Tag: Narendra Modi

PMJDY turns 7; brings 43 crore under formal banking system

Banking & Finance

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As India celebrates its 75th Independence Day, nearly 43 crore poor beneficiaries in the country now have a basic bank account, thanks to Centre’s flagship financial inclusion scheme, Pradhan Mantri Jan Dhan Yojana (PMJDY).

The scheme, announced by Prime Minister Narendra Modi in August 2014, has dispelled initial apprehensions on its efficacy and proved to be a steady vehicle for financial inclusion.

Also read: Over 5.82 crore Jan Dhan accounts inoperative: Finance Ministry

As per latest government data, PMJDY now has 42.89 crore beneficiaries (basic bank account holders) with ₹1,43,834 crore total balance. More than half of the beneficiaries are women (23.76 crore) while 28.57 crore are from rural and semi urban areas.

‘Unparalled achievement’

When asked on the impact of the scheme so far, D Janakiram, Director, Institute for Development and Research in Banking Technology (IDRBT), an arm of RBI, said, “PMJDY has done extremely well so far… The massive financial inclusion achieved by the scheme is unparalleled.”

A senior official of State Bank of India said the average balance in the accounts which is hovering around ₹3,000-3,500 across banks is ‘an indication’ that the scheme has now become a channel for savings for the low income families.

“The total deposit balance of ₹1.43-lakh crore is actually a huge amount. Our studies have shown that a good number of these accounts are being regularly used,” Prasanna Tantri, Exectuive Director, Center For Analytical Finance, Indian School of Business (ISB) said.

The Global Findex data base of the World Bank has also shown ‘substantial’ increase in financial inclusion in the country after 2014. As per the index, 80 per cent of people above 15 years of age in the lower-middle income group have a bank account now compared to 53 per cent in 2014.

The next step

While the contribution of PMJDY has well been recognised, there is also a need to scale up to the next level, say experts.

Also read: Why PMJDY must be scaled up to next level

“Going forward, we should move from financial inclusion to financial empowerment by providing credit. The PMJDY should become PM Jan Dhan Vridhi with universal access to bank credit to the most underprivileged sections of our society,” the IDRBT chief said.

It would also need a model of credit history, which will require reduction in cash transactions and moving to digital transactions and building credit models using artificial intelligence/machine learning techniques, he added.

“We should think of building India’s next generation digital financial infrastructure focusing on these needs and to reduce per transaction cost as well as the maintenance cost of these accounts,” Janakiram said.

According to Tantri, there is a need to build up a data base to capture the income, transaction history of the Jan Dhan account holders on the basis of which credit delivery models can be worked out. “As of now, we have only aggregate data. Banks and Fintechs can do further data analysis to create a new data base,” he added.

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Pandemic hits India's prospects to become $5 trillion economy by FY25: Top US economist

Personal Finance

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According to him, even if everything goes according to current growth projections by the RBI and IMF, Indian economy will be smaller for a considerable period of next year than it was in 2019.

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Modi rolls out digital payment solution e-RUPI

Banking & Finance

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e-RUPI, a cashless and contactless instrument for digital payment developed by the National Payment Corporation of India (NPCI), Health Ministry, National Health Authority and Department of Financial Services was launched by Prime Minister Narendra Modi on Monday.

How does it work

This one-time payment mechanism allows users to redeem the voucher without a card or any digital payment app or internet banking. Based on the Unified Payment System, the Reserve Bank of India-approved e-RUPI is an e-voucher issued to the beneficiary through SMS or QR code on his or her mobile number. With the help of this, the service provider gets the payment directly into his account. Any government agency or corporate can generate e-RUPI through their partner banks.

DBT schemes

Speaking at the launch of this digital tool, Modi said the e-RUPI voucher will play a big role in making direct benefit transfer more effective. Modi said with time its utility will also change. For instance, the e-RUPI will be helpful to give treatment, say for TB, or provide food for the needy. It is not only person-specific, but also purpose-specific.

“Any person who is desirous of giving vaccination to poor people in private hospitals can do so with the help of eRUPI. eRUPI will ensure that the e-voucher is used for the purpose of vaccination only and for any other work,” Modi said.

“It can also be used for delivering services under schemes meant for providing drugs and nutritional support under Mother and Child welfare schemes, TB eradication programmes, drugs & diagnostics under schemes like Ayushman Bharat Pradhan Mantri Jan Arogya Yojana, fertiliser subsidies, etc. Even the private sector can leverage these digital vouchers as part of their employee welfare and corporate social responsibility programmes,” the official release said.

e-RUPI connects the sponsors of the services with the beneficiaries and service providers in a digital manner without any physical interface. It also ensures that the payment to the service provider is made only after the transaction is completed. Being pre-paid in nature, it assures timely payment to the service provider without involvement of any intermediary, it added.

RS Sharma, Chief Executive Officer of the National Health Authority, said, “e-RUPI can be used in the areas of Health, Agriculture, nutrition and education. It will also be used in India’s National Digital Mission. We are fortunate to be the first user of this tool in the health ministry.”

TV Narendran, President, CII, while endorsing the tool, said that “the voucher system will enable all beneficiaries, including feature phone-users, to benefit through this mechanism. It will also be an excellent tool for the corporates, through which they can extend employee and community welfare schemes”.

According to Uday Shankar, President, FICCI, “The e-RUPI system will not only ensure that there are no leakages in the delivery of government services but also offer a much-needed ease and convenience to the people who are the recipient of such services. This can be a revolutionary concept and alter the paradigm of governance…FICCI will also encourage its members to consider using this platform for offering benefits to their employees and other stakeholders.”

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Barring a few like Essar, banks have lost 80% dues in top NCLT resolutions, BFSI News, ET BFSI

Banking & Finance

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The resolution of Videocon Industries close to the liquidation value has put the spotlight on realisations through the Insolvency and Bankruptcy Code mechanism.

Bankers have lost over Rs 40,000 crore in the Videocon account, as Anil Agarwal’s Twin Star snapped the company for less than Rs 3,000 crore.

In over 363 major NCLT resolutions since 2017, banks have taken an average haircut of 80% over the past four years, the largest among them being Deccan Chronicle (95%), Lanco Infra (88%), Ushdev International (94%) and Zion Steel (99%).

While RBI has pointed to a recovery rate of 45% in IBC so far, barring the recovery rates in the top nine accounts, recoveries in other accounts average 24%. The top nine accounts were from the steel sector which led to good recoveries, while accounts in the power and infrastructure sectors struggle for buyers.

Lenders have been able eke out good recoveries in steel sector, with the highest being in the case of Essar Steel where lenders got 90% of their dues.

Fiscal 2021 drop

The realisation for financial creditors from IBC declined significantly in FY2021 with a total resolution amount of around Rs 26,000 crore, which is almost a quarter of the realisations in fiscal 2020.

The pandemic has increased operational challenges for the various parties involved in a CIRP, which resulted in limited cases yielding a resolution plan. The suspension of new proceedings under the IBC for the entire FY21 resulted in a sharp slowdown in the resolution process.

Out of the total 4,300 cases that have been admitted to bankruptcy courts since FY17, only 8% has been resolved and nearly 40% of the cases are still pending. About 30% of the cases have seen liquidation.

From its commencement in December 2016, 4,376 CIRPs have been admitted, of which 2,653 were closed till March 2021,

About 40% of the cases admitted by the NCLT were closed on appeal or settled or withdrawn under Section 12A which highlights that at least some promoters have been more willing to pay their dues to keep the IBC proceedings at bay. The extent of cases being referred to liquidation remains high at about 40% and only a quarter of such cases have seen the liquidation process come to a conclusion. The average realisation through liquidation has been a mere 3% of the claim amount.

Fiscal 2022 hopes

Although rating agency ICRA estimates that financial creditors could realise about Rs 55,000 crore to Rs 60,000 crore in FY2022 through successful resolution plans from the IBC. The higher realisation by the financial creditors would depend on the successful resolution of 8-9 big-ticket accounts, as more than 20% of ICRA’s estimated realisation for the year could be from these alone.



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PSU banks headed for privatisation may get a major makeover, BFSI News, ET BFSI

Banking & Finance

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The government plans to spruce up public sector banks’ balance sheets through capital support and sale of non-core assets and trim their workforce before putting them on block.

It may also look at transferring bad loans of these lenders to the upcoming bad bank.

On the radar

The NITI Aayog, which has been entrusted with the job of identifyng suitable candidates for the privatisation, has recommended names to a high-level panel headed by Cabinet Secretary Rajiv Gauba.

Central Bank of India, Indian Overseas Bank, Bank of Maharashtra and Bank of India are some of the names that may be considered for privatisation by the Core Group of Secretaries on Disinvestment.

The other members of the high-level panel are Economic Affairs Secretary, Revenue Secretary, Expenditure Secretary, Corporate Affairs Secretary, Secretary Legal Affairs, Secretary Department of Public Enterprises, Secretary Department of Investment and Public Asset Management (DIPAM) and the Secretary of administrative department.

Following clearance from the Core Group of Secretaries, the finalised names will go to the Alternative Mechanism (AM) for its approval and eventually to the Cabinet headed by Prime Minister Narendra Modi for the final nod.

VRS scheme

Two state-owned banks being picked up for privatisation by the government are likely to come out with an attractive voluntary retirement scheme (VRS) to get rid of the extra flab.

An attractive VRS will make them lean and fit for takeover by the private sector entities that are keen to enter the banking space, the sources said.

VRS is not forced exit but an option for those who would like to take early retirement with a good financial package, the sources said adding that it has been done in the past before the consolidation of some of the PSBs.

Out of PCA?

State-owned UCO Bank is hopeful of coming out of the Prompt Corrective Action (PCA) framework very soon.

PCA is triggered when banks breach certain regulatory requirements such as return on asset, minimum capital, and quantum of the non-performing asset.

The bank had also met the other major criteria including net NPA norm, Goel said. Net NPA was at 3.4 per cent in March quarter against requirement of below six per cent. Return on Asset is also positive at Rs 167 crore and latest leverage ratio stood at 4.53 against a requirement of four per cent.

The government in the last round had infused Rs 14,500 crore of equity in Central Bank of India, Indian Overseas Bank, Bank of India, and UCO Bank by issuing non-interest-bearing, non-transferable bonds to these state-owned lenders.

Central Bank had narrowed its loss to Rs 888 crore in FY21, from Rs 1,121 crore in FY20. IOB, which is yet to declare its results for Q4 of FY21, posted a profit of Rs 482 crore for the nine months to December 2020, as against a loss of Rs 8,527 crore for FY20. gross non-performing asset (NPA) for Central Bank are 16.55 percent while for IOB they are 12.19 percent.



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Is DeMo crackdown coming? Banks asked to preserve CCTV footage, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India (RBI) has asked banks to continue preserving the CCTV recordings of operations at their branches and currency chests for the period from November 8, 2016, to December 30, 2016, in view of the pending investigations and legal proceedings in matters related to illegal accumulation of new currency notes.

On December 13, 2016, the central bank had first asked the banks to preserve the recordings to facilitate coordinated and effective action by the enforcement agencies.

In a notification on Tuesday, the RBI said: “In continuation to the above, keeping in view the investigations pending with law enforcement agencies, proceedings pending at various courts, you are advised to preserve the CCTV recordings of operations at bank branches and currency chests for the period from November 08, 2016, to December 30, 2016, in a proper way, till further orders.”

On November 8, 2016, Prime Minister Narendra Modi had made the surprise announcement of demonetising the then circulating Rs 500 and Rs 1,000 currency notes, thereby rendering them invalid from midnight.

Citizens were given around 50 days to exchange the notes for the new Rs 500 and Rs 2,000 notes.

The Prime Minister and the government had then said that the move was primarily aimed at wiping out black money. After the government announced withdrawal of 500- and 1,000-rupee currency notes on Nov 8, 2016, there have been instances of counterfeit currencies or large amounts being deposited in banks.

Suspicious transactions

The 2016 demonetisation of two high-value currencies has led to an all-time high generation of over 14 lakh suspicious transaction reports (STRs), a record 1,400 per cent jump over the past, by banks and other financial institutions in the country, a FIU report had earlier found.

The elite financial snooping unit of the country has compiled comprehensive data of such instances, including fake currency deposits, for the year 2017-18.

This is the highest-ever figure of STRs since the FIU first started the regime over a decade ago.
The FIU is the central agency under the Union finance ministry that analyses suspicious financial transactions pertaining to money laundering, terror financing and serious instances of tax frauds and crimes.

What’s an STR?

STRs are generated when a transaction either indicates that it has been made in circumstances of unusual or unjustified complexity or appears to have no economic rationale or bona fide purpose and also those transactions that give rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism.

“During the year (2017-18), reporting entities (banks and other financial institutions) continued to examine transactions during demonetisation and as a consequence over 14 lakh STRs were received by FIU-IND.

“This increase is almost 3 times than the STRs received in the last year (2016-17) and 14 times than the STRs received prior to demonetisation,” the agency’s director Pankaj Kumar Mishra had said in the report.



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India to inject $2 billion capital in four weakened state banks, BFSI News, ET BFSI

Banking & Finance

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By Suvashree Ghosh

India will infuse 145 billion rupees ($2 billion) into four state-run banks to help strengthen capital buffers and potentially free some of the lenders from regulatory curbs.

Central Bank of India, Indian Overseas Bank, Bank of India and UCO Bank will receive the funds through zero-coupon bonds, according to a government notification dated Tuesday. All these lenders, except Bank of India, are under the Reserve Bank of India’s sanctions as their bad loans rose.

Prime Minister Narendra Modi’s government needs a healthier banking sector to boost lending and revive an economy set for a steep contraction. It is also looking to sell its stakes in certain lenders to earn cash and improve competitiveness. The industry’s bad-loan ratio is forecast to double in the year through September, with most of the soured assets held by state-run banks.

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