RBI report shows decline in bank credit post festival season pick-up

[ad_1]

Read More/Less


The outstanding credit of all scheduled banks declined by ₹5,034 crore in the fortnight ended November 19, indicating the festival season credit pick-up witnessed in the preceding fortnight has lost steam.

In the preceding fortnight ended November 5 the outstanding credit of all scheduled banks had increased by ₹1,25,262 crore, according to Reserve Bank of India’s data on “Scheduled Banks’ Statement of Position in India”.

Sluggish loan growth

“Loan growth continues to be sluggish with no sharp recovery in any specific segment barring Small and Medium Enterprise.

“A low interest rate environment continues but spreads remain elevated. With asset quality issues gradually receding, we should see spreads decline but loan demand issues remain,” Kotak Securities Analysts’ MB Mahesh, Nischint Chawathe, Abhijeet Sakhare, Ashlesh Sonje and Dipanjan Ghosh, said in a report.

Deposits during the reporting fortnight declined by ₹2,67,623 crore against an increase of ₹3,38,451 crore in the preceding fortnight.

Deposit rates flat

As per the latest data from RBI, deposit rates were flat month-on-month at about 5.1 per cent.

“Both private and PSBs have reduced their term deposit rates by about 50 basis points (bps) over the past 12 months. Wholesale deposit cost (as measured by Certificate of Deposit rates) has seen a much sharper decline. It has been broadly stable in FY2022,” the Analysts said.

[ad_2]

CLICK HERE TO APPLY

Unwise to place a ban on private crypto assets: Report

[ad_1]

Read More/Less


Cryptocurrencies have witnessed exponential growth over the last five years with more than 15 million Indian investors and as a result, like any other financial asset, the asset class needs to be regulated to protect consumer welfare as well as promote innovation, said a report jointly published by Esya Centre and Observer Research Foundation.

The report highlights that crypto assets are likely to form the basis for future forms of the internet and that India is well placed to capitalise on this due to its burgeoning private crypto market. Given this, it would be unwise to place a ban on private crypto assets as these can result in significant revenue loss to the government and force nascent industries to operate illegally.

Instead, the report advocates a balanced regulatory approach that addresses concerns of fiscal stability, money laundering, investor protection and regulatory certainty while preserving innovation.

According to one of the authors, Meghna Bal, “Most regulatory formulae necessary to address the policy concerns related to crypto-assets, such as investor protection, foreign exchange management, money-laundering and tax evasion, already exist in financial legislation. They just have to be adapted to accommodate an emerging technological paradigm. The recommendations in our report show how this can be done. ”

In India, classifying crypto as a security, good or capital asset could lead to unintended restrictions on investment or leave regulatory gaps in key policy areas. A sui generis crypto framework that adopts the nuances of the crypto industry would be more appropriate and in keeping with emerging global trends.

Suggestions for lawmakers

The report also lays out suggestions for lawmakers on what a crypto regulatory framework should include: it must be technology neutral, innovation friendly and consistent to fully harness India’s potential in this domain. Among other things, the framework must lay down clear definitions, identify the relevant regulatory bodies and create KYC/anti-money laundering obligations, the report says. It should also provide crypto asset service providers with safe harbor – protection from liability for the actions of investors on their platform. This will help asset service providers innovate and scale new crypto-based products and offerings.

The report also recommends the government adopt a co-regulatory approach where industry associations and authorities such as SEBI, the RBI, and the Ministry of Finance share responsibility for oversight. Such an approach takes a leaf out of Japan’s book, where authorities have tasked industry associations to enforce regulations. The report also recommends incentivising industry whistleblowing so that players within the crypto-market work to keep a check on each other’s activities.

Such a facilitative regulatory framework will boost the growth of India’s crypto ecosystem while addressing any possible harms to consumers and society at large, the report says.

[ad_2]

CLICK HERE TO APPLY

Gen Z hardest hit professionally by the economic impact of Covid-19: Report

[ad_1]

Read More/Less


Generation Z has been hardest hit professionally by the economic impact of the Covid-19 pandemic, according to a new study by the ADPRI research Institute, called ‘People at Work 2021: A Global Workforce View.’

The report is based on ADP’s survey of more than 32,000 adult workers across 17 countries.

As per the report, over 78 per cent of the 18–24 year-old cohort said that their professional lives have been affected by the pandemic.

Also read: Chipping off the old block

The survey also found two in five (39 per cent) had lost jobs, were furloughed, or suffered a temporary layoff from their employer. Whereas 28 percent of workers of all ages said the same.

Generation Z also indicated they were twice as likely to have been impacted by the pandemic compared to those aged over 55, the oldest age bracket where 19 per cent of respondents lost a job, been furloughed or were temporarily laid off with the same employer.

“This may explain the plunge in optimism of 10 percentage points (83 per cent) among them,” the report said.

In comparison, 29 per cent of professionals in the 25-34 age bracket, 25 per cent aged between 35-44 and 21 per cent of the 45-54 cohort said that they lost a job, been furloughed or were temporarily laid off with the same employer.

Gen Z to be professionally agile

Rahul Goyal, Managing Director of ADP India & Southeast Asia, said Generation Z has had to be the most professionally agile of any age group in the face of Covid-19.

“In India, more than half of young workers say they have taken up additional responsibility for fear of job loss during the pandemic,” said Goyal.

“Employees often define job security by the reach of their professional network and the ability to tap into relationships to find non-linear jobs that can extend a career. That’s exactly what Generation Z is doing: finding new ways to climb the ladder,” Goyal said.

The report also highlighted the impact the pandemic has had on employees’ attitudes toward the current world of work, their expectations of and what they hope for in the workplace of the future.

In India, 89 per cent of the Generation Z mentioned that they had to choose between work and well-being or family.

“They attributed working from home to blurring the boundaries of definitive working hours,” it said.

“The unfortunate reality of entering the workforce in a recession is large initial earnings losses. This triggers significant changes to local labour market structures that can take years to recover from. The more young people can be proactive, the better,” Goyal said.

“Covid-19 has been an emotional burden for the younger generation of workers in India, but they see themselves getting better and stronger through self-motivation, adaptability, and new personal skills. This could have long-term implications for the jobs people do and how they work in the future,” Goyal further added.

[ad_2]

CLICK HERE TO APPLY

India ahead of China in financial inclusion metrics: Report

[ad_1]

Read More/Less


India is now ahead of China in financial inclusion metrics according to a report authored by Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India.

Sound financial inclusion policies have a multiplier effect on economic growth, reducing poverty and income inequality, while also being conducive for financial stability.

India has stolen a march in financial inclusion with the initiation of PMJDY accounts since 2014, enabled by a robust digital infrastructure and also careful recalibration of bank branches and thereby using the BC model judiciously for furthering financial inclusion. Such financial inclusion has also been enabled by use of digital payments as between 2015 and 2020, mobile and internet banking transactions per 1,000 adults have increased to 13,615 in 2019 from 183 in 2015.

“The number of bank branches per 100,000 adults rose to 14.7 in 2020 from 13.6 in 2015, which is higher than Germany, China and South Africa. Our research also shows that States with higher PMJDY accounts balances have seen a perceptible decline in crime. We also observed that there is both statistically significant and economically meaningful drop in consumption of intoxicants such as alcohol and tobacco products in States where more PMJDY accounts are opened,” the report said.

BC Model

The Banking Correspondent (BC) model in India is enabled to provide a defined range of banking services at low cost and hence is instrumental in promoting financial inclusion. Interestingly, the new branch authorisation policy of 2017 – which recognises BCs that provide banking services for a minimum of 4 hours per day and for at least 5 days a week as banking outlets has progressively obviated the need to set up brick and mortar branches. For example, the number of ‘Banking Outlets in Villages – BCs’ has risen from 34,174 in March 10 to 12.4 lakh in December 20. Such progress shows an impressive outreach of banking services through branchless banking.

However, the success of financial inclusion depends upon BCs who are micro-level entrepreneurs. As per RBI guidelines, under the BC Model, while a BC can work for more than one bank, at the point of customer interface, a retail outlet or a sub-agent of a BC shall represent and provide banking services of only one bank. Interoperability of transactions is permitted by RBI at the retail outlets or sub-agents of BCs (i.e. at the point of customer interface), subject to certain conditions. Herein lies the problem.

“It is sometimes observed that there is no uniformity among the BCs across banks regarding adherence to the above guidelines. PSBs mostly follow ‘branch-led BC model’ , while other banks follow ‘branch less/corporate BC model’. The BCs of PSBs extend basic banking services, including opening of accounts, from a fixed location under the oversight of specific bank branch. The BCs of other banks operate through ‘micro ATM/kiosk application on mobile’ and primarily provide fee-based financial services, viz. withdrawals and remittance services, using hand-held devices. This also adds to the bottom-line by way of interchange fee from the PSBs or remittance fee from PSB customers. As a typical example, BCs convert AePS ON-US transactions of one set of bank customers, to AePS OFF-US issuer transactions and also carry out multiple AePS ON-US and AePS OFF-US transactions on the primary bank application/software,” the report said.

[ad_2]

CLICK HERE TO APPLY

IMF gets briefing on probe into China rankings at World Bank

[ad_1]

Read More/Less


The International Monetary Fund said Monday its board of directors has been briefed by attorneys from the law firm whose investigation found that current IMF Managing Director Kristalina Georgieva and other officials pressured World Bank employees to alter data affecting the business rankings of China and other nations.

The IMF said the 190-nation lending agency’s board of directors met with representatives of the WilmerHale law firm as part of an on-going review of the issues raised by the firm’s investigation into the World Bank’s “Doing Business 2018” report.

The Doing Business report evaluated a country’s tax burdens, bureaucratic obstacles, regulatory system and other business conditions, and its rankings was used by some governments to try to attract investment.

The IMF said in a statement that the board board would soon meet with Georgieva as part of its review of the matter. The statement said the IMF’s board “remains committed to a thorough, objective and timely review” of the issues raised by the report.

The investigation prompted the World Bank to end the annual Doing Business reports. The report found that Georgieva, then the chief executive of the World Bank, and other senior World Bank leaders had pressured the bank’s economists to improve China’s 2018 ranking at a time when she and other officials were attempting to persuade China to support a boost in the World Bank’s funding resources.

The incident has led to calls for Georgieva to resign from the IMF’s top job. It has also served to underscore complaints that China has too much influence over global financial institutions.

Georgieva has denied all wrongdoing. “Let me be clear. The conclusions are wrong. I did not pressure anyone to alter any reports,” she said in a statement issued after the report came out last month.

Georgieva said she was looking forward to meeting with the IMF board to brief them on her actions.

The controversy is coming ahead of the annual meetings of the IMF and World Bank, which will take place next week in Washington. (AP) MRJ

[ad_2]

CLICK HERE TO APPLY

Indian cryptocurrency market likely to reach up to $241 million by 2030: Nasscom

[ad_1]

Read More/Less


The Indian cryptocurrency market has been growing exponentially over the last few years and is expected to reach up to $241 million by 2030 in India and $2.3 billion by 2026 globally.

As more and more young Indian investors are excited to explore newer investment options, they are adopting cryptocurrencies such as Bitcoin, Ethereum, and Polygon to make investments that promise them viable returns, a study on “Crypto Industry in India” by the National Association of Software and Services Companies (Nasscom) and industry partner WazirX said on Friday.

These digital currencies and other applications have garnered significant attention leading to an exponential growth of the CryptoTech Industry in India.

According to the report, with more than 60 per cent of States in India emerging as CryptoTech adopters and over 15 million retail investors, the industry is increasingly attracting new start-ups. Over 230 start-ups are already operating in India in the CryptoTech space, adding that the rising investment from institutional and retail investors has heightened awareness of the benefits of CryptoTech in the country.

The report further highlights that Bitcoin, Smart Contracts, Decentralised Finance, The Wave of Tokenisation, Non-Fungible Tokens, Rise of CryptoTech Capital and Central Bank Digital Currencies would be seen as seven key trends driving the growth and adoption of CryptoTech in India.

While at a nascent stage, the industry is already picking up and creating employment opportunities across trading, software development, analytics, and other practices, the report further said.

“CryptoTech industry in India has not only demonstrated a positive impact at the grassroots levels but is emerging as one of the fastest-growing technology sub-sector. India provides the most unique ecosystem to CryptoTech to play a transformative role in strengthening key priority areas such as healthcare, safety, digital identification and trade and finance,” Debjani Ghosh, President, Nasscom, said.

Further, the report said that the market in India is expected to grow 2X faster and has the potential to create eight-lakh+ jobs by 2030. It can create an economic value addition of $184 billion in the form of investments and cost savings.

[ad_2]

CLICK HERE TO APPLY

NARCL will have negligible short-term impact for banks: Kotak Securities report

[ad_1]

Read More/Less


The National Asset Reconstruction Company Ltd (NARCL),which is being put together by public sector banks and a few private sector banks to clean up their bad loans, will have negligible short-term impact as the upfront cash received is a smaller proportion and divided across banks, according to a Kotak Securities Ltd (KSL) report.

Government guarantee, aggregating ₹30,600 crore, to the cecurity receipts (SRs) to be issued by NARCL puts a 18 per cent floor on recovery rate, the report said.

The government guarantee on SRs can enable trading of these securities (that is converted into cash in secondary market).

“The upfront cash received, 15 per cent of the written-down value, will be reversed while the provisions for the balance (value of security receipts) are unlikely to be reversed even if it is fully provided.” said a team of six KSL analysts led by MB Mahesh.

As this cash is a smaller proportion and divided across public banks and a few private banks, the short-term impact is negligible, the analysts added.

They opined that larger release of provisions, if any, would be made as and when the cash is received on sale of these receipts or redemption of security receipts.

The analysts felt that banks are unlikely to reverse any provisions based on their discussions with these banks in the past on this topic.

They assessed that a 15:85 (cash: SR) structure implies that the ₹30,600 crore guarantee would translate to ₹36,000 crore of marked-down value of NPLs.

So, the ₹2 lakh crore of NPLs (non-performing loans) purchase value would imply 18 per cent recovery rate.

“Today, the NPL recognition and provisions cycle is largely complete with some of the largest bad loans already resolved.

“Banks have about 90-100 per cent (provision) coverage on these assets, implying there is no management incentive to delay decision making,”the analysts said.

The NPLs (written-off or otherwise) exchanged for security receipts are fully provided but the analysts don’t expect banks to reverse provisions.

Major benefit

The report emphasised that the major benefit of NARCL would accrue through faster debt consolidation, potentially leading to quicker decision making and better recovery rates.

Further, senior management bandwidth would be released on solving these problems, which can be channelized towards identifying fresh segments for growth that has been tepid in recent years.

[ad_2]

CLICK HERE TO APPLY

Q1FY22 results: Banks likely to report muted earnings, some stress in asset quality

[ad_1]

Read More/Less


Banks are likely to report muted earnings with pressure on asset quality for the first quarter of 2021-22, reflecting subdued economic activities due to localised lockdowns amidst the second wave of the pandemic.

A number of banks have already released provisional data on key business parameters for the quarter-ended June 30, 2021, that reflect muted growth in advances and robust increase in deposits.

Private sector banks are set to release their first quarter results in coming weeks. HDFC Bank will report its results on July 17, followed by others like Axis Bank and ICICI Bank.

Non-food bank credit growth slowed to 5.9 per cent in May compared with 6.1 per cent in the year-ago month, data from the Reserve Bank of India revealed.

Brokerage views

“We believe the first quarter of 2021-22 to be a quarter of consolidation as the momentum in recovery gained over the fourth quarter of 2020-21 was impacted by the second Covid wave, with the asset quality outlook deteriorating once again. Business activity was impacted over April and May 2021, and localised lockdowns were seen across most States. As a result, systemic growth moderated to 5.8 per cent as of June 18, 2021,” said a recent report by Motilal Oswal on first quarter earnings of banks.

“The second Covid wave, coupled with localised lockdowns, is likely to impact asset quality performances of banks,” it further said.

ICICI securities in a recent report noted that lead indicators point towards increased stress in the near term.

“…according to various management commentary, there has been a decline in collections by 2 per cent to 5 per cent range in April and May 2021 due to partial lockdowns,” it noted.

The RBI’s Financial Stability Report of July 2021 has noted that gross non-performing asset (GNPA) ratio of scheduled commercial banks may increase from 7.48 per cent in March 2021 to 9.80 per cent by March 2022 under the baseline scenario; and to 11.22 per cent under a severe stress scenario.

While the impact of the second wave of the pandemic is likely to be lower, restructuring requests are expected to be higher this year in the absence of a moratorium.

However, most experts believe that banks are in a better position to tide over the economic slowdown this time than last year.

“We believe that the banks are relatively better-placed to handle the stress from the second wave and hence we continue to maintain a stable outlook on the sector,” said Anil Gupta, Vice-President – Financial Sector Ratings, ICRA Ratings, in a recent report.

[ad_2]

CLICK HERE TO APPLY

India’s consumer credit market to grow at a higher rate than global economies: Report

[ad_1]

Read More/Less


Driven by a shift in demography, a burgeoning affluent middle class ramping up private consumption and growth in rural population, India’s consumer credit market is projected to grow at a higher rate than most major global economies.

According to the Experian-Invest India Credit Ecosystem Review report, the factors supporting the consumer credit market would be all catalysed by technology.

Experian is a global information services company, and Invest India is an Indian agency for investment and facilitation.

V-shaped recovery

The report, which tracks India’s credit ecosystem from March 2017 to February 2021, highlights a ‘V’-shaped recovery across Indian markets, with a gradual and steady improvement in sourcing trends.

Neeraj Dhawan, Managing Director of Experian India, said: “The behavioural shift in Indian population has been tremendous just over the last five years. Consumerism has been growing in the previously untapped semi-urban and rural regions as millennials become the main driving force of the mass market. Technological adaption is steep which has, in turn, created acceptance for new financial tools”.

“The biggest beneficiary of this change is the credit market, which is evolving into a self-generating and self-sustaining one. In line with this trend, the risk appetite of traditionally conservative lenders is growing as the horizon of creditworthiness expands. With its array of innovative solutions that help businesses in credit evaluation, smarter lending decisions and safeguarding themselves and their customers from fraud, Experian is at the forefront and one of the main enablers of this shift,” he added.

Domestic credit growth

The country’s domestic credit growth has averaged 15.1 per cent from March 2000 to March 2021, primarily driven by retail loans and increasing penetration of credit cards. The consumer credit market continues to expand at a rate higher than most other major economies globally, with 22 million Indians applying for new credits every month.

The recovery of personal loans has been high in both low (less than Rs 1 lakh) and high (higher than Rs 5 lakh) ticket-size segments, while the recovery in higher ticket-size loans is also improving steadily.

The credit portfolio has been resilient in February 2021, and growth stood at 8 per cent year-on-year for the portfolio of key products, lower than the 13 per cent observed for March 2020. However, the pace of growth slowed down for all products with unsecured products experiencing a faster year-on-year growth rate compared to secured loans.

[ad_2]

CLICK HERE TO APPLY