India offers huge potential for digital banks: Report
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India offers a huge potential for Digital Challenger Banks (DCBs) but currency depreciation and local regulations are concerns for foreign investors.
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Tag: nbfc
RBI nod for Ghosh’s re-appointment as Bandhan Bank MD and CEO for three years, BFSI News, ET BFSI
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Bandhan Bank has received RBI nod to re-appoint Chandra Shekhar Ghosh as its MD and CEO for three years, lower than the five-year tenure approved by the company’s board in November last year. “The Reserve Bank of India vide its communicated dated June 8, 2021, has granted approval for re-appointment of Chandra Shekhar Ghosh, Managing Director & Chief Executive Officer (MD&CEO) of the bank, for a period of three years, with effect from July 10, 2021,” the lender said in a regulatory filing on Tuesday.
On November 2, 2020, the board of the bank had approved re-appointment of Ghosh as the MD and CEO for a period of five years with effect from July 10, 2021, subject to approval of the RBI and shareholders.
Ghosh’s current term comes to an end on July 9, 2021.
With 30 years of experience in microfinance and development, Ghosh had set up Bandhan as an NGO in April 2001 and it was converted into an NBFC later.
Subsequently, it was established as a universal bank in August 2015 after getting licence from the RBI.
The Kolkata-headquartered lender earlier in September 2018 was barred by the RBI from expanding its branch network. The RBI had also freezed Ghosh’s remuneration as the lender failed to comply with a licensing condition that required cutting down promoters’ stake to 40 per cent, from close to 82 per cent, within three years of commencing operations.
The restrictions on expansion were lifted in February 2020 by the RBI even as the bank was not in compliance with the licensing condition, given the efforts made by the lender to comply with the guidelines. It had reduced the promoters’ stake to 62 per cent by then.
RBI had lifted the regulatory restriction on branch opening, on the condition that the bank ensured that at least 25 per cent of the total number of banking outlets opened during a financial year were in unbanked rural centres.
The curbs on Ghosh’s remuneration were lifted in mid-August 2020.
According to RBI’s bank licence norms, a private sector bank’s promoter will need to pare holding to 40 per cent within three years, 20 per cent within 10 years and to 15 per cent within 15 years.
Bandhan had merged with mortgage lender HDFC’s low-value home loan company Gruh Finance in order to reduce the promoter ownership to the 60 per cent level from the earlier 82 per cent.
Bandhan is the first bank in India which has been transformed from a microfinance institution.
As of March 31, 2021, the promoter and promoter group shareholding in Bandhan Bank stands reduced to 39.99 per cent, as per data on BSE.
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Central Bank of India inks co-lending pacts with Indiabulls Housing, IIFL Home Finance, BFSI News, ET BFSI
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State-owned Central Bank of India on Monday announced co-lending partnerships with NBFC players Indiabulls Housing Finance and IIFL Home Finance.
Under this arrangement, non-banking finance companies (NBFCs) will originate and process retail home loans while Central Bank of India will take into its book 80 per cent of the housing loan under direct assignment transactions, the lender said in separate regulatory filings.
The bank said it has entered into strategic co-lending partnership with Indiabulls Housing Finance and IIFL Home Finance to offer housing loans under priority sector to homebuyers at competitive rates.
The partnership will result in a greater disbursement of housing loans by Central Bank of India, Indiabulls HFL and IIFL HFL, the bank said.
NBFCs will service the loan account throughout the life cycle of the loan.
The lender said this arrangement will help all the three players expand their reach across India.
In November last year, the Reserve Bank had announced a Co-Lending Model (CLM) scheme under which banks can provide loans along with NBFCs to priority sector borrowers based on a prior agreement.
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Bernstein, BFSI News, ET BFSI
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New Delhi, Paytm is on track to break even in 12-18 months with increased financial discipline and targeted strategic investments, investment research firm Bernstein said in a pre-IPO primer.
According to reports, Paytm is aiming to raise about $3 billion in an initial public offering (IPO) late this year, which could be the country’s largest debut ever.
The startup, backed by investors including Berkshire Hathway, Softbank and Ant Group, plans to list in India in November around Diwali.
Paytm, formally called One 97 Communications, is targeting a valuation of around $25 billion to $30 billion, as per reports.
“Paytm has come a long way from a simple digital wallet business to an integrated payments ecosystem. We believe the next stage of growth will be led by financial services, particularly delivering seamless credit tech products to consumers and merchants.
“With increased financial discipline (rare in the hyper-competitive payments space), Paytm is on track to break even in 12-18 months. We expect Paytm to continue being the largest payments and fintech ecosystem in India,” Bernstein said in its report.
Paytm has realigned its payments strategy around merchant payments leadership. Paytm’s beneficiary UPI market share (a proxy for merchant receipts) is rising month-on-month and was 16 per cent in April, the report said.
“Combine that with its digital wallet, merchant acquiring and online merchant payments, Paytm has a total throughput of $52 billion in FY21, up 33 per cent year on year,” it added.
Paytm’s credit tech vertical is likely to lead the next wave of revenue growth.
“We expect Paytm’s revenue base to double by FY23 to $1 billion with non-payments revenue contributing 33 per cent,” Bernstein said.
Paytm has crossed the proof of concept stage on consumer credit tech and merchant credit tech. Early disbursal numbers have been strong, rising month-on-month with strong bank and NBFC funding partners. Broking business with Paytm Money has also got off to a strong start, the report said.
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CII wants RBI to review circular on appointment of bank, NBFC auditors, BFSI News, ET BFSI
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Industry chamber CII has asked the Reserve Bank to review its circular on appointment of auditors for banks and NBFCs saying it was inconsistent with the provisions of the Companies Act and would create hardship for businesses in times COVID.
The Reserve Bank in its circular on April 27, 2021 imposed various restrictions on appointment of auditors by banks and NBFCs and prescribed a cooling off period for re-appointment.
Urging the RBI to review the circular, the Confederation of Indian Industry (CII) said the proposals “will cause significant hardship to the companies, its stakeholders as well as industry in general”.
The chamber said that few matters that warrant an immediate attention of the RBI include a clarification that the circular is only intended to cover banks and NBFCs and their respective audit firms.
“The RBI may not apply the same principles to the commercial banks and NBFCs, including in respect of cap on maximum number of audits, mandatory joint audits, and rotation/cool off principles. The NBFCs may continue to be governed by the Companies Act, 2013,” it said.
It also suggested to re-consider severe restrictions on capacity and eligibility requirements, limit on number of audits, maximum engagement period of 3 years and 6 years cool off period after rotation.
“The RBI may consider aligning them with the provisions in the Companies Act, 2013. The RBI may still achieve its objectives, without diluting any of the principles,” it said.
The chamber further asked for review of definition of related parties, which as per the circular include the group entities using a common brand name as this has far reaching implications and unintended consequences; and restrictions on audit/non-audit services during one year before/after the appointment as auditors of a bank/NBFC, covering the entity and its group entities.
“These provisions may create severe capacity constraints, without adding any qualitative parameters,” CII said, requesting the RBI to help in facilitating an effective implementation of regulation, without disrupting the ease of doing business.
It also said that a sudden change in major policies, without any reasonable transitional provisions, is bound to create several practical challenges in successful implementation.
“It should also be noted that appointment of auditors is a critical and important process for an organisation and merits right level of attention especially from senior management, board and audit committee, and approval from RBI,” CII said.
It added that all these amendments will create inconsistent policies without adding any qualitative parameters.
“It is all the more challenging in present times, severely impacted by COVID-19, to implement these requirements without any transitional provisions,” it said.
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Kumbhat Financial to be taken over by 3 investors for ₹9 crore
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Kumbhat Financial Services, a Chennai-based non-deposit accepting non-banking finance company (NBFC), will be taken over by investors Sunil Khetpalia, Maneesh Parmar and Ravindran R for a cash consideration of ₹9 crore. The company will make a preferential issue of 90,00,000 equity shares on a private placement basis.
The acquirers of the BSE-listed company have also floated an open offer for 35.75 lakh fully paid-up equity shares representing 26 per cent of Emerging Voting Share Capital of Kumbhat Financial as their collective holding post preferential share allotment is estimated to be over 65 per cent, triggering SEBI’s open offer clause.
According to SEBI’s Substantial Acquisition of Shares and Takeover (SAST) rules, when promoter holding and voting rights in the company crosses 25 per cent, it triggers an open offer.
The company has already filed a draft open offer letter with SEBI and is awaiting approval from the market regulator and the RBI.
Sunil Khetpalia and Maneesh Parmar are engaged in trading, real estate advisory and investments. According to details filed in open offer, Khetpalia and Parmar were directors and shareholders in realty firms such as KLP Projects Private Limited, Aadhi Enterprises Pvt Limited, KLP Townships Private Limited among others.
In a regulatory filing, the company said that the adjourned extra ordinary general meeting held on May 17, it was decided to increase the authorised share capital of the company from ₹10 crore to ₹15 crore, make consequent alteration in the Memorandum of Association (MOA) of the company and approved preferential allotment of 90,00,000 equity shares of ₹10 each.
The stocks of Kumbhat Financial were trading at ₹6.38 a piece on the BSE but trading has been restricted as it was placed under Graded Surveillance Measure (GSM), which is placed on securities that witness an abnormal price rise.
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RBI, BFSI News, ET BFSI
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Mumbai, As the severe Covid crisis and the resultant lockdowns have shut down economic activities to a great extent, the monthly RBI Bulletin has said that demand and employment have been among the most impacted economic aspects amid the second Covid wave.
The RBI Bulletin for May 2021 noted that the real economy indicators moderated through April-May 2021.
“The biggest toll of the second wave is in terms of a demand shock – loss of mobility, discretionary spending and employment, besides inventory accumulation, while the aggregate supply is less impacted,” it said.
It, however, said that the resurgence of Covid-19 has dented, but not debilitated economic activity in the first half of Q1 2021-22. Although extremely tentative at this stage, the central tendency of available diagnosis is that the loss of momentum is not as severe as at this time a year ago, it added.
On the NBFC segment, the report said that the consolidated balance sheet of NBFCs grew at a slower pace in Q2 and Q3 2020-21. However, NBFCs were able to continue credit intermediation, albeit at a lower rate, reflecting the resilience of the sector.
The Reserve Bank and the government undertook various liquidity augmenting measures to tackle Covid-19 disruptions, which facilitated favourable market conditions as indicated by the pick-up in debenture issuances.
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Company posts highest-ever quarterly net profit of Rs 375 cr, BFSI News, ET BFSI
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Aditya Birla Capital on Friday said it has reported the highest-ever quarterly net profit of Rs 375 crore for the fourth quarter ended March 2021.
It had posted a net profit of Rs 144 crore in the year-ago period.
The non-banking financial company said it posted strong growth across businesses leading to delivery of the highest ever consolidated profit, despite a COVID-hit year.
The highest ever quarterly net profit at Rs 375 crore grew by 2.6 times year-on-year.
Revenue during the fourth quarter of the financial year 2020-21 rose by 16 per cent to Rs 5,917 crore as against Rs 5,085 crore in the year-ago period.
For the full year 2020-21, the company’s net profit grew by 22 per cent to Rs 1,127 crore as against Rs 920 crore in the previous financial year.
Revenue during the year rose by 14 per cent to Rs 20,447 crore from Rs 17,927 crore, ABCL said.
The active customer base grew by 22 per cent to 2.4 crore aided by the focus on granular retail growth across businesses.
The company’s AUM (assets under management) across asset management, life insurance, and health insurance businesses rose 10 per cent year on year, to over Rs 3,35,000 crore.
Overall lending book (NBFC and housing finance) grew by 2 per cent, nearly at Rs 60,000 crore.
Gross premium (life and health) grew by 25 per cent to Rs 11,076 crore, with the retail mix at 72 per cent, reflecting the scale in insurance, ABCL said.
The stock of the company closed at Rs 121.35 apiece on BSE, up 1.68 per cent from the previous close.
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Bankers, BFSI News, ET BFSI
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MUMBAI: Bankers on Wednesday welcomed the measures announced by RBI as a nuanced attempt to address not just economic concerns but public health issues as well.
SBI Chairman Dinesh Kumar Khara said the unscheduled statement from Governor Shaktikanta Das has targeted moves to alleviate the troubles faced by multiple sectors.
“…the series of measures announced today reflect a novel approach. The decision to create a dedicated Rs 50,000 crore fund for ramping up Covid related healthcare infrastructure reflects RBI’s commitment to transcend boundaries by addressing not only economic health but also public health,” he said in a statement.
He also appreciated the decision to augment the lending firepower of small finance banks (SFBs) through priority sector tag, restructuring framework for individuals and small businesses, cash reserve ratio flexibility for lending to SMEs and the measures to help the state governments through ways and means advances relaxations.
MFIN, a self-regulatory organisation of micro-lenders, was very appreciative of the attempt to infuse liquidity for small MFIs by classifying and recognising SFBs’ lending to smaller NBFC-MFIs as priority sector lending.
The body’s chief executive Alok Misra said Das had met sector representatives looking at the “severity of the situation” and followed it up with the steps on Wednesday.
From the non-bank lenders, Mahindra Finance‘s Managing Director and Vice Chairman Ramesh Iyer said the measures aimed at individuals, small businesses and micro borrowers are a timely move, and welcomed the restructuring proposals.
“It’s (restructuring) an important announcement looking at the present economic landscape, this will provide as an impetus for businesses to recover from COVID-19 pandemic blues,” he said, adding that the moves to rationalise certain components of the extant KYC (know your customer) norms will support financial institutions to operate in a more efficient way.
Paul K Thomas, who heads the ESAF Small Finance Bank, said the RBI’s core focus on small lending and the last-mile delivery of credit to individuals and small businesses and the schemes to boost the provision of immediate liquidity to SFBs will go a long way in expediting economic recovery.
SFBs will now be permitted to give fresh lending to smaller micro-finance institutions (MFIs) with asset size of up to Rs 500 crore for on-lending to individual borrowers as priority sector lending.
This will add impetus to the SFBs who have been consistently playing a prominent role by acting as a conduit for the last-mile delivery of credit to individuals and small businesses, he said.
Private sector lender Kotak Mahindra Bank’s Group President for Consumer Banking, Shanti Ekambaram said the RBI has announced some timely liquidity measures that will provide relief to the most vulnerable by ensuring credit flow to individuals and small businesses and also give them greater repayment flexibility.
Viral Sheth, finance controller at Moneyboxx Finance, said several states with a huge rural population like Uttar Pradesh, Bihar and West Bengal are witnessing sharp rise in new cases and it was imperative to provide a helping hand to vulnerable sections of individuals and small businesses.
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Motilal Oswal PE buys minority stake in Fincare Small Finance Bank for about ₹185 crore
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Motilal Oswal Private Equity (MOPE) has picked up a minority stake in Fincare Small Finance Bank for $25 million (about ₹185 crore) through a secondary acquisition. The deal provides partial exit to True North Fund V LLP, one of the key investors in the firm.
The deal was done by India Business Excellence Fund–III, a fund managed and advised by MOPE, it said in a statement.
Vishal Tulsyan, Managing Director and CEO of MOPE, said: “Over the past decade microfinance has established itself as an asset class with potential for high growth and profitability. Based on our assessment, a small finance bank is the best platform to capitalise on this opportunity.”
“Fincare has established itself as a pioneer in this space with its focused approach towards efficient last mile distribution of financial products and services. The enormous white space available for retail banking in India combined with the strong execution capabilities of the Fincare management team makes this partnership quite exciting for us,” he added.
Fincare Small Finance Bank is a Bengaluru-based MFI-NBFC turned small finance bank. Before converting into a small finance bank, the microfinance lender was largely conducting business from two entities – West India based Disha Microfin and South India-based Future Financial Services.
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