Tag: RBI

Soma Sankara Prasad likely to be next UCO Bank MD, BFSI News, ET BFSI

Banking & Finance

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The government is considering appointing Soma Sankara Prasad, the deputy managing director of State Bank of India, as managing director of Kolkata-based UCO Bank. The Banks Board Bureau (BBB) has suggested the name of UCO Bank Managing Director Atul Kumar Goel for heading Punjab National Bank as MD. The managing director position of PNB will fall vacant after the superannuation of S S Mallikarjuna Rao in January.

According to sources, since Prasad was in the reserve list when the interview for appointment for managing director of Indian Bank took place earlier this year, he has been recommended to head UCO Bank subject to various clearances including vigilance.

The final view in this regard would be taken by the Appointments Committee of the Cabinet (ACC) headed by the Prime Minister, sources said.

The BBB, the headhunter for state-owned banks and financial institutions, in May had conducted interviews for the position of MD of Indian Bank. Post interview, Shanti Lal Jain was recommended for the post while Prasad was the candidate on the reserve list.

Last month, the Reserve Bank removed UCO Bank from its Prompt Corrective Action (PCA) Framework following improvement in various parameters and a written commitment that the state-owned lender will comply with the minimum capital norms.

The lender also apprised the RBI of the structural and systemic improvements that it has put in place, which would help the bank in continuing to meet the financial commitments. The public sector bank plunged under PCA in May 2017.

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

The restrictions disable banks in several ways to lend freely and force them to operate under a restrictive environment that turns out to be a hurdle to growth.

UCO Bank had posted over a four-fold jump in its net profit to Rs 101.81 crore for the first quarter of the fiscal ended June 30, as bad loans fell significantly.

The lender trimmed its gross non-performing assets (NPAs or bad loans) significantly to 9.37 per cent of the gross advances as of June 30, 2021, as against 14.38 per cent at June-end 2020.

The net NPAs were down at 3.85 per cent (Rs 4,387.25 crore) from 4.95 per cent (Rs 5,138.18 crore). PTI DP ANZ MR



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Bank of Baroda, BFSI News, ET BFSI

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Bank of Baroda has been the first of the nationalised banks to have completed the amalgamation of two smaller banks with itself. The bank’s experiences in the merger have helped other consolidating public sector banks to draw their strategy. In an interview with TOI, MD & CEO Sanjiv Chadha speaks of the road ahead…

How has the second quarter been in terms of business?

There have been challenges in credit growth — the investment cycle in particular — for the last few years. Even today capacity utilisation is about 70% and it’s only when it moves up to 80% that you get a serious round of investments. We are seeing some investment in brownfield projects in companies that have gone through an ownership change. We are seeing large capacities in areas like renewable energy. We also have a large investment in electric vehicles. We are seeing progress in going beyond green shoots. For this to gather momentum and become a full-fledged revival of the investment cycle, we might be a few months away.

On the asset quality side, do you see more clean-up happening?

There has been a broad-based improvement in the corporate credit cycle, which we have seen for the last few quarters. Corporate slippage has had come down dramatically compared to what was the case in the previous quarters. Challenges in retail and MSME have got accentuated during the pandemic. Overall, in terms of credit quality for banks, I think we should see an improvement notwithstanding the challenges that we saw with the second wave.

When do you expect RBI to start normalising its monetary policy?

I think there are two pieces to the monetary policy stimulus. One has been in terms of rates and the other has been in terms of liquidity. So, you would expect that the liquidity piece will start getting normalised first. Change in the rate cycle is a few quarters ahead. The distortions in risk pricing due to liquidity surplus should get sorted and we should start seeing credit risk that way it would be in normal times.

You have launched a new digital platform BoB world. What does this mean for customers?

Covid has brought a broad and deep transformation and nearly twice the number of customers visiting the branch, now use the app. So rather than being an adjunct to the bank, it will be the bank and the other parts of the bank will become an adjunct. The thought was to enable everything that can be done in the branch within the app. Therefore, we got down to see what should be the design, branding and positioning of the app. BoB world will be the primary interface at the centre of the bank.

What is the effort that has gone into the back-end?

The bank has been making investments and was identified as the best technology bank of 2021 by the IBA. The integration (of Dena and Vijaya Bank) on a common platform after the merger gave us a robust base to build this strategy.

How scalable is the core banking platform for digital?

Today we 13 million customers using bob World which is a very robust platform and scalable. For the future cloud computing will be a very important element as this will help scale up not only in terms of users but also multiple fintech partners on the platform.

Will bob World be a super app like SBI’s Yono and are you integrating the subsidiaries?

The way the app is being positioned that you can save, borrow, invest and pay. All four capabilities are in the app and are being scaled up every day. In addition to the regular transaction, we are having things like airline ticket booking and comparison shopping across merchants to bring the cheapest proposition to the customers. The other important thing is the benefit programme which depends on the category you choose in terms of the balance you would like to maintain.

How do you as a 100-year bank plan to attract millennials?

The marketing campaign is squarely aimed at millennials. The design is something they will find appealing. They can open the account entirely online through video KYC and the account will have benefits including Amzon Prime.

Will you be part of the account aggregator platform?

It is a conversation that we are still having. But having a platform of this sort gives you a very powerful lever to make sure you can profit from certain engagements.

Will BoB World be restricted to retail?

We’re starting off with retail with about 95% of all retail services now available on mobile. The logical next step is to fashion it for other segments.

On the corporate side are there any gaps in digital banking that you will fill?

The primary banking channel for banks is mobile. Not too far ahead the mobile phone is likely to become an important piece particularly for MSME and that is what we will target next in Bob World.

How do you plan to reach unbanked areas and push the financial inclusion agenda?

It’s a matter of great pride for us that while we have a 6-7% share in banking. Our share in Jan Dhan Yojana is 15%. So one piece of service delivery will be digital but that may not be relevant to people who are on the other side of the digital divide. We have a very aggressive programme for increasing our business correspondent and increase their number from two for every branch to five BCs for every bank branch that we have. We want to double the BC outlets to 50,000.

Would you be hiring people?

The amalgamation has brought about efficiencies, but we have not shed people. Redeployment will help in filling marketing and other vacancies. We will continue to recruit specialists. For instance, we are now recruiting wealth relationship managers. We may also recruit for specific skills like digital banking. But there may not be much of an increase in the headcount.



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Only 60% banks ready with new auto debit system, customers to face inconvenience, BFSI News, ET BFSI

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Bank customers are set to face disruptions in their auto debits after new RBI norms kicked in on Friday as only about 60% of banks are ready with the new system.

Private sector lenders, including HDFC Bank, ICICI Bank, Citibank, Axis Bank, IDFC Bank are ready with the new systems. IndusInd Bank, Bank of Baroda, RBL Bank and YES Bank are also set to meet the deadline.

However, public sector banks are still working on putting the new system in place.

Dashing messages

Banks are sending communications to customers saying that they will not process the recurring payments and customers will have to make payments directly to merchants. Below are some text messages received by customers:

> “Attention! From 1st Oct’21, as per RBI guidelines on e-Mandate on cards, we will decline Non Compliant recurring txn at Merchant Web/App on your Credit/Debit Card. Alternate Solution – Retry regular payment on Merchant Web/App authenticated via OTP or Pay via AutoPay in BillPay on our NetBanking for your Electricity /Water/Gas/ Landline/Postpaid mobile/Broadband/Insurance billers,” said a message to customers by HDFC Bank.

> “In compliance with the regulatory requirements, we are currently building a solution to seamlessly manage all your domestic standing instructions for recurring payments. This solution will be available soon for you. Starting October 1, any existing standing instruction for domestic and international recurring transactions on your card account will not be processed. We request you to make these payments directly to the service providers to avoid any interruptions,” American Express said in a recent message to customers.

How does the new system work?

Under the proposed system, as a risk mitigating and customer facilitation measure, the card-issuing bank will have to send a pre-transaction notification to the cardholder, at least 24 hours before the actual charge or debit to the card. While registering e-mandate on the card, the cardholder shall be given the facility to choose a mode among available options (SMS, email, etc.) for receiving the pre-transaction notification from the issuer. On receipt of the pre-transaction notification, the cardholder shall have the facility to opt-out of the particular transaction or the e-mandate. For transactions above Rs 5,000, banks will also be required to send one time passwords to customers.

What is a standing instruction?

A standing instruction is a service offered to customers of a bank, wherein regular transactions that the customer wants to make are processed as a matter of course instead of initiating specific transactions each time.

This service relates to transactions like renewing subscription to OTT platforms, newspapers and magazines, and utility bill payments.

The issue

Large lenders and payment entities including State Bank of India, ICICI, Citi, HDFC, Axis, HSBC, Visa and Mastercard had asked the Reserve Bank of India (RBI) to postpone the deadline for putting in place a new system to alert customers on ‘standing instruction’ transactions.

The banks were asked to set up the system by March 31, 2021.

The lenders also wanted RBI to exclude transactions against pre-existing standing instructions and those with international merchants from the new conditions for e-mandates on cards for recurring transactions.



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Monetary Policy Committee seen keeping rates unchanged with ‘accommodative stance’

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Amidst softening retail inflation, the Monetary Policy Committee is expected to keep key rates unchanged and maintain its accommodative stance to help sustain the growth momentum. Some experts believe that there could be steps announced to calibrate excess liquidity.

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research, said: “Acuité believes, in line with market expectations, that Reserve Bank of India will continue with its accommodative monetary policy in October although it is likely that it may take some further steps to recalibrate the excess liquidity in the monetary system over the next one to two quarters.”

Economy bouncing back

While the high-frequency indicators for August and September reveal that economic activity is reaching its pre-pandemic levels and the risks of another wave of the Covid are gradually on a decline, the recovery momentum is still uneven, he said.

Retail inflation, as measured by the Consumer Price Index, eased to a four-month low of 5.3 per cent in August with moderation in food prices.

“We expect headline inflation for September to come in at a five-month low of 4.35 per cent,” said a Treasury Research report by HDFC Bank.

“…the RBI is likely to keep its stance accommodative and maintain surplus liquidity in the system. The RBI is likely to wait for growth impulses to get stronger and once domestic and global risks abate (third wave, global supply chain disruptions, Fed taper) before rolling back monetary accommodation,” it said, adding the RBI is likely to continue to manage the yield curve (through GSAP sterilised or Operation Twist).

The MPC, chaired by RBI Governor Shaktikanta Das, is set to meet between October 6 and 8 for the next bi-monthly review. The Reserve Bank had last cut the repo rate by 40 basis points in May 2020 but has since then maintained status quo on rates.

Upside risks to inflation

Economists at Standard Chartered Bank too said they expect the MPC to keep both reverse repo and repo rates unchanged at the October meeting and said it is likely to marginally trim its 2021-22 CPI forecast from 5.7 per cent towards 5.5-5.6 per cent, though upside risks to inflation have increased.

The Standard Chartered Bank report said it expects the MPC to signal reverse repo rate normalisation from December at the October meeting “…in the absence of growth shocks.” It expects the MPC to hike the reverse repo rate by 40 bps (to 3.75 per cent) at the December and February policy meetings.

“The trajectory of inflation is shifting down more favourably than anticipated. As pandemic scars heal and supply conditions are restored with productivity gains, a sustained easing of core inflation can be expected, which will reinforce the growth-supportive stance of monetary policy,” the RBI Bulletin of September had noted.

At the August policy meeting, MPC member JR Varma was the sole dissenter. While he agreed with the other five members on keeping the policy repo rate unchanged at 4 per cent, he disagreed on continuing with the accommodative stance. He had noted that the possibility that Covid-19 will haunt us (though with lower mortality) for three -five years can no longer be ruled out.

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Yields harden as liquidity concerns outweigh positive news

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Benchmark yields rose 5 basis points last week compared to the previous one pushed up by concerns on the liquidity front despite a slew of positive news.

The week commenced with the FY22 second-half borrowing calendar coming in at ₹5.03-lakh crore, which was well within the anticipated level. Then came the fiscal deficit number for April-August at 31 per cent of the Budget Estimate. The GST collections for September also came in at ₹1.17-lakh crore which is 23 per cent higher compared to the same month last fiscal.

However, yields continued to move higher as concerns on the liquidity front took precedence. For one, the cut-off on the seven-day variable rate reverse repo auction came in at 3.99 per cent last week. Compared to this, the cut-off on the 14-day variable rate reverse repo auction was at 3.6 per cent the week before.

This implies that the RBI is gradually getting comfortable paying a relatively higher rate in order to suck out the excessive liquidity sloshing around in the system.

Rate review

Bond market participants are wary that the central bank will raise the variable rate reverse repo (VRRR) auction quantum as well as the tenors and also raise the fixed reverse repo rate in the upcoming Monetary Policy.

Ananth Narayan, Professor-Finance at SPJIMR, said a lot has happened over the past few weeks that wasn’t conducive for the bond market. “Commodity prices have shot up, there have been energy shortages around the world, mainly China and the UK, and the whole confusion about the US debt ceiling also added pressure on the US treasury yields.

“As we worry about cost-push and imported inflation, the concern is whether the RBI might start reducing G-SAP and raising overnight rates next week. I believe the central bank would not want to shock the markets. They may increase the VRRR and suck out some of the excess liquidity, but would also comfort the market that the liquidity would remain on the surplus side for much longer. I think it would be a surprise if the benchmark yield goes beyond 6.30 per cent in the short term,” Narayan said.

The 10-year US treasury yield also went up to 1.56 per cent last week before cooling to 1.46 per cent. With the benchmark yield hitting 6.24 per cent, bond traders expect the yield to find solace close to the 6.3 per cent level. All eyes are now on the Monetary Policy where the crucial thing to watch out would be any potential changes in the VRRR quantum, tenor as well as the fixed reverse repo rate.

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

Banking & Finance

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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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Know how banks, financials performed this week, BFSI News, ET BFSI

Personal Finance

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The indices were volatile this week, in line with its global peers, while the broader market indices continued to outperform. The BSE Sensex breached its 60,000-mark, while the Nifty extended its winning run to five weeks in a row on Wednesday, posting the longest weekly gaining streak since 20 December 2020.

However, overall, the indices were muted this week, with experts suggesting indices may see further correction on concerns over global economic recovery and US inflation.

Stock specific moves, cues from Asian markets, US debt ceiling crisis and uptick in bond yield, strong vaccination numbers were key driving factors this week.

Monday Closing bell: Benchmark indices end flat with positive bias, Nifty Bank up nearly 1%

The BSE Sensex pared 334 points from the day’s high to end 29 points higher at 60,078, while the NSE Nifty50 closed at 17,855. During the day, the Sensex logged a fresh record high of 60,412.

The broader market indices underperformed the benchmark Sensex, as the BSE Midcap closed flat and BSE Smallcap down 0.13%.

The Nifty PSU Bank ended flat with positive bias gaining 0.48%, the Nifty Bank ended 0.90% higher at 38,171, and the Nifty Financial Services ended 0.41% higher at 18,706. SBI and HDFC Bank were among top gainers, while Bajaj Finserv was the top laggard, losing more than 2%.

Tuesday Closing bell: Indices bleed, financials highly underperform

After crashing nearly 1,000 points, Sensex recovered from its day’s low to finally close at 59,668, down 0.68%. The Nifty, meanwhile, tumbled 0.60% to end at 17,749.

The broader market also declined, in tandem with the benchmarks. The BSE Midcap index lost 0.71% and the BSE Smallcap 0.62%.

After a volatile session, Nifty PSU Bank gained 1.24% closing at 2,398. Bank Nifty ended in the red, losing 0.59% to end at 37,945, while Nifty Financial Services ended 0.92% lower at 18,534. Kotak Mahindra Bank was among the top gainers, while Bajaj Finance, Bajaj Finserv, ICICI Bank and Induslnd Bank were top laggards.

Weekly Market wrap up: Know how banks, financials performed this week

Wednesday Closing bell : Indices volatile for second day; PSU Banks gain over 2.5%, financials fall

Indices remained volatile for the second day in a row on Wednesday, ending with losses. S&P BSE Sensex recovered from intraday lows and closed 0.43% lower at 59,4113. NSE Nifty 50 turned positive during the day but failed to hold gains and closed 0.21% lower at 17,711.

Midcap and Smallcap indices outperformed benchmark indices, closing with gains.

Nifty PSU Banks finished the day with 2.72% gains, while Nifty Bank slipped 0.53% ending at 37,743. Nifty Financial Services closed 0.88% lower at 18,371. HDFC was among the worst-performing Sensex constituents, falling 2.15%, followed by Axis Bank, Kotak Mahindra Bank and HDFC Bank.

Thursday Closing bell: Indices witness 3-day losing streak, both down 0.5%

Domestic headline indices ended with losses for the third consecutive session, with the Sensex witnessing a tug of war between gains and losses for most of the day to end 0.48% lower at 59,126. The Nifty50 dropped 0.53% to close at 17,618.

Nifty PSU Bank Index maintained its winning streak, closing with 0.80% gains. Nifty Bank, however, fell below the 37,500-mark, down 0.84% to close at 37,425, while Nifty Financial Services closed 0.37% lower at 18,303.

Bajaj Finserv was the top Sensex gainer, jumping 2.19%, followed by Bajaj Finance. Axis Bank, SBI and Kotak Mahindra Bank were among the top drags.

Friday Closing Bell: Sensex, Nifty witness losses for fourth day, both down 0.5%

Indices settled in the red for the fourth straight day on Friday, with Sensex closing 0.6% lower at 58,766, and the Nifty50 falling 0.5% to close at 17,532.

Nifty PSU Bank index continued its winning streak for the fourth consecutive session, closing 1% higher. Nifty Bank, however, fell more than half a percent to close at 37,225, while Nifty Financial Services closed 0.91% lower at 18,137.

Bajaj Finserv fell more than 3%, and Bajaj Finance, ICICI Bank and Induslnd Bank were among top laggards. Muthoot Finance gained over 5%, and Au Small Finance Bank, Bandhan Bank, PNB were among top gainers.

Key Industry takeaways

Icra revises up FY22 GDP growth forecast to 9%

Ratings agency Icra on Monday revised up its 2021-22 real GDP growth estimate for India to 9 percent from the earlier 8.5 percent. A ramp-up in COVID-19 vaccination, healthy advance estimates of kharif (summer) crop and faster government spending were the factors which led to the revision, the agency said in a statement. Icra on Monday said it expects the second half of the fiscal year to have brighter prospects.

Aditya Birla Sun Life AMC IPO fully subscribed on Day 2

Weekly Market wrap up: Know how banks, financials performed this week

The initial public offer of Aditya Birla Sun Life AMC Limited was fully subscribed on the second day on Thursday. The Rs 2,768.25crore initial share sale received bids for 2,99,46,460 shares against 2,77,99,200 shares on offer, translating into 1.08 times subscription, according to an update on the NSE.

The qualified institutional buyers (QIBs) category was subscribed 6 per cent, non-institutional investors 40 per cent and retail individual investors (RIIs) two times. The initial public offer is of 3,88,80,000 equity shares.

RBI extends MSF facility for banks until March next year

Weekly Market wrap up: Know how banks, financials performed this week

The Reserve Bank of India (RBI) on September 28 said it has extended the marginal standing facility (MSF) relaxation for banks until March 31. Earlier, this facility was given till September 30.

Under MSF facility, banks are allowed to avail of funds by dipping into the Statutory Liquidity Ratio (SLR) by up to an additional one percent of net demand and time liabilities (NDTL), i.e., cumulatively up to 3 percent of NDTL.

“With a view to providing comfort to banks on their liquidity requirements as also to enable them to continue to meet LCR requirements, it has been decided to continue with the MSF relaxation for a further period of six months, i.e., up to March 31, 2021,” the RBI said.

US Fed’s tapering inclination may impact India’s FPI inflows, says CARE Ratings

Weekly Market wrap up: Know how banks, financials performed this week

The US Federal Reserve’s indication of tapering asset purchases is likely to impact the flow of funds into Indian markets, but may not be immediate, CARE Ratings said in a report.

The tapering is likely to affect India’s foreign portfolio inflows. Earlier when the Fed had announced tapering in 2013, FPI inflows to India had shrunk in the 2015-18 period.

RBI lifts PCA curbs on Indian Overseas Bank

Weekly Market wrap up: Know how banks, financials performed this week

The Reserve Bank of India on 29, September lifted Prompt Corrective Action restrictions from the Indian Overseas Bank, the central bank said in a release.

The decision came after the bank reported its earnings for the year ended March 31, 2021, and the RBI observed that IOB was not in breach of the PCA parameters. IOB has also provided a written commitment that it would comply with the norms of Minimum Regulatory Capital, Net NPA and Leverage ratio on an ongoing basis



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Crisis and Mobile Money, BFSI News, ET BFSI

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By Rahul De’ and Abhipsa PalMobile payment usage across the globe witnessed a drastic spike after the onset of the Covid-19 pandemic. In India, the United Payments Interface (UPI) transactions, along with Aadhar enabled Payments System (AePS), Immediate Payment Service(IMPS), Fastag, and Bharat Bill reported surges in terms of both value and volume. UPI, which is the flagship platform for digital payments, clocked a record of three billion transactions in July, which was about rupees six lakh crore of value.

This growth in mobile money transactions is primarily understood in connection with two major patterns emerging from the pandemic. One, citizens feared surface contamination of cash and subsequent transmission of coronavirus through the exchange of “dirty money”. The contactless mobile wallets and payment systems offered a safe corridor for contamination-free transactions. The second reason was the barrier to obtaining physical banknotes amid the lockdowns, stay-at-home and quarantine orders, and social distancing norms. Not only did citizens face constraints in visiting the nearest bank or ATM during the lockdowns, but also the stay-at-home and work-from-home norms for banking sector employees curtailed services at the banks, and even created a shortage of cash at ATMs. As a result, people migrated to the most convenient alternative to physical money – mobile money.

This phenomenon is a repeat of history in India, as the nation witnessed a similar surge post the banknote crisis in 2016, triggered by demonetization. In the absence of the availability of cash in circulation, and shortage of cash in banks and ATMs, users migrated to the easiest alternative of using mobile money, visible in the sudden spike digital payments and its subsequent growth post-November 2016. This growth was further supported by the steady increase in digital penetration, both in terms of smartphone ownership and Internet access, with over forty percent of the Indian population having Internet access today. As cash returned to circulation in late 2017, users continued transactions with the newly adopted mode of payment.

We conducted a detailed market study in this period, 2017-18, and investigated the intentions of users to continue using mobile payments, even as cash returned to the economy. The respondents of the study were from across the country, and noted salient advantages of mobile payment technology that distinctly pointed towards their interest in continuing using it. Besides the convenience of not having to carry cash, there were many advantages: many services, such as paying bills, shopping, ordering food, etc, were bundled with the payment apps; the apps provided an opportunity to see and reflect on past purchases; and the systems offered additional security measures.

As users started gaining familiarity with the payment apps, the second cash crisis dawned upon the nation as Covid-19 introduced a new set of threats and constraints to cash usage. This time, the market was prepared to transition to mobile payments, as merchants and consumers were now in the network of various technology providers, which also enabled cross-platform transactions.

After the effects of demonetization were reduced, and cash became freely available, usage of mobile money stopped growing as steeply as before, but payments firms and vendors continued to add features and facilities. New players, such as Amazon Pay, Yono, Dhani, entered the market with varied offerings. Some of the apps were made available in Indian languages – Bhim-UPI is available now in 20 different languages – and this further eased the challenges with using it.

Although the current surge in mobile payments is an immediate after-effect of the threat of coronavirus transmission through cash surfaces and the difficulty in physical banking amidst the lockdowns, the technology’s core underlying benefits served as a reliable and trustworthy alternative. As people and merchants began to use these technologies – network effects kicked in.

The more people that joined the digital payments network, the better it was for others to join. In a city like Bangalore, even small street vendors – ice-cream sellers, roasted peanut vendors, footpath trinket sellers – all prominently displayed their Bhim-UPI or Paytm QR codes. Larger stores and service vendors adopted these platforms. One of us had to request a somewhat stubborn newspaper vendor to also get a UPI account, and he eventually did, after almost a year’s resistance.

As we move into the final quarter of 2021, it is likely that the digital payments surge is likely to continue. People and businesses have tasted the convenience of this technology, and also understood the ways in which problems can occur, and how they can be overcome. They have learned a new way of doing ordinary things, like make payments, and have seen its convenience and value. They are likely to stick with it and encourage others to adopt it also.

(Rahul De’ is Professor of Information Systems at IIM Bangalore; Abhipsa Pal is Professor of Information Systems at IIM Kozhikode.)

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

Banking & Finance

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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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