IndusInd Bank, BFSI News, ET BFSI

Banking & Finance

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IndusInd Bank on Saturday admitted that its micro-finance arm gave nearly 84,000 loans “without customer consent” due to a “technical glitch” in May 21, but denied whistleblowers’ allegations of “ever greening” — a ploy to mask defaults with new loans. An independent review has been initiated by IndusInds “to see if there is any process lapse or accounting failure at Bharat Financial Inclusion (BFIL), the bank’s wholly-owned micro-lending subsidiary, said an IndusInd release. “The Bank wishes to reiterate that there is a strong risk management and control framework in place, both within the Bank and at BFIL,” said the bank.

In multiple emails to the Reserve Bank of India (RBI) and the IndusInd board in October, a whistleblower group comprising officials of the BFIL had alleged that the bank had ever-greened loans, inflated revenues and under-reported nonperforming assets. The emails followed a month after similar allegations by former BFIL vice-chairman MR Rao who, in his resignation letter, had said that the loans disbursed without customer consent did not appear as “process lapse” but a “deliberate attempt to shore up repayments.” The letters from the whistleblower group and Rao’s parting observations were reported by ET on Friday.

Reacting to the whistleblowers’ allegations, a statement issued by the bank on Saturday, said, “…the technical glitch was rectified expeditiously. Out of the above, only 26,073 clients were active with the loan outstanding at Rs 34 crore, which is 0.12% of the September end portfolio. The bank carries necessary provision against this portfolio. The standard operating procedure (SOP) has since been revised to make biometric authorisation compulsory.”

While strongly denying allegations of ‘ever greening’, the IndusInd statement said, “All the loans originated and managed by BFIL, including during the Covid period which saw the first and second waves ravaging the countryside, are fully-compliant with the regulatory guidelines… During the pandemic, the customers faced operational difficulties and some have turned intermittent payers, though a large part of them demonstrated a strong intent to repay on many occasions. Basis the requirements, the Bank adopted a multi-pronged approach depending upon the need of the client. (sic)”

The whistleblower group has blamed BFIL CEO Salabh Saxena and CFO Asish Damani for the alleged under-provisioning of loans running into thousands of crores. Neither of them responded to ET’s query on the whistleblower emails. According to a media report, both Saxena and Damani may soon quit BFIL and join Spandana Sphoorty, a micro-finance institution.

However, this could not be independently confirmed. According to the IndusInd release, the loans follow a weekly repayment model and the customers are required to make payments week on week. “.. if there is any default, the same gets recorded as missed instalments. In view of the weekly repayment model, the concept of ever greening is infeasible,” said the statement. “The level of non-performing assets reported by BHIL is significantly lower than other MFIs. So, we would like to know more, given that many lenders have seen a drop in collection efficiency during the pandemic.. If a loan is given by mistake without taking the borrower’s consent, it should be reversed,” said an analyst who did not wish to be named.



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DHFL recovery lifts PSU banks’ Q2 net profits, offsets Srei group account slip, BFSI News, ET BFSI

Banking & Finance

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Most top public sector banks have reported steady second-quarter earnings, with lower slippages as the economy opened up and COVID-19 cases fell.

State Bank of India reported a robust performance as it bravely fought off the COVID-19 impact and displayed remarkable resilience in asset quality performance.

India’s largest bank reported a steady quarter, with net earnings growing 67% YoY to Rs 7630 crore, aided by controlled provisions, as asset quality showed remarkable strength, despite the impact of the second Covid wave.

The bank has been reporting continued traction in earnings, led by controlled provisions. However, business trends remain modest, impacted by continued deleveraging by corporates. The bank has been able to maintain a strong control on restructured assets at 1.2% of loans, while the special mention account (SMA) pool declined sharply.

It created a family pension provision of Rs 7,420 crore, instead of amortizing it over five years, thus prudently deploying one-off gains from the DHFL recovery and tax refund. The bank has fully provided for its exposure towards the SREI group.

GNPA/NNPA ratios improved by 42 basis points /25bp quarter on quarter (QoQ) to 4.9%/1.5% as fresh slippage subsided to Rs 4180 crore. Restructured book remained in check at 1.2% of loans, while the SMA pool declined sharply to Rs 6,690 crore (27bp of loans).

According to analysts, the slippage trajectory of the bank is likely to moderate further assuming there is no third Covid wave, while credit cost may undershoot the normal cyclical trends. The bank has a healthy PCR of 70% and holds unutilized Covid-related provisions of Rs 6200 crore.

Canara Bank

State-run Canara Bank reported a three-fold jump in its standalone net profit at Rs 1,333 crore in the quarter ended September, aided by lower bad loan provisioning, rise in non-interest income, and recovery from DHFL resolution. The lender had reported Rs 444 crore profit in the year-ago quarter.

“Despite moderate credit growth of 6% YoY and soft NIMs (Net interest margin), Canara Bank reported a strong beat on PAT versus our estimate, mainly helped by higher treasury income, contained provisions and cash recovery from DHFL,” said Emkay in a note.

Union Bank

Union Bank of India reported healthy earnings, supported by recovery from the DHFL resolution.

The bank reported a PAT of Rs 1530 crore, up 195% year on year, supported by higher recoveries from written-off accounts of Rs 1760 crore, including recovery of

Rs 1,650 crore from the resolution of the DHFL account.

Furthermore, fee income trends improved, while domestic margins declined; muted loan growth affected net interest income growth. On the other hand, asset quality performance was stable despite elevated slippage, largely led by Corporate – this includes slippage from SREI Infra (Rs 2,600 crore). However, higher write-offs and upgrades aided improvement in asset quality on a sequential basis. Moreover, it now carries provisions of 65% on SREI Infra (higher versus peers).

The SMA-2 book declined to 2.3% of loans (versus 3.7% of loans in first quarter of FY22). Thus, slippage would moderate from fiscal 2023 onwards, and credit costs are expected to come in at 2.2%/1.9% for FY22/FY23, according to analysts.

Punjab National Bank

Punjab National Bank (PNB) delivered a weak operating performance in the second quarter as the bank was impacted by a decline in net interest income with domestic margins contracting sharply by 36 basis points quarter on quarter, while net earnings grew 78% year on year, aided mainly by tax reversals. The total recovery from the DHFL resolution was Rs 1,270 crore and was predominantly utilised for making provisions for one large corporate account (SREI Infra). On the business front, loans/deposits grew 2% sequentially.

PNB reported a 78% YoY and 8% QoQ increase in PAT at Rs 1,110 crore aided mainly by tax reversals (Rs 340 crore) and controlled provisions (34% QoQ decline). However, PNB’s operating performance was weak with the PPoP declining 27% YoY due to a decline of 25% YoY in net interest income and domestic margins declining sharply by 36 bps QoQ to 2.45%.

On the asset quality front, slippages were elevated (~5.4% annualised) due to two large corporate accounts (Rs 3600 crore) which included slippage of Rs 2,800 crore from Srei Infra. However, higher recoveries and upgradations supported the bank’s asset quality with its GNPA/NNPA ratio declining by 70bp/35bp sequentially. PNB’s total restructured book (earlier Covid schemes) stood at 3.1% of loans, while total SMA overdue (Rs 5 crore) amounted to Rs 25,000 crore.

UCO Bank

UCO Bank’s net profit for July-September jumped 581.9% on year to Rs 210 crore on improvement in asset quality, lower overall provisions, and growth in other income. Sequentially, the net profit increased 101.7%. In the quarter ended September, provisions and contingencies excluding current tax, stood at Rs 1,020 crore, down 21.7% on year and largely unchanged on quarter. Provisions for tax were at Rs 100 crore, against a Rs 260 crore write-back last year. Provisions for non-performing assets stood at Rs 1,590 crore, up 54.6% on year and 88.9% on quarter.

The bank said it had identified two Kolkata-based accounts of the same group as non-performing assets during the quarter, post lifting of a legal stay on identifying them as bad loans. While UCO Bank didn’t name the account or group, it possibly referred to Srei Infrastructure Finance and Srei Equipment Finance.

The Srei twins are under the scanner after the Reserve Bank of India superseded their boards, citing corporate governance issues. UCO Bank said it had provided for these two stressed accounts as per regulatory norms. Despite this, UCO Bank’s gross non-performing asset ratio eased to 8.98% as on September 30 from 9.37% on Jun 30, and 11.62% a year ago.

The net non-performing asset ratio fell to 3.37% as on Sep 30 from 3.85% a quarter ago and 3.63% a year ago. The bank said that to guard against the impact of any future waves of Covid on its books, it was making an ad hoc provision of 2.5 bln rupees in July-September, taking the total provisions linked to Covid to Rs 750 crore as on September 30.



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Ten steps for overhaul of ARCs as competition for bad bank arrives, BFSI News, ET BFSI

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In a bid to streamline the functioning of asset reconstruction companies (ARCs), a Reserve Bank committee has come out with a host of suggestions including the creation of an online platform for the sale of stressed assets and allowing ARCs to act as resolution applicants during the IBC process.

Amortise loss

To incentivise lenders to sell their financial assets to ARCs at an early stage of stress, the RBI panel has recommended a dispensation to lenders, on an ongoing basis, to amortise the loss on sale, if any, over a period of two years. To optimise upside value realisation by lenders, it recommends a higher threshold of investment in security receipts (SRs) by lenders, below which provisioning on SRs held by them may be done on the basis of Net Asset Value (NAV) declared by the ARC instead of IRACP norms.

Online platform

An online platform may be created for sale of stressed assets and infrastructure created by the Secondary Loan Market Association (SLMA) may be utilised for this purpose. For all accounts above Rs 500 crore, two bank-approved external valuers should carry out a valuation to determine the liquidation value and fair market value and for accounts between Rs 100 crore to Rs 500 crore, one valuer may be engaged. Also, the final approval of the reserve price should be given by a high-level committee that has the power to approve the corresponding write-off of the loan.

Acquiring financial assets

In the interest of debt aggregation, the scope of Section 5 of the SARFAESI Act, and other related provisions, may be expanded to allow ARCs to acquire ‘financial assets’ as defined in the Act, for the purpose of reconstruction, not only from banks and ‘financial institutions’ but also from such entities as may be notified by RBI. RBI may consider permitting ARCs to acquire financial assets from all regulated entities, including AIFs, FPIs, AMCs making investment on behalf of MFs and all NBFCs (including HFCs) irrespective of asset size and from retail investors. ARCs should be allowed to sponsor SEBI registered AIFs with the objective of using these entities as an additional vehicle for facilitating restructuring/ recovery of the debt acquired by them.

Binding on lenders

If 66% of lenders (by value) decide to accept an offer by an ARC, the same may be binding on the remaining lenders and it must be implemented within 60 days of approval by majority lenders (66%). 100% provisioning on the loan outstanding should be mandated if a lender fails to comply with this requirement. Given that the debt aggregation is typically a time-consuming process, the planning period is elongated to one year from the existing six months. In cases where ARCs have acquired 66% of debt of a borrower, the Act should provide for two years of moratorium on proceedings against the borrower by other authorities. The Act should also provide that Government dues including revenues, taxes, cesses and rates due to the Central and state governments or local authority will be deferred in such cases.

Equity sale

For better value realisation for originators and enhancing the effectiveness of ARCs in recovery, even the equity pertaining to a borrower company may be allowed to be sold by lenders to ARCs which have acquired the borrower’s debt. The Committee recommends that ARCs may be allowed to participate in the IBC process as a Resolution Applicant either through a SR trust or through the AIF sponsored by them.

Allowing HNIs to buy SRs

For giving impetus to listing and trading of SRs, the list of eligible qualified buyers may be further expanded to include HNIs with minimum investment of Rs 1 crore, corporates (Net Worth-Rs 10 crore & above), all NBFCs/ HFCs, trusts, family offices, pension funds and distressed asset funds with the condition that (a) defaulting promoters should not be gaining access to secured assets through SRs and (b) corporates cannot invest in SRs issued by ARCs which are related parties as per SEBI definition.

Minimum SR investment

The interest of investors and investing lenders should be weighed against the need for distribution of risk among the willing investors. Therefore, it recommends that for all transactions, per SR class/ scheme, the minimum investment in SRs by an ARC should be 15% of the lenders’ investment in SRs or 2.5% of the total SRs issued, whichever is higher.

Credit rating agencies

Recognising the critical role of Credit Rating Agencies (CRAs) in the valuation of SRs and, therefore, the need for continuity in engagement of CRAs, the Committee recommends that ARCs must retain a CRA for at least three years. In case of change of a CRA, both parties must disclose the reason for such change.

Tax pass through

In the matter related to taxation of income generated from investment in SRs issued by ARCs, the possibility of a ‘pass-through’ regime for AIF investors may be looked into by the Central Board of Direct Taxes (CBDT). The CBDT may consider clarifying on the tax rate applicable to FPIs.



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Good Banking: The role of banking in driving ESG goals

Banking & Finance

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Rajashekara Maiya

By Rajashekara Maiya

The 2030 Agenda for Sustainable Development that includes 17 Sustainable Development Goals (SDGs) and the landmark Paris Agreement, which came into force in 2016, as well as the growing awareness on climate change have had an impact on Environmental, Social, and Governance (ESG) goals of organisations across industries, including banking and financial services. As per a BCG report on sustainable finance, large institutional investors are increasingly incorporating ESG metrics into their capital allocation and stewardship criteria.

Banks undoubtedly hold considerable clout in shaping and enabling the ESG goals of industries and corporates. In addition, they also have an opportunity to enable their own ecosystem by embracing the right technology and designing policies around employment and inclusivity. Some of the areas where banks have an opportunity to participate and drive ESG goals are:

Financial inclusion
Financial inclusion is key to achieving the goal of ‘ending poverty’ as part of the UN SDGs for 2030. Banks have an opportunity as well as a responsibility to provide banking services to the unbanked and underbanked population across the globe, thereby allowing them to participate effectively in the economic arena. Access to banking helps encourage savings and makes inclusion into welfare schemes easier.

Inclusive financing, which entails a systemic mandate to encourage access to finance for populations that traditionally fall outside the ambit of traditional financing is key. Grameen Bank in Bangladesh is a successful example. Ujjivan Small Finance Bank in India has successfully followed a similar model. Besides these private players, government initiatives such as the Pradhan Mantri Jan Dhan Yojana, a financial inclusion programme of the government of India have had a significant impact.

Investor activism
Shareholders and investors are seeking greater openness and disclosure around issues that concern ESG, whether it is about curbing the gun culture in the US, penalising chronic polluters such as big oil, or encouraging sustainable businesses. The fact that banks and financial institutions play a key role in providing the necessary funding and capital for the functioning of various industries, puts them in the center of the ESG revolution.

Sustainable operations
Aside from lending policies and customer offerings, there is also an opportunity to streamline internal operations of banks to make them more ESG friendly. This includes the adoption of technologies such as cloud, AI etc. to ensure more efficient operations, inclusive hiring policies, and adopting eco-friendly practices that help reduce their carbon footprint. The pandemic has created its own challenges and opportunities. For example, remote banking operations have become mainstream, spurred by the need for social distancing as well cost cutting.

Overall, banks need to be mindful of their impact on larger environmental, social, and governance issues and closely track their reputational risk index. As governments, customers, shareholders, become more aware, banks must rise to the occasion and deliver.

The writer is vice-president, global head – Business Consulting-Finacle at Infosys

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Festival season brings cheer to bond market

Banking & Finance

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Although the week was short due to the festive season and yield movements were narrow, all the newsflow last week turns out to be positive for the domestic bond market. The benchmark yield closed at 6.36 per cent on Wednesday, down by almost 3 basis points compared to the week before.

Global events

On the global front, the US Fed announced tapering of its bond buying programme on much anticipated lines at $15 billion per month. The 10-year US treasury yields, which had been having a negative impact on the domestic bond market, cooled down to 1.45 per cent last week compared to 1.56 per cent the week before. Brent crude prices also softened a bit, even nudging the $80/barrel mark last week before closing near the $83/barrel level.

Domestic development

On the domestic front, the Centre announced an excise duty cut of ₹5 per litre on petrol and ₹10 per litre on diesel last week. Bond dealers say this will be a positive for the market which expects the yields to fall further down to near the 6.3 per cent mark. Meanwhile, the Reserve Bank of India continued to absorb the excess liquidity out of the system even as it conducted a 15-day variable rate reverse repo auction where the cut-off rate stood at 3.99 per cent. The central bank accepted offers worth ₹4.34 lakh crore against the notified amount of ₹5 lakh crore.

Subdued CPI expected

This week, the market is looking forward to the announcement of the consumer price index inflation print. Market participants say the CPI figure will most likely stand below the 4 per cent mark owing to the base effect for October, post which it may slightly start moving up gradually.

Vijay Sharma, Senior Executive Vice-President at PNB Gilts opined that so far, all the developments seen during the week are positive for the domestic bond market. “The two factors that were responsible for the upward movement in yields have turned positive over the last few days. The US Treasury yields came down even as the Fed decision on tapering stood pretty much in line with the market expectations. Crude prices coming down and a cut in excise duty are also conducive for the yields. It seems the benchmark yield could move towards the 6.3 per cent level in the short term. The inflation print for October is expected to come down below 4 per cent, mostly due to base effect.”

 

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Ola Financial Services plans international expansion of its insurance business

Banking & Finance

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Ola’s subsidiary, Ola Financial Services (OFS) will expand its insurance business internationally to support the operations of Ola’s mobility business through innovative insurance products designed for the UK, Australia and New Zealand market.

According to Ola’s recent MCA filings, OFS will also be launching new capabilities to the pay-later instrument to make it more appealing for the users. Further, OFS will expand its suite of products by launching new lending products in the form of two- and four-wheeler loans and personal loans to offer a comprehensive financial product ecosystem to the customer.

During 2020-21, Ola Financial Services has had a turbulent year due to external factors such as Covid on the lending environment in general and the double impact on mobility business and its spillover to the Ola Money brand. Through these new growth avenues, OFS hopes to generate regular and sustainable financial results.

Ola is looking to go public by next year and is estimated to raise around $1 billion – $2 billion from the IPO. The company is expected to file its DRHP (Draft Red Herring Prospectus) soon, after the board reaches a consensus on the route of listing. BusinessLine has earlier reported in September that the company’s board is divided between no-promoter and promoter route of listing.

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Banks, HFCs on hiring spree amidst rising home loan demand

Banking & Finance

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Banks, housing finance companies and NBFCs are on a hiring spree amidst rising demand for home loans.

Industry experts and players say that hiring for home loan departments is up by at least 20 per cent to 25 per cent in recent months as players look to expand their home loan portfolios in smaller towns and attract more customers through lower home loan rates.

“Hiring has gone up by 22 per cent to 25 per cent by banks, NBFCs and HFCs. This is especially the case in the last three to four months, especially after the second wave of the pandemic. A small portion seasonal in nature but we expect it to be largely sustained for the next few years. The requirement for additional staff is equally in urban and rural markets,” said Amit Vadera, Vice President – Staffing, TeamLease Services.

About 90 per cent of the requirement is in the sales function with starting salaries in the range of ₹15,000 to ₹20,000 along with attractive variable incentives.

Amidst the pandemic and work from home, many people are now looking at their own homes as well as larger homes, leading to the demand for home loans. Banks, HFCs and NBFCs consider the home loan portfolio to perform better as typically borrowers do their best not to default on home loans. They have been offering interest rates as low as 6.4 per cent (such as Union Bank) and are also charting out aggressive expansion plans.

“There has been increased hiring as most small finance banks, HFCs and NBFCs in different segments are expanding their reach to newer locations and need people,” said the head of a housing finance company.

However, he noted that many employees as are moving from one company to leading to higher manpower costs.

“Every company is in a hiring spree. Everybody feels that there will be a huge uptick in housing and other credit demand,” he, however, noted.

Shriram Housing Finance had in September announced that it plans to hire 350 employees in Andhra Pradesh and Telangana as part of its expansion plans in the region. ICICI Home Finance had also announced in September that it would hire over 600 people by the end of this calendar year to meet the demand for home loans.

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Multibagger Stocks: These Stocks Rose Over 2000% And Up To 4000% In This Year

Personal Finance

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Chennai Ferrous Industries

The company has enough cash on hand to cover its contingent liabilities. The stock returned 2763.71 percent over three years, compared to 74.57 percent for the Nifty Smallcap 100. The company’s yearly revenue growth rate of 471.59 percent outpaced its three-year compound annual growth rate of 51.58 percent.

For the past three years, the company has shown a good profit growth of 48.44 percent and the company has grown its revenue by 34.73 percent.

The company’s debt has been reduced by 32.06 crores. The company has had poor ROE for 3 years.

With a healthy interest coverage ratio of 414.02, the company is in good shape.

Gita Renewable Energy

Gita Renewable Energy

Since the last five years, the company has had no debt. In the fiscal year ending March 31, 2021, the company spent less than 1% of its operating revenues on interest charges and 50.42 percent on labour costs. For the past three years, the company has posted a negative return on investment (ROI). Gita Renewable Energy Ltd., founded in 2010, is a Small Cap business in the Miscellaneous category with a market capitalization of Rs 85.37 crore.

TTI Enterprise

TTI Enterprise

Since the last five years, the company has had no debt. The company’s yearly revenue growth rate of 433.61% surpassed its three-year CAGR of 48.12%. TTI Enterprise Ltd., founded in 1981, is a Small Cap business in the Financial Services industry with a market capitalization of Rs 96.54 crore. Over the last three years, the company has generated dismal Operating Income growth of -29.34 percent. Provisioning and contingencies have risen by 361.54%.

The company is registered as a non-banking financial company with the RBI (NBFC). The business of investing in shares and securities, as well as providing short- and long-term financing, has long been the focus of the company.

National Standard (India)

National Standard (India)

The company’s annual sales increase of 111.24 percent surpassed its three-year compound annual growth rate (CAGR) of -12.95 percent. The company spent Rs 3.25 crore on investing operations, a rise of 451.46% year on year. National Standard (India) Ltd., founded in 1962, is a Small Cap firm in the Engineering sector with a market capitalization of Rs 25,343.90 crore.

JITF Infralogistics

JITF Infralogistics

Jindal ITF is altering established norms in the areas of water, wastewater, and solid waste management, as well as logistics and transportation equipment fabrication. Jindal ITF is involved in establishing a strong basis for a secure and sustainable future through its subsidiaries. The stock returned 1059.33 percent over three years, compared to 74.57 percent for the Nifty Smallcap 100. For the fourth quarter in a row, the company has lost Rs 40.62 crore. Stock returned 1059.33 percent over three years, compared to 74.57 percent for the Nifty Smallcap 100.

Multibagger Stocks: These Stocks Rose Over 2000% And Up To 4000% In This Year

Multibagger Stocks: These Stocks Rose Over 2000% And Up To 4000% In This Year

Company Latest price in Rs Sector Returns in 2021
Chennai Ferrous Industries 174.40 Iron & Steel 4,406.46%
Gita Renewable Energy 207.60 Power 2,861.48%
TTI Enterprise 37.00 Finance 2,681.95%
National Standard 12,671.95 Iron & Steel 2,625.15%
JITF Infralogistics 225 Logistics 1,657.81%

Disclaimer

Disclaimer

Investing in stocks has the risk of financial loss. As a result, investors must proceed with prudence. Greynium Information Technologies and the author are not accountable for any damages incurred as a result of decisions based on the article. Please keep in mind that past performance does not guarantee future results.



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Post demonetisation, notes in circulation on rise; so are digital payments

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Five years after the demonetisation, currency notes in circulation continue to rise albeit at a slower pace even as digital payments surge with more and more people embracing cashless payment modes.

Primarily, banknotes in circulation went up in the last financial year as many people opted for the precautionary holding of cash amid the COVID-19 pandemic disrupting normal lives and economic activities in varying degrees.

Official data points out a jump in digital payments through different modes, including plastic cards, net banking and Unified Payments Interface. UPI of the National Payments Corporation of India (NPCI) is fast emerging as a major medium of payment in the country. All said, currency notes in circulation are still in the upward curve.

On November 8, five years ago, Prime Minister Narendra Modi had announced the demonetisation of old Rs 1,000 and Rs 500 banknotes and one of the key objectives of the unprecedented decision was to promote digital payments and curb black money flows.

Thanks to the increasing popularity of digital payment ways, cash usage is not growing at a fast clip but still is on the rise.

According to the latest Reserve Bank data, the notes in circulation in value terms soared from Rs 17.74 lakh crore on November 4, 2016, to Rs 29.17 lakh crore on October 29, 2021.

The notes in circulation (NIC) increased by Rs 2,28,963 crore on October 29, 2021, from Rs 26.88 lakh crore as on October 30, 2020. The year-on-year increase on October 30, 2020, was Rs 4,57,059 crore. The data revealed the year-on-year increase in NIC on November 1, 2019, was Rs 2,84,451 crore.

The value and volume of banknotes in circulation had increased by 16.8 per cent and 7.2 per cent, respectively, during 2020-21 as against an increase of 14.7 per cent and 6.6 per cent, respectively, witnessed during 2019-20.

The banknotes in circulation had increased during 2020-21, primarily on account of precautionary holding of cash by people due to the pandemic.

NIC had grown at an average growth rate of 14.51 per cent year-on-year from October 2014 till October 2016, the month preceding the demonetisation.

During the last Parliament session, the government had said the quantum of banknotes in the economy broadly depends on the GDP growth, inflation, and replacement of soiled banknotes and growth in non-cash modes of payment. Barring the COVID-19-hit 2020-21 financial year, the Indian economy has recorded a positive growth rate.

The UPI was launched in 2016, and the transactions have been growing month-on-month barring a few blips. In October 2021, the transactions in value terms stood at over Rs 7.71 lakh crore or over USD 100 billion. A total of 421 crore transactions were done through UPI in October.

The sudden decision of the government to withdraw the two high denomination currencies five years ago lead to long queues outside banks to exchange/deposit the demonetised notes. Several sectors of the economy, especially the unorganised segment, was affected by the government’s decision.

Anuj Puri, chairman of ANAROCK Group, said that although there was a lot of confusion and uncertainty immediately after demonetisation, the shadow of the “radical move has now faded”.

“Nevertheless, it had a profound impact in the first year after it was announced, he said, and added the housing market emerged stronger than before, with speculative buying and selling getting eliminated and end-users emerging as the strongest market drivers in the primary sales segment,” Puri said.

He added that the secondary market was highly susceptible to demonetisation as compared to the primary market. Property transactions in the secondary sales and luxury housing segments tended to have significant cash components.

“It cannot be said that cash components have been eliminated from the market. However, they have become a far less influential factor driving property purchases,” he added.

A pilot survey was conducted by the Reserve Bank on retail payment habits of individuals in six cities between December 2018 and January 2019, results of which were published in April 2021. The RBI Bulletin indicates that cash remains the preferred mode of payment and for receiving money for regular expenses. For small value transactions up to Rs 500, cash is used predominantly.

Following the withdrawal of the then prevailing Rs 500 and Rs 1,000 notes as part of demonetisation, the government had introduced a new Rs 2,000 currency notes as part of re-monetisation. It also introduced a new series of Rs 500 notes. Later, a new denomination of Rs 200 was also added.

In value terms, the share of Rs 500 and Rs 2,000 banknotes together accounted for 85.7 per cent of the total value of banknotes in circulation as on March 31, 2021, as against 83.4 per cent as on March 31, 2020.

However, no indent for Rs 2,000 note was placed with Bharatiya Reserve Bank Note Mudran Private Ltd (BRBNMPL) and Security Printing and Minting Corporation of India Ltd (SPMCIL) during 2019-20 and 2020-21.

The Reserve Bank of India issues notes in denominations of Rs 2, Rs 5, Rs 10, Rs 20, Rs 50, Rs 100, Rs 200, Rs 500 and Rs 2,000.

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Reserve Bank of India – Tenders

Tenders

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Reserve Bank of India, Guwahati proposes to prepare a panel of Suppliers/ Distributors/ Dealers/ Manufacturers for the supply of following items costing up to ₹2-3 lakhs approximately per year. The panel will remain in force for three years up to March 31, 2024.

Items: 2”11/12 Gauge Wire nails, Plastic Strapping 5/8”, Jute Twine, Signode Seals for Steel Strapping 5/8”, Cloth Mask – Surgical, Banding Rolls for CVPS machines, Polythene covers 125×100 cm, Jute Gunny Bags, Rubber Bands, Cutter, Transparent Trays, Hammer, Nail Puller, Pouches, Screwdriver, Knife, Hand Gloves, Hand Sanitizer, Hand Pressure / Steel Strap stealer, Strapping Machine, Cleaning Materials etc.

Tender form may be collected from Reserve Bank of India, Station Road, Pan Bazar, Guwahati on all working days from 10 AM to 4 PM or may be downloaded from website www.rbi.org.in. Last date for submission of Tender form is November 29, 2021 (4 PM). The Bank reserves the right to accept or reject any or all quotations without assigning any reason whatsoever. For any further clarifications please email or dial to phone No. 0361-2730955.

Shri Sanjeev Singha

Regional Director,
Reserve Bank of India
Guwahati

Date: November 07, 2021

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