 basis points in the last one year. At present only, regional rural banks or RRBs are suppliers of priority sector lending credit.

“We have had informal discussions with the Reserve Bank of India, and have made representation to the government as well,” said a bank executive, aware of the developments, adding that there was a need to broaden the priority sector.

At present lending towards eight sectors including agriculture, micro and small medium enterprises, export credit, housing, education, renewable energy and social infrastructure is considered eligible for priority sector loans. Commercial lenders have to mandatorily deploy 40% of their adjusted net bank credit (ANBC) towards these sectors, of which 18% is allocated towards agriculture.

The latest data from RBI indicates that overall priority sector lending for scheduled commercial banks stood at 40.54% in 2020-21 (as at the end of December 2020) even though there was a marginal shortfall for private sector and foreign banks.

“There are various subcategories within this structure and most banks are unable to meet these requirements and hence there is a need to identify new potential sectors,” the above quoted executive said adding that most big lenders resort to buying priority sector lending certificates (PSLCs) to meet their regulatory requirements. A bank running short of meeting targets can purchase priority sector lending certificates from a lender having surplus for a fee.

“Today, only regional rural banks (RRBs) are suppliers of PSLC and most sponsoring banks buy it from their RRBs,” he said, adding that non-banking finance companies or NBFCs also have underwriting limitations.

The total trading volume of PSLCs recorded a growth of 25.9% and stood at Rs 5.89 lakh crore in 2020-21 as compared with 43.1% growth a year ago.



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