Tag: reserve bank of india

RBI Gov hints on ‘gradual’ unwinding of exceptional liquidity measures

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Reserve Bank of India Governor Shaktikanta Das on Friday dropped ample hints on unwinding of the exceptional liquidity measures announced over the last one-and-a-half years, stating that the process has to be gradual, calibrated and non-disruptive, while remaining supportive of the economic recovery.

Given the liquidity overhang of more than ₹13-lakh crore, Das underscored that the RBI will continue to absorb surplus liquidity via the 14-day variable rate reverse repo (VRRR) auction.

Further, the Central bank will discontinue the Government Security Acquisition Programme (G-SAP) operation, which is aimed at providing liquidity to banks so that they subscribe to Government Securities at primary auctions and yields are kept under check. The Governor said, “As we approach the shore, we don’t want to rock the boat. We want to go beyond the shore.”

Das said as the economy shows signs of emerging from the Covid-19 inflicted ravages, a near consensus view emerging among market participants and policy makers is that the liquidity conditions emanating from the exceptional measures instituted during the crisis would need to evolve in sync with the macroeconomic developments to preserve financial stability

Keeping in view the market feedback, it is proposed to undertake the 14-day VRRR auctions on a fortnightly basis in the following manner: ₹4-lakh crore today as already notified; ₹4.5-lakh crore on October 22; ₹5-lakh crore on November 3; ₹5.5-lakh crore on November 18; and ₹6-lakh crore on December 3.

Further, depending upon the evolving liquidity conditions – especially the quantum of capital flows, pace of government expenditure and credit offtake – the RBI may also consider complementing the 14-day VRRR auctions with 28-day VRRR auctions in a similar calibrated fashion.

“Let me reiterate and re-emphasise that the VRRR auctions are primarily a tool for rebalancing liquidity as part of our liquidity management operations and should not be interpreted as a reversal of the accommodative policy stance. The RBI will ensure that there is adequate liquidity to support the process of economic recovery. The Reserve Bank will continue to support the market in ensuring an orderly completion of the borrowing programme of the government,” Das said. Further, RBI’s focus on orderly evolution of the yield curve as a public good also continues.

G-SAP

Das emphasised that given the existing liquidity overhang, the absence of a need for additional borrowing for GST compensation and the expected expansion of liquidity in the system as government spending increases in line with budget estimates, the need for undertaking further G-SAP operations at this juncture does not arise.

The Reserve Bank, however, would remain in readiness to undertake G-SAP as and when warranted by liquidity conditions and also continue to flexibly conduct other liquidity management operations including Operation Twist (OT) and regular open market operations (OMOs), he added.

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Sensex scales 60k after RBI retains accommodative stance, BFSI News, ET BFSI

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Mumbai, Oct 8 (PTI) The Sensex soared past the 60,000-level while the Nifty finished at an all-time high on Friday after the Reserve Bank kept the key interest rates unchanged but maintained its accommodative stance to bolster economic recovery. Market heavyweight Reliance Industries led the gains, while IT stocks too saw heavy buying ahead of TCS’ results.

The 30-share BSE Sensex jumped 381.23 points or 0.64 per cent to close at 60,059.06, just shy of its lifetime high.

The NSE Nifty rose 104.85 points or 0.59 per cent to its fresh closing peak of 17,895.20.

Reliance Industries was the top gainer in the Sensex pack, rallying 3.84 per cent, followed by Infosys, Tech Mahindra, HCL Tech, TCS, Tata Steel and L&T.

In contrast, HUL, NTPC, Kotak Bank, Maruti Suzuki, Dr Reddy’s and Titan were among the laggards, shedding up to 1.16 per cent.

Rate-sensitive banking and realty indices ended in the red, but auto closed with gains.

On a weekly basis, the Sensex rallied 1,293.48 points or 2.20 per cent, and the Nifty soared 363.15 points or 2.07 per cent.

The Reserve Bank of India (RBI) expectedly kept interest rates unchanged at a record low but signalled the start of tapering pandemic-era stimulus measures on economic recovery taking root.

The six-member Monetary Policy Committee (MPC) kept the key lending rate or the repo rate unchanged at 4 per cent while the reverse repo rate or the borrowing rate was maintained at 3.35 per cent.

It voted 5-1 to retain the accommodative stance, RBI Governor Shaktikanta Das said.

The GSAP programme to purchase government securities from the market has been stopped for now to ensure that there is no further infusion of liquidity, he said, but stressed that the step is not a reversal of its accommodative policy stance and RBI will be ready to resume bond purchases if needed.

“With the RBI continuing with its accommodative policy, indices remained firmly bullish through the day led by the IT index as the street awaits TCS earnings and guidance,” said S Ranganathan, Head of Research at LKP Securities.

Reliance led from the front with the broader markets seeing action across pockets, he added.

Vinod Nair, Head of Research at Geojit Financial Services, said, “Domestic indices traded higher with optimism underpinned by dovish RBI policy and mixed global cues due to US jobs data awaited later in the day. RBI kept rates unchanged and maintained the status quo on accommodative stance.”

“FY22 GDP growth was maintained at 9.5 per cent while trimming inflation worries by lowering CPI forecast from 5.7 per cent to 5.3 per cent, provided the push to the market. On the sectoral front, the IT sector was in focus ahead of the result releases of sectoral majors while realty and FMCG succumbed to profit booking,” he added.

Sectorally, BSE energy, IT, teck, industrials, oil and gas, auto and basic materials indices spurted up to 2.69 per cent, while realty, power, FMCG and utilities closed lower.

Broader BSE midcap and smallcap indices climbed up to 0.83 per cent.

Asian stocks mustered gains, led by Chinese markets which returned from a week-long holiday. Bourses in Shanghai, Hong Kong and Tokyo ended with gains, while Seoul was in the red.

Stock exchanges in Europe were largely trading on a negative note in the afternoon session.

Meanwhile, international oil benchmark Brent crude rose 0.83 per cent to USD 82.63 per barrel.

The rupee tumbled 20 paise to close at 74.99 against the US dollar on Friday, as rising crude oil prices weighed on investor sentiment.

Foreign institutional investors were net sellers in the capital market on Thursday as they offloaded shares worth Rs 1,764.25 crore, as per exchange data. PTI ANS ABM ABM



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RBI says reviewing ATM outage circular after bank’s feedback, BFSI News, ET BFSI

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The Reserve Bank of India on Friday said that it was reviewing its recent scheme on ATM replenishment whereby the regulator put in place mechanisms to penalise lenders. The central bank deputy governor T Rabi Shankar said that they had received inputs from banks and were in the process of reviewing it.

“The idea behind the penalty on outages in ATMs was to ensure that these services are available as much as possible in areas where the attention to ATMs is less, which is largely rural and semi-urban areas,” Shankar said. “We have received various feedback, some positive while some raise concerns. There are issues specific to location (of ATMs). We are trying to take all the feedback and have a review and see how best it can be implemented.”

ET was the first to report in its September 9 edition that lenders had approached the RBI seeking relaxation in its scheme citing issues of replenishing ATMs in rural geographies that could significantly push up costs and make business unviable.

In August, the banking regulator directed banks and white label ATM operators to strengthen systems that will allow them to monitor the availability of cash in ATMs and ensure timely replenishment to avoid cash-out situations. As part of the circular, a penalty of Rs 10,000 per ATM will be levied in the event of a cash-out situation for more than 10 hours in a month.

Banks were of the view that cash availability will drop as they go deeper in rural geographies as the cost to set up and maintain ATMs is high.

“Cost of transportation for ATM fitted notes is very high in rural India because of the distance between ATMs and the sparse network,” a banker said on the condition of anonymity. “Generally cash management companies and ATM service providers visit once in a few days to replenish cash and fix other tech or hardware issues.”

Banks have been slowly reducing ATM presence as they operationalise overall costs. Recently, Small finance bank Suryoday decided to shut down all its 26 automated teller machines, giving customers the option to use their debit cards on other banks’ ATMs, becoming the first domestic lender to completely do away with such machines. The small finance bank is formulating a strategy where it would offer its customers 5-7 transactions free per month when they use the ATM network of other banks to withdraw cash.

At the end of August there were 2.13 lakh ATMs in the country up from 2.09 lakh same time last year, a meagre growth of 1.5%. On the flip side the micro-ATMs have grown to 4.94 lakh as against 3.07 lakh in August last year, a rise of over 60%.

In order to make the business more viable the RBI recently increased the interchange fee on ATM transactions from Rs 15 to Rs 17. ATM interchange is the charge paid by the bank that issues the card (issuer) to the bank where the card is used to withdraw cash (acquirer).

In addition to this, the cap on fee that can be charged to the customer, which is capped at Rs 20 per transaction, was also increased to Rs 21.



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RBI governor, BFSI News, ET BFSI

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Amid rising concerns over mispricing of credit risk by banks due to abundant liquidity, the Reserve Bank of India today said it was for the banks to do their own risk assessment and price their loans accordingly.

‘Banks should do own risk assessment and based on it should price their loans, action lines in the domain on banks,” said RBI governor Shaktikanta Das.

“I don’t think SBI has flagged this issue as a complaint, SBI has flagged it as a concern, which is for the banks to take note of, whatever be the liquidity situation,” he said.

Mispricing of loans

A few weeks ago, SBI, the country’s largest lender, has said that mispricing of risks is a cause of concern given the fact that there is ample liquidity in the system.

Since deposits are flowing into the system and credit offtake is yet to take place, bankers may be tempted to make investments in alternative avenues like T-Bills, SBI chairman Dinesh Kr Khara said.

“The depth of this alternative investment market is shallow. There is a chance of mispricing of risks. But I feel there will be no compromise on underwriting standards as the banking system has learned the hard way due to huge NPAs,” he said.

Striking a balance

The SBI chairman said there is a need to strike a balance and unless there is improvement in growth, it will be big challenge.

Regarding offtake of credit, the banker said some industrial sectors are showing improvement but it is not universal across sectors.

“I hope the Production Linked Incentive scheme will help a lot in offtake of liquidity, particularly in the MSME sector. Now some private sector investments are likely to take place besides PSUs. The road sector is looking promising,” he stated.

Khara said given the present macroeconomic conditions it is unlikely that the central bank will alter interest rates in the coming Monetary Policy Committee meeting.



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

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

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

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

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

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

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

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

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

–IANS

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

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

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

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

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Gold loans sparkle again after second COVID-19 wave blip, BFSI News, ET BFSI

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Gold that lost shine after the Reserve Bank of India took away the loan-to-value (LTV) benefit for banks amid COVID restrictions in the second wave are sparkling again.

Gold loans were up 1% month on month in August 2021 as restrictions during the pandemic eased and economic activities grew.

Loan demand has picked up from the beginning of July as COVID-19 cases started declining. Gold loan non-banking finance companies (NBFCs) had reported higher customer walk-ins.

FILE PHOTO: Gold bars and coins are stacked in the safe deposit boxes room of the Pro Aurum gold house in Munich, Germany, August 14, 2019. REUTERS/Michael Dalder/File Photo

LTV impact

However, gold loans have grown a mere 3.6% year to date, which is in contrast with the 54% CAGR seen in gold loan growths over the past two years. Gold loan portfolios are up 66% year on year in August.

RBI had raised the LTV of 90% on gold loans, which allowed banks to lend up to 90% of the value of the collateral.

However, it withdrew the special allowance for banks from April 2021, impacting loan growth.

The average ticket size of loans that customers are opting for is Rs 55,000-60,000, which are rising for many lenders, showed growing signs of distress.

Gold loan NBFCs saw higher competition in the gold loan business last fiscal as banks grew their portfolio taking advantage of the special LIV allowance given to them by the RBI.

The expansion

With growth returning gold financiers are ow gearing up to tap the expected surge in gold loans.

Muthoot FinCorp has expanded its physical network by more than 100 new branches, mainly in the north, east and west regions of India, most of which were in rural and semi-urban areas. The NBFC had opened 70 branches in FY20.

Muthoot’s gold asset under management (AUM) grew at a compound annual growth rate of 12% between FY15 and FY20. In FY21, the portfolio grew 27%.

Pune-based Bajaj Finance has increased its gold loan branches from 480 to 700 in the last financial year and plans to add 100 plus branches this fiscal.

Its loan book grew 52% last year to Rs 2,300 crore while it saw an increase in ticket sizes from Rs 75,000 to Rs 85,000 last year.

Bengaluru-based Rupeek Fintech Private Ltd’s disbursals grew 2.5 times during the calendar year 2020. It has added its presence in 17 more cities, from 10 at the end of 2019.

Shriram City Union Finance is also looking to ramp up its gold financing business this financial year, changing its strategy of focusing on other loan portfolios.



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Will Srei firms head for bankruptcy after RBI supersedes boards?, BFSI News, ET BFSI

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The Reserve Bank of India‘s move to supersede the boards of Srei group firms may see the companies head for the National Company Law Tribunal for corporate insolvency resolution under the IBC.

Most banks favour DHFL-type resolution for the group. However, the move may be opposed by Srei promoters, who have submitted a proposal to pay the full amount to banks under a scheme filed under Section 230 of the Companies Act 2013 in October 2020.

What Srei says

“We are shocked by the RBI’s move as banks have been regularly appropriating funds from the escrow account they have controlled since November 2020. Moreover, we have not received any communications from banks on any defaults,” Srei group said.

“The question of IBC does not arise because we have already submitted a debt realignment plan which has been accepted by some creditors. The plan involves paying every creditor their entire dues in a structured manner over time. in the past 10 months, the banks have collected Rs 3,000 crore through the TRA account. Hence, we are already repaying our loans. So the question of default does not arise. As banks had control over the company’s cash flow, we could not pay any other creditors. Nevertheless, the matter is sub-judice since it is with the tribunals and counts,” Srei had said. according to a report.

Srei Group was in talks for a debt realignment and lenders were waiting for the outcome of an ongoing forensic audit to take a call on debt realignment.

Related party lending?

In FY2020, RBI audit had flagged Rs 8,576 crore of probable related-party lending by Srei group.

“We had submitted a proposal to pay the full amount to banks under a scheme filed under Section 230 of the Companies Act 2013 in October 2020. However, they have neither accepted the scheme nor proposed a payment schedule acceptable to them. Banks have been controlling the company’s cash flow since November 2020. Almost Rs 3000 crore has been collected by them, out of which they have been disbursing to themselves, Srei said.

The loans

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

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

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

The suitors

Till date, it received expressions of interest from 11 investors and has signed non-disclosure agreements with nine of them. Two Investors — Makara and Arena — had submitted non-binding term sheets indicating their intent for investment.

Srei Infrastructure, which is a listed entity, reported a net loss of Rs 971 crore in the June quarter as against Rs 23 crore net profit in the year ago period as provisions on loans rose nearly seven times to Rs 439 crore over the same period as repayment collections were hit due to the impact of the Covid 19 pandemic.

“The appointment of the administrator by the RBI paves the way for the corporate resolution process of the two Srei entities. Once the NCLT approves the same, the board of directors of these entities will stand suspended. A moratorium will be imposed on any proceedings against these entities, enforcement of any security or transfer of assets.

The CIRP will enable foreign creditors, including ECB lenders and bond holders to restructure their debts alongside domestic creditors. If a resolution plan is successfully approved under the CIRP, it will allow the companies to start on a clean slate, which is missing under the RBI stressed assets framework. This decision of RBI follows on the heels of a successful resolution process of DHFL,” Aashit Shah, Partner, J Sagar Associates, said.



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Banks step up credit card sales, offers in festive season as BNPL threatens, BFSI News, ET BFSI

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With the Covid pandemic weakening and consumer confidence rising, banks are betting on credit card spends this festive season. Lenders have launched a slew of new credit cards and offers to solidify their positions and grab a bigger share of the market.

The credit card push comes at a time when buy now-pay later (BNPL) products have become popular with consumers. BNPL essentially offers around 15 days of interest-free funds to small borrowers and are seen as competitors of credit cards.

SBI offering

Banks step up credit card sales, offers in festive season as BNPL threatens

SBI Card is luring consumers with 10% cashback up to Rs 10,000 across mobiles, consumer durables, laptops, kitchen appliances, home décor & furnishing, and fashion & lifestyle purchases, done at leading domestic e-commerce shopping sites. The offerings are not restricted to just one or two e-commerce portals

However, the offer will not be applicable on online spending in some categories such as insurance, travel, wallet, jewellery, education, healthcare, and utility merchants.

HDFC Bank

Banks step up credit card sales, offers in festive season as BNPL threatens

HDFC Bank and digital payments firm Paytm will launch a range of credit cards powered by Visa this month. The partnership aims to provide one of the widest range of offerings across customer segments, with special focus on millennials, business owners and merchants. Under the partnership announced in August, the two will build comprehensive solutions across payments gateway, point of sale machines, and credit products.

The cards announced today will be customised to meet the distinct needs of retail customers, from new-to-credit users to affluent users and offer rewards and cashback for users. The new cards offering will also facilitate small business owners.

Federal Bank cards

Banks step up credit card sales, offers in festive season as BNPL threatens

Kochi-based private lender Federal Bank entered the credit card business in September in association with card network Visa. The bank has partnered with National Payments Corp of India to launch ‘Federal Bank RuPay Signet Contactless Credit Card,’ according to a press release.

The card’s annual percentage rate starts from 5.88% per annum. Cardholders will gain access to a wide range of offers and deals across categories including travel, food, among others, the bank said. The card is currently being offered to existing customers of Federal Bank.

According to the Reserve Bank of India (RBI), the total number of credit cards stood at 63.4 million at the end of July.



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RBI appoints advisory committee to assist administrator of 2 Srei group firms, BFSI News, ET BFSI

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After superseding the boards of Srei Infrastructure Finance Limited (SIFL) and Srei Equipment Finance Limited (SEFL) on Monday, the RBI has appointed a three-member Advisory Committee to assist the administrator of the two crisis-ridden firms. The Reserve Bank of India (RBI) superseded the board of directors of SIFL and SEFL and appointed Rajneesh Sharma, ex-chief general manager, Bank of Baroda, as the administrator.

“The Reserve Bank…has constituted a three-member Advisory Committee to assist the Administrator in discharge of his duties,” the central bank said in a statement.

The members of the Advisory Committee are — R Subramaniakumar (former MD and CEO, Indian Overseas Bank), T T Srinivasaraghavan (former managing director, Sundaram Finance Limited), and Farokh N Subedar (former chief operating officer and company secretary, Tata Sons Limited).

The Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 provide for the concerned financial sector regulator appointing a Committee of Advisors to advise the administrator in the operations of the financial service provider during the corporate insolvency resolution process.

Srei group, which mainly caters to the MSME and infrastructure sectors, owes around Rs 18,000 crore to around 15 lenders, including Axis Bank, UCO Bank and State Bank of India, and another nearly Rs 10,000 crore of external commercial borrowings and bonds. PTI NKD ABM ABM



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