Tag: POS

RBI brings changes in RTGS & NEFT, PPI Interoperability and cash withdrawal from full KYC PPIs, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India in order to strengthen the digital payments ecosystem has brought in a slew of changes in the payments and settlement system from allowing non-bank entities in the RBI operated centralised payments systems to allowing cash withdrawals in full KYC Prepaid Payment Instruments.

Non-Bank entities in RTGS & NEFT

Currently the RBI operated Centralised Payment Systems (CPSs) – RTGS & NEFT are limited to banks and a few specialised entities like clearing corporation and select development financial institutions. The RBI will be now allowing non-bank players like PPI issuers, card networks, white label ATM operators, Trade Receivables Discounting System (TReDS) platforms in a phased manner. These entities will now have to take direct membership in CPSs.

RBI said, “This facility is expected to minimise settlement risk in the financial system and enhance the reach of digital financial services to all user segments. These entities will, however, not be eligible for any liquidity facility from the Reserve Bank to facilitate settlement of their transactions in these CPSs.”

PPI Interoperability & Increased Limit
The Reserve Bank has further allowed interoperability of PPIs and increased the account limit to Rs 2 lakh in a view to promote optimal utilization of payment instruments like cards, wallets, etc. considering the constraints of scare acceptance infrastructure across the country. The RBI has been stressing on the benefits of interoperability among PPIs issued by banks and non-banks. It further noted that the migration of full KYC based on the October 2018 guidelines enabling interoperability is not significant.

RBI said, “It is, therefore, proposed to make interoperability mandatory for full-KYC PPIs and for all acceptance infrastructure. To incentivise the migration of PPIs to full-KYC, it is proposed to increase the limit of outstanding balance in such PPIs from the current level of ₹1 lakh to ₹2 lakh.”

Cash Withdrawal from Full-KYC PPIs issued by Non-banks

The RBI has allowed cash withdrawals from full KYC PPIs which are issued by non-bank entities.

Currently the cash withdrawal is allowed only for full-KYC PPIs issued by banks and the same facility is available through ATMs and PoS terminals.

The RBI said, “Holders of such PPI, given the comfort that they can withdraw cash as required, are less incentivised to carry cash and consequently more likely to perform digital transactions. As a confidence-boosting measure, it is proposed to allow the facility of cash withdrawal, subject to a limit, for full KYC PPIs of non-bank PPI issuers as well. The measure, in conjunction with the mandate for interoperability, will give a boost to migration to full-KYC PPIs and would also complement the acceptance infrastructure in Tier III to VI centres.”

The RBI will be issuing necessary instructions on all three measures separately.



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SBI Card sees over 50 percent of its transaction from online payments, says CEO, BFSI News, ET BFSI

Banking & Finance

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SBI Cards and Payment Services (SBI Card) has been seeing over 50 per cent of its transactions via online payments such as on groceries, utility bills, insurance premium, and hopes the trend to go up further as point of sale purchases are yet to pick up, top company executive said. Keeping a watch on the recent coronavirus resurgence in the country across some key locations, SBI Card MD and CEO Rama Mohan Rao Amara said it would be too early to say whether it will have any bearing on people’s purchasing behaviour.

However, online payments is a trend which is going to go up further, he added.

“Particularly within SBI Card, now, more than 53 per cent of the spends actually come from online payments which used to be around 44 per cent earlier. Almost 9 percentage points improvement is there mainly in terms of the categories like for groceries, apparel, utility bill payment, insurance premium, online education,” Amara told in an interview.

He added that for these kind of categories, suddenly the company has seen kind of an increase in spends online. “We believe (it) will remain online because once people get used to the comfort of it, they will continue with that. So, COVID or no-COVID, it will not impact that.”

However, he said the point of sale (PoS) locations have not opened that well, as and when the footfall increases, there will be a pick-up there also.

The pure-play card company is also seeing an emerging trend of securing more customers from non-metro locations. It is also banking on its parent company SBI’s huge customer base to expand further.

Maybe till 5-6 years ago, tier-I locations were contributing majorly to the credit card industry growth.

“But, if you look at our recent performance, around 58 per cent of our incremental sourcing is actually coming from non-tier cities that is tier II, III and IV.

“These are contributing more to our new credit card acquisitions, that is basically we have a piggyback of our parent bank (SBI) customer base,” he added.

The company’s card-in-force grew 15 per cent to 1.15 crore in the third quarter of the fiscal ended March 2021, against one crore in the year ago same period. The spends were higher by 8 per cent to Rs 37,797 crore from Rs 35,135 crore.

And, the new accounts volume increased 8 per cent to 9,18,000 accounts in the third quarter of 2020-21, compared with 8,48,000 in the third quarter of 2019-20.

Under the company’s pre-approved programme, wherein it looks towards the customer base of the parent bank and the cardable population, it has helped SBI Card immensely in terms of adding to the new card base, Amara added.

“It started around 2017, it has now reached a good volume. It contributes well but if you look at our disclosures, more than 50 per cent is coming from our bank channel which you essentially call kind of a SBI sourcing,” Rao said further.

He added that particularly, during the first and second quarters of FY21, when open market locations were closed and when sourcing were limited, the company’s banking channel helped it in terms of ramping up. “We were able to come back to almost 10,000 accounts per day, that was the usual run rate in best of the best times. So, we were able to get back to that trend by Q3.”

And, majorly, this growth has come from tier-II, -III and -IV cities, he added.

Amara also said the company will continue to work with its parent bank.

“If you look at the customer base of our parent bank, it is more than 400 million. We have hardly explored the base of around 20-22 per cent. So, there is a plenty of runway left,” Rao said.

However, he said the company will always look forward to forge new tie-ups and recently joined hands with Jio Payments also.

On the company’s tie-up with various airline companies, which were hit the most during the lockdown period and are running below the capacity off-take of passengers, Amara said the business has been impacted on that front, but exuded confidence that it will be back to track once things normalise.

In the nine-months ended December 2021, SBI Card witnessed a flat growth in its income at Rs 7,245 crore. And, the net profit was down by 30 per cent to Rs 809 crore during the April-December period of 2020-21.

Rao said the company had already reached to the pre-COVID-19 level business by third quarter and expects to post decent numbers for the overall fiscal.

The company is expected to declare the financial results for the fourth quarter of 2020-21 within the end of this month.



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PNB sets-up subsidiary to manage credit card business, BFSI News, ET BFSI

Banking & Finance

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State-run Punjab National Bank (PNB) has set up a wholly-owned subsidiary to manage its credit card business, the bank said on Wednesday. A wholly-owned subsidiary of the bank namely PNB Cards & Services Ltd has been incorporated on March 16, 2021, by the Registrar of Companies, Delhi, it said in a regulatory filing. The subsidiary will undertake the non-financial support services related to credit card business of the bank.

The authorised capital of the company is Rs 25 crore and the paid-up capital is Rs 15 crore, PNB said.

The number of outstanding credit cards at the end of December 2020 of PNB stood at over 4.3 crore (43,402,879), according to the RBI data.

The value of transactions through credit cards was Rs 137.55 crore (Rs 13,755 lakh) at the point of sale (PoS) and Rs 1.17 crore (Rs 117 lakh) at the ATMs during the month.

The number of transactions at PoS were 5,79,244 while at the ATMs the number of transactions through credit cards were 3,871 in December 2020.



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Kotak Mahindra Bank says glitch in its accounts due to wrong claims by a PSU bank, BFSI News, ET BFSI

Banking & Finance

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Kotak Mahindra Bank said that wrongful claims by a public sector bank on debit cards used on its point of sale (PoS) terminals has resulted in excess debits on its customer accounts.

Kotak was responding to a query by ET after twitter users complained of excess debits from their accounts.

“A PSU bank has claimed wrong amounts in the settlement file for card transactions done at merchant establishments managed by the PSU bank’s POS. This has resulted in excess debit from customers’ bank accounts on 8th March. All such excess debits have already been reversed”, Rohit Rao, Chief Communication Officer, Kotak Mahindra Group said without naming the bank.

On Monday evening Kotak account holders took to twitter to complain about the sudden loss from the bank accounts.

“Massive technical glitch in Kotak Bank, it seems. Rs 81,972 debited from my account (I don’t even have that much in all my a/cs put together). Call centre exec says ppl have lost Rs 6 lakh+ or Rs 1 lakh +, so i shouldn’t worry. Wait for 24 hours, she said,” Ravi Joshi a user said.



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BFSI events that made 2020 one of a kind, BFSI News, ET BFSI

Personal Finance

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As the year draws to an end here’s a look at what shaped the BFSI sector in the year gone by:

RBI vs. Covid-19: The Reserve Bank of India came out with a slew of measures to safeguard the financial services sector and the overall economy against the virus triggered pandemic and the lockdowns.

Shaktikanta Das, RBI Governor, during one of his monetary policy announcements.

Since March, the RBI cut the repo rate by 115 basis points to 4%. It also purchased Rs 1.9 lakh crore of G-secs until September. These measures helped in reducing the interest rates in money and debt markets, and even got transmitted to bank lending rates. RBI also maintained an accommodative monetary policy stance, suggesting it could cut rates to inject money into the financial system whenever needed.

Moreover, the regulator provided instant relief to borrowers by wavering off EMIs on term loans for six months — March to August.

Bidding farewell: State Bank of India’s chairman Rajnish Kumar hung up his boots in 2020, after serving the bank in various capacities for almost 40 years, and the last three as its chairman. Kumar is credited with launching SBI’s digital platform YONO, whose valuation he’d estimated to be around $40 billion. Kumar’s vision for the bank was to transform it into a strong bank and at the top of the digital game. And he definitely succeeded at that. In October he was replaced by Dinesh Kumar Khara, previously a Managing Director at SBI.

Rajnish Kumar, Former Chairman, State Bank of India and Aditya Puri, Former MD & CEO, HDFC Bank
Rajnish Kumar, Former Chairman, State Bank of India and Aditya Puri, Former MD & CEO, HDFC Bank

Aditya Puri, who was at the helm of HDFC Bank for 26 years, also retired in October to give way to Sashidhar Jagdishan. Puri was at Citi Bank when Deepak Parekh first offered him the job to pilot the newly formed HDFC Bank. Puri, a Chartered Accountant, became the first CEO of HDFC Bank in 1994. And in the past quarter century, he transformed the bank and made it the largest private sector lender of India. Puri is now a Senior Advisor at The Carlyle Group.

Failed banks: In March, RBI placed YES Bank under moratorium and restricted withdrawals to a maximum of Rs 50,000, sending its customers to a frenzy. Shares of the bank tanked to Rs 5.65 a piece, its lowest till date.

Yes Bank customers queue up to withdraw money when the bank was put under moratorium by the regulator
Yes Bank customers queue up to withdraw money when the bank was put under moratorium by the regulator

The bank ran into trouble following the RBI’s asset quality reviews in 2017 and 2018, which led to a sharp increase in its NPA ratio and significant governance lapses that led to a complete change of management. The bank subsequently struggled to address its capitalisation issues and get investors. Later, the bank was rescued by State Bank of India (SBI), six private sector banks, and a mortgage lender, who invested a total of Rs 10,000 crore the bank, helping it shore up its capital buffers after they dropped below the regulatory requirements. SBI’s then CFO Prashant Kumar was chosen to head the struggling lender.

Another bank that made headlines is Lakshmi Vilas Bank. In September, in an unprecedented move, shareholders voted against the seven out of a total of 11 members from the senior management including the interim MD & CEO, S, Sundar. According to reports the shareholders were unhappy with the rise in bad loans, value erosion and the future of the bank. The RBI then appointed three members to look after the daily affairs of the bank along with the remaining four senior officials of the bank.

The capital starved LVB was looking for potential mergers and began talks with IndiaBulls Housing Finance, but couldn’t get a nod from the RBI. Later this year, LVB announced merger talks with Clix Capital. But before anything could materialise, RBI put it under moratorium and later announced its merger with DBS Bank India.

Coronavirus health insurance policies : On the basis of guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI), most insurance companies rolled out their Corona Kavach and Corona Rakshak policies. These short-term policies will cover the treatment cost of the coronavirus disease and remain valid until March 31, 2021. The Corona Kavach policy will cover both individuals and families. The Corona Rakshak policy will only cover individuals.

IRDAI had asked insurers to roll out Covid-19 specific policies Corona Rakshak & Corona Kavach. Industry experts believe many first time buyers have purchased these policies and the sale of these policies has been good.
IRDAI had asked insurers to roll out Covid-19 specific policies Corona Rakshak & Corona Kavach. Industry experts believe many first time buyers have purchased these policies and the sale of these policies has been good.

Above all, the industry accelerated digital adoption, leaving behind the face-to-face service, a dominant mode of distribution and business acquisition. Agents and distributors now interact with customers on video calls for selling products and customer engagement.

The awareness for insurance has gone up significantly towards the concept of protection, the primary reason why insurance exist. Industry experts believe this momentum is here to stay. Further, the industry is moving towards rolling out standardised insurance products like Aarogya Sanjeevani for health insurance, the regulator has also pushed for standardised term cover and travel insurance.

NBFC vs liquidity: NBFCs continued to struggle with liquidity and credit flow. They faced a dual challenge of growth and profitability. The percentage of customers availing the moratorium was relatively lower for NBFCs, while loans outstanding under moratorium were higher than those extended by banks, indicative of incipient stress, said a latest report by RBI. Moreover, the asset quality deteriorated as slippages rose in FY20. However, efforts were made by NBFCs to clean up their balance sheets, as reflected in their written-off and recovery ratios.

Meanwhile, amidst pervasive risk aversion, bank borrowings by NBFCs continued to grow at a robust pace as compared to market borrowings. As the RBI required NBFCs to adopt a Liquidity Risk Management Framework from December 2020, NBFCs gradually swapped their short-term borrowings for long-term borrowings with the aim of maintaining adequate liquidity.

RBI’s NUE: RBI took a leap towards establishing a new umbrella entity (NUE) for retail payments. This entity will set up, manage, and operate new payment systems in the retail space. It is tasked with operating payment systems such as ATMs, white-label PoS, Aadhaar-based payments, and remittance services. All NUEs will have to be interoperable with the National Payments Corporation of India (NPCI)— the umbrella entity that currently manages retail payments in India. However, they will be allowed to set themselves up as for-profit or not-for profit entities. Some big names are already in fray for licence.



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Barriers to a cashless society in India, BFSI News, ET BFSI

Personal Finance

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by Padmini Gupta, CEO and Co-founder rise Fintech

Padmini Gupta, CEO and Co-founder rise Fintech

Despite much-debated demonetisation and the massive stigma associated with cash circulation, currency usage in the Indian economy is poised to hit an all-time high. Currency in the hands of the public is now crossing $26 trillion and given the economic contraction is likely to be around 15% of GDP this year – a record high. ATM withdrawals are back up in October / November this year after suffering a decline in the first half of the year. This is happening at the same time as digital payments are taking off. The number of users of Unified Payment Interface or UPI has nearly doubled in a year, with the number of UPI transactions on apps such as Google Pay or Phone Pe nearing 2.2 billion in November 2020, with a total value exceeding Rs 3.3 trillion.

The case for digital payments
It is a case of two extremes. Despite the astonishing growth of digital payments – cash still accounts for around 70% of all consumer transactions in the country. This is despite all the gains made by UPI and digital payment methods. It’s important to understand that the number of people using UPI in India is still around 150 million, while the number of unique credit card holders is only approximately 35 million. This gap looks even starker if you compare to it the total number of debit cardholders which is around 850 million – clearly highlighting that even though many people can use UPI to transact, they do not. Understanding why requires a view into who still spends in cash in India and what are the barriers to digital payment adoption.

Three barriers to going cashless
The very first being the income barrier. Once you get paid your salary in cash, it becomes exceedingly challenging to digitise that cash and transact digitally. Over 75% of the Indian labour force is employed in the informal sector, and more than 100 million micro-loan accounts are serviced in cash every week. For this stratum of society, if they get paid in cash–they will transact in currency. Once the informal sector workers who are migrants start receiving their salaries in their bank accounts, it will change the face of digital India. Digitising payments would also make it much simpler for individuals to calculate and file their income taxes and for governments to make sure they are being paid.
Building on the momentum, fintech companies in India need to develop a digital ecosystem to facilitate greater access to finance to informal and new-to-bank segments. It is time fintech’s launch new apps digitising the informal sector. Many such apps have already been launched which allows people to share access to their cards or UPI, with their tribe members in a secure, digital and controlled manner is such a game-changer. The first time someone uses UPI is likely to be handheld by a friend or family member and likely transacting on their UPI id or card – rather than creating an account of their own. The app will facilitate activities in the digital market for those who rely heavily on cash, individuals who do not get paid into a bank account and even families of international migrants that receive their remittances in cash and hence spend in cash. The second they were the infrastructure barrier. Another large section of society either lives in low connectivity areas or transacts mainly with merchants who are not comfortable accepting digital payments. This goes back to the point of informal labourer. Suppose your local thela guy or your domestic helper is a migrant who is not necessarily licensed to do this job. In that case, he/ she is unlikely to set up a merchant account to receive UPI payments and will continue to rely on cash payments as a way to transact – both upstream (buying his goods) and downstream (accepting from his customers). Apart from the various government policies, factors that enable going cashless will be the penetration of technology, such as smartphones, e-commerce, and internet access adding to the penetration of banking services, such as online banking, mobile banking, cards, and POS devices.

The last barrier in the motivation barrier and includes both consumers and merchants who have no obstacles to use digital tools, but decide not to for reasons associated either with the comfort of using digital tools or other reasons (like tax avoidance). This is where regulatory efforts like requiring PAN for large cash transactions will drive the adoption of digital tools. However, this is also, where for a section of society – especially elders – where community support and training can play a significant role.

The right environment
The real questions are, how do you circumvent these barriers? By making both top-down supply-side efforts, including regulatory push and bottom-up community-driven push to adopt digital payments. Apart from promising regulatory environment, factors that enable going cashless are the penetration of technology in rural India, such as smartphones, e-commerce, and internet access plus the penetration of banking services, such as online banking, mobile banking, cards, and POS devices. This group demands flexibility in terms of price, mobility, and a low entry threshold. The pandemic has given the slow rise of digital currency a gigantic boost. The shift will be disruptive but is a leap in the right direction. To conclude, we believe that the longer the pandemic will last, the more cashless-friendly the societies will become. COVID-19 has changed people’s behaviour, and this change is likely to be permanent.

DISCLAIMER: The views expressed are solely of the author and ETBFSI.com does not necessarily subscribe to it. ETBFSI.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.



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