Banking and Financial News for DT. 21/09/2017

Fino Payments Bank launches mobile banking app (BL 21.09.17)

In a bid to help develop the fintech ecosystem in India, Fino Payments Bank has launched its mobile banking app called BPay. Fino, which started its banking operations in July with 410 branches and 25,000 access points, aims to make banking easy for millions of under banked people in India. BPay is also an extension of its already existing wallet in the same name that was launched in December last year. The upgraded BPay app, available on Android at present, is now much more than just a wallet. The mobile banking app enables simple, paperless and convenient banking that allows customers to make bill payments, recharges, fund transfers and buy insurance either through wallet or bank account. An interesting feature of the mobile app is that it allows customers to seamlessly access wallet as well as savings account, with a single login and interface, Fino said in a statement. Rishi Gupta, MD & CEO, Fino Payments Bank, said, “Over a decade ago we pioneered digital banking in rural India through biometric solutions. Going forward we believe rural India or Bharat, where mobile internet usage is growing at 26% year-on-year, will drive mobile banking adoption. BPay app will play a critical role in our endeavour to bring banking closer to 50 million customers in 5 years, largely driven by tech savvy rural youth.”

Cheque books, IFSC codes of 6 subsidiary banks invalid from Sept 30: SBI (BS, FE 21.09.17)

SBI notified its customers that cheque books and India Financial System (IFS) code of six of its subsidiary banks would be invalid from September 30 and asked them to submit new applications. These banks are — Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Raipur, State Bank of Travancore, State Bank of Hyderabad and Bhartiya Mahila Bank. Earlier in April, these banks had merged with SBI, which put SBI among the top 50 banks in the world, reported Money Control. The bank is also examining customer feedback over the charges for non-maintenance of monthly balance in their accounts. Earlier in April, SBI had retrieved charges for non-maintenance of monthly average balance (MAB) after 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," Rajnish Kumar, the banks managing director (national banking group) said. On the minimum balance issue, Kumar also said that there could be a change in policy, especially for senior citizens and students who have an account with SBI. MAB for metro branches were raised to Rs 5,000 and penalty for non-maintenance of minimum balance was decided to be kept between Rs 50 and Rs 100. For urban and semi-urban branches, it was fixed at Rs 3,000 and Rs 2,000 respectively.

Kotak Mahindra Bank emerges 2^nd only to HDFC Bank; ICICI Bank pushed to 3^rd (FE 21.09.17)

Kotak Mahindra Bank (KMB)’s market capitalisation is nudging Rs 2 lakh Cr. On Wednesday, the private sector lender’s market cap stood at Rs 1.95 lakh Cr while ICICI bank’s m-cap was Rs 1.86 lakh Cr. KMB is the country’s second-most valued private lender after HDFC Bank, which commands a market cap of Rs 4.77 lakh Cr. Shares of KMB closed Wednesday’s session 0.87% lower at Rs 1,025.45 on BSE. The stock is up 42.6 % so far in 2017, while the return over one month is 5.58 %. The bank recently raised Rs 5,806 Cr through a placement of shares at Rs 936 per share. ICICI Bank’s market cap had hit Rs 1.95 lakh Cr on July, 25 but since then the stock has lost close to 4.5 %. While Axis Bank is valued at Rs 1.24 lakh Cr, Indusind Bank is valued at Rs 1.03 lakh Cr, respectively. KMB reported a consolidated profit after tax (PAT) in Q1 FY18 of Rs 1,347 Cr. The lender posted profits for FY17 of Rs 3,411 Cr. The lender is strongly capitalised with a Tier I capital of 18.8% and the total assets at the end of June were Rs 2.9 lakh Cr. “KMB’s deposit franchise is growing strongly, providing a base for faster growth,” JP Morgan said in a report. Kotak Mahindra Prime, bank’s car finance company reported robust loan growth of 25% y-o-y in 1QFY18.

After HDFC Bank, Yes Says No to 2,500 Jobs (ET 21.09.17)

Yes Bank has eliminated about 2,500 jobs -more than 10% of its workforce -citing increased redundancy, poor performance and the impact of digitisation. The reduction in Yes Bank's 21,000 strong workforce marks the second recent cut in India's private-sector banking space. HDFC Bank, the country's most valuable lender by market capitalisation, has trimmed its workforce by about 11,000 over three quarters to March 2017. “As part of the bank's regular human capital management practices, to ensure higher productivity and improved efficiencies, the bank undertakes some performance-linked actions on a periodic basis,“ Yes Bank said in an e-mailed response. “We have a process of identifying bottom performers every year as part of our normal appraisal cycle. These actions are not any different from those being pursued by other leading private sector banks.“ Separately, the bank referred to a natural attrition rate in line with the industry average, and included staff from the frontline sales force. The Indian banking industry has an annual at Bank insiders said the lender will continue to cut jobs to reduce redundancy, simultaneously attracting top talent that it will need from top campuses and laterally from peer banks for key growth functions. At the end of June, total headcount was 20,851. “The bank's digital transformation exercise is also underway, with a greater degree of automation and digitisation, aimed at better productivity and cost efficiency, and customer service,“ the bank said. “This will additionally aid in rationalising some redundancies. It will be our constant endeavour to further digitise the bank operations.“

Yes Bank Reaches out to Global Fintech Startup Accelerators (ET 21.09.17)

To deepen its reach into the fintech startup ecosystem across the world, Yes Bank's Business Accelerator programme for fintech startups is now forging partnerships with multiple international startup accelerators which have wide networks in areas such as digital payments, real-time data analytics, cybersecurity and process automation. The accelerators include OurCrowd, an Israel-based Crowd funding platform, US-based fintech accelerator QC Fintech, Lattice 80, which is Singapore's largest fintech hub, Holland Fintech, which is based in Netherlands and Nestholma, a fintech accelerator among others. “Most fintech startups are geography agnostic. Yes Bank intends to bring market leading fintech solutions in different geographies to Indian market. Currently, we want to have a deeper understanding of their products,“ said Amit Shah, senior president, Yes Bank.

Karnataka Bank Shortlists Advisors for Digital Push (ET 21.09.17)



Karnataka Bank has shortlisted three consultants to suggest a change in strategy with a digital focus as it prepares to achieve a 80,000-Cr loan book by March 2020 and reduce costs to improve profitability, CEO Mahabaleshwara M S said. “We feel there is a growth opportunity in the next few years if we look at human resource and service transformation in light of the opportunities presented by digital technologies and away from brick and motor branches. It could also include rebranding. We plan to create a new chief transformation officer position at the general manager level with our vision 2020 in mind,“ Mahabaleshwara said. He said the new strategy would help the bank reduce costs, increase business per branch and profit per employee. The bank has 773 branches and plans to increase it to 800 by the end of this fiscal. In a notice to BSE earlier on Wednesday Karnataka Bank said its board will meet on September 24 to select a consultant and agree on the strategy for the future. This will be the second time in five years that the bank will engage an outside consultant. In 2012, the bank had hired KPMG for a so-called business process re-engineering to double business in a three year time frame.

UBI Charts Out Vision 2020 (ET 21.09.17)



Centralisation, verticalisation and digitalisation would be the strategic levers for Mumbai-based Union Bank of India's quest toward revenue leadership, with the lender seeking to be the third-largest domestically by 2020 and securing 1% return on assets by then. Last week, the bank's top management discussed these issues as part of an exercise that sought to achieve an annual profit of 4,000 Cr and become the fifth largest lender in market capitalisation under the Vision 2020 plan, two people familiar with the development said. The state-run lender is likely to put the maximum thrust on these areas along with specialisation, performance parameters, risk and compliance, and human capital. “We will see in future that much will happen in the above seven points in order to achieve the Vision 2020,“ said a note circulated after the meeting. The bank reported a net profit of 557 Cr in FY17, with ROA at 0.13%. “There has been a palpable change the way the management is thinking about the future after our new MD has taken over,“ said a senior official. Rajkiran Rai G took over as MD on July 1.

Banks Told to Scan Accounts of Shell Cos' Promoters, Directors (ET 21.09.17)

The government has asked lenders to scrutinise all bank accounts of promoters and directors of shell companies for possible fraudulent activities as part of an ongoing crackdown on shell companies. In some cases, investigating agencies have already shared relevant information with the banks, officials said. Besides, banks will now secure their loans to such borrowers by asking for more collateral, said a senior government official. “Multiple investigating agencies including Serious Fraud Investigation Office are looking into the role and activities of such promoters and directors. Banks have been asked to step up scrutiny of such individuals and firms,“ the official said, adding that the aim is to identify the actual beneficiaries behind these firms. On Tuesday, the government released a list of around 55,000 directors of shell companies who have been barred from such role in the future. In all, the government has identified over a lakh such directors of shell companies. This came after bank accounts of more than 200,000 shell companies were frozen earlier this month after they were struck off the Register of Companies. The step was taken as part of the government's drive against black money. According to the latest figures released by RBI, loss incurred by banks due to frauds went up 72% to 16,770 Cr in 2016-17 from 9,750 Cr in 2012-13. A senior bank executive said banks have stepped up the vigil on such promoters and are taking steps to protect their interest.

 

CBDT proposal on advance estimates of tax liability irks industry (BS 21.09.17)

A draft notification by the Central Board of Direct Taxes (CBDT) has not gone down well with the industry, which said it would increase compliance burden on them at a time when they are already struggling to cope with issues related to the goods and services tax (GST) regime. However, some of them said that the notification is aimed at bringing about transparency. The CBDT had proposed that companies and taxpayers, who have to get their accounts audited, will be required to submit their income estimates and tax liability for six months of the financial year 2017-18 to the I-T department by November 15. It had come out with a draft notification seeking stakeholders' comment on the filing of Form 28AA by giving details of income and advance taxes paid. Naveen Wadhwa of Taxmann says currently taxpayers are struggling with compliance burden after the introduction of GST, the Income Computation and Disclosure Standards (ICDS) norms and Indian Accounting Standard (Ind-AS). "Such reporting will put additional compliance burden on taxpayers," he said. Also, businesses have to specify the reason for any reduction in advance tax payment compared to preceding financial year. Also in cases where the total income has declined by Rs 5 lakh or 10%, whichever is higher, compared to the previous financial year, taxpayers will have to furnish a similar statement of income and tax liability for the April-December period by January 31.

2.2 mn GST returns filed till 6 pm, deadline ends midnight (BS 21.09.17)

Nearly 2.2 million GST returns have been filed, so far, for August as businesses flocked the GSTN portal to submit their returns on Wednesday -- the last day for tax filing. Over 2.18 million returns were filed till 1800 hours, a source said. Return filing would continue till midnight. This is the second month of return filing under the Goods and Services Tax (GST) regime and similar to last month, businesses thronged the GST Network portal on the last day to pay taxes. Nearly 45 lakh businesses had filed returns in July fetching a revenue of Rs 95,000 Cr to the exchequer. Finance Minister Arun Jaitley had earlier in the day said that GSTN has the capacity to handle 1 lakh returns per hour, which translates to 24 lakh returns in a day, but if majority of taxpayers decide to pay taxes on the last day then the system would have some trouble. "Therefore I would appeal to everybody, it is in their interest (to file returns early)," Jaitley said.

`RBI Unlikely to Cut Rate to Rein in Rupee' (ET 21.09.17)

RBI is unlikely to cut interest rates to tackle the appreciation of the rupee and temper inflows of foreign funds. Instead, the central bank will continue to purchase more of foreign exchange from the market and sterilise the excess liquidity by selling government bonds in the open market, Morgan Stanley economists said in a note. India's forex reserves crossed $400 billion for the first time ever last week mainly driven by buoyant capital inflows, which has offset a widening current account deficit. But it has also created another challenge for the RBI to ensure that the rupee does not rise sharply which would hit exports and impact job creation in the country. India's reserves have increased sharply to more than $400 billion now from $275 billion in September 2013. RBI's dollar buys have ensured that forex reserve accretion in India is the fastest in Asia excluding Japan, barring Hong Kong, according to Morgan Stanley. Between January and July, RBI has bought more than $16 billion of dollars from the spot currency markets and outstanding forwards have risen to at least a two-year high of $26.5 billion. “Given that FX reserves have risen further, RBI may have continued to accumulate dollars in August and September to date,“ Morgan Stanley said. However, RBI is unlikely to tackle currency appreciation directly through rate cuts. “(Instead like it has done so far), RBI will respond with further intervention (resulting in further build-up of FX reserves) and sterilisation of liquidity via OMOs (open market operations), even though the RBI would have to incur sterilisation costs while doing so,“ Morgan Stanley said.

 

Microfinance sector must work on its strengths for growth: RBI (BL 21.09.17)

The days of regulatory forbearance vis-à-vis non-performing assets (NPAs) are over and the micro-finance sector has to grow on the basis of its own strength, according to RBI Deputy Governor NS Vishwanathan. “One of the things that we are being requested by the MFI sector is to kind of recognise the issue of NPAs in the recent past. …It is not that everybody faces the same extent of problem. “So, I think, in the same situation there are some entities that have a lower default as opposed to others,” he said. While the regulated entities can always ask for forbearance, Vishwanathan underscored that the fundamental thing that this leads to is a question of introspection as well: “As to what have we done, have we done the right thing, have we overstretched, have we extended beyond what was required because the impact is not uniform? “The days of regulatory forbearances are over. I don’t think we are looking at any kind of regulatory forbearance. If there is capital erosion, the capital has to be met by the capital providers,” he said. In terms of stabilisation of the sector, the Deputy Governor observed that there is fair amount of stability. “But I don’t think we have reached a stage where we can say that all the people who can be targeted by MFIs today have been targeted….,” he said. Whatever changes the RBI will make in the sector will not be on the basis of forbearance, the Deputy Governor said and added that MFIs must learn to work on their strengths. “Being strong is very important. Growth on the basis of strength is very important rather than seeking a concession here and a concession there…Responsible financing on the one hand and responsible availing of credit on the other hand will enable both the stakeholders to grow.”

Peer-to-peer lending platforms to be treated as NBFCs (BL 21.09.17)

After a year or more of due-diligence, the RBI has notified that peer-to-peer (P2P) lending platforms need to be regulated and treated on par with non-banking financial companies (NBFCs). In a notification, the RBI has pressed the need for regulation of this segment, which is fairly nascent in India with only 10-12 small players. While the final guidelines are still awaited, P2P lending platforms such as LenDen Club, Faircent, Qbera, Lendbox, Rupaiya Exchange and Monexo are a relieved lot. The players, had themselves, been asking the apex bank for regulations that would help bring credibility and trust into the business. Bhavin Patel, co-founder of LenDenClub, said that the move will bring a lot of legal clarity wherein the platform will have the rights to take legal action against defaulters. Most of these borrowers are small businesses with no credit history. Mukesh Bubna, founder of Monexo, which launched its operations in India last year, said the biggest challenge in the segment is awareness about P2P platforms, which have to spend time, energy and money to educate consumers about the industry just as the mutual fund industry has done so far. According to Aditya Kumar, Founder and CEO Qbera.com, the lack of regulatory framework has led to very slow growth in the segment which has been in existence for the last 2-3 years. He also said that many lenders tend to look at regulations before returns in the digital space. While the players are expecting the final guidelines soon, they do not expect RBI to cap interest rates like it did in the microfinance sector. At present, the biggest challenge in the sector, which could disrupt the urban financial inclusion space, is that most of the players are outside the formal credit rating and reporting process — a reason why lenders and even several investors shy away from investing.

Govt. moving to spur growth, hints Jaitley (BL, BS 21.09.17)

Finance Minister Arun Jaitley has indicated that the government could take additional measures to spur economic growth, which slumped to a three-year low in the first quarter of the fiscal year.

“We have taken note of all economic indicators which are available. The government will take all necessary additional moves... We will consult the Prime Minister before any announcement,” Jaitley said. Questioned about the spike in petrol and diesel prices, Jaitley slammed the Opposition parties for crying foul over the high prices and dared the Congress and CPI-M led State governments to slash the value-added tax they have imposed on petroleum products. “Two years ago, oil prices were reviewed on a fortnightly basis… States like Delhi, Haryana and Himachal Pradesh used to hike the VAT the same evening by the exact amount that prices were reduced,” he said. Defending the government’s decision to not lower the Central excise duty on fuel, Jaitley further said: “As much as 42% of Central taxes goes to the States…Let CPI-M and Congress-led States say they don’t want it.” He also maintained that inflation is well under control and within the monetary policy target of 4%. “When those who are crying about rising petrol prices were in power, inflation was at 10-11%. Now, inflation is at 3.36%,” said the Finance Minister. His comments come at a time when both the Centre and States have been passing the buck on lowering duties on fuel as global crude oil prices harden and hurt consumers.

Stimulus package in the works: Focus may be on affordable housing (BS 21.09.17)

The government could use the affordable housing route to help the economy out of the blues and generate jobs. Social sector schemes could also be revised to boost demand and rev up the slowing economic growth, sources said.  A stimulus package seems to be in the works but the specifics are being kept under wraps. At a press conference after the Cabinet meeting on Wednesday, Finance Minister Arun Jaitley did not disclose the measures being discussed to lift the economy. He only said some necessary measures would be announced after discussions with Prime Minister Narendra Modi, Cabinet colleagues, officials and experts. He also held a meeting with his colleagues and senior government officials on Tuesday to take stock of the situation. Already, commerce and industry ministry has demanded a package for exports and manufacturing. Commerce and Industry Minister Suresh Prabhu in a series of tweets said: “We are working in close collaboration with the finance ministry to address the issue of blockage of working capital, speeding up refunds of taxes paid by exporters.” However, there are signals on the contrary from some parts in the government, suggesting that offering a fiscal stimulus may be at the cost of fiscal deficit target of the Centre.  A stimulus package could prod the Reserve Bank of India to cut the policy rate and intervene to depreciate the rupee.

 

Fed keeps rates steady, approves portfolio cuts in October (BL 21.09.17)

The U.S. Federal Reserve left interest rates unchanged on Wednesday but signaled it still expects one more increase by the end of the year despite recent weak inflation readings. New economic projections released after the Fed's two-day policy meeting showed 11 of 16 officials see the “appropriate" level for the federal funds rate, the central bank's benchmark interest rate, to be in a range between 1.25% and 1.50% by the end of 2017. That is one-quarter of a point above the current level. “The labor market has continued to strengthen ... economic activity has been rising moderately so far this year,” the Fed said in its policy statement. It added that the near-term risks to the economic outlook remained “roughly balanced” but that inflation was being watched “closely.” The interest rate outlook for next year remained largely unchanged, with three hikes envisioned. But the U.S. central bank slowed the pace of projected monetary tightening from there. It forecasts only two increases in 2019 and one in 2020. It also lowered again its estimated long-term “neutral” interest rate from 3.0% to 2.75%, reflecting concerns about overall economic vitality. The Fed, as expected, also said it would begin in October to reduce its approximately $4.2 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities by initially cutting up to $10 billion each month from the amount of maturing securities it reinvests. That action will start a gradual reversal of the three rounds of quantitative easing the Fed pursued between 2008 and 2014 to stimulate the economy after the 2007-2009 financial crisis and recession.

Theleme Master sells BoB shares worth Rs 1,115 cr through open transaction (BS, ET 21.09.17)

Theleme Master Fund Ltd, a UK- based hedge fund, offloaded Bank of Baroda shares worth Rs 1,115 Cr through an open market transaction. The hedge fund sold its entire holding of 3.29% or 75,817,327 shares of the bank, according to bulk deal data available with BSE. The shares were offloaded on an average price of Rs 147.06, valuing the transaction at Rs 1,114.97 Cr, data showed. Merrill Lynch Markets Singapore Pte Ltd picked up 75,473,856 scrips at Rs 147.08 apiece. This takes the transaction size to Rs 1,110.07 Cr. Following the development, shares of Bank of Baroda gained 2.84% to close at Rs 148.40 on BSE. During the intra-day trade, the stock touched a high of Rs 150.70.

 

Advance tax payout by top cos grows just 2% in Sept quarter (BL 21.09.17)

The advance tax paid by top Mumbai-based companies in the September quarter has gone up by just 2% to ₹30,200 Cr against ₹29,600 Cr, largely due to uncertainty in GST regime, according to informed sources. In the last two quarters, the top-100 companies have remitted ₹46,800 Cr (₹45,200 Cr), an increase of 4% which reflects the stress in the economy. Corporates pay 15% of their estimated total tax liability in June quarter, 45% in September, 75% in December and the final tax outstanding in March. SBI paid marginally lower tax of ₹1,200 Cr (₹1,210 Cr) while Bank of Baroda and Central Bank of India payout reduced by 20% and 6% to ₹500 Cr (₹620 Cr) and ₹150 Cr (₹160 Cr). ICICI Bank and Kotak Mahindra Bank maintained their payment at last year’s level of ₹1,200 Cr and ₹460 Cr during this quarter. However, ICICI Bank’s overall remittance in this fiscal is down 5% at ₹1,800 Cr. IndusInd Bank payment was down 7% at ₹500 Cr. Housing Development and Finance Company paid ₹870 Cr (₹850 Cr). With tax payout of ₹3,000 Cr (₹2,600 Cr), Reliance Industries retained its top slot even while public sector refiners IOC cut its payment by 18% to ₹1,000 Cr.

Banks Likely to Reject Essar Steel's Demand for Working Cap Loans (ET 21.09.17)

Banks are likely to reject bankruptcy-facing Essar Steel's demand for 1,000 Cr of working capital loans as the lenders are easing the other monetary restrictions they imposed on the company to safeguard their interests, said two people familiar with the developments. Banks have decided to do away with the so called `tagging' of Essar Steel's account which has resulted in restricted flow of funds to the company from its businesses, said those people. The move, though it deprives of fresh loans to the beleaguered steel maker, it could release as much 3,120 Cr of additional fund annually which may be sufficient to keep the plants running as the company works its way out of the bankruptcy. Tagging is a practice that banks follow where they forcibly withhold a proportion of the sale proceeds of a defaulted company which comes up during its normal course of business. Banks release funds for the company's use only after taking a share of what is due to them. Banks, led by State Bank of India, have initiated corporate insolvency proceedings against Essar Steel on August 2 after they faced severe resistance from the company. Lenders have an exposure of 45,655 Cr to the company and every month a sum was 260 Cr was deducted as `tagging' by banks. According to the lenders, under the new recovery law, the Insolvency and Bankruptcy Code, banks are not allowed to tag an account. This is one of the reasons why banks are reluctant to give additional loan even as the RBI has allowed banks to classify the fresh loan as standard assets, said a bank official.