Tag: reserve bank of india

RBI approves re-appointment of Sandeep Bakhshi as MD and CEO of ICICI Bank

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The Reserve Bank of India has approved the re-appointment of Sandeep Bakhshi as Managing Director and CEO of ICICI Bank with effect from October 15, 2021 till October 3, 2023.

“…the shareholders at the annual general meeting held on August 9, 2019 had already approved the appointment of Bakhshi for a period effective from October 15, 2018 up to October 3, 2023,” the private sector lender said in a stock exchange filing.

Also read: ICICI Bank files cheating case against Karvy Stock Broking

Bakhshi was appointed as MD and CEO of ICICI Bank in October 2018 after the bank’s board had accepted the request of Chanda Kochhar to seek early retirement.

“His appointment will be for a period of five years until October 3, 2023, subject to regulatory and other approvals,” the bank had said at the time.

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Sitharaman to meet CEOs of public sector banks today, BFSI News, ET BFSI

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New Delhi: Union finance minister Nirmala Sitharaman will meet heads of public sector banks (PSBs) on Wednesday to review the financial performance of the lenders and progress made by them in supporting the pandemic-hit economy, sources said.

The meeting with MD and CEOs of PSBs assumes significance given the importance of the banking sector in generating demand and boosting consumption. Recently, the finance minister had said the government is ready to do everything required to revive and support economic growth hit by the Covid-19 pandemic.

The meeting is expected to take stock of the banking sector and progress on the restructuring 2.0 scheme announced by the Reserve Bank of India (RBI), the sources said, adding that banks may be nudged to push loan growth in productive sectors.

The revamped 4.5 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) would also be reviewed during the meeting likely to be held in Mumbai, the sources said.

Besides, the finance minister is expected to take stock of the bad loans or non-performing assets (NPAs) situation, and discuss various recovery measures by banks, they said.

As a result of the government’s strategy of recognition, resolution, recapitalisation and reforms, NPAs have shown a declining trend, from 7,39,541 crore on March 31, 2019 to 6,78,317 crore on March 31, 2020 and further to 6,16,616 crore as on March 31, 2021 (provisional data).

At the same time, comprehensive steps were taken to control and to effect recovery in NPAs, which enabled PSBs to recover 5,01,479 crore over the last six financial years, the government informed Parliament recently.

Besides, Sitharaman is expected to declare the results of Ease 3.0 Index for 2020-21, they said, adding that PSBs would be rated on various indexes for the year. PTI



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Study, BFSI News, ET BFSI

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Housing loan borrowers are making the most of the current record-low interest rate regime as indicated by a 42% on-year surge in demand for Balance Transfers (BT) and 26% rise for home loans in the first half of 2021, showed a Magicbricks Home Loans Consumer Study.

The demand for Loan Against Property (LAP) during this period has also witnessed a 20% rise. The soaring demand is largely attributed to the Reserve Bank of India’s decision to keep the repo rate unchanged at a constant 4%.

This has allowed many banks to offer home loans at interest rates lower than 7%, which has also been a key driver in augmenting the demand for home buying.

Magicbricks Home Loans Consumer Study also reveals that the most frequently searched home loan amount across tier-1 cities during this period was Rs 36 lakh, while that for BT and LAP were Rs 26 lakh and Rs 32 lakh, respectively. For tier-2 cities, it was Rs 26 lakh for home loans, Rs 23 lakh for LAP and Rs 18 lakh for BT.

“The rising demand for home loans is in line with the increasing demand for residential real estate across key markets of India. Several initiatives by the government, such as keeping the repo rate constant and reduced stamp duty rates, are steps in the right direction. These measures have been instrumental in boosting the overall consumer sentiment, making almost 50% of the borrowers opt for tenures less than 15 years,” said Sudhir Pai, CEO, Magicbricks.

With factors like low interest rates, stable prices, and attractive payment plans, he hopes the pent-up demand would soon translate into sales.”

With Work from Home (WFH) becoming a norm, home buyers are now looking to buy or upgrade to large configuration houses, and thus the demand is mostly in the mid and above segments, said the report.

Hyderabad, Pune, Ahmedabad, Mumbai, and Delhi are the top five tier-I cities witnessing maximum demand for home loans. A similar trend has been recorded in tier-II cities like Lucknow, Patna, Indore, Jaipur, and Agra.

In terms of the demand for Balance Transfers, New Delhi, Bangalore, Mumbai, Pune, and Hyderabad were the top five tier I cities, and Ghaziabad, Mohali, Noida, Indore, and Visakhapatnam the top five tier II cities.

For LAP, Bangalore, Hyderabad, Chennai, New Delhi, and Pune saw the most demand across tier I cities and Gurgaon, Jamshedpur, Patna, Faridabad, and Lucknow for tier II cities.

According to the report, Bank of Baroda, Indian Bank, SBI, HDFC and ICICI Bank are the most searched lenders on Magicbricks’ Home Loans platform.

Magicbricks is a part of Bennett, Coleman & Co, which published The Economic Times.



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83% of RBI’s MPC statements had net negative sentiment : Study

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Negative sentiment had dominated the statements of RBI’s Monetary Policy Committee (MPC) since its first meeting in October 2016 to the latest one in August 2021, according to a sentiment scoring analysis done by professors of Great Lakes Institute of Management, Chennai.

The communication sentiment study of RBI’s MPC statements, done by professors Vidya Mahambare and Jalaj Pathak, was based on analysis of 180 statements of MPC members related to 30 meetings (6 member statements per meeting) held between October 2016 and August 2021.

Negative sentiment

“An overwhelming majority over 83 per cent (149 out of 180 MPC member statements) have a net negative sentiment, reflecting up until 2019 the weak domestic economic environment and from March 2020 the adverse sentiment as a result of the Covid pandemic,” the analysis found.

The study used an improved sentiment analysis technique which assigns a positive or a negative net sentiment score for each statement which is then averaged for every meeting. A negative score can arise due to concerns related to lower domestic/global growth and/or higher inflation and inflation expectations, financial instability, and vice-a-versa for the positive score.

The researchers said that since communication sentiment is not directly quantifiable, researchers have begun to use text analysis techniques to convert the qualitative information contained in central banks’ communication such as monetary policy statements and central bankers’ speeches, into a quantitative indicator.

Also read: MPC Minutes: ‘Not for extended accommodative stance’

“However, there hasn’t been such sentiment analysis of the statements of the Monetary Policy Committee (MPC). This research note is the first attempt to quantify and compare net sentiment in statements of MPC members of India’s central bank, the RBI,” the authors noted.

Out of 30 MPC meetings held until August 2021, the average MPC communication sentiment is negative for 26 MPC meetings, marginally positive for 1 (October 2016), and nearly neutral for 3 meetings (December 2016, April 2018, and February 2021), the report found.

However, the report added that the longest consecutive worsening of the negative sentiment in six MPC meetings was in the pre-Covid period from August 2018 to June 2019.

“Before the pandemic hit, the communication sentiment had begun to improve but hit the lowest point in the statements of March -2020. Since October 2020 once again the sentiments expressed in the MPC statements had improved, before deteriorating again in April 2021 on the expectation of the second wave,” the report said.

“The average net sentiment in the MPC statements remained negative and marginally worsened in the latest August 2021 meeting,” the report concluded.

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IBA moves RBI seeking licence to set up 6k-cr NARCL, nod likely soon, BFSI News, ET BFSI

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New Delhi: The Indian Banks’ Association (IBA) has moved an application to the Reserve Bank of India (RBI) seeking licence to set up a Rs 6,000-crore National Asset Reconstruction Company Ltd (NARCL) or bad bank, according to sources.

NARCL was incorporated last month in Mumbai following the registration with Registrar of Companies (RoC).

According to sources, the company after mobilising an initial capital of Rs 100 crore and fulfilling other legal formalities has approached the RBI seeking licence to undertake asset reconstruction business.

The RBI in 2017, raised the capital requirement to Rs 100 crore from the earlier level of Rs 2 crore, keeping in mind the higher amount of cash required to buy bad loans.

RBI has its process and procedure for granting licence for such business, sources said, adding, it could take next few weeks to obtain licence from the regulator.

RBI’s approval could come either in September or October, sources added.

Legal consultant AZB & Partners has been engaged to seek various regulatory approvals and fulfilling other legal formalities.

IBA, entrusted with the task of setting up a bad bank, has put a preliminary board for NARCL in place. The company has hired P M Nair, a stressed assets expert from State Bank of India (SBI), as the managing director.

The other directors on the board are IBA Chief Executive Sunil Mehta, SBI Deputy Managing Director S S Nair and Canara Bank’s Chief General Manager Ajit Krishnan Nair.

Finance Minister Nirmala Sitharaman in Budget 2021-22, announced that the high level of provisioning by public sector banks of their stressed assets calls for measures to clean up bank books.

“An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt,” she had said in the Budget Speech. It will manage and dispose the assets to alternative investment funds and other potential investors for eventual value realisation, she had said. ba



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Taxes on fuel trigger worry at RBI policy panel’s meet, BFSI News, ET BFSI

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MUMBAI: The government’s move to pass on increases in global crude oil price to consumers, but prevent corrections through higher taxes, has raised concerns on inflation among the Reserve Bank of India‘s (RBI’s) monetary policy committee (MPC) members.

The minutes of the MPC meeting released on Friday reveal that, worried by inflation, one member, J R Varma, had voted to raise the reverse repo, the rate at which banks lend to the RBI. This rate is outside the remit of the MPC, which votes only on the repo rate, the rate at which banks borrow from the RBI.

High domestic price of fuels has triggered worries over stubborn price pressures and there have been demands to reduce taxes to help calm prices of petrol and diesel across the country.

Finance minister Nirmala Sitharaman has blamed the burden of UPA-era oil bonds as an obstacle to bringing down fuel prices. She has said that if she did not have the burden to service the oil bonds, she would have been in a position to reduce excise duty on fuel.

Earlier, RBI governor Shaktikanta Das had also said that diesel and petrol prices act as cost-push factors across a range of activities. “It’s not just that passengers who use cars and bikes. High fuel prices also have an impact on the cost of manufacturing, transportation and other aspects,” Das had said in a speech in February.

While retail inflation has shown some signs of moderation in July, wholesale price inflation continued to remain in double digits for the fourth consecutive month. Stubborn inflationary pressures have prompted the RBI to pause its rate-cutting cycle, although it has promised to keep an easy stance to help support growth and nurse the economy to a high growth trajectory.

The minutes reveal that Das made a strong pitch for continuing monetary policy support, citing slack in the economy and inflation being driven by supply-side factors. “Continued policy support with a focus on revival and sustenance of growth is indeed the most desirable and judicious policy option at this moment,” said Das, making a case for maintaining status quo. “On the whole, the economy still requires support in terms of maintaining congenial financial conditions and fiscal boosters. At such a critical juncture, can we really pull the rug and let the economy tumble?” said Das.

RBI ED Mridul Saggar estimated that the excise duty hike itself may have pushed headline inflation higher by 60-80 basis points (100bps = 1 percentage point), adding to cost-push inflation. Saggar, who along with the others voted for status quo, highlighted the significance of narrative economics in difficult times in producing business cycle movements endogenously.

The views of external members reveal that, while all are keen to support the economy, there is some divergence in respect of their view on inflation. External member Ashima Goyal said that if indirect taxes impart persistence to inflation, it could de-anchor inflation expectation and pose challenges to monetary policy. Pointing out that fuel prices do not fall with international prices, she said, “A persistent rise in Indian fuel prices is at odds with inflation targeting.”

Varma, who argued for withdrawing the accommodative stance, said, “Persistent high inflation means that the monetary accommodation has to be somewhat restrained and, therefore, I argued for raising money market rates towards the repo rate of 4%.”

Barclays economist Rahul Bajoria said that the minutes indicate a shift within the MPC’s narrative and, while the overarching view remains consistently to support the economic recovery, the comfort with inflation dynamics is certainly shifting within the MPC members. He added that there also appears to be a slight divergence visible on inflation persistence between the internal and external members. “But we reckon this gap is unlikely to be sustained, as more inflation prints come through,” he said.



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Banks may slow ATM expansion, encourage online transactions, BFSI News, ET BFSI

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The new Reserve Bank of India rule to penalise banks Rs 10,000 for each instance of an ATM out of cash for 10 hours has an unintended fallout in the form of banks slowing down the rollout of ATMs.

According to experts, banks may rely on other banks ATMs if there are more restrictions rather than setting up new ones. With digital channels picking up banks would go slow on ATMs.

The directive may cost banks Rs 125-200 crore, according to estimates by ATM operators and cash logistics companies.

In a circular to banks, the RBI said that they should monitor the availability of cash in ATMs and ensure that there are no cash-outs. The circular said that banks would be fined Rs 10,000 if there is a cash-out at any ATM for more than 10 hours in a month.

The issue

There are 2,13,766 ATMs in the country, and most of them are managed by MSPs who appoint cash-in-transit companies to replenish the currency notes in the machines.

An ATM typically goes out of cash six times every month and nearly 50% of the ATMs face this issue. The biggest hit will be to State Bank of India which has about 64,000 ATMs.

However, there are certain locations where ATMs run out of cash within hours of being loaded. These machines may not become feasible to operate if there is a penalty every month.

The reaction

There is a mixed reaction to the move by the RBI to penalise banks Rs 10,000 for each instance of an ATM being out of cash for 10 hours. ATM operators (known in the industry as managed service providers, or MSPs) and cash-in-transit companies are throwing up their hands, stating that they will not bear the penalty.

However, it is quite likely that the banks may pass the penalty to MSPs, which will in turn pass it on to cash logistics agencies.

Experts stress the need to address the root causes of ATMs running dry, such as sub-optimal cash forecasting and delays in the availability of ATM-fit currency.

The RBI circular

Already banks are struggling to meet the 2018 RBI circular that requires banks to put in place stringent measures such as transporting cash in cassettes, in prescribed vehicles sticking to government norms on the transport of currency during specified hours of the day. According to banks, it is difficult to implement all these norms under present cost structures.



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RBI suggests startups to convert ‘innovative ideas’ into breakeven, profits, BFSI News, ET BFSI

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Mumbai: At a time when startups and new-age companies are garnering huge investor interest along with robust responses for IPOs, the Reserve Bank of India (RBI) has said that the interest will sustain only if the companies are able to breakeven, increase cash flow and turn profitable.

In its Bulletin for August, RBI has lauded the recent IPOs of tech-based companies such as Zomato which received enthusiastic investor interest and said that 2021 could well turn out to be India’s year of the initial public offering (IPO).

Debut offerings by Indian unicorns — unlisted start-ups — kicked off by a food delivery app’s stellar IPO that was oversubscribed 38 times, have set domestic stock markets on fire and global investors in a frenzy.

“Yet, this explosion of interest in these companies will only be sustained if they are able to convert innovative ideas into metrics such as breaking even at the level of earnings before interest, taxes, depreciation and amortisation (EBITDA) level without expensing business development costs, followed by cash flows and profits,” it said.

Expanded and dynamic exploitation of innate advantages such as data and logistics will be essential to live up to investors’ starry-eyed expectations, as per the Bulletin.

“The jury is still out. Investors will closely scrutinise their stories. Analysts will put it down to stock markets’ idiosyncratic behaviour, investors’ greed and bandwagon effects, including myopic pursuit of listing day gains.”

It noted that there are already warnings of systemic risks to financial stability that monetary policy authorities should not ignore as the unicorn IPO party gets going.

The bursting of the dotcom bubble in 2001 showed that many startups could go bust, but risk management practices have changed to diffuse this risk over many newcomers, it said, adding that, those that survive can go on to become the Googles, Facebooks and Amazons of the future.

The RBI report also noted that IPOs of new age companies arrive as bullishness about India mounts, especially around Indian tech

“These listings coincide with a broader rush by Indian companies to tap the market and the fomo (fear of missing out) factor driving investors, which have taken the benchmark indices to records.”

It is estimated that India has 100 unicorns, with 10 new ones created in 2019, 13 in 2020 in spite of the pandemic and 3 a month in 2021 so far, it added.

The platform is being readied by Sidbi, which already manages a fund for startups, with LIC and EPFO evincing interest during a meeting of the National Startup Advisory Council chaired by commerce and industry minister Piyush Goyal.



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HDFC Bank sets ambitious target for card issuance, source says, BFSI News, ET BFSI

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India’s most valuable lender HDFC Bank has set out an ambitious plan to more than double monthly card issuance from September after the central bank lifted a temporary ban imposed on HDFC in December, according to a source.

“The sales teams have been asked to meet a target of issuing 500,000 cards a month starting September for the next few months,” said the source with direct knowledge of the matter.

HDFC Bank, which in September 2020 had issued nearly 200,000 cards, did not immediately respond to a request seeking comment.

The latest target is a big jump from a year ago but some analysts said it was achievable given the number of “liability” or savings accounts it has opened this year. Savings account holders are typically sold credit cards and loans by lenders.

“Having added close to 3.65 million liability accounts from Jan 2021 to June 2021, it can easily capture market share in the credit card space,” Macquarie said in a research note.

Earlier the bank said in a regulatory filing that India’s central bank had relaxed restrictions placed on it last year on issuing new credit cards, following outages in the bank’s digital payment services.

The relaxation was welcomed within the company.

“All the preparations and strategising that we have put in place to ‘come back with a bang’ (on credit cards) will now be rolled out,” HDFC Bank Chief Executive Sashidhar Jagdishan said in an internal email to employees, a copy of which was seen by Reuters.

“In the coming months, we will aggressively go to the market with not just our existing suite of credit cards but also new offerings in the form of co-brands and partnership,” Jagdishan said in the email.

With nearly 15 million credit cards in issue, HDFC Bank is the largest lender in the segment with nearly 24% market share. Yet over the last eight months peers such as ICICI Bank and SBI Cards have gained ground.

As of June, ICICI Bank had 11 million credit cards, up from about 10 million in January.

“Lifting of RBI (Reserve Bank of India) restrictions before the festive season augurs well and we expect HDFC bank to turn more aggressive on credit cards over the next few months,” brokerage Motilal Oswal said.

HDFC Bank is the seventh most valuable lender in Asia-Pacific with a market capitalisation of 8.37 trillion rupees ($112.7 billion).



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RBI against dropping card data storage clause in new rules, BFSI News, ET BFSI

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The Reserve Bank of India (RBI) has rejected a demand by India’s payment gateways for exemptions on select new regulatory norms that are set to prohibit merchants from storing card details and payment operators from offering one-click checkout service to consumers from January 2022, three sources aware of the matter told ET.

The new Payment Aggregator/Payment Gateways (PA/PG) rules will mandate every online merchant processing transactions for customers to only have access to a ‘tokenised’ key linked with the consumer’s cards instead of the entire card file. While authorised card operators will be allowed to store card details for seamless processing of redressals and chargebacks, the new rules will prohibit the usage of this data even by authorised operators for auto checkouts.

This means millions of card holders – both debit and credit – making payments online in 2022 may have to enter their 16-digit card numbers every time they make a payment online as opposed to just authenticating these transactions through the CVV (card verification value) and the one-time password (OTP) as is the current norm.

“The RBI’s new rules have been framed keeping security of the consumers as paramount,” said an industry official aware of the matter. “The current system, while seamless, is prone to breaches and cyber risks as customer card details are being stored in the servers of merchants not directly under the supervisory purview of the central bank.”

The Payments Council of India (PCI) lobby group has suggested alternative solutions beyond encryption through tokenisation–such as secure reference on file–to minimise customer inconvenience. They argue that as licensed aggregators are storing card data on isolated servers for chargeback references, these may be used for allowing one-click checkouts subject to consumer consent.

PCI has also sought a further extension of the deadline for compliance in its letter to the RBI.

“To allow regulated entities to develop and implement solutions that meet the criteria, as well as to ensure consumers are informed, we request sufficient time to be allowed to ensure the entire card ecosystem is prepared to handle card transactions under new solutions without adverse unintended consequences,” said the letter reviewed by ET.

To be sure, the rules were initially set to be enforced from July 2021. The RBI extended this by six months after the industry lobbied for it.

The RBI didn’t respond to queries.

The gateways say customers will see experience friction in subscription-based services that require storage of card data to bill them on a recurring basis. Without the customer data, merchants will have to ask for the card information in every billing cycle, which will result in business disruption, they say.

“While this directive from the RBI is right in intent, it leads to a blanket prohibition for service provider merchants from storing customers’ financial information, even when the said merchants may have the requisite security norms in place or may intend to have one for the same, thereby affecting smooth flow of online payments,” said Rameesh Kailasam, CEO and president of IndiaTech, an industry grouping of startups.

Earlier in the year, IndiaTech had made representations to both the RBI and the finance ministry to allow merchants with adequate security compliances to handle customer data without encryption to prevent disruption to seamless checkouts. Kailasam said IndiaTech is preparing another representation to reiterate this point to the central bank ahead of the deadline.

“It is important to understand here that from a practicality standpoint, device tokenisation may not work in all use cases, like subscription businesses and payments that are device agnostic,” he said.

ET reported Thursday that at least 30 firms including Tata Group, Amazon, Zomato and PhonePe have applied for PA/PG authorisation under the new RBI rule, which was formally introduced in March 2020. The widespread interest among internet firms to apply for an aggregator licence can also be explained by their intent to convert themselves from merchants to payment processors to ensure reduced friction in payment processing for customers.

“The central bank is firm on its stand to not allow any more extensions as of now as the ecosystem has seen several high-profile breaches, mostly at the end of merchants and unauthorised payment aggregators,” said the chief executive of a payment gateway present at the meeting with RBI representatives earlier this month. This year has seen high-profile cyberattacks such as those on JusPay, Mobikwik, Air India and Upstox.



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