Tag: RBI

Banking venture of Centrum Financial Services christened Unity SFB

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Centrum Financial Services Ltd (CFSL) has christened its proposed banking venture as Unity Small Finance Bank (SFB).

Unity SFB, which has its registered office in New Delhi, currently has three Directors — Jaspal Singh Bindra, Executive Chairman, Centrum Capital Ltd (CCL); Sriram Venkatasubramanian, CFO, CCL; and Ranjan Ghosh, MD & CEO, CFSL.

Tally Solutions and Cosmea Financial Holdings apply to RBI for SFB licence

The SFB will eventually take over the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank. Currently, there are 11 SFBs in the country.

Revamp of operations

RBI had accorded “in-principle” approval to CFSL, which is a wholly-owned subsidiary of CCL, on June 18, 2021, to set up an SFB. This approval was in specific pursuance to CFSL’s February 2021 offer in response to PMC Bank’s November 2020 Expression of Interest (EoI) notification.

Depositors of PMC Bank still await clarity on withdrawals

Under the “in-principle” approval, CFSL will first operationalise Unity SFB in 120 days. Thereafter, the RBI will place in public domain a draft scheme of amalgamation of PMC Bank with the SFB. The last step will be the government sanction for the scheme.

Mobile payments firm BharatPe is expected to be an equal partner in Unity SFB.

In the run-up to the formation of the SFB, CCL announced a restructuring of its operations, whereby its board approved the sale of the entire business of two wholly-owned material subsidiaries — CFSL and Centrum Microcredit Ltd — to its proposed step-down subsidiary (proposed SFB), subject to members’ and other requisite statutory and regulatory approvals.

Pooling of business of the aforementioned subsidiaries into the proposed SFB is required to be done as per the “in-principle” approval received from the RBI to set up the SFB, CCL said in an exchange filing on August 24.

The consideration for the sale of the entire business of CFSL and Centrum Microcredit to the proposed SFB is ₹316 crore and ₹110 crore, respectively, per the filing. This sale is subject to adjustments for any material change in financial status till effective date of the business transfer.

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Indian banks facilitate cryptocurrency transactions amid a fresh boom, BFSI News, ET BFSI

Banking & Finance

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As Indians flock to the cryptocurrency market with renewed enthusiasm, banks are joining the party.

They are again allowing the purchase of Bitcoin and other cryptocurrencies through their channels, easing curbs that they had imposed on such services.

Lenders including HDFC Bank, ICICI Bank and Axis Bank are allowing transactions in virtual currencies through the UPI platform.

Crypto exchange WazirX has listed the net banking facilities of Punjab National Bank, Union Bank of India, IDBI, IDFC First Bank, Federal Bank and Deutsche Bank to make payments for crypto purchases.

According to crypto exchanges, more banks are now warming up to them and several channels are available for customers to buy crypto assets.

The change in stance happened after the Reserve Bank of India told banks that they no longer can use the regulator’s 2018 circular prohibiting dealings in virtual currencies, as the direction has been struck down by the Supreme Court, said people in the know.

Banks have also reopened accounts with crypto exchanges after conducting due diligence, in absence of any specific regulation. This comes at a time when Indians are flocking back to cryptocurrencies.

Reluctant banks

As early as June banks were sending official notices to many customers warning them of curbs, including permanent closure of accounts.

Lenders were asking customers to clarify the nature of transactions and warning credit card users that transactions of virtual currency will lead to suspension/cancellation of card.

While trading in cryptocurrency is not illegal as per existing Indian laws, individual institutions can enforce their terms based on their risk assessment.

A grey area

Despite the boom, cryptocurrencies are in a grey area in India, with the Reserve Bank hostile towards it and the government unsure about its prospects.

There is no legislation or regulatory code yet to govern the crypto ecosystem, leading to confusion among customers, businesses and financial institutions providing banking services.

In 2018, the Reserve Bank of India barred financial institutions from supporting crypto transactions, which the Supreme Court overturned in 2020. The government has circulated a draft bill outlawing all cryptocurrency activities, which has been under discussion since 2019.

Last month, the RBI asked banks not to cite its 2018 circular and clarified that banks can do their own KYC for crypto clients. With this, banks are now reassessing the situation, but several banks currently lack the technical expertise to make a supervisory assessment on these transactions.



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Indian banks facilitate cryptocurrency transactions amid a fresh boom, BFSI News, ET BFSI

Personal Finance

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As Indians flock to the cryptocurrency market with renewed enthusiasm, banks are joining the party.

They are again allowing the purchase of Bitcoin and other cryptocurrencies through their channels, easing curbs that they had imposed on such services.

Lenders including HDFC Bank, ICICI Bank and Axis Bank are allowing transactions in virtual currencies through the UPI platform.

Crypto exchange WazirX has listed the net banking facilities of Punjab National Bank, Union Bank of India, IDBI, IDFC First Bank, Federal Bank and Deutsche Bank to make payments for crypto purchases.

According to crypto exchanges, more banks are now warming up to them and several channels are available for customers to buy crypto assets.

The change in stance happened after the Reserve Bank of India told banks that they no longer can use the regulator’s 2018 circular prohibiting dealings in virtual currencies, as the direction has been struck down by the Supreme Court, said people in the know.

Banks have also reopened accounts with crypto exchanges after conducting due diligence, in absence of any specific regulation. This comes at a time when Indians are flocking back to cryptocurrencies.

Reluctant banks

As early as June banks were sending official notices to many customers warning them of curbs, including permanent closure of accounts.

Lenders were asking customers to clarify the nature of transactions and warning credit card users that transactions of virtual currency will lead to suspension/cancellation of card.

While trading in cryptocurrency is not illegal as per existing Indian laws, individual institutions can enforce their terms based on their risk assessment.

A grey area

Despite the boom, cryptocurrencies are in a grey area in India, with the Reserve Bank hostile towards it and the government unsure about its prospects.

There is no legislation or regulatory code yet to govern the crypto ecosystem, leading to confusion among customers, businesses and financial institutions providing banking services.

In 2018, the Reserve Bank of India barred financial institutions from supporting crypto transactions, which the Supreme Court overturned in 2020. The government has circulated a draft bill outlawing all cryptocurrency activities, which has been under discussion since 2019.

Last month, the RBI asked banks not to cite its 2018 circular and clarified that banks can do their own KYC for crypto clients. With this, banks are now reassessing the situation, but several banks currently lack the technical expertise to make a supervisory assessment on these transactions.



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RBI to deepen retail mkt, BFSI News, ET BFSI

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Mumbai: Reserve Bank of India (RBI) governor Shaktikanta Das on Tuesday spoke of measures to deepen retail participation even as he hinted at preparations to normalise the liquidity pumped into markets in the wake of the pandemic.

“As markets settle down to regular timings and functioning and liquidity operations normalise, the RBI will also conduct fine-tuning operations from time to time as needed to manage unanticipated and one-off liquidity flows so that liquid conditions in the system evolve in a balanced and evenly distributed manner,” Das said. He was delivering the keynote address at the annual conference organised by the Fixed Income & Money Market Derivatives Association (FIMMDA) and the Primary Dealers Association of India (PDAI).

Das also said that the RBI will work with primary dealers to popularise STRIPS — Separate Trading of Registered Interest and Principal of Securities. This is a system that will enable conversion of government securities into zero-coupon bonds where a lump sum is paid on maturity. This will be one of the measures by the RBI to develop a retail market for government securities.

Under the STRIPS mechanism, if there is a long-term bond for, say, 10 years, a primary dealer can sell the principal to one investor and the periodic interest payments to other investors. The advantage is that an investor looking for short-term government bonds can buy the coupon (interest) payments and a long-term investor can buy only the principal.

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Shaktikanta Das, BFSI News, ET BFSI

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The Reserve Bank of India‘s (RBI) role as a full-service central bank – North Block’s debt manager, banking regulator, and monetary policy conductor – helped keep the financial markets stable during volatile times, said Governor Shaktikanta Das, blunting the debate to spin off government borrowing from the central bank.

“In the wake of the pandemic, when fiscal response resulted in a sharp increase in government borrowing, the market operations conducted by Reserve Bank not only ensured non-disruptive implementation of the borrowing programme, but also facilitated the stable and orderly evolution of the yield curve,” Das said. “Monetary policy, G-sec market regulation and public debt management, therefore, need to be conducted in close coordination, and the primary focus of such coordination is the G- sec market.”

The RBI’s role as the investment banker to the government and banking regulator came in handy when the state had to respond to extreme stress in the economy – unlike the US where balkanisation of regulations disrupted the market, he said.

“The Reserve Bank’s regulation of the G-sec market has also a strong synergy with its role as the banking regulator – as banks are the largest category of participants in these markets,’’ said Das. “The importance of this aspect is also highlighted in the recent G30 report, which identified the balkanized regulation of US Treasury markets where banking regulations seem to have adversely impacted market-making.’’

Governor Das said direct oversight of various markets and the obligations to keep the markets stable and expand the economy have synergies.

“The synergy between the Reserve Bank’s responsibility for key macro market variables – interest rates and exchange rates, which ensures overall financial market efficiency – and its obligation to ensure stability while keeping in mind the objective of growth is well-accepted,’’ Das said. “Indeed, its effectiveness in managing stress in foreign exchange and interest rate markets is made possible by direct access and oversight of the G-sec market.’’

Insurance and pension funds, among the largest holders of government bonds, should take the next step to be active in the securities lending market so that market liquidity is not concentrated and that during times of volatility, the yield curve moves in an orderly way, he said. Das said that discussions held by the Securities Lending and Borrowing Mechanism (SLBM) on augmenting secondary market liquidity, by incentivizing investors like insurance companies and pension funds, should be carried forward.

The RBI is also making efforts to enable international settlement of transactions in G-secs through International Central Securities Depositories (ICSDs), he said.

“Once operationalized, this will enhance access of non-residents to the G-secs market, as will the inclusion of Indian G-secs in global bond indices, for which efforts are ongoing,” Das said.

Separately, Das also said that the global economy is showing some signs of recovery but the problems aren’t over yet.

“While there are signs of recovery, we are not yet out of the woods,” he said “Many central banks also implemented measures targeting specific market segments that were witnessing heightened stress. These measures were, in many cases, complemented by regulatory relaxations (lower capital and liquidity requirement) aimed at supporting credit flow from banks and other financial intermediaries and at stabilizing the financial system and restoring confidence in financial markets,” Das said.



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Naspers’ arm-backed PayU to acquire BillDesk for $4.7 billion

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In one of the largest deals in India’s booming fintech sector, Naspers’ technology investment arm Prosus on Tuesday acquired Mumbai-based BillDesk for $4.7 billion. The acquisition is being done through Prosus’ global fintech business PayU.

“The proposed acquisition will see PayU, the payments and fintech business of Prosus which operates in more than 20 high-growth markets, become one of the leading online payment providers globally by volume,” Prosus said in a statement.

PayU India and BillDesk run complementary businesses and the two expect to create a financial ecosystem handling four billion transactions annually, which would be four times PayU’s current level in India. The combined entity would have a total payment volume (TPV) of $147 billion. Founded in 2000, BillDesk had a TPV of over $90 billion in 2020-21. PayU has a TPV of $55 billion across India, Latin America and EMEA.

PayU’s fourth buy

This is the fourth acquisition by PayU in India after CitrusPay, Paysense and Wibmo. This marks the largest exit by an Indian start-up through an acquisition, zooming past Snapdeal’s $400-million acquisition of Freecharge, and BYJU’s $950-million buy of Aakash Educational Services.

Bob van Dijk, Group CEO of Prosus, said: “We’ve invested close to $6 billion in Indian tech to date, and this deal will see that increase to more than $10 billion… Along with classifieds, food delivery, and education technology, payments and fintech is a core segment for Prosus, and India remains our No 1 investment destination.”

Noting the complementarity of the two companies, Dijk said in a media call that payments systems need scale to be efficient.

Anirban Mukherjee, CEO of PayU India, said the company hopes to provide a full fintech ecosystem of diversified products. “We will take time to figure out how to bring the platforms together. Anything we do will be in consultation with the RBI,” he said on the roadmap.

MN Srinivasu, Co-founder of BillDesk, said in a statement that the investment by Prosus validates the significant opportunity in India for digital payments that is being propelled by innovation and the progressive regulatory framework put into place by the RBI.

Prosus, which came from Naspers, invests in areas including health, logistics, blockchain, and social commerce. It is known for its 28.9 per cent stake in Tencent and has also invested in Indian firms including Swiggy.

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Das emphasises importance of G-Sec market in RBI policy making

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The Reserve Bank of India (RBI) made it plain to the Securities and Exchange Board of India (SEBI) that it will not yield ground when it comes to regulation of the government securities (G-Sec) market.

RBI Governor Shaktikanta Das, on Tuesday, emphasised the importance of the central bank’s direct access and oversight of the government securities market, stating that it enables the management of stress in the foreign exchange and interest rate markets.

The Governor’s observation assumes significance as it comes in the backdrop of SEBI Chairman Ajay Tyagi seeking unification of the G-Sec and corporate bond markets, which could bring G-Sec under the market regulator’s ambit.

Critical market

Highlighting the criticality of the G-Sec market for effective discharge of RBI’s functions, Das underscored that the RBI’s regulation of it has a strong synergy with its role as the banking regulator as banks are the largest category of participants in these markets.

Unified regulation

He mentioned that this is also highlighted in the recent G30 report which identified the balkanized regulation of US Treasury markets as having adversely impacted market making.

In his address at the 21st FIMMDA-PDAI annual conference, Das highlighted that the current arrangement of the G-Sec repository residing with the RBI facilitates seamless conduct of liquidity operations and simultaneous settlement of G-Sec trading.

“This provides confidence to investors, removes custodial risk, and minimises transaction costs. Access to real time market intelligence arising from ownership or oversight of market infrastructure is critical for fine-tuning timely policy responses,” he said.

Das called attention to the fact that the current regulatory arrangement offers synergies in terms of a unified market for G-Secs, repo in G-Secs, liquidity and other monetary operations, exchange rate management, regulation for key derivative markets, public debt management, and prudential regulation of banks, the largest category among market participants.

Close coordination

He noted that the synergy between the RBI’s responsibility for key macro market variables – interest rates and exchange rates, which ensures overall financial market efficiency – and its obligation to ensure stability while keeping in mind the objective of growth is well-accepted.

“With the development of the domestic financial markets and deregulation of interest rates, effective transmission of monetary policy impulses relies on the G-Sec market being deep and liquid so as to create the intended impact on interest rates by linking expectations of future short-term rates to current long-term rates,” Das said.

Similarly, a well-functioning G-Sec market ensures efficient discharge of the public debt management function.

He also remarked that the public debt structure – quantity, composition and ownership of debt – also influences monetary conditions.

“In the wake of the pandemic, when fiscal response resulted in a sharp increase in government borrowing, the market operations conducted by the Reserve Bank not only ensured non-disruptive implementation of the borrowing programme, but also facilitated the stable and orderly evolution of the yield curve,” the Governor said.

Das stressed that monetary policy, G-Sec market regulation and public debt management, therefore, need to be conducted in close coordination, and the primary focus of such coordination is the G-Sec market.

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Moody’s, BFSI News, ET BFSI

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NEW DELHI: Moody’s Investors Service on Tuesday said the economic activity in India is picking up with the gradual easing of Covid restrictions and there could be further upside to growth as economies around the world gradually reopen.

In its August update to ‘Global Macro Outlook 2021-22’, Moody’s retained India’s growth forecast for the 2021 calendar year at 9.6 per cent and 7 per cent for 2022.

“In India, economic activity is picking up alongside a gradual easing of restrictions that were implemented in response to the second wave. And there is further upside to growth as economies around the world progressively reopen,” Moody’s said.

The rating agency said it expects the Reserve Bank to maintain an accommodative policy stance until economic growth prospects “durably improve”.

“We expect the RBI …. to maintain the status quo until the end of this year. We expect to see an increasing number of emerging market central banks shift to a neutral policy stance amid their gathering growth momentum later this year and early next year,” Moody’s said.

Indian economy contracted 7.3 per cent in 2020-21 fiscal. GDP growth in the current fiscal was estimated to be in double digits initially, but a severe second wave of the pandemic has led to various agencies cut growth projections.

Moody’s had in June projected a 9.3 per cent growth for the current fiscal ending March 2022.

It said the rapid global spread of the highly contagious delta variant of the coronavirus is a stark reminder that the global pandemic is far from over, although some vaccines appear to be highly effective at suppressing the severe disease, reducing the need for hospitalisations and lowering the incidence of fatalities.

Vaccination rates, the extent of serious infections and mobility restrictions remain the key determinants of where countries find themselves in their economic recovery cycle, it said, adding while the spread of the delta variant has prompted mobility restrictions in Asia, renewed lockdowns are far less likely in other regions of the world.

Moody’s estimates that the G-20 economies will grow by 6.2 per cent in 2021, after a 3.2 per cent contraction last year, followed by 4.5 per cent growth in 2022.

G-20 advanced economies will grow by 5.6 per cent collectively in 2021 while emerging markets will collectively expand by 7.2 per cent in 2021, it added.



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Tally Solutions and Cosmea Financial Holdings apply to RBI for SFB licence

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The Reserve Bank of India (RBI) on Monday said it received applications from Bengaluru-based Tally Solutions and Mumbai-based Cosmea Financial Holdings for ‘on tap’ license to operate as small finance banks.

Tally Solutions delivers business software for small and medium businesses (SMBs). Cosmea Financial Holdings is involved in activities auxiliary to financial intermediation, according to zaubacorp.com.

With these applications, the number of applicants wanting to set up small finance banks (SFB) has gone up to six.

In April 2021, the central bank had announced that four applicants — VSoft Technologies, Calicut City Service Co-operative Bank, Akhil Kumar Gupta and Dvara Kshetriya Gramin Financial Services — had applied to set up an SFB under the December 2019 Guidelines for ‘on tap’ licensing.

SFBs primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.

Guidelines

As per the guidelines for ‘on tap’ licensing of SFBs, the minimum paid-up voting equity capital/net worth requirement is ₹200 crore (₹100 crore earlier).

For urban co-operative banks (UCBs), desirous of voluntarily transiting into SFBs, the initial requirement of net worth is ₹100 crore, which will have to be increased to ₹200 crore within five years from the date of commencement of business.

Payments banks can apply for conversion into SFB after five years of operations, if they are otherwise eligible as per these guidelines.

Further, SFBs will be given scheduled bank status immediately upon commencement of operations and they will have general permission to open banking outlets from the date of commencement of operations.

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