Bank of India mulling merger, says CEO (BL 18.09.17)
The board of Bank of India is examining the possibility of merger with other banks, based on the synergy in business. According Dinabandhu Mohapatra, MD and CEO, the bank is in the process of strengthening its systems and processes before exploring merger possibilities. “Discussion is going on; we are examining the possibility (of a merger). But before that, you have to be strong enough, have some uniqueness in order to be able to attract another partner. Only then, the process will be productive,” Mohapatra said. “Why should we be apprehensive (about mergers). You look at SBI; their merger with associate banks has been rather smooth,” he said, talking in favour of bank mergers. Former RBI Governor Raghuram Rajan had earlier suggested that mergers of PSU banks should be done only after balance sheets are cleaned up and these are nursed back to health with adequate capitalisation. Rajan had also drawn attention to the fact that going forward, mergers will not be as easy as that of SBI and its associate banks, as it will revolve around merger of banks with fairly different cultures, orientations, systems and regions. With a view to fast-track the process of mergers, the Cabinet had recently approved the setting up of an alternative mechanism, or a panel of Ministers, to decide on consolidation proposals for State-run banks. However, it is learnt that the government will expect banks to come up with a proposal. However, some banks have not been too comfortable with the idea of consolidation in the industry. Kishor Kharat, MD and CEO, Indian Bank, had recently said that with most banks under severe stress, it may not be the right time to move ahead with consolidation. He also opined that if merger takes place under the current situation, it might affect the health of the banks and may not be good for the entire banking ecosystem. “The government has made its intention clear; there is nothing to be forced upon. Individual bank boards are discussing it (the possibility of mergers), it is a work in progress,” Mohapatra said.
SBI may raise PCR to 67% (BL 17.09.17)
State Bank of India is looking to increase its provision coverage ratio (PCR) to 66-67% by early FY19. According to Rajnish Kumar, MD, SBI, the exercise of increasing PCR could be either achieved within this fiscal or may spill over to early next fiscal. The bank’s PCR, which is measured by the quantum of funds set aside by it to cover bad loans, was higher at 60.79% as on June 30, 2017, compared with 59.91% the same period last year. Gross non-performing assets (NPA) of the bank increased to ₹188,068 Cr as of June 2017, against ₹137,662 Cr during the same period last year. The percentage of gross NPA to advances also increased to 9.97% (7.40%) while net NPA increased to 5.97% (4.36%) as of June 2017. “Provisioning needs to be done. Our PCR may go up to 66-67% either by the end of this fiscal or spill over to early next fiscal,” Kumar said. The cost of provisioning for the bank is currently high at 2.4% and has to be brought down. “The high cost of provisioning will come down once asset quality starts improving and fresh slippages come down,” he pointed out. Fresh slippages have started tapering off and going forward, slippages will be under control, he said. According to Kumar, the cost of credit in the large corporate and mid-corporate segment is high compared with credit cost in the retail portfolio. “In the retail portfolio, the credit cost is not high; but in corporate and mid-corporate segment, it is high as the level of non-performing assets is high, and the bank has to make provisions for stressed assets.” The bank expects 6-8% growth in credit in the current fiscal.
SBI Card plans to double credit card customers in 2-3 years (BL 18.09.17)
SBI Card, the joint venture between State Bank of India and GE Capital, is looking to double its credit card acquisition and improve its market share in the next two years. According to Vijay Jasuja, CEO, SBI Card, the company has worked out a strategy for doubling its credit card customers on an incremental basis month-on-month, by tapping the bank’s own customer base. With a card base of close to 50 lakh, SBI Card is currently the second-largest issuer of credit cards after HDFC Bank. In terms of spend too, the company currently holds the second place with an average spend of ₹5,500 Cr a month. The company’s card sales increased 26% year-on-year to 45.6 lakh as on March 31. The company is looking to grow its card sales 25-30% this fiscal. “We have entered into a tripartite agreement with SBI and CIBIL to offer pre-approved cards to eligible customers. The eligibility will be based on parameters including the quantum of deposits, loans or investments in various instruments such as mutual fund,” Jasuja said. SBI’s own customers currently account for nearly 38% of its total cards in circulation, while 47% comes from open market and the remaining from co-branded offerings. “SBI has a 45-50-Cr customer base; even if we can get 1% of that, it will make us market leaders in the segment,” he said. The share of SBI’s own customers has been steadily increasing from 33% a year ago to 38% at present. “We are looking at a big leap in this segment; we have been working on a strategy for the last 2-3 years and are on the last stage now. Once we cross this stage, we will start seeing the numbers coming in.” The company also launched ‘Unnati’ card aimed at Jan Dhan account holders with a savings bank balance of ₹25,000. “This is one segment that we are looking at. We expect demand to pick up moving forward,” Jasuja said. SBI Card is also set to go all out to woo customers with special online and offline offerings this festival season. It has tied up with Flipkart for its flagship Big Billion Days sale between September 20 and 24. Under the tie-up, the bank will offer up to 10% cash back on all purchases. This apart, it is also tying up with offline stores such as Croma and Reliance Fresh and travel portal Yatra.com for boosting spend on the card. It is also looking to partner large jewellers to offer discounts on purchase of gold and diamond jewellery on the eve of Dhanteras. SBI Card is also coming up with EMI-based offerings for purchase of mobile phones, particularly for the younger population. “EMI schemes account for nearly 10% of our total spend.”
Allahabad Bank board to consider AllBank Fin merger this week (BL 17.09.17)
The board of state-owned Allahabad Bank will meet on Wednesday to consider a draft scheme of amalgamation of its wholly-owned subsidiary AllBank Finance. AllBank Finance (ABFL) is a leading merchant banker and has been holding licence for Debenture Trusteeship since February 2010. “A meeting of Board of Directors is scheduled to be held on Wednesday, the 20th September, 2017, inter-alia, to consider Draft Scheme of amalgamation of... AllBank Finance Ltd with the bank,” the state-owned lender said in a regulatory filing.
‘Federal Bank close to roping in strategic partner for NBFC arm’ (BL 18.09.17)
Federal Bank, India’s 10th largest bank by market cap, is close to identifying a “strategic partner” for its wholly owned subsidiary Fedbank Financial Services Ltd (Fedfina), said a top official of the private sector bank. “We are at an advance stage (of identifying the strategic investor). We have appointed an investment banker for this. Very soon, you will hear from us,” Shyam Srinivasan, MD and CEO, Federal Bank said. For 2016-17, Fedfina had recorded a total revenue of ₹134.62 Cr, a 50% increase over a revenue of ₹89.48 Cr recorded in 2015-16. Net profit had risen to ₹22.53 Cr, almost double the ₹12.25 Cr the previous year. Srinivasan said Fedfina’s loan book is on course to double to about ₹2,000 Cr this fiscal. In 2016-17, the loan book had grown to ₹962 Cr, up 57% from ₹611 Cr the previous year. Fedfina, which bagged RBI licence as a non-banking finance company in 2010, has interests in SME-focussed mortgage loans, loans against pledge of gold ornaments and structured finance. Currently, it has 110-plus full-fledged retail branches, loan hubs in top 10 metro and semi-metro locations and presence in more than 500 villages, talukas and towns. The NBFC has a visible footprint in Tamil Nadu, Karnataka, Andhra Pradesh, West Bengal, Rajasthan, New Delhi, Gujarat and Maharashtra. Asked if Federal Bank had taken a call on the future strategic action plan for its interest in life insurance joint venture IDBI Federal Life Insurance, Srinivasan said the bank was yet to take a decision on whether it wanted to be an owner or a distributor or both. “We have appointed an investment bank to arrive at the enterprise value of IDBI Federal Life Insurance. We will then take a commercial decision on whether to continue to be a shareholder or a distributor,” he said.
SBI reviewing minimum balance charges for savings accounts (BL 17.09.17)
SBI said it is reviewing charges for certain categories of accounts for non-maintenance of monthly average balance (MAB) after receiving feedback from customers. In April this year, the country’s largest lender reintroduced charges on non-maintenance of monthly average balance (MAB) after a gap of five years. “We have received feedback from our customers on the issue and we are reviewing those. The bank will take into account those and make an informed decision,” the banks MD (national banking group) Rajnish Kumar said. “We will internally debate whether any moderation for certain categories of customers like senior citizens and students needs to be done anywhere. The charges are never cast in iron.” Meanwhile, United Forum of Bank Unions (UFBU), an umbrella organisation of all banks unions, has sought Finance Minister Arun Jaitley’s intervention to rollback the hike in charges imposed on customers. Besides, the representatives of UFBU, at a meeting with the finance minister on September 15, also requested him to stop the merger of public sector banks. With regard to rising bad loans, unions have made suggestion of declaring wilful defaulters as criminals, said All India Bank Officers Confederation (AIBOC) Joint General Secretary Ravinder Gupta. AIBOC is one of the bank officer unions of the UFBU. He further said, on the one hand banks are writing off loans of big corporates, on the other hand they are increasing charges on their customers. This is unfair and unions have requested the finance minister for his intervention. As per the list of revised charges of SBI, failure to maintain monthly average balance in accounts will attract penalty of up to Rs. 100 plus goods and services tax (GST). In metropolitan areas, there will be a charge of Rs. 100 plus GST, if the balance falls below 75% of the MAB of Rs. 5,000. If the shortfall is 50% or less of the MAB, then the bank will charge Rs. 50 plus GST. In rural areas, the monthly average balance requirement has been kept at Rs. 1,000. Any shortfall in maintaining minimum balance in rural areas can attract penalty in the range of Rs. 20 to Rs. 50 plus GST.
Banks to gain as steel sector shows signs of growth (BL 18.09.17)
With the steel sector showing prospects of improvement in financial health, commercial banks are hopeful of taking a lower haircut on resolution of stressed assets in the sector. Steel industry, which accounts for a major share of the stressed assets in the books of banks, has been reeling under the pressure of excess capacity and low capacity utilisation. According to Rajnish Kumar, MD of State Bank of India, the steel sector has been showing signs of improvement. The demand and capacity utilisation is also expected to go up aided by higher government spend. “In last six months, the scenario in steel sector is looking up, and if the government spends on infrastructure and affordable housing goes up, then there are chances that the sector will see a revival,” said Kumar. The improvement in steel industry scenario could translate into lower haircuts for the bank. “I think haircut will reduce with the revival of steel sector,” he added. The Insolvency and Bankruptcy Code 2016 (IBC) will curb the number of long pending cases substantially, and also encourage foreign investments, apart from promoting entrepreneurship. According to a CII-Deloitte report, Paradigm Shift in Banking: Future Strategies, IBC provides for resolution of insolvency in a speedier and homebound manner, and also specifies prioritisation of settlement of debts owed by a corporate debtor. “It [IBC] should encourage foreign investment as well as promote entrepreneurship as businesses can exit faster and with few legal hassles. This should result in improving India’s international ranking due to ease of doing business,” the report said. The report further added that banks should invest more time and resources to scale up the existing practices for credit evaluation, background checks and post-disbursement monitoring.
Airtel Payments Bank integrates UPI to its platform (BL, ET 18.09.17)
Airtel Payments Bank said it has integrated the Unified Payments Interface (UPI) to its digital platform. This will add to customer choice and convenience for making secure digital payments to online/offline merchants and for instant money transfers to any bank account in India, it said. “This will allow our 20 million bank customers to create their personalised UPI handles on the Airtel app, and enable them to make digital payments in both the offline and the online space. Our bank customers will also be able to link their bank accounts on BHIM app and make UPI payments,” said Shashi Arora, MD and CEO, Airtel Payments Bank. According to Arora, customers are not required to furnish their bank details to enable transactions for UPI-based payments and transfers, and can create easy-to-remember IDs, ensuring optimal data security. Customers can also use MyAirtel app (bank section) to scan any UPI QR code for making merchant payments. Online and offline merchants can leverage Airtel Payments Bank as a payment mode to accept payments seamlessly from their customers. Airtel Payments Bank is the first payments bank to integrate UPI, and others are expected to follow soon. Tech giant Google is also launching its payment app, ‘Tez’, on Monday and Facebook-owned Whatsapp is also planning to launch one soon. The government is working towards linking all these payments banks with its BHIM platform.
BOI, United Bank to raise up to Rs 1,500 Cr via bonds (BS 18.09.17)
Banks are tapping the bond market to shore up capital adequacy under Basel-III norms ahead of the end of the financial year second quarter in two weeks. Two public sector lenders, United Bank of India and Bank of India (BOI), are raising up to Rs 1,500 Cr through tier-I and tier-II bonds. Kolkata-based United Bank of India is raising up to Rs 1,000 Cr through the bonds (Rs 500 Cr in each tier). Bank of India is raising up to Rs 500 Cr via Tier-I bonds. Both banks are facing elevated pressure on asset quality and profitability. They have to set aside higher amounts as provision for bad loans, as growth in interest income tapers due to tepid credit demand. CRISIL has assigned “BBB+” rating to United Bank’s Rs 500-Cr Tier-I bonds and “AA-/Negative” rating to the Tier-II bonds. The outlook on both the instruments is negative on account of weakness in the bank’s asset quality and profitability. The ratings continue to reflect strong expectation of support from the Government of India, the majority stakeholder. Ratings for United Bank also factor in healthy resource profile. Its current and savings account deposits (CASA), as a proportion of overall deposits, reached a high of 47.8% as on June 30, 2017, from 43.3% a year before, CRISIL said. The lender’s gross non-performing assets (NPAs) remained elevated at 17.17% in June 2017 (14.29% as on June 2016), which is in line with the industry trend. United Bank’s capital adequacy ratio (CAR) stood at 10.35% with Tier-I capital of 8.54% as on June 30, 2017. India Ratings has assigned “A+” rating for Bank of India’s Tier-I bonds (Rs 500 Cr). The rating on BOI’s bonds is supported by the bank’s stand-alone credit profile, along with its ability to service coupons and manage principal write-down risk over the Basel-III transition period.
Penalty from accounts to partly fund Aadhaar linkage costs: SBI (FE 18.09.17)
SBI expects to collect Rs 2,000 Cr as penalty on savings bank accounts which have failed to maintain a minimum balance, a sum which may be used to partly cover the costs incurred on the linking of accounts with Aadhaar. The recent directive of the government to link all savings bank accounts with Aadhaar by December 31 was a “very costly affair” as lenders were already facing high costs in maintaining such accounts and complying with the KYC (know your customer) requirement, says SBI MD Rajnish Kumar. To recover such costs, including the lender’s costs on ATMs and business correspondents, the bank expects to realise over Rs 2,000 Cr in the current fiscal from account holders as penalty for failing to maintain minimum balance in their savings accounts, he said. “Maintaining savings bank accounts and complying with KYC requirement is not an easy task. Now the government has said that you have to link Aadhaar to each and every account by December 31. So I have to look at (SBI’s) 40 Cr (savings bank) accounts and it is a very costly affair,” he said. According to the government’s mandate, all existing bank account holders will have to submit Aadhaar card numbers to banks by December 31 this year, failing which the accounts will become invalid. Kumar said that the process would add to the costs of banks as it involves a process and making changes in the IT-backend as well. “It (Aadhaar linking) is a costly affair because you have to contact the customer, you have to do the process, you have to make changes in IT. There are costs associated with savings bank accounts,” he said. The largest public lender said it also invests heavily in technology requirement to take care of the transactions made in the savings bank accounts. “For maintaining savings bank accounts, there are certain costs. We have to invest heavily in technology. Our cost on technology every year is very high and that is more to take care of the transactions in (savings) accounts,” he said. “The penalty realised, we will use it to recover our outgo on ATMs. On business correspondents (BCs) channel, SBI incurs a loss of more than Rs 400 Cr. We are incurring a cost of almost Rs 2,000 Cr on business correspondents channel and ATMs per year. At least we should be able to recover that (from the penalty),” he said.
SBI hopeful of controlling fresh slippages: MD Rajnish Kumar (FE 17.09.17)
SBI, reeling under huge stressed assets like other banks, is hopeful that going forward it would be able to control fresh slippages. “Going forward, fresh slippages will be under control. Specifically from September onwards, things will be become better,” MD (national banking group) of SBI Rajnish Kumar said. Kumar said that gross NPA was 9.93% of its total lending, which was roughly Rs 1.90 lakh Cr. “We are rather concerned with the net NPA which is at three% now,” he said. The ideal net NPA level should be 1.5%, he said. The bank was also aiming at higher provisioning which would be aided by increased earnings, he said adding that the present provision coverage ratio was 60%. Kumar said that reduction in NPA levels as a percentage of total lending would only happen when the credit base increases. During the current financial year, the bank’s credit growth is pegged at six to seven%, he said. SBI would also raise money from green bonds to fund clean projects, he said. Regarding resolution of stressed assets, he said that there was need to improve the infrastructure in the first place. Presently, there are only 11 National Company Law Tribunal benches across the country and 25,000 insolvency cases were pending. Since the resolutions would have to done in a time-bound manner, the number of benches would have to be increased, he added.
Banks witness surge of wilful defaults, numbers cross Rs 1 lakh cr (FE 18.09.17)
Banks are observing a rise in wilful defaults, or refusal of payment obligations by borrowers, despite having the strength to pay the loan. According to data available from TransUnion CIBIL, a credit information bureau, local lenders have seen a nearly 45% surge of Rs 34,900 Cr in wilful defaults from last year. The data portrays that the numbers of wilful defaults by borrowers from banks spiked up from Rs 74,694 Cr in March 2016 to Rs 1,09,594 Cr in March 2017, added the report. The data further shows that over the last five years, the number of the wilful defaults has risen by over Rs 84,000 Cr. SBI topped the list of banks with wilful defaulters with Rs 15,069 Cr stuck in 997 accounts of borrowers, recording a rise of Rs 2,759 Cr in fiscal 2017. PNB was second with wilful defaults of Rs 10,989 Cr in 871 accounts. Bank of Baroda’s wilful defaults soared from Rs 1,367 Cr in the year ended March 2016 to Rs 4,785 Cr by March 2017. Talking about the financial institutions, then LIC’s wilful defaults came down from Rs 1,304 Cr in March to Rs 1,034 Cr by March 2017. Also, the company’s IFCI’s spiked up from 1,069 Crs to Rs Rs 1,274 Cr in March 2017. The wilful-default accounts of SBI comprise of GET Engineering (Rs 424 Cr), Zenith Birla (Rs 139 Cr) and Rajput Retail (Rs 282 Cr), among others. Furthermore, Bank of Baroda has classified Sidhivinayak Logistics for Rs 281 Cr in defaults and ABC Cotspin for Rs 362 Cr. PNB has filed suits against Zoom Developers, for Rs 410 Cr in defaults, Forever Precious (Rs 747 Cr) and Winsom Diamond (Rs 899 Cr).
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India likely to be 3rd largest economy by 2028: HSBC (BL, FE 17.09.17)
India is likely to overtake Japan and Germany to become the third largest economy in the next 10 years but needs to be consistent in reforms and focus more on the social sector, British brokerage HSBC has said. Social capital is “insufficient” in the country and spending on aspects like health and education “is not just desirable for its (India’s) own sake, but is also central to economic growth and political stability,” it said. India also needs a lot of focus on ease of doing business and related aspects like contract enforcements. “In over the next ten years, India will likely surpass Germany and Japan to become the world’s third largest economy in nominal USD and the transition will happen even more quickly on a PPP (purchasing power parity) basis,” its economists said in a note. Demographics and macro stability were pointed out as key strengths for the country by the brokerage. The brokerage’s estimates show that India will be a USD 7 trillion economy in 2028, as compared to less than USD 6 trillion and USD 5 trillion for Germany and Japan, respectively. Presently, India’s GDP is around USD 2.3 trillion (fiscal 2016–17). It stands at the fifth spot in global rankings. The brokerage said the growth rate, which will be lower in FY18 as compared to the year-ago’s 7.1% due to the introduction of Goods and Services Tax (GST), but the country will recover from next year in a sustainable fashion. It also made a case against “stray reforms”, terming them as “harmful”. “There are limits to one-off reforms. India needs to create an ecosystem of continuous change,” it said.
Current account deficit seen at 1.2-1.3% of GDP in FY18: ICRA (FE 17.09.17)
India’s current account deficit (CAD), which widened to a four-year high in April-June, is likely to touch USD 30-32 billion, or 1.2-1.3% of GDP by March-end 2018, says a report. CAD increased to USD 14.3 billion, or 2.4% of gross domestic product (GDP), in the first quarter of the current fiscal from USD 0.4 billion in the year ago period. In FY17, CAD was at USD 15.2 billion, or 0.7% of GDP. “With the size of the current account deficit in the first quarter nearly as high as the FY17 level of USD 15 billion, we expect the FY18 deficit to double to around USD 30-32 billion or 1.2-1.3% of GDP,” rating agency Icra said in a report. In general terms, CAD refers to the difference between inflow and outflow of foreign exchange that has a bearing on exchange rate. The increase in CAD in the first quarter was on account of higher trade deficit, which stood at USD 41.2 billion. The rise in the trade deficit was brought about by a larger increase in merchandise imports relative to exports. “The sharp surge in the current account deficit in April-June quarter relative to Q1 FY17 comes as no surprise, with the spike in gold imports prior to the introduction of GST responsible for half of this uptick,” the report said. The lagged impact of rupee appreciation was partly responsible for a faster rise in non-oil non-gold imports relative to exports, bloating the size of the merchandise trade deficit, Icra said. Net services receipts during the quarter rose by 15.7% on a y-o-y basis mainly on the back of a rise in net earnings from travel, construction and other business services. The net foreign direct investment at USD 7.2 billion in the reporting quarter almost doubled from the same period last year.
Foreign Money may Push Rupee to New Heights (ET 18.09.17)
The rupee, among the best-performing emerging-market currencies this year, is poised to gain 4% more against the dollar by March on sustained overseas flows unless a surprise hardening in US rates or premature shrinkage in Fed balance sheet triggers a safe-haven rush. Taxation and sectoral-ownership reforms should otherwise continue to enhance India's attractiveness as a destination for debt, equity, and foreign direct investment (FDI). According to a poll of 20 financial-market participants, foreign portfolio investments (FPI) should under pin rupee's ascent to 61 versus the dollar by March. Six of those polled said the rupee could be in the 58-62 range by end-FY18. On September 15, it closed at 64.08. “The general consensus is that the rupee would rise amid overseas fund inflows,“ said Jayesh Mehta, MD at Bank of America Merrill Lynch in India. “A combination of FPI and FDI may continue to drive the rupee in the coming quarters. The central bank's intervention is evident and the currency would have crossed new highs otherwise.” This calendar year, FPIs have invested a net 1.74 lakh Cr in Indian securities, with debt cornering the largest share in investments that are the highest since 2014. Overseas funds should continue to flow into Indian assets, with several high-profile initial public offerings scheduled. To be sure, US Federal Reserve action could swiftly reverse the direction of the rupee's movement. Last week's data showed US consumer prices rose 0.4% month-on-month and 1.9% on-year in August, with the gauge appearing to inch closer to the central bank's benchmark inflation goal. A sustained improvement in US consumer prices and falling jobless claims should shorten the odds of a rate increase, but only in December or even later.
RBI likely to keep policy rate on hold till fiscal-end: Report (BL 17.09.17)
The Reserve Bank is expected to pause rate cuts for the rest of 2017-18 as retail inflation is likely to tread higher towards 4.7% by March, says a Kotak Institutional Equities report. According to the report, both CPI and WPI inflation have bottomed out and retail inflation is inching towards 4.7% and wholesale towards 3.6% by March 2018. It further noted that the impact of the 7th Pay Commission Housing Rent Allowance will further lend upside pressure to CPI inflation, a major factor for the RBI to decide its monetary policy stance. “We expect CPI inflation to tread higher towards 4.7% by March 2018 (4.3% without HRA),” the report said. Moreover, core CPI (excluding HRA) inflation is expected to remain tepid, averaging 4% in this fiscal compared to 4.7% in 2016—17 underscoring the weak underlying demand pressures. Retail inflation rose to five—month high of 3.36% in August due to costlier vegetables and fruits. The consumer price index (CPI) based inflation was 2.36% in July. According to the domestic brokerage firm, the RBI is expected to keep on hold the repo rate for the rest of this financial year but might consider an easing in policy stance. “if inflation surprises below the 4% mark on improvement in food supplies amid good monsoon, imported disinflation due to INR appreciation and downward surprise on core inflation“. “We maintain our call for status quo on repo rate for rest of 2017—18 and remain watchful of the incoming data, especially given the recent slide in high-frequency growth indicators,” the report said. The RBI reduced the repo rate by 0.25% to 6% in August, citing reduction in inflation risks. The rate cut was the first in 10 months and brought policy rates to a near 7 year low. The next RBI policy review meet is scheduled on October 3-4.
Arun Jaitely to launch Google payment app Tez today (FE 17.09.17)
Union Finance Minister Arun Jaitely will launch Google’s Unified Payments Interface (UPI)-based digital payment service called “Tez” on Monday. FM Shri @arunjaitley to launch the Google Digital Payment app ‘TEZ’ on 18th September, 2017 in the national capital,” the Finance Ministry confirmed in a tweet on Saturday. The report of Google entering India’s fast growing digital payment ecosystem appeared in the media on Thursday, following which Google India sent out an invite for an event in New Delhi on a September 18. “As we continue to make strides in ensuring that our products continue to serve the needs of everyone, we invite you to a press conference to share details on the launch of a new product developed grounds up for India,” the invite read. “Tez” (meaning fast in Hindi) may work like Android Pay. UPI is a payment system launched by the National Payments Corporation of India (NPCI) and regulated by the RBI which facilitates the instant fund transfer between two bank accounts on the mobile platform. The other big player to join India’s growing digital payment market is Facebook-owned WhatsApp.
Government asks state-owned banks to discuss ways to merge at board level (FE 17.09.17)
The Finance Ministry of India, just days after the Union Cabinet approved a framework to oversee proposals for the merger of banks has written to the state-owned banks asking them to start looking at the possibility of consolidation, including discussions at the board level. The news was confirmed by the senior bankers who said that most banks were yet to even start the process of identifying potential lenders with whom a merger could be considered based on geographical reach, branch network or franchise, loan portfolio, deposit spread, and other synergies. This decision has come in the backdrop of rising bad loans that have underlined a growing need for huge capital infusion. In fact, the bankers said that they are betting on the Insolvency and Bankruptcy Code and the process of National Company Law Tribunal for getting quick resolutions in order to solve the problems of bad loans, according to a report by IANS. “The Insolvency and Bankruptcy Code, 2016 is a game-changer,” State Bank of India’s MD (National Banking Group), Rajnish Kumar said, adding that it will greatly increase the pace of resolution of stressed assets. Meanwhile, Bank of India’s MD and CEO Dinabandhu Mohapatra said, “With the guideline of earlier restructuring models (S4A, 5/25 and others), the lenders tried their best to solve the bad loans issues. Some of the stressed accounts were addressed but some bigger problems were not solved. The NCLT and IBC is an improved version. The response under the process is so far so good.” Despite the latest communication by the Finance ministry, the top management of banks are reluctant, given their functioning as independent entities with different work cultures for decades, a banker said. However, Finance Minister Arun Jaitley believes that the experience with consolidation has been positive so far. Earlier this year, even the RBI Governor Urjit Patel had said that the system would be better off with fewer but healthier bank. Patel had added that the banks should bear the burden of recapitalisation themselves, rather than relying on the government.
Government savings through DBT touches Rs 65,000 Cr, says Prakash Javadekar (FE 18.09.17)
Union Human Resource Minister Prakash Javadekar said the central government has saved Rs 65,000 Cr through Direct Benefit Transfer (DBT) in various public schemes. Scores of welfare schemes have been linked to DBT, under which the receivables are transferred directly to the beneficiary’s bank accounts. DBT enables linking of Aadhar card to bank accounts and other subsidised services availed by citizens, covering a slew of government schemes. It is being used to plug the loopholes in the system due to which the government incurred losses. “With one third achievement in DBT, the government has been able to save Rs 65,000 Cr. Imagine how much money government will save when we will achieve DBT completely,” Javadekar said. The government has successfully opened 30 Cr Jan Dhan bank accounts, while 118 Cr Aadhar numbers have been issued, Javadekar said.
CVC to probe govt employees deposits post demonetisation (BL 17.09.17)
Deposits of scrapped currency notes made by the central government employees post demonetisation will be probed by anti-corruption watchdog Central Vigilance Commission (CVC), its chief K V Chowdary said. He said the commission has sought relevant data from income tax authorities in this regard. Prime Minister Narendra Modi had on November 8 last year announced the scrapping of old Rs. 500 and Rs. 1,000 notes. Citizens were provided a limited time window to deposit such notes in their bank accounts. “We have already sought data (from the CBDT). We will get more refined data on which we will certainly proceed,” Chowdary said. The CBDT or Central Board of Direct Taxes is the apex policy—making body for the IT department. Chowdary said he had had discussions with tax authorities on how to conduct the exercise as the number of transactions involving cash deposits for the country as a whole is very huge. “So how do we see that whether the amount deposited by them (the employees) commensurates with their income or not. Because the CBDT is already doing this exercise for everybody, irrespective of (whether) somebody is an employee or non- employee. We have taken the help of the CBDT. We are yet to get (data),” he said. The CVC expects the CBDT to provide more specific data on the deposits.
Hike likely in FPI limit for corporate bonds (BS 18.09.17)
The RBI might soon increase foreign portfolio investment in the corporate bond market by around $2 billion from the current limit of $51 billion. The central bank and the finance ministry are said to have decided upon the matter and an official notification is expected before the end of this month. According to the website of the National Securities Depository, 99.2% of the $51-billion cap has already been utilised as on September 15. An official told Business Standard that the overall FPI limit in India’s debt market would not be raised. “The FPI limits from other unutilised or underutilised segments will be shifted to the corporate bond markets,” the official said. For example, the FPI limits in securitised debt instruments and state development loans remained heavily underutilised, with only 23% and 12.3% of the limits being used as on Friday, the NSDL website showed.
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Government may raise over Rs 15K cr from IPO of 2 PSU general insurers (FE 17.09.17)
Initial public offering of the two state-owned general insurance companies is likely to yield over Rs 15,000 Cr to the exchequer, said merchant banking sources. Out of the five state-owned general insurance companies, New India Assurance (NIA) and GIC Re are gearing up to hit the capital market over the next few weeks. The government had estimated to garner about Rs 11,000 Cr by diluting its stake in insurance companies as part of disinvestment plans for the current fiscal. In view of the current market condition, the government may easily get Rs 15,000 Cr by diluting stake in these two companies, sources said, adding it could be upwards of Rs 15,000 Cr. Initial public offer (IPO) is a part of the government’s plans to list four state-owned non-life insurers and the national reinsurer. These listings would help the government to meet its ambitious disinvestment target of Rs 72,500 Cr for the current fiscal. In case of GIC Re, the government will be selling 10.75 Cr shares, whereas GIC Re itself is likely to sell 1.7 Cr shares through IPO. Thus, a total of 12.4 Cr shares of the reinsurer would be sold through the share sale offer, constituting 14.22% of the company’s post issue share capital, as per the filing of the company.
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