Tag: RBI

RBI calls for public comments on digital lending

Banking & Finance

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The Reserve Bank of India on Thursday released the report of the Working Group on Digital Lending, which has called for a legislation against illegal digital lending activities as well as a verification process for these lenders and a self-regulatory organisation.

“The thrust of the report has been on enhancing customer protection and making the digital lending ecosystem safe and sound while encouraging innovation,” the RBI said. It has sought public comments by December 31, 2021.

“As per the findings of the Working Group, there were approximately 1,100 lending apps available for Indian Android users across over 80 application stores (from January 1 to February 28),” the report said, adding that there were over 600 illegal loan apps.

Complaints against DLAs – Sachet, a portal established by the Reserve Bank received 2,562 complaints from January 2020 to March 2021, it further noted.

The much-awaited report has suggested three-pronged measures on a near to medium term basis, which can be implemented in a period of upt o one year to over one year.

In the near-term, it has suggested subjecting the digital lending apps to a verification process by a nodal agency to be setup in consultation with stakeholders. The nodal authority will also maintain a public register of the verified apps on its website.

It has also called for setting up of a self regulatory facility covering the participants in the digital lending ecosystem. The SRO would be expected to maintain a ‘negative list’ of lending service providers.

Code of conduct

A standardised code of conduct for recovery would be framed by the proposed SRO in consultation with RBI. Use of unsolicited commercial communications for digital loans would also be governed by the Code of Conduct.

The report has also recommended that balance sheet lending through DLAs should be restricted to entities regulated and authorised by RBI or entities registered under any other law for specifically undertaking lending business.

Further loan servicing, repayments should be executed directly in a bank account of the balancesheet lender and disbursements should be made into the bank account of the borrower.

In the medium term, “Central Government may consider bringing in a legislation to prevent illegal lending activities by introducing the ‘Banning of Unregulated Lending Activities Act’,” the working group report said.

Data collection

The RBI should develop a separate framework styled as Agency Financial Service Regulation (AFSR) for all customer-facing or fully outsourced activities of regulated entities including lending service providers, it has suggested. The working group has said data collection should be with prior and explicit consent of borrowers with verifiable audit trails. All data should be stored in servers located in India and algorithmic features should be used in digital lending to be documented to ensure necessary transparency.

The Working Group chaired by Jayant Kumar Dash, Executive Director, RBI was set up on January 13, 2021 in the backdrop of business conduct and customer protection concerns arising out of the spurt in digital lending activities.

 

“We welcome the report of the working group, which aims to safeguard consumers from unregulated digital lenders. It’s important to differentiate between lenders who already follow the law of the land and those who exploit consumers with unfair practices. DLAI has already set up a code of conduct for all members. DLAI will submit its suggestions on the report,” said Anuj Kacker, Vice President, Digital Lender’s Association of India and Co-founder, FREO.

 

 

 

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RBI authorises RBL Bank to collect direct taxes

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Private sector lender RBL Bank has been authorised by the Reserve Bank of India to collect direct taxes on behalf of the Central Board of Direct Taxes.

“After technical integration, RBL Bank’s corporate and individual customers will be able to pay their direct taxes through RBL Bank’s mobile banking or net banking platforms as well as through the branch banking network, resulting in ease and convenience for customers,” it said in a statement on Thursday.

Parool Seth, Head, Financial Institutions and Government Banking, RBL Bank, said, “We are pleased to be entrusted with this important mandate, which will help us enhance our bouquet of services and open up multiple convenient channels for our customers to pay taxes.”

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Punjab & Sind Bank adjusts net loss for FY21 at Rs 2,750 cr after divergence in asset classification, BFSI News, ET BFSI

Banking & Finance

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Public sector Punjab & Sind Bank (P&SB) on Wednesday said it has adjusted the net loss for fiscal ended March 2021 slightly higher at Rs 2,750 crore due to divergence in asset classification. The bank had reported a net loss of Rs 2,733 crore in 2020-21.

Whereas the bank reported gross non-performing assets (NPAs) at Rs 9,334 crore, the Reserve Bank assessed it at Rs 9,363 crore, thus leading to a divergence of Rs 29 crore.

Similarly, the net NPAs too had a divergence of Rs 29 crore.

Based on the difference of the provisions for NPAs reported by the bank and that assessed by the RBI, the divergence in provisioning for the financial year 2020-21 stood at Rs 17 crore.

The adjusted (notional) net profit after tax (PAT) for the year ended March 31, 2021, after taking into account the divergence in provisioning stood at Rs 2,750 crore, the bank said in a regulatory filing.

The bank published the divergence in asset classification and provisioning in accordance with RBI’s Risk Assessment Report as on March 31, 2021.

P&SB stock closed at Rs 17.25 apiece on BSE, down 1.43 per cent from previous close. PTI KPM SHW SHW



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RBI, BFSI News, ET BFSI

Banking & Finance

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In the fortnight ended November 6, 2020, bank loans stood at Rs 104.19 lakh crore and deposits at Rs 144.03 lakh crore, according to the RBI‘s Scheduled Banks’ Statement of Position in India as on November 5, 2021, data released on Wednesday.

In the previous fortnight ended October 22, 2021, bank credit had grown by 6.84 per cent and deposits by 9.94 per cent. In FY2020-21, bank credit had risen by 5.56 per cent and deposits by 11.4 per cent.

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Banks see robust festival season credit growth

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Banks collectively lent about four times more in the reporting fortnight ended November 5, vis-a-vis the preceding fortnight amid the festival season, indicating further improvement in credit appetite in the economy.

Banks lent ₹1,27,742 crore in the reporting fortnight ended November 5, against ₹32,671 crore in the preceding fortnight ended October 22, according to Reserve Bank of India (RBI) data on Scheduled Banks’ Statement of Position in India.

Brickwork Ratings (BWR) in a report, noted that credit growth has begun to pick up as business activity resumes in full swing, with gross bank credit growth improving to 6.80 per cent year-on-year (y-o-y) in October 2021 against 5.80 per cent y-o-y growth in June 2021.

In a speech at State Bank of India’s Banking & Economics Conclave on November 16, RBI Governor Shaktikanta Das observed that: “There are signs that consumption demand triggered by the festive season is making a strong comeback. This would encourage firms to expand capacity and boost employment and investment amidst congenial financial conditions.”

New investments

Further, with stronger balance sheets, the organised corporate sector is well-placed to make new investments in emerging areas.

“As demand recovers, I am sanguine about corporate sector playing a major role in turning the investment cycle that will facilitate absorption of surplus liquidity for productive investment,” the Governor said.

In this background, Das emphasised that it is incumbent upon a competitive and efficient financial system to identify high productive sectors and reallocate resources to harness the growth opportunities.

He opined that banks, in particular, should be investment ready when the investment cycle picks up.

The Governor said: “Improved vaccination and reduced infections have materially reduced extreme health outcomes like hospitalisation and mortality.

“This has boosted consumer confidence. With additional boost coming from the festival fervour and pent-up demand, numerous high-frequency indicators suggest that economic recovery is taking hold.”

Per the data on Scheduled Banks’ Statement of Position in India, deposit accretion was at ₹3,40,496 crore in the reporting fortnight against a de-growth of ₹38,019 crore.

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Former RBI DG says central bank’s concerns on crypto stem from money laundering, valuation concerns, BFSI News, ET BFSI

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Former RBI Deputy Governor N S Vishwanathan on Wednesday said money laundering and lack of clarity on valuations are the primary concerns of central banks in being circumspect about the introduction of cryptocurrencies. If the government goes ahead and allows cryptocurrencies, bankers need to be wary and not confuse persons’ wealth with the amount of crypto assets they hold even if they do not use it as collateral for lending, Vishwanathan said.

The comments come amid a heated debate over whether to allow private cryptocurrencies into the country, which has seen the RBI being vocal about its concerns, while the government seems to be more amenable.

RBI Governor Shaktikanta Das had on Tuesday reiterated his concerns over cryptocurrencies, saying there are ‘far deeper issues’ involved in virtual currencies that could pose a threat to the country’s economic and financial stability. The government is likely to introduce a bill on cryptocurrencies during the winter session of Parliament, beginning November 29.

Vishwanathan said world over, central banks are concerned with cryptocurrencies and wondered what makes governments more supportive of it.

“The central bank’s concerns come from two fundamental areas. One, of course, is that crypto-assets are seen as a possible source of money laundering, number two is that the valuations,” he said, speaking at the 8th SBI Banking and Economic Conclave.

He said we should not confuse cryptocurrencies with dematerialisation, where there is an underlying asset, which comes up in a digital form.

The career central banker added that we do not know what defines a value of a crypto asset, and the limited understanding is demand-supply forces govern the value.

The value of bitcoin, probably the most popular among the crypto assets, “gyrated” to USD 10,000 and swings between USD 7-17,000 per coin, he noted.

Vishwanathan said a person’s crypto holdings should not determine the wealth because the constant volatilities in the value can make a rich person seem poor or vice-versa.

Bankers should be extra careful and should not look at the crypto holdings while assessing a wealth of a potential borrower and should not lend against such assets, he added.

Earlier, Vishwanathan said, central banks prefer central bank digital currencies (CBDC) over the private and unregulated crypto assets and added that the introduction of the CBDC will help foreign trade.

The former DG said the activity of big tech companies like Google in aspects like deposit mobilisation for lenders is not so high that the RBI needs to be concerned about.

SBI Chairman Dinesh Kumar Khara said our experiences with the past will ensure an orderly exit from the present stimulus given by the RBI.

Replying to a question on whether banks are overcharging for forex commissions to small exporters, Khara said the market forces can ensure that no one is over-charged, while Swaminathan J, a managing director of SBI, said any enterprise works on cross-subsidisation, where it earns higher from a particular revenue stream and less from another.

Swaminathan added that various fee and commission streams have closed down with time, and banks will take an appropriate call on this particular one and case of regulatory action.



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UBS revises GDP forecast to 9.5% from 8.9% for FY22, BFSI News, ET BFSI

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Mumbai, Nov 17 (PTI) Citing faster-than-expected recovery, rising consumer confidence and the resultant spending spike, Swiss brokerage UBS Securities has revised upwards its growth forecast for the current fiscal to 9.5 per cent from 8.9 per cent in September. The brokerage also sees the economy clipping at 7.7 per cent in FY23 but moderating to 6 per cent in FY24, as it expects the benefit of the low-interest rate regime to end by the end of FY23, and it sees the central bank hiking policy rates by 50 bps in the second half of the next fiscal.

The Reserve Bank also forecasts 9.5 per cent GDP growth this fiscal while the average projection ranges from 8.5 to 10 per cent. The government projection is around 10 per cent.

The GDP grew 20.1 per cent in the June quarter of FY22.

In its September review, UBS said on a seasonally adjusted sequential basis, the real GDP declined by 12.4 per cent in the June quarter against the -26 per cent in the same period last year.

Therefore, we maintain the base case estimate of GDP growth at 8.9 per cent in FY22 compared to the consensus of 9.2 per cent against the deeper 7.3 per cent contraction in FY21, UBS Securities said.

The economy is bouncing back on progressive reopening, and the recovery from the second wave has been more pronounced than what we anticipated, Tanvee Gupta Jain, the chief economist at UBS Securities India said on Wednesday. Therefore pencilled in a higher-than-expected GDP run this fiscal.

Without giving an exact number, she said the economy will grow by 9-10 per cent in Q3 and 6-6.5 per cent in Q4 this fiscal, leading to higher overall full-year growth.

Gupta-Jain told reporters in a concall that she sees real GDP clipping at 9.5 per cent this fiscal, up from 8.9 per cent forecast earlier, 7.7 per cent in FY23 — which is more optimistic than the consensus 7.4 per cent for the year, but the growth momentum will moderate to 6 per cent in FY24 as the output gap will remain negative amidst the global growth engine slowing down.

Their optimism comes from their internal UBS India Activity Indicator data, which suggest economic activity has improved sequentially by an average of 16.8 per cent in the September quarter after contracting 11 per cent in the June quarter. Even for October, the indicator was up 3.1 per cent month-on-month on the festive demand bounce.

The brokerage bases the more-than-consensus growth optimism on the following: though consumption growth may moderate measures to boost public Capex and early signs of a recovery in the residential real estate sector may offset some of the adverse impacts.

Similarly, exports could also moderate next year from the very high rates this year due to a shift from goods to service consumption at the global level as the pandemic recedes.

They also see a potential credit accelerator effect in the country aiding the recovery. The baseline assumption is that activity continues to normalise, and remaining mobility restrictions are gradually removed.

Downside risks to the outlook include the following: a mutant virus that is resistant to vaccines is the biggest downside risk, as it may leave the government no choice but to begin new mobility restrictions, another could be a more than the expected spike in inflation and the resultant hike in repo rates to the tune of 75 bps next fiscal. If both materialise, then FY23 growth will be much lower at 5 per cent, she said.

And the upsides would be a successful and timely implementation of the recently announced structural reforms boosting growth beyond our baseline forecast, which will also lead to the economy closing the output gap faster.

According to the brokerage, potential growth has slowed to 5.75-6.25 per cent currently compared to over 7 per cent in 2017, due to longer-than-expected disruption caused by the pandemic and balance sheet concerns faced by economic agents.

Beyond FY22, Gupta-Jain believes Capex, especially infrastructure spending, manufacturing and exports will be the next key growth drivers.

On inflation, she expects CPI to decelerate to 4.8 per cent in FY23 from 5.4 per cent in FY22, assuming the RBI gradually starts unwinding its ultra-easy policy as the economic recovery gains momentum. In a base case scenario, she expects a policy rate hike of 50 bps in H2 FY23.

On the fiscal front, she expects the government to remain committed to fiscal consolidation and narrow the deficit to 8.8 per cent in FY23 from 10.1 per cent in FY22.



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RBI Governor Das urges banks to be investment-ready as recovery gathers pace, BFSI News, ET BFSI

Banking & Finance

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RBI governor Shaktikanta Das

Shaktikanta Das, governor of Reserve Bank of India, has asked banks to be investment-ready when the private Capex cycle picks up, as the pandemic-battered economy is on a strong recovery path that will demand huge investments to sustain in the long run.

Crediting the faster-than-expected recovery primarily to the improved vaccination pace and the resultant steady fall in the infection caseload, Das said this has led not only to lower extreme health outcomes like mortality/ hospitalisation but also boosted consumer confidence, which was visible in the festival demand.

Addressing an event by State Bank of India, Das said it is heartening to note that the economy is gradually getting back on its feet after the devastating second wave, which is very visible from the numerous high-frequency indicators that suggest that economic recovery is taking hold.

Since contact-intensive services are yet to regain the lost capacity despite rapid improvement in the recent period, it is clear that there still exists a significant gap in private consumption and investment relative to their pre-pandemic levels in FY20.

So, while the economy is picking up pace, it is yet to cover a lot of ground before it gets broad-based and entrenched. This points to the need for sustained impetus so that growth could return to or, better still, exceed the pre-pandemic trend, he said.

The growth triggers

Stating that the country has the potential to grow at a reasonably high pace after the pandemic, Das pointed to the several factors that are stacked in our favour of faster growth.

First, as a developing economy, it has significant potential to catch up with the rest of the world supported by favourable demographics, improving skill base and strong domestic demand.

Secondly, the government is providing necessary support, especially through Capex and reforms in various sectors like infrastructure, manufacturing and telecom, apart from other institutional changes to boost productivity, ease supply constraints and improve the business environment.

Thirdly, he said the pandemic has opened new opportunities for growth in the digital and green technology and also on account of resetting of global supply chains that could be advantageous to us and finally exports have been a bright spot since recent months and are likely to benefit further from global economic recovery.

With such enabling conditions and supportive policies, I have no doubt that we have a unique opportunity to step up growth as we emerge from the pandemic, Das said.

Private consumption

Calling private consumption as the backbone of overall economic growth, he said private consumption contributes the largest share of aggregate demand with around 56 per cent of GDP and is thus critical for inclusive, durable and balanced growth.

There are many signs that consumption demand triggered by the festive season is making a strong comeback. This would encourage companies to expand capacity and boost employment and investment amidst congenial financial conditions, he said, adding the recent tax cuts on petroleum products will give a further fillip to consumption.

Stating that reinvigorating private investment is crucial to realise the growth potential, Das said various policy measures such as a cut in corporate taxes, taxation reforms, the introduction of a performance-linked incentive scheme for 13 major sectors, enhanced focus on infrastructure development and asset monetisation, and proactive liquidity measures by the RBI etc are all leading to investment demand.



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Under co-lending tie-up, SBI and U GRO aim to disburse ₹500 cr to MSMEs by March 2022

Banking & Finance

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U GRO Capital, a technology-focused small business lending platform, has entered into a co-lending partnership with the State Bank of India (SBI) to provide credit to micro, small and medium enterprises (MSME).

Through this collaboration, SBI and U GRO aim to disburse up to ₹500 crore by March 2022, U GRO said in a statement.

The agreement has been signed under the alternative option of Reserve Bank of India’s revised co-lending guidelines, which involves post disbursal takeover of the bank’s share in the loan on a back-to-back basis.

“This arrangement will leverage SBI’s prowess on the liability side and U GRO Capital’s origination and distinctive underwriting engine capabilities on the assets side,” the company said, adding it also has co-lending partnerships with Bank of Baroda and IDBI Bank.

U GRO lends to SMEs in eight sectors — Healthcare, Education, Chemicals, Food Processing / FMCG, Hospitality, Electrical Equipment and Components, Auto Components, Light Engineering.

Dinesh Kumar Khara, Chairman, SBI, said, “Such partnerships align with our commitment to accelerate effective and affordable credit to MSMEs in India and contribute to the country’s financial inclusion imperative towards building an Atmanirbhar Bharat.”

Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital, observed that India’s lending landscape for NBFCs is transitioning. The next decade is expected to be all about collaboration between large banks and niche NBFCs / FinTech wherein ‘Lending as a Service’ would become the prominent force.

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