Tag: virus

Soiled notes taking more space than usable ones, banks tell RBI, BFSI News, ET BFSI

Banking & Finance

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Banks have conveyed to the Reserve Bank of India (RBI) that soiled notes are occupying more space in chests than the issuable currency, seeking an urgent intervention. Even as overall cash in the system has gone up, soiled notes are occupying more space, a senior bank executive said, suggesting an increase the chest cash holding limits till the soiled currency notes are lifted.

“RBI can take a policy decision for increasing the cash holding limits of currency chests if the soiled currency notes exceed a certain percentage, say, 60% of chest space,” the banker said.

RBI regional offices can hand out approvals for increasing the cash holding limits, the person said. The central bank has embarked on a ‘clean note policy’, which includes retrieval and processing of banknotes received from currency chests and destruction of soiled banknotes in an automated manner.

According to the RBI annual report, there was a higher than average rise in banknotes in circulation in 2020-21 primarily due to precautionary holding of cash by the public due to the Covid-19 pandemic.

The value and volume of banknotes in circulation increased by 16.8% and 7.2%, respectively, during 2020-21, as per the report. In value terms, the share of Rs 500 and Rs 2,000 banknotes together accounted for 85.7% of the total value of banknotes in circulation as on March 31, 2021, against 83.4% a year earlier. The report further said the pandemic also affected disposal of soiled banknotes although it was expedited during the latter part of 2020-21.

“Despite efforts, the year as a whole still witnessed a 32% decline in the disposal of soiled banknotes as compared to the previous year,” the report noted. At present, there are 3,054 currency chests of which 55% are with the State Bank of India (SBI).

“We anticipate that as the informal economy gathers pace as the country emerges from the shadow of the Covid-19 pandemic, there will be a greater demand for currency notes,” a second bank executive said.

Some industry participants suggest that the central bank should comprehensively update its currency chest policy. “They should allow private third party non-banking entities to operate currency chests for greater cost efficiency,” said Rituraj Sinha, group MD at private security firm SIS India.

RBI is in the process of introducing varnished banknotes in Rs 100 denomination on a field trial basis with a view to elongate the life of the banknotes.



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Gold loan demand is expected to spike after lockdown: Indel Money CEO

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Pledging of household gold is expected to go up across states with the gradual easing of lockdown restrictions, according to Umesh Mohanan, Executive Director and CEO, Indel Money, a Mumbai-based NBFC.

He says that customers are strapped for cash to honour committed outflows. The virus has been deadly this time with rising infection rate, caseloads and number of deaths, forcing people to borrow more. All these have added to the financial woes of the common people, he adds. Edited excerpts of an interview:

What is the outlook on gold loan for the current fiscal? And what will drive the growth of gold loans?

The outlook for gold loan demand is positive and the demand will be fuelled by healthcare requirements, pandemic-driven uncertainty, the limitations of the banking sector to serve gold loan demand at the earlier pace due to decreased gold prices and end of 90 per cent LTV lending on last March 2021, apart from increased credit crunch due to the prevailing policies.

Our gold loan book has registered around 40 per cent growth in FY20-21. We expect around 50 per cent plus growth in FY21-22, thanks to our expanded geographical presence.

Has there been growth in the gold loan business in April and May of FY22 compared to the same period last year?

The branches in locations with reduced restrictions on movements have witnessed larger pent-up demand in comparison to last year. The industry has been growing at over 25 per cent. Gold loan demand is expected to spike after the lockdown and the post-lockdown demand growth is expected to surpass growth registered during the post lockdown period last year.

Also read: Borrowers to get option to repay a part of the Gold (Metal) Loan in physical gold

Recently, gold loan NBFCs auctioned record tonnage of pledged gold through auctions. Does this point to the growing credit risks for firms offering short-term loans?

Truly, at this point when cash flow is constrained for the common consumer, the facility to keep their gold live by remitting interest and continuing at their original LTV would be a better option than the short-term loans. The consumers have to settle interest along with principal within a short period of time, and correspondingly re-pledge at relatively lower LTV. This will result in huge cash outflow for the customer, in comparison with the longer-tenure schemes.

What are your plans for the company?

We are planning to explore various options such as capital injection by the group holding company, raising funds through public NCDs and PE/VC placement for our expansion. We have recently opened 25 branches across Andhra Pradesh and Telangana. We also have plans to enter Maharashtra and Gujarat with our conventional brick-and-mortar format by Q4 FY21-22. We are also planning to set up a support hub in all major cities to spread our doorstep gold loan facility which functions through the network of virtual branches.

We are planning to launch pre-paid cards. Our disbursals are fully automated because of our tie-ups with banks through our app. Existing customers can use our portal or mobile app to extend the exposure of the gold pledged with us on the basis of the prevailing LTV.

We will set up an automated process in which customers can manage the credit line according to their preferences. We are also planning to expand our online gold loan facility to take the branches to the homes of customers as the upper segments of MSMEs are not comfortable visit gold loan company branches during the gold appraisal process.

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Dollar fights for footing as Fed minutes eyed

Banking & Finance

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The US dollar found pockets of support in Asia on Monday, but struggled to post gains, as investors are heavily positioned for it to fall further while the US Federal Reserve holds interest rates low and US trade and current account deficits grow.

Easing commodity prices and virus outbreaks in Singapore and Taiwan — where Covid-19 had been contained — helped modest dollar gains of 0.2 per cent against the Australian and New Zealand dollars in the early part of the Asia session. The greenback also rose 0.1 per cent against the euro and the yen. But it remains close to testing major support levels, which if broken could see a return to a downtrend that pressed it lower through April.

Also read: Rupee rises 13 paise to settle at 73.29 against US dollar

A dollar bounce that followed higher-than-expected inflation data last week has also faded as traders figure the Fed will keep rates low. The dollar last traded at $1.2134 per euro and has support around $1.2179. The dollar index is likewise, at 90.389, just above key supports at 89.677 and 89.206. It bought 109.45 yen and traded at $0.7758 per Aussie and $0.7228 per kiwi.

Fed minutes, from an April meeting that predated the data surprise on inflation last week, are due on Wednesday and are the next market focus for clues on the Fed’s thinking.

“We expect the minutes … to reiterate that policymakers consider the pick up in inflation to be transitory,” said Kim Mundy, a currency strategist at the Commonwealth Bank of Australia in Sydney. “The upshot is that we do not expect the (Fed) to consider tapering its asset purchases soon,” she said. “The dollar is expected to resume its downtrend this week after last week’s CPI-inspired boost.”

Speculators increased their bets against the dollar last week, mostly by adding to bets on the euro and to a lesser extent sterling as Britain and Europe head toward recovery. Sterling was perched near a two-and-a-half-month high on Monday, at $1.4085, as Britain reopens its economy after a four-month Covid-19 lockdown.

Things are travelling in the opposite direction in Asia where some early leaders in taming the pandemic are now dealing with new outbreaks. Singapore and Taiwan have both tightened curbs as cases rise and the Taiwan dollar fell to a three-week low on Monday. The dollar crept up 0.1 per cent against the Chinese yuan to trade at 6.4424 ahead of industrial output and retail sales figures due mid-morning on Monday. Elsewhere, cryptocurrencies traded under pressure after another weekend bouncing around following tweets from Tesla boss Elon Musk. Bitcoin hit its lowest since February on Sunday after Musk hinted at Tesla possibly selling its holdings. Bitcoin last traded 2 per cent weaker at $45,302 and ether was 4 per cent lower at $3,421.

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