Tag: reserve bank of india

HDFC Bank, Paytm set to launch co-branded credit cards in Oct, BFSI News, ET BFSI

Banking & Finance

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HDFC Bank and Paytm have entered into a partnership to launch a range of credit cards, powered by global card network Visa.

The launch is planned for next month, amid the the festive season, to tap into potentially higher consumer demand for credit card offers, EMIs and Buy Now Pay Later options. The full suite of products will be on offer by the end of December, the companies said in a joint press release.

The launch will mainly target millennials, business owners and merchants, and will introduce business credit cards for merchant partners from smaller cities.

The cards will be customised to meet demands of retail customers, from new-to-credit users to affluent users, and offer rewards and cashback, it said.

Paytm has a reach of over 330 million consumers and 21 million merchants, while HDFC Bank has over 5 million debit, credit and prepaid cards, and serves 2 million merchants through its offerings.

This development comes after the Reserve Bank of India lifted its new credit card issuance ban on HDFC Bank, which was imposed for over eight months as a penalty for frequent technical glitches. After the ban was lifted, the bank said it will ‘come back with a bang’, and has aggressive plans to regain lost market share.

Currently, Paytm has a tie-up with global lender Citi, under which co-branded credit cards are issued.



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Banks rush to implement ‘standing instructions’ system, but may still miss deadline, BFSI News, ET BFSI

Banking & Finance

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Banks and payment aggregators are rushing to meet the October 1 deadline for implementing a new system for standing instructions for recurring online transactions as the Reserve Bank of India is not likely to extend it. Banks are sending communications to customers saying that they will not process recurring payments, and customers will have to make payments directly to merchants.

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

How does the new system work?

Under the proposed system, as a risk mitigating and customer facilitation measure, the card-issuing bank will have to send a pre-transaction notification to the cardholder, at least 24 hours before the actual charge or debit to the card. While registering e-mandate on the card, the cardholder shall be given the facility to choose a mode among available options (SMS, email, etc.) for receiving the pre-transaction notification from the issuer. On receipt of the pre-transaction notification, the cardholder shall have the facility to opt-out of the particular transaction or the e-mandate. For transactions above Rs 5000, banks will also be required to send one time passwords to customers.

What is a standing instruction?

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

This service relates to transactions like renewing subscription to over-the-top (OTT) platforms, newspapers and magazines, and utility bill payments.

The issue

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

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

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

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Banking… Not without a glitch?, BFSI News, ET BFSI

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Not just server down, but ‘technical glitches’ seems to have become a common term for banks.

The number of glitches in the online banking space seems to be rising, with recent cases surprising everyone – large sums being transferred to wrong bank accounts.

So far, two cases from Bihar have actually uncovered the system issues in the banking system.

A glitch that credited funds

A private tutor in Khagaria was erroneously credited Rs 5.5 lakh in his bank account by the South Bihar Gramin Bank, and two school students in Katihar were credited Rs 960 crore overnight by the North Bihar Gramin Bank.

The tutor has been arrested for not returning the money, according to The Hindu, while the incident that happened with the two school students is under investigation.

For the Katihar case, the bank’s branch manager said that there was some glitch in the computerised system of sending money. The amount was visible in their statements but the actual money wasn’t in their account. For the Khagaria case, however, the money was credited and the tutor claimed that he did not return the money because it was government relief sent to him.

The two incidents have caused havoc, making villagers run to ATMs to check if they too had been struck with such luck, according to NDTV. But, so far, only two such incidents have been reported.

This is, however, not the first time such a ‘glitch’ has happened.

Banking... Not without a glitch?

Glitches by Citi, HDFC, PNB

In February, one of the world’s largest banks – Citibank – accidentally transferred $900 million to cosmetic company Revlon’s lenders. Citi was serving as the administrative agent or loan agent between Revlon, the embattled cosmetics company, and its creditors.

The bank accidentally paid those lenders much more than it had to. The bank had to credit only $8 million, but ended up transferring $900 million, according to reports.

The US District Court judge termed this to be the “biggest blunder in banking history”, after the bank had moved the court, because it still had not received $500 million from the accidental transfer.

Apart from erroneous transfers, there have been other incidents of continuous technical glitches to an extent that the Reserve Bank of India banned a top private bank from issuing new credit cards – the bank’s best seller.

HDFC Bank was the bank that was banned for eight months from issuing new credit cards.

The RBI had taken this step after customers faced multiple glitches in the bank’s internet and mobile banking systems for over two years.

On Friday, Punjab National Bank‘s Twitter account was seen flooded with complaints from several customers. They raised concerns over the technical glitches they have been facing throughout this week.

Below are two of the many instances from PNB’s Twitter account –

“Dear customer, we regret the inconvenience caused to you. Our App service is facing glitches due to some technical difficulty. However, our team is working on the same and it will be resolved soon.” – has been the bank’s standard reply to all such complaints.

Glitches in the PNBONE mobile application have been rising. This could be because of the newly built app “PNBONE” after the mega merger of Oriental Bank of Commerce, United Bank of India with Punjab National Bank, sources, who did not wish to be named, said, adding that the tech team is looking to help resolve all the issues for a better banking experience.

At times, customers face technical glitches when banks go for maintenance activities. Failed transactions and reconciliation takes its own time and customers have no choice than waiting and hoping for the seamless service.

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

Personal Finance

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Domestic benchmark indices Sensex and the Nifty snapped their 3-day winning run yesterday, of which state-owned banks were among the major losers. The market has been showing signs of correction, with investors resorting to profit booking after a stellar record-setting spree.

Among sectors, public sector banks lost the most, while private banks gained the most today.

On Friday, banking and financial services stocks were in focus after Finance Minister Nirmala Sitharaman announced the much-awaited bad bank.The Nifty Bank scaled the crucial 38,000-level mark for the first time ever, and a fresh lifetime high of 38,112.75.

The BSE Sensex has gained around 9% over the last month. Stock-specific moves, weak cues from Asian markets, inflation data, revival of economic activity in Europe, improving economic data and healthy pick up in India’s daily inoculations were considered key driving factors this week.

Monday Closing bell: Indices end flat on negative bias, Nifty Bank falls

Domestic equity indices ended in the red on Monday, with BSE Sensex down 0.2% at 58,177 points and Nifty 50 down 0.08% at 17,355. However, mid and smallcap stocks outperformed other sectors, with BSE Midcap index closing 0.32% higher and the smallcap index ending with a gain of 0.80%.

Nifty Bank and Nifty Financial Services closed 0.58% and 0.19% lower, respectively. ICICI Bank, HDFC Bank and SBI Life Insurance were top laggards among Sensex stocks, while Kotak Mahindra Bank, Bajaj Finserv, Chola Invest and Power Finance were top gainers.

Tuesday Closing bell: Indices end with mild gains, broader markets outperform

The BSE Sensex closed at a high of 58,247 points, up 69 points, and the Nifty 50 rose 25 points to end at 17,380, a record closing high for the benchmark. Broader markets outperformed the benchmarks as both mid and small-caps were up 1% each.

Bank Nifty opened higher and made an intraday high of 36840 but failed to sustain higher levels. It closed with a gain of 0.38%, and Nifty Financial Services closed at 18,103, down 0.13%.

Weekly Market Wrap Up: Know how banks, financials performed this week

Wednesday Closing bell : Sensex, Nifty end at record closing highs

Headline indices Sensex and Nifty 50 ended at record closing highs, with both indices up nearly 1% each. The Sensex closed at 58,723 points, up 0.82%, while Nifty closed the day at 17,519, up 0.80%. BSE Midcap and Smallcap indices closed 0.65% and 0.86% higher, respectively.

Nifty Bank closed 0.65% higher at 36,852, while Nifty Financial Services ended at 18,158, up 0.30%. SBI, IndusInd Bank and HDFC were among the top gainers, while Axis Bank and HDFC Bank were among the top laggards.

PSU bank index jumped 2.83% with J&K Bank, Bank of Baroda, IOB, Indian Bank gaining 2.7% each.

Thursday Closing bell: Market closes at record highs again; banks, financials outperform ahead of FM announcement

Domestic benchmark indices ended at record closing highs on Thursday. Banks and financials outperformed all the sectors, ahead of Financial Minister Nirmala Sitharaman’s bad bank announcement.

BSE Sensex jumped 418 points to end above 59,100 mark for the first time at 59,141, while the Nifty 50 index ended at 17,629.50, rising 0.63%. BSE Midcap and Smallcap indices also hit their fresh record highs intraday, and closed 0.48% and 0.08% higher, respectively.

Among sectors, the Nifty PSU Bank index jumped 5.43%, while the Nifty Private Bank index clocked a gain of 2.67% . The Nifty Bank index rose 2.22%, while Nifty Financial Services gained 1.09%. Induslnd Bank emerged as the top gainer jumping 7% followed by SBI, Kotak Mahindra Bank, ICICI Bank, Axis Bank and HDFC Bank.

Friday Closing Bell: Sensex and the Nifty snapped 3-day winning streak, PSU banks gain

Having scaled fresh highs in early deals, benchmark indices lost steam as investors were seen booking profits after the three-day winning streak. Losses were led by PSU banks, auto, pharma stocks. BSE Sensex ended 0.21% lower at 59,016, while the Nifty 50 index fell 0.25% to settle at 17,585. BSE Midcap index fell 1.14% and the BSE Smallcap index closed 1.06% lower.

Bank Nifty ended at 37,811, up 0.38%, while Nifty Financial Services rose 0.65% ending at 18,476. Nifty PSU Bank index fell more than 3%, with Bank of Baroda losing 4.37%, by IOB, UCO Bank and Bank of India.

Key Industry takeaways

Retail inflation softens to 4-month low in August at 5.3%

Weekly Market Wrap Up: Know how banks, financials performed this week
Retail inflation based on Consumer Price Index (Combined) eased to a four-month low of 5.3% in August due to moderation in food prices along with a high base effect, data released by the National Statistical Office (NSO) on 13 September showed.

The August inflation print is within the targeted range of 2±4 per cent of the Reserve Bank of India (RBI) though this is the seventh consecutive month of an inflation print higher than 5 per cent and 23rd consecutive month of it being above the RBI’s target of 4%.

SREI’s Rs 35,000-crore loan may be classified as NPA

Banks may classify Rs 35,000 crore loan given to SREI group as Non Performing Asset (NPA) by the end of this quarter after the National Company Law Tribunal (NCLT) set aside the previous order restraining banks from such classification.

According to analysts’ estimates, Indian Bank and Canara Bank have exposures of Rs 2,000 crore and Rs 1,200 crore, respectively, to Srei group, while ICICI Bank and Axis Bank have Rs 800 crore each.

Sebi proposes to tighten timeline for filing settlement applications

The Securities and Exchange Board of India on Tuesday proposed to tighten the timeline of settlement mechanism, whereby it suggested fixing the total timeframe for filing the application at 60 days after receipt of the notice to show cause.

The total timeframe for filing the application for settlement may be fixed at 60 days of the date of receipt of the show-cause notice or the supplementary notice, whichever is later, Sebi said in a consultation paper.

Finance Minister Sitharaman announces bad bank

Weekly Market Wrap Up: Know how banks, financials performed this week
Finance Minister Nirmala Sitharaman announced the much-awaited bad bank on Thursday, and said that the Union Cabinet approved on Wednesday the sovereign backing of up to Rs 30,600 crore for the securities receipts.

The planned National Asset Reconstruction Company Ltd (NARCL) will issue securities receipts to banks as it takes on non-performing assets from their books. These securities receipts will be valid for five years.

Mahindra Finance enters vehicle leasing and subscription business

Mahindra & Mahindra Financial Services Ltd announced on Thursday, its entry into vehicle leasing and subscription business, under the brand name ‘Quiklyz’.

Under this model, consumers can pay a monthly fee to access a vehicle of their choice across all car brands, at a lower price as against regular ownership.

IDFC Board approves initiating steps to divest mutual fund business:

Weekly Market Wrap Up: Know how banks, financials performed this week
The board of directors of IDFC Ltd and IDFC Financial Holding Co Ltd at their meetings held on Friday have considered and approved to initiate steps to divest its mutual fund business subject to requisite regulatory approvals, as applicable.

The boards have authorised respective strategy and investment committees to take necessary steps, including appointment of investment banker, for the same.



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Large corporates no longer borrowing engine for banks as retail borrowing rises, BFSI News, ET BFSI

Banking & Finance

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The dominance of large corporate accounts in banks’ loan portfolio that lasted until 2014 has shrunk, giving way for retail borrowing to rise, according to a study by the Reserve Bank of India.

An analysis of the sectoral composition of non-food credit by a team of RBI economists reveals that the share of the industrial sector in overall non-food credit offtake, which stood at over 45% in 2013-14, declined to around 30% by 2020-21.

Over the years, retail and services sector loans have gained more prominence.

Capital investment shrinking

Capital investment by private companies could slide this financial year as well, after shrinking in the previous year due to COVID-19 lockdowns, a central bank forecast shows.

A study of the phasing profile, i.e., stage wise implementation over three or four years, of planned capex of pipeline projects could shrink 27% on year to Rs 68,469 crore. The phasing profile of the capital expenditure based on the pipeline of sanctioned projects in the previous years indicates a decline from Rs 94,227 crore in 2020-21 to Rs 68,469 crore.

The pandemic impacted adversely appetite for new projects during 2020-21, and also posed impediments to timely completion of projects in the pipeline, the RBI said.

The regulator assessed that a total capex of Rs 1.60 lakh crore would be incurred by the private corporate sector in FY21, translating into a sharp dip of 30% from the previous year.

Retail going strong

The outstanding retail loans are higher at Rs 28.6 lakh crore against Rs 28.2 lakh crore for industry that includes MSMEs and large corporates at the end of July. The outstanding loans to the services sector stand at Rs 26 lakh crore.

The growth rate of the retail/personal loans segment stood at 11.2% in July 2021, higher by 220 basis points when compared with July 2020.

In absolute terms, credit outstanding has increased from Rs 25.7 lakh crore in July 2020 to Rs 28.6 lakh crore in July 2021.

The growth in retail loans has been driven by personal unsecured, vehicle loans and gold loan lending by some banks. The growth rate came in higher by 120 bps as compared with March 2021.

Industry loans

The industry segment witnessed a growth of 1% on a year-on-year basis in July 2021, after witnessing a de-growth in previous month. Large industries account for 80.5% share (83.8% share in July 2020) in the total outstanding credit to industries, and this segment reported a drop of 2.9% in July 2021 versus a growth of 1.4% in July 2020.

The growth movement is weak as corporates continue to de-leverage and select large corporates access to bond markets. MSME industries grew by 21.3% in July 2021, which partially offset the fall in large segments, compared with a drop of 1.8% in July 2020. The growth in lending to industry and services was almost entirely led by the MSME segment, which was driven by disbursements under ECLGS scheme, wherein Rs 2.14 lakh crore were disbursed up till date.

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DoT may return Rs 14,000-crore bank guarantees to Vodafone Idea, BFSI News, ET BFSI

Banking & Finance

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MUMBAI: The government plans to return bank guarantees worth Rs 14,000 crore to Vodafone Idea (Vi) and Rs 8,000 crore to Bharti Airtel if they opt for a four-year moratorium on payment of spectrum dues, a person aware of the development said.

The development is expected to drastically reduce Vodafone Idea’s non-fund exposure to banks that have been hesitant to furnish fresh bank guarantees (BGs) to the loss-making telco due to its precarious financial position.

“BGs in deferred annual instalment against spectrum bought in earlier auction will be returned to telcos opting for moratorium,” the source told ET. “Vi stands to get about Rs 14,000 crore and Airtel about Rs 8,000 crore.”

Bharti Airtel chairman Sunil Bharti Mittal on Thursday said the telco will opt for the moratorium while cash-strapped Vodafone Idea too is widely expected to opt for it.

Experts said return of bank guarantees will allow banks more leeway to lend to Vodafone Idea in the future.

“A large part of our exposure (to Vi) is towards bank guarantees to the DoT (Department of Telecommunications),” a lender said on the condition of anonymity. “If those are returned, it gets cancelled and our exposure towards Vodafone Idea will drop significantly.”

Re-rating of the company could also lead to refinancing of existing loans at lower rates.

“We will have to see how this evolves, but in all likelihood, when the operating metrics of the telco improves, we will be able to offer them lower rates and rework loan covenants depending on how the cash flow situation improves,” the lender said.

Banks have a total exposure of a little over Rs 35,000 crore to the company, of which funded exposure is close to Rs 13,800 crore while the remaining is non-funded.

Vodafone Idea had a gross debt of Rs 1.9 lakh crore at June end – mostly in obligations to the government towards deferred spectrum charges and adjusted gross revenues (AGR)-related dues – while its cash and cash equivalents are only Rs 920 crore.

The government on Wednesday rolled out a four-year moratorium on the statutory dues of telcos and opened up the automatic route for 100% foreign direct investment in the sector, which is expected to help attract global investors.

Bank guarantees have long been a bone of contention between telcos and DoT.

Airtel’s Mittal has been propagating scrapping the practice of taking BGs. “Bank guarantee is something which the DoT must reconsider because those are from historical times,” he had told ET in a recent interview. “Now that you have exposure of tens of thousands of crores of spectrum payments to these operators without any such instruments, why bother about these small bank guarantees?”

Mittal also pointed out that the Reserve Bank of India (RBI) norms mandate provisioning of that much capital allocation, thus reducing the capital pool, and the cost of bank guarantee has quadrupled.

The government had on Wednesday cut bank guarantee requirements against statutory dues such as licensee fees to 20% from 100%, and said the financial instrument won’t be required anymore to secure instalment payments in upcoming auctions.

This was over and above a four-year moratorium on AGR and spectrum payments, approved redefining AGR to exclude ‘non-telecom’ items and cut the spectrum usage charge (SUC) to zero — both prospectively — as part of wide-ranging reforms to improve the health of the debt-laden sector and make sure the market has at least three private players.

Vi stock has jumped about 30% in two days to close at Rs 11.25 on the BSE on Thursday.

Govt can also turn part of dues into equity after four-year period.



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RBI study, BFSI News, ET BFSI

Banking & Finance

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The uptick in the credit growth in the recent months notwithstanding the second COVID-19 wave augurs well for the economy, said an article published in the RBI’s latest bulletin. Bank credit growth has witnessed significant fluctuations in the past one and a half decades.

The period between 2007-08 and 2013-14 could be characterised as a bank credit boom period in the Indian economy, as non-food credit registered double-digit growth, primarily driven by robust credit growth to the industrial sector, the article said.

“Both dominant-group and other-group of banks lent aggressively to the industrial as well as other sectors,” it said adding that within industries, infrastructure, and basic metal and metal product industries accounted for a major portion of credit offtake from both the bank groups during the credit boom period.

Thereafter, however, the credit cycle reversed along with a shift in the sectoral deployment of bank credit.

The article said that during 2014-15 to 2020-21, overall credit growth decelerated, primarily driven down by a reversal in credit growth to the industrial sector.

The overall non-food credit growth during 2014-15 to 2020-21 was almost entirely driven by the expansion of credit to the non-industrial sectors, particularly lending to the retail segment in the form of personal loans.

Active participation of both the dominant-group and the other-group of banks is driving credit growth to the non-industrial sectors, the article said.

The sharp slowdown in industrial credit warrants attention and steps to step up credit offtake commensurate with appropriate risk-taking, a number of which have already been taken by the government and the RBI, could de-freeze the credit market for the industrial sector. It can help in reviving the growth momentum derailed by the COVID-19 pandemic, it said.

“After witnessing a significant slowdown in credit offtake during 2019-20 and 2020-21, there has been some uptick in credit growth in the recent months notwithstanding the second COVID-19 wave, which augurs well for the economy,” the article said.

Another article published in the bulletin titled ‘Private Corporate Investment: Growth in 2020-21 and Outlook for 2021-22′ said the investment intentions of the Indian private corporates remained sluggish as reflected by lower numbers of new announcements and completions of projects.

The article highlighted that the pandemic uncertainties adversely impacted appetite for new projects during 2020-21 and posed impediments to the timely completion of pipeline projects.

In 2021-22, demand for new projects would shape the private investment outlook, along with the progress of the projects already in the pipeline, it added.

The central bank, however, said the views in the articles are of the authors and do not represent the views of the Reserve Bank of India.



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Resources for developing financial literacy at a young age to ensure entrepreneurship-led growth, BFSI News, ET BFSI

Personal Finance

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Financial literacy, like every other life skill, is crucial. The earlier you expose it to your children, the better their money management abilities will be later in life. This money management practice lays a solid foundation for concepts like saving, spending, and investing in children.

Learning how to invest and manage money wisely will eventually become an important life skill for teenagers to master to achieve their goals. This becomes all the more important as India’s growth and development is going to be entrepreneurship-led in the future and learning the ropes of money management skills is very crucial at a young age.

Unfortunately, financial literacy is often left out of the traditional educational system’s curriculum. Children and teens enter adulthood without knowing how to manage their resources properly. As a result, parents are the primary educators when it comes to teaching teenagers money management skills.

Following are some ways parents can teach their kids about financial literacy:

  • To start, parents can give kids money to buy food in the school canteen to be able to keep a check on their expenses.
  • You can also help them understand the cost of things so that they will understand the value of money.
  • Piggy banks can be a great start for kids to learn about savings. They will cut out on expenses to start saving a little every day, thus beginning their journey towards financial education.
  • If kids list a few things, try not to buy them everything. Let them instead choose a few things to buy from that list. This will help them to spend wisely.
  • Monopoly and other business games will also make them proactive about money matters.
  • Take your kids to the supermarket, let them know your budget, and sit with them while preparing a rough list of things you want to buy in the supermarket.
  • Let them know if you’re facing any financial crisis, they might cut down their expenses and learn to spend wisely on things that matter.
  • Gradually introduce them to the world of investments, starting with an FD; open a bank account for them as well.
  • Once they learn about the benefits of investing in FDs, they gradually introduce them to other investment instruments.
  • Technology has also made investing simple with just one click, allowing consumers to invest with simplicity. Introduce your child to the concept of digital finance and help them make informed financial decisions.

Several organizations have taken the following actions to ensure that the teens are financially literate as part of the government’s financial literacy strategy.
1. Project Financial Literacy
The Reserve Bank of India (RBI) has undertaken a project, “Project Financial Literacy.” The project’s objective is to impart information regarding the central bank and banking concepts to various target groups, including school- and college-going children, defence personnel, senior citizens, women, and the rural and urban poor.The project is implemented in two modules. One module lets users get acquainted with the role and functions of the Reserve Bank of India. In the other module, users are introduced to banking concepts.
2. NCERT – Personal Finance Supplementary Reading Material
There are a total of 9 modules covered in this sequentially: Financial Plan, Budgeting, Managing your Money, Financing Assets, Protecting your Assets, Investing Money, Retirement Planning, Taxes & you, and Career Planning.
3. Pocket Money – the student’s Guide to Money
It is a financial literacy initiative by the Securities and Exchange Board of India (SEBI) and the National Institute of Securities Markets (NISM). The objective of this is to help school-going children to understand the importance of financial management and the value of money.
4. Financial Education for School Children
This material was developed under the guidance of the Advisory Committee for the Investor Protection and Education Fund (IPEF) of the Securities Exchange Board of India (SEBI) and by the National Stock Exchange (NSE). It covers modules on the following: Money Matters, Planning, Budgeting, Investment, and Stock Market.
5. Introduction to Retirement Planning for School Students
This material is developed by the Pension Fund Regulatory & Development Authority. It aims to explain retirement and how to plan for retirement with various pension schemes effectively.
6. Commodity Futures Market for Students
This resource helps students understand the basics of commodity markets.
7. Material on Insurance for Children
The resource is available as comics and videos and is developed by the Insurance Regulatory and Development Authority (IRDA). It aims to explain the basics of insurance, several types of insurance, insurance ombudsman, ULIP (Unit Linked Insurance Plan), etc.

Allow your children to learn about money, regardless of their age. They can grow into financially responsible individuals and entrepreneurs who make sensible financial decisions with the proper guidance and healthy money management habits. Adults who are skilled at budgeting build family relationships while also contributing to economic progress.

(The writer is Co-founder & CEO, Pencilton)



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Will banks clamp down on cryptocurrency transactions again?, BFSI News, ET BFSI

Banking & Finance

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Banks which had started processing cryptocurrency transactions after RBI clarification may be again shying away from virtual currencies.

The country’s largest lender, State Bank of India, has blocked the receipt of funds by crypto bourses on its UPI platform. The bank has told payment processors to disable SBI UPI for crypto merchants, according to a report.

With this, traders cannot buy Bitcoin or any cryptocurrency by transferring funds via UPI, as none of the processors which handle funds for

exchanges will be unable to receive money sent for crypto purchases on their SBI accounts.

The largest domestic crypto bourse, WazirX, has already been impacted by the decision, with the processing agency following the directive of SBI. Industry circles said payment processors may stop accepting payment for other exchanges as well, unless SBI does a rethink.

With UPI blocked, many traders on WazirX are using one of the e-wallet services to transact.

But due to wallet charges and limits on fund transfer, traders prefer UPI in the absence of other payment modes like credit and debit cards, NEFT (national electronic fund transfers) and net banking.

After SBI’s decision, many banks may be reluctant to onboard crypto merchants on their respective UPI platforms.

The RBI decision

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, banks were allowing crypto transactions.

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

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

Till June this year 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.

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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MSMEs, retail loans to take bank NPAs to Rs 10 lakh crore by March 2022, BFSI News, ET BFSI

Banking & Finance

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Banks’ bad loans might cross Rs 10 lakh crore by the end of this fiscal, mainly on account of slippages in retail and MSME sectors, a study said.

“NPAs are expected to rise to 8.5-9 per cent by March 2022, driven by slippages in retail, Micro, Small and Medium Enterprise (MSME) accounts, besides some restructured assets,” the study by industry body Assocham and ratings firm Crisil said.

Reserve Bank of India (RBI) Governor Shaktikanta Das this month had said the current levels of non-performing assets (NPA) looks manageable.

At the end of June, the gross NPA level of the banking system was 7.5 per cent and the capital adequacy level was around 16 per cent, which gives an adequate cushion, Das said at an event.

MSME, retail hit

The current asset quality stress cycle will be different than that witnessed a few years back. NPAs then came primarily from bigger, chunkier accounts.

According to the study, this time, smaller accounts, especially the MSME and retail segments, are expected to be more vulnerable than large corporates, as the latter have consolidated and deleveraged their balance sheets considerably in the past few years.

Even though the restructuring scheme announced for MSMEs and small borrowers should prevent the NPAs from rising too much, there is an opportunity for stressed asset investors with expertise and interest in these asset classes, it added.

”The effectiveness of the Insolvency and Bankruptcy Code (IBC) will be tested by the potential spike in NPAs as the standstill on initiation of fresh insolvency cases for year ended in March 2021 and as most of the pandemic-induced policies or measures are unlikely to be continued”the study said.

IBC to rescue

The expected increase in GNPAs of both banks and non-banks this fiscal, because of the pandemic, will provide an opportunity for players in the stressed assets market through resolution via various routes, with IBC likely to be the most preferred.

However, the GNPAs of banks have declined from the peak seen in March 2018 and were lower as of March 2021 as against March 2020. Supportive measures, including the six-month debt moratorium, Emergency Credit Line Guarantee Scheme (ECLGS) loans and restructuring measures were among the main reasons.

According to the study, the risk management practices of Indian banks, especially public sector banks, have scope for improvement.

In the past, laws were not in favour of lenders and allowed erring promoters to exploit the tedious recovery procedure. This is borne out by the high number of wilful defaulters of banks, it noted.

”However, RBI has tightened norms for such defaulters and made stressed asset resolution norms more stringent. That, coupled with increased resolution of large-ticket NPAs under the IBC framework, have contributed to better recovery of NPAs,” the study said.

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