Tag: RBI

New RBI rule on recurring payment not to impact transactions with compliant merchants, BFSI News, ET BFSI

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People looking forward to watching their favourite shows on OTT platforms such as Netflix, Amazon and others would not face any disruption in service over non-payment or delayed payment of subscription fee owing to new payment security feature made mandatory by the Reserve bank of India from this month.

Banking sector experts said that most of these merchants offering various bouquet of service have migrated to the new Standard Instruction Platform put in place by the banks in the country. This would mean that payment instruction to these compliant vendors would have to be revalidated once and it would move seamlessly in subsequent months without any hindrance to the service.

As part of measures to secure recurring transactions made by customers using their cards, the Reserve Bank of India (RBI) has mandated new auto-debit rules that have kicked in from October 1. The apex banks directive states that there will be no automatic recurring payment for various services including utility bills, recharge of phone, DTH, and OTT, among others as the additional factor of authentication (AFA) will become mandatory.

This created confusion initially as customers were flooded with messages to update their payment instruction or else such transactions would be declined from the beginning of October.

“We have not experienced any disruption in service or customer complaints over new system of recurring payments. Most banks are already compliant with new security measure and several large merchants have also updated their transaction systems and have joined the standard instruction platform of banks. Some merchants are still non compliant to the changes and customers would have to authorize payments under an additional factor of authentication (AFA),” said a senior executive from country’s largest private sector bank asking not to be named as he was not authorized to speak to media.

The new RBI rules will not impact any standing instructions registered using bank accounts for mutual funds, SIPs, equated monthly instalments. It will also not impact payment to complaint merchants.

Customers will have to go through a one-time registration process, and subsequent transactions can be performed without the additional factor authentication.

While registering, customers can now provide the validity period for future transactions. For recurring payments above Rs 5,000, banks are required to send a one-time password to customers as per the new guidelines.

–IANS

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Cryptocurrencies rebound 10-fold since last yr, despite tough steps from China, India, BFSI News, ET BFSI

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Cryptocurrencies have rebounded with a total market value of $2.2 trillion in late September, despite tough restrictions imposed by countries like China and India, according to report by DBS Group Research.

This is a ten-fold increase since the beginning of last year. The launch of several digital asset exchanges, rollout of innovative wallets, changes in mining technology and wide issuance of stablecoins have kept the momentum strong for crypto, the report said.

Also read: China announces cryptocurrency bank – what does it mean for India?

Countries like India and China are keeping a close eye on crypto assets, as the scale and scope of this asset class are large enough to have systemic implications, it said.

Multiple reasons for the ban have been cited by the governments, such as security and governance, consumer protection, surveillance gap and monetary policy efficacy.

Also read: What are stablecoins, and how stable are they?

China’s central bank, in the last week of September, declared all transactions involving Bitcoin and other virtual currencies illegal, stepping up a campaign to block use of unofficial digital money. This was the second time the government announced a ban on crypto.

In March, it was reported that India would propose a law banning cryptocurrencies, fining anyone trading in the country or even holding such digital assets. This, again, is not the first time when India is declaring its inhibition towards adopting crypto.

The resilience of crypto assets after the ban suggests that the market impact of China’s opposition to crypto could be declining. Year-to-date, Ether is outperforming Bitcoin by 400% in price return terms.

The ban has also led miners to migrate their businesses to crypto-friendly locations, which can offer cheap, reliable and greener sources of electricity, the report said.

Kazakhstan, US and Russia are some of the preferred locations.

According to experts, China’s ban was likely because the government wants to remove competition for its digital yuan. Adding to this, India’s Reserve Bank of India has also said that it was eyeing a phased implementation of its central bank digital currency (CBDC).

Also read: RBI eyes phased implementation of CBDC, will work in unison with payment infra, says RBI’s Ranjan

CBDC adoption will help drive future usefulness, acceptance by merchants and improve cross-border payments, according to banking regulators.

However, there is still a lot of time for countries to roll out their CBDCs. To maintain stability, CBDCs would need to have a careful design and implementation, the report said.



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RBI to call-back retired officers to improve efficiency

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Old is gold for the Reserve Bank of India (RBI) if one goes by its plan to engage the services of retired officers to strengthen its supervisory framework for both banking and non-banking sectors.

The central bank is planning to hire 29 officers, who retired from its services, on contractual basis as supervisory resource persons/analysts in the Department of Supervision (DoS).

This move comes in the backdrop of the steps taken by the central bank to improve the effectiveness of its supervision and monitoring of supervised entities resulting in supervisory action being taken against them.

In the last one year, RBI has imposed business restrictions on a large private sector bank; stopped a prominent card payment network from on-boarding new domestic customers onto its card network; slapped monetary penalties on a host of urban co-operative banks for non-compliance with its various master directions, among others.

Hiring plans

In view of the large-scale changes in the size, complexity, business model and risks in the operations of banks and non-banking finance companies (NBFCs), RBI is beefing up its supervisory workforce by engaging retired officers.

So, the central bank is planning to hire 26 retired officers in the supervisory examination division (SED) of DoS — 12 in NBFC SED; eight in the urban co-operative bank (UCB) SED; and six in the scheduled commercial banks (SCBs) SED. Further, three retired officers will be hired in the Information Technology (IT) Group.

The officers engaged in SED will undertake onsite supervision and off-site surveillance in a computerised environment and associated duties, including sharing of specialised skills with supervisory resources of RBI.

The officers in IT group will undertake onsite IT examination/ thematic study covering assessment of areas such as application, network and database security, resilience of IT infrastructure; analysis of cyber security/ IT incidents reported by regulated entities and follow-up action thereon, among others.

These officers will be initially engaged for two years, with provision of one-year extension based on review of performance and achievement of intended objectives, subject to a total period of five years.

The move to hire retired officers also comes in the backdrop of serving officers reportedly being reluctant to join the Unified Department of Supervision (for Banking, Non-Banking and Co-operative Bank), which was created in November 2019, due to issues around career progression.

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Visa launches card-on-file tokenisation service, BFSI News, ET BFSI

Banking & Finance

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New Delhi, Oct 7 (PTI) Visa, a digital payments platform, on Thursday launched its card-on-file (CoF) tokenisation services in India in line with the recently issued RBI guidelines. Card-on-file (CoF) tokenisation provides two key benefits – consumer and ecosystem security and an enhanced checkout experience, VISA said in a statement.

Launched in partnership with Juspay, the CoF tokenisation service is now available across e-commerce leaders such as Grofers, BigBasket and MakeMyTrip.

The RBI’s recent CoF tokenisation guidelines mandate replacing the actual card data with encrypted digital tokens, which are then used to facilitate and authenticate transactions.

This devaluation of sensitive card details alleviates risk and reduces vulnerability of sensitive data, as only tokens are present in transit, across the ‘in-rest’ and ‘in-use’ phases, it said.

These new guidelines are expected to enhance consumer trust in e-commerce payments, ensure seamless transaction experience as well as allow card issuers the comfort of authorising a higher number of transactions, it added. PTI DP HRS hrs



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SC declines to entertain plea seeking guidelines to tackle rising NPAs in banking sector, BFSI News, ET BFSI

Banking & Finance

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New Delhi [India], October 7 (ANI): The Supreme Court on Thursday declined to entertain a plea filed by BJP MP Subramanian Swamy seeking direction to frame guidelines to deal with the ever-increasing Non-Performing Assets (NPA) in the banking sector.

The Apex Court disposed of the plea and told Swamy that it’s a policy matter to be decided by the government and Reserve Bank of India (RBI).

The Court allowed Swamy to make representation before the RBI. (ANI)

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Srei lenders face Rs 5,000 cr provisioning for Srei loans, eroding DHFL recovery, BFSI News, ET BFSI

Banking & Finance

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Lenders which were preparing to add the big DHFL recovery of over Rs 35,000 crore to their profits, may have to temper their celebrations. They will have to make provisioning for loans of Srei group firms, on which RBI has put an administrator.

Bankers will have to make an immediate provision of over Rs 5,000 crore, according to the rules.

According to the Reserve Bank of India’s (RBI’s) norms, Srei exposure will be treated as substandard asset, which is the first stage of non-performing asset (NPA). Banks will now have to set aside around 15 per cent provision for secured loans while it would be higher for unsecured credit.

Srei loans were stressed for many quarters, but lenders could not classify them as NPAs due to restrictions by the tribunals. However, they have made provisions for the Srei loans under general and Covid provisions.

Based on the results of a forensic audit, banks may have to even make 100 per cent provisions if the accounts are treated as fraud.

Promoters move court

Meanwhile, Srei Group promoters have moved the Bombay High Court challenging Reserve Bank of India’s decision to supersede the board of two group companies, in preparation for sending them to bankruptcy courts.

Srei group promoters are seeking stay on any insolvency proceedings at group companies Srei Infrastructure Finance Ltd and Srei Equipment Finance Ltd, whose board the regulator sacked and appointed an administrator.

The promoters are also seeking stay on the appointment of the administrator. On October 4, the banking regulator superseded the board of directors of Kolkata-based Srei Infrastructure Finance and Srei Equipment Finance and said that it will initiate insolvency proceedings with the National Company Law Tribunal (NCLT). The RBI move makes Srei the second non-bank lender to be referred to the bankruptcy courts after DHFL.

The RBI cited governance concerns and defaults by the company and appointed Rajneesh Sharma, former chief general manager, Bank of Baroda as an administrator of the company.

In June 2021, Srei companies reported to the exchanges that the RBI inspection had flagged loans worth Rs 8,576 crore as related party loans. These accounted for nearly 30% of the group’s consolidated debt.

The loans

Srei Infrastructure, and its subsidiary Srei Equipment Finance, together owe lenders and debenture holders a total of Rs 30,000 crore. Kolkata-based UCO Bank is the lead lender, with more than Rs 2,000 crore of exposure. State Bank of India (SBI)’s exposure to the group is also more than Rs 2,000 crore.

The bank loans have turned non-performing assets after the end of the September quarter.

The company had earlier announced that Arena Investors, Makara Capital and others had evinced interest to invest in the company to the tune of Rs 2,200 crore. The company had formed a strategic coordination committee to coordinate, negotiate and conclude discussions with the investors.



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What is co-lending, and how will work?, BFSI News, ET BFSI

Banking & Finance

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-By Ishwari Chavan

Under RBI’s model, banks can co-lend with all registered NBFCs, including housing finance companies.


The co-lending model has been around in the BFSI sector for some time now, but after the Reserve Bank of India issued guidelines in November 2020, co-lending has become a response to ease the liquidity crisis in non-bank lenders. The method aims to enhance credit flow to productive sectors, and banks and non-banking financial companies (NBFCs) have been increasingly exploring co-lending opportunities.

What is RBI‘s Co-Lending Model, and how will it work?

RBI’s CLM is one wherein two lender firms, in this case a bank and an NBFC, come together to disburse loans. Under RBI’s model, banks can co-lend with all registered NBFCs, including housing finance companies.

As per the guidelines, NBFCs and HFCs facilitate the origination and collection of housing loans while banks leverage their balance sheet strength to house the majority of the loan. This means that 80% of the loan will reflect in the bank’s balance sheet, while 20% in that of NBFCs or HFCs.

In simple terms, banks will lend to NBFCs, and NBFCs will pass it on to the priority sectors, since they have a greater reach.

NBFCs will be the single point of interface for the customers and enter into a loan agreement with the borrowers. The agreement should contain the features of the arrangement and the roles and responsibilities of NBFCs and banks.

The ultimate borrower would be charged an all-inclusive interest rate.

Considering the lower cost of funds from banks and greater reach of NBFCs, the primary focus is to improve credit flow to the unserved and underserved sectors of the economy, also known as priority sectors, and make funds available to the ultimate beneficiary at an affordable cost.

The agreement should contain the features of the arrangement and the roles and responsibilities of NBFCs and banks.
The agreement should contain the features of the arrangement and the roles and responsibilities of NBFCs and banks.

RBI has prescribed that a portion of bank lending should be used for developmental activities, for the priority sector, which includes agriculture, MSMEs, housing, and so on.

According to norms, both public and private sector banks have to lend 40% of their net bank credit (NBC) to the priority sector and foreign banks have to lend 32% of their NBC.

How is co-lending beneficial for lenders and borrowers?

The partnership allows banks to lend more funds to sectors and regions they do not have reach in. With the greater reach of NBFCs, the model allows banks to meet their total priority sector lending (PSL), while NBFCs get bigger and top rated borrowers on its books.

It also allows NBFCs to source clients, perform credit appraisals and disburse a small part of the loan amount, and enables banks to expand their lending business.

The end borrower gets accessibility to loans at very affordable and competitive rates, and is in turn included in the country’s financial ecosystem.

Recent co-lending agreements

> Last week, U GRO Capital signed a co-lending agreement with IDBI Bank to provide formal credit to underserved MSMEs.

> Last month, Bank of India entered into a co-lending arrangement with MAS Financial Services for MSME loans, IIFL Home Finance signed an agreement with Punjab National Bank, and SBI signed an agreement with Paisalo Digital.

> In July, YES Bank and Indiabulls Housing Finance Ltd entered into a strategic co-lending agreement to offer home loans.



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Srei promoters move Bombay HC

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Promoters of Srei Infrastructure Finance and Srei Equipment Finance have moved the Bombay High Court challenging the Reserve Bank of India’s decision to supersede the boards of the Kolkata-based NBFCs.

RBI supersedes boards of two debt-laden Srei companies

According to sources, the promoters have sought a stay on the proceedings. The case is expected to come up on Thursday.

Srei Infra and Equipment Finance have debt obligations of over ₹29,000 crore

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Bank, NBFCs report spurt in Q2 advances as lending recovery picks up, BFSI News, ET BFSI

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Most banks and non-banking finance companies reported a jump in disbursal of advances in the quarter ended September in a sign that credit uptake is rising.

HDFC Bank saw its advances book grow by around 15.4% year on year at the end of the September quarter, proforma numbers released by the private sector lender showed. Its total loans aggregated to Rs 11.98 lakh crore at the end of September, up 4.4% sequentially. Its total loans were at Rs 10.38 lakh crore at the end of September 2020.

As per the bank’s internal business classification, retail loans during the September quarter grew by around 13% year on year and 5.5% over June quarter. Commercial and rural banking loans grew by around 27.5% y-o-y while other wholesale loans grew by around 6%.

Mortgage lender HDFC assigned loans amounting to Rs 7,132 crore at the end of the September quarter versus Rs 3,026 crore a year earlier. It sold loans

worth Rs 27,199 crore in the preceding 12 months versus Rs 14,138 crore in the previous year, regulatory filings show.

Private sector lender

IndusInd Bank

IndusInd Bank reported better-than-expected credit growth of 10% with total loans at Rs 2.2 lakh crore at the end of the September quarter, preliminary numbers filed with stock exchanges showed.

IDFC First Bank posted 9.75% growth in advances at Rs 1,17,243 crore for the second quarter ended September.

Private lender Yes Bank posted a 3.6% rise in its advances to Rs 1.72 lakh crore, though retail disbursements grew at a faster rate and grew by 126.6% over last

year to Rs 8531 crore at the end of the September quarter as against Rs 3764 crore a year ago.

NBFCs

Leading non-bank lender Bajaj Finance reported it had booked 6.3 million new loans at the end of the September quarter versus 3.6 million a year ago. It’s

assets under management (AUM) stood at Rs 1.66 lakh crore for the quarter under review as against Rs 1.37 lakh crore a year earlier.

Non-bank lender Mahindra & Mahindra Financial Services posted a 60% year-on-year growth in disbursements at Rs 6,450 crore at the end of the September

quarter. With further improvement in mobility during September, the collection efficiency for the NBFC was reported at 100% for September 2021.

Subject to improvement in auto supply chain, the company is hopeful of a good Q3 FY22 ahead, supported by festival season and harvest cash flow.” M&M Finance said.

AU Small Finance Bank

AU Small Finance Bank Ltd’s total deposits were up 45% on year at Rs 39,030 crore as of September 30, according to provisional data from the bank. Gross advances rose 32% on year to Rs 36,405 crore. Of the total gross advances, the small finance bank restructured 800 accounts worth Rs 800 crore in July-September. Disbursements rose 57% on year and 171% on quarter to Rs 5135 crore. It also made disbursements worth 530 mln rupees under the Reserve Bank of India’s targeted long-term repo operations.

RBL Bank’s total deposits rose 17% on year as of Sep 30, according to provisional data from the bank. Deposits stood at 755.9 bln rupees, up 1% on quarter. The bank’s gross advances rose 1% on year to Rs 58,046 crore as on September 30. Of the gross advances, 55% comprised retail advances while the remaining 45% is in the wholesale category.



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US-based Arena Investors evinced interest to acquire Srei before RBI took control, BFSI News, ET BFSI

Banking & Finance

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Arena Investors, a US-based company, had proposed to buy 74% in Srei Equipment Finance, a wholly owned subsidiary of Srei Infrastructure Finance for about Rs 2,000 crore before the Reserve Bank of India (RBI) took control of the non-bank lender on Monday, two people familiar with the matter told ET.

The Srei group had forwarded the proposal to RBI for a review a couple of months ago, the executives said. Arena is an institutional asset manager that provides solutions for those seeking capital in special situations

Singapore-based Makara Capital Partners had also proposed to bring in about Rs 2,200 crore.

ET had sent mails to both Arena and Makara last Saturday on the matter but both companies didn’t respond until Tuesday evening.

Srei’s board of directors and the strategic coordination committee for capital raising, chaired by an independent director, had accepted the proposals and sent them to the regulator for approval, Srei Infrastrcuture’s former chairman Hemant Kanoria said Tuesday.

It is not clear at this juncture if RBI finds Arena or Makara fit enough to acquire Srei, a lender to the country’s core sector, or if it prefers a domestic company to take over Srei. RBI has initiated steps to move Srei to the bankruptcy court so that lenders and bond holders can recover their money from Srei. Their cumulative exposure is in the vicinity of Rs 31,000 crore.

As many as 11 investors had evinced interest in Srei, while Arena and Makara submitted non-binding terms sheets to the non-bank lender.

Some of those included Varde Partners, Sumitomo Mitsui Banking Corporation (SMBC) and Apollo Global. They could not be contacted immediately for comments.

The group had approached the National Company Law Tribunal (NCLT) with a repayment scheme aligned to inflows for all its creditors. The scheme had proposed to pay full dues to all creditors in a structured manner. A majority of the lenders did not accept the scheme.

After the scheme was filed in October 2020, banks led by Uco Bank took control of the company’s cash flow. Since November last year, banks have recovered about Rs 3,000 crore.



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