IndusInd Bank net up 25% at ₹880 Cr in Q2 (BL 13.10.17)
Healthy growth in advances and low-cost deposits helped IndusInd Bank report a 25% increase in second quarter net profit at ₹880 Cr against ₹704 Cr in the year ago period. The private sector bank’s net interest income (difference between interest earned and interest expended) was up 25% at ₹1,821 Cr. Other income, comprising distribution fees, loan processing fees, investment banking, foreign exchange income, trade and remittances, and trading income, among others, rose 22% to ₹1,188 Cr. Net interest margin (NII/ average interest earning assets) in the reporting quarter was steady at 4%. Overall advances increased by 24% to ₹1,23,181 Cr. Corporate advances were up 26% to ₹73,716 Cr and consumer finance advances were up 22% to ₹49,465 Cr. While vehicle financing had suffered over the last few quarters due to the impact of BS IV (emission) norms, demonetisation, and implementation of GST, September was a record month for the bank in terms of commercial vehicles loan disbursement (of ₹2,300 Cr), said Romesh Sobti, MD & CEO. Overall deposits were up 26% to ₹1,41,441 Cr. Within this, savings bank deposits soared 95% to ₹40,157 Cr. Slippages during the reporting quarter were lower at ₹498 Cr (₹608 Cr in the preceding quarter). Gross NPAs to gross advances ratio nudged up from 0.90% in September 2016 quarter to 1.08% in the September 2017 quarter. Of the 40 large stressed accounts referred by the lenders’ consortium to the National Company Law Tribunal (NCLT) for resolution, Sobti said his bank had an exposure to nine accounts. The bank has made a provision of ₹36 Cr towards these accounts.
IndusInd Bank Q2 results: The good run continues (BL 13.10.17)
At the industry level, bank credit growth has been languishing at 5-8% levels over the past three years. A few banks though, have remained resilient, clocking healthy earnings growth during this period. IndusInd Bank, that has been registering 25-30% earnings growth in the last couple of quarters, has not seen any material deviation from its robust past performance in the latest September quarter. A well-diversified portfolio leading to above-industry loan growth, increasing share of low-cost deposits and higher proportion of fixed rate loans aiding margins, healthy growth in fee income and stable asset quality — these sum up the bank’s performance in the latest September quarter. The bank’s 25% growth in net profit during the September quarter, has been achieved thanks to the strong 24% growth in loans and 25% growth in net interest income. The healthy growth of 22% in the bank’s fee income further aided earnings. Apart from the healthy growth across key segments, growth in the commercial vehicle financing segment, that had moderated last fiscal, is slowly recovering. Within retail, barring credit cards, gross non-performing assets as a% of loans fell for other key segments in the September quarter vis-à-vis the June quarter. In any case, at the aggregate level, the bank has been maintaining steady asset quality over the last several quarters. Thanks to its well-diversified loan portfolio, IndusInd Bank has been able to offset the slackness in one segment, with lending opportunities in other segments. For instance, within the retail segment, over a third of loans comes from commercial vehicle financing. Despite the sluggishness in this segment in recent quarters, the bank has been able to grow its retail book upwards of 20%, thanks to other segments firing on all cylinders. In the September quarter, the CV segment too saw a recovery. After clocking a modest 11% growth in 2016-17, growth picked up marginally in the June quarter to 12%. This inched up further to 15% in the September quarter. While the bank has been recording a robust growth in riskier loans such as credit cards, and loan against property, among others it has managed to keep bad loans under check. Within corporate loans again, a granular portfolio has helped. Also, the MCLR framework has helped the bank offer competitive rates and tap into opportunities in the corporate segment, particularly working capital financing. The bank’s one-year MCLR has fallen to 8.95% as of September 2017 from 9.75% as of September 2016. The 60-80 basis point fall in yields over the past year has been offset by a commensurate fall in cost of deposits. Hence, on the margin front, a couple of factors have aided the stable performance in a falling rate scenario. One, IndusInd Bank has relatively higher proportion of fixed rate loans (70%). Two, increasing share of low-cost CASA deposits — there has been a near two percentage increase in CASA ratio for the bank between the September quarter of last year and the current fiscal. Trimming of relatively higher rate on savings deposits that the bank has been offering, also aided margins. The bank’s bad loans have also been under check, despite the stellar run in loans. The gross non-performing assets (GNPA) stood at 1.08% of loans as of the September quarter. Restructured assets as a proportion of loans are also low at 0.16%.
HDFC Bank launches SmartUp zones to nurture, collaborate with start-ups (BL 13.10.17)
HDFC Bank wants to become the ‘Go To’ bank and preferred banker for the start-up community in the country, a top executive of the private sector bank said. Towards this end, HDFC Bank on Thursday announced the launch of SmartUp zones in its branches across India. “We have now completely revamped our offering for start-ups. Our aim is to become the Go-to Bank and preferred banker in the start-ups community. Numbers will follow,” Smita Bhagat, Senior Executive Vice-President and Head of E-Commerce and Branch Banking, HDFC Bank said. She said HDFC Bank, which is already engaged with 150 start-ups, wants to “nurture” innovate and collaborate with more start-ups, especially in interior India where there is an emerging start-up ecosystem. “Our economy will grow only if you help the start-ups. We want to grow with them. Of course, failures will be there. We should accept failures and try to address their problems.” A SmartUp Zone is an exclusive area inside the branch dedicated to start-ups. In the first phase, SmartUp zones will be launched in over 65 branches in 30 cities including Tier-2 and-3 cities that are emerging as start-up hubs. Through these zones, specially trained bank staff will offer tailor-made banking and advisory solutions to entrepreneurs. Two-and-a-half years ago, HDFC Bank had started engaging with Start-ups through a product called ‘Smartup’, providing vanilla banking products and freebies. Now, it has added a number of value-added services like SmartUp portal, advanced legal advisories, and industry-academia interaction, among others. Through a Smartup portal, start-ups will be able to tap into the knowledge and experience of a complete network of start-ups while simultaneously offering their services to this universe. Start-ups will also have access to HDFC Bank’s SmartBuy platform, which allows them to market their product to the general public. They will be able to showcase their products to over 40 million HDFC Bank customers. HDFC Bank is looking to tackle specific pain points of the start-ups community. For instance, the private sector bank is looking to help them to demat their unlisted shares so that exits become easy for investors. “We identified this as a very big pain area for start-ups and so are helping them out. Our SmartUp zones will provide end-to-end solutions for start-ups,” she said.
SBI’s SME Assist to provide short-term loans to MSME clients (BL 13.10.17)
SBI said it has launched a new product to provide short-term working capital demand loans to its MSME clients. The new initiative, called SME Assist, would offer loans to MSME customers on the basis of their input credit claims under Goods and Services Tax (GST). The loans will be offered at a concessional rate of interest, the bank said in a statement. “This product will help them manage their working capital requirements till the time they get input credit. It will also help stabilise the SMEs to run their operations without any hurdle,” the bank’s Chief General Manager (SME), V Ramling, said in the statement. The loan will be sanctioned outside Assessed Bank Finance (ABF) at 20% of the existing fund-based working capital limit or 80% of input tax claim due on purchases, whichever is lower. The loan processing fee under the scheme is Rs. 2,000. Companies applying for the loan have to provide a certificate from their chartered accountant confirming the input credit claims. Under the scheme, the SME borrowers would have a moratorium period for the first three months, the bank said. The ad-hoc amount can be repaid either in one bullet payment or in six EMIs in the next six months after the moratorium period is over. The SME customers of the bank can avail of the loan under the facility till March 31, 2018.
SBI loan festival (BL 13.10.17)
State Bank of India (SBI) will conduct a home and car loan festival – ‘SBI Habba’ – in Mangaluru on October 14 and 15. VK Sukumar, Deputy General Manager of the bank said that reputed builders and automobile dealers from Mangaluru will participate. Farooque Sahab, CGM (Bengaluru Circle), will inaugurate the loan festival.
We have strong faith in microfinance business: Romesh Sobti (BL 13.10.17)
IndusInd Bank has strong faith in microfinance business, said Romesh Sobti, MD & CEO. This observation comes in the backdrop of the private sector bank entering into a ‘confidentiality, exclusivity, and standstill’ agreement with Bharat Financial Inclusion last month for due diligence and discussions to evaluate a potential strategic combination between the two financial sector entities. Sobti said, “The (microfinance) industry is back at normal levels of disbursement since demonetisation…The industry has taken more than affirmative steps to get over the hump…The micro-finance industry has performed much better than it was expected to.” “We’d never get into a transaction of this nature when there is volatility… Demonetisation was a black-swan event and thus was only a blip and has thus not deterred us.’” As at September-end 2017, microfinance accounted for 2.18% of the overall loan book. Sobti said this is expected to grow to about 5% by 2020. Under microfinance, the bank provides loans to weaker sections of society through the ‘business correspondent model’ involving microfinance institutions that are geographically spread across the country. According to the bank’s annual report, the loans have helped support micro-enterprises such as saree trading, snack stores, tea stalls and bicycle repair shops. The bank, according to the report, has a dedicated Inclusive Banking Group which adopts a collaborative approach by partnering with suitable intermediaries/ institutions for furthering the cause of financial inclusion.
Common written test results valid only for subsequent financial year, says IBPS (BL 13.10.17)
The Institute of Banking Personnel and Selection (IBPS) has said that results of the common written examination conducted by it during a year are valid only for the subsequent financial year, and not in perpetuity. The point was articulated in a ‘limited affidavit’ filed by it in the Bombay High Court in response to a writ petition by officer candidates in the reserve list for 2016-17 seeking allotment to ‘non-joining’ vacancies. The petitioners had contended that IBPS should have allotted the reserve candidates against vacancies arising on account of candidates in the merit list not taking up their appointments. But there can be no such compulsion, the affidavit said. The decision whether or not to allot candidates from the reserve list is to be taken by participating banks alone. In the present case, the concerned banks were not able to, or did not desire to fill all vacancies existing at the end of the financial year. The validity of the score card automatically had expired on March 31, 2017. Hence, the petitioners cannot claim any relief in respect of the scores obtained by them in the written examination for 2016-17. The common recruitment is an independent process for filling up of reported vacancies for a specific period. On completion of the prescribed period, the common selection process gets completed and the process is closed. IBPS is a mere test-conducting agency; it neither creates nor fills vacancies in the participating banks. The decision whether or not to allot candidates from the reserve list is to be taken by the latter alone. Therefore, it is only bound by the number of vacancies reported by the participating banks in advance for the following financial year. The banks have envisaged such a scheme to ensure a level playing field. With the allotment of merit-listed candidates against reported vacancies, the common recruitment selection process was over by March 31, 2017. Hence, the question of granting any remedy to the petitioners does not arise.
HSBC names retail head John Flint as next chief executive (BL 13.10.17)
HSBC has appointed John Flint as its next chief executive, the bank said, sticking with a tradition of promoting company insiders to run the firm. Flint, who currently runs HSBC's retail and wealth management business, will start in his new role on February 21, 2018, taking over from current chief executive Stuart Gulliver, who is retiring after seven years in the job. The appointment marks the first major decision taken by the bank's new chairman, former AIA Group chief Mark Tucker, who joined HSBC on October 1 as its first ever externally-appointed chairman. Flint, no relation to outgoing chairman Douglas Flint, is viewed by other executives inside HSBC as a safe pair of hands, having been at the bank since 1989. He has worked across most of its business lines and spent the first 14 years of his career with the bank in Asia, giving him the breadth of experience seen as vital to the CEO role. “He has a great understanding and regard for HSBC's heritage, and the passion to build the bank for the next generation,” Tucker said in a statement. Flint's main task will be to grow revenues across HSBC's businesses, as Europe's biggest bank seeks to grow profits again following a period of restructuring after the 2008-9 financial crisis. HSBC's previous management duo of Gulliver and former chairman Douglas Flint spent the years since their appointment in 2010 shrinking HSBC, after a period of empire-building in the run-up to the 2008 global financial crisis left the bank overextended.
Bankers wary of insolvency code as high provisioning looms (BS 13.10.17)
When the Insolvency and Bankruptcy Code (IBC) was introduced in Parliament in December 2015, bankers were jubilant that they could finally show some tough love to the borrowers gaming the system. But in less than a year since the Code became effective in December 2016, banks seem to have lost interest in the new framework. Earlier, the general perception among bankers and even policy makers at the RBI was that the absence of a strong bankruptcy code was behind the many ills in the banking system. The banking regulator had been rolling out one scheme after another, but out of design, or perhaps perversely, bankers used them to sweep their bad debt dirt under the carpet. Rightfully, then RBI governor Raghuram Rajan launched a diatribe against the banks and proposed a deep surgery in the form of asset quality review. The idea was to bring out all the bad debt on the bank books. And then, those bad debts were supposed to get cleaned up by the Bankruptcy Code. On the face of it, the process seemed pretty straightforward. Banks needed to refer a company to the National Company Law Tribunal (NCLT), which then would appoint an insolvency professional who would act as the CEO of the company. And in six months, the debt-laden company would either be nursed back to health, or liquidated and creditors be paid off. Bankers now are sort of pleading to the central bank that they don’t want to invoke the Code to all companies.
Banks need Rs 3.3 lakh Cr as NPA provisioning in FY18: Crisil (BS 13.10.17)
Banks are likely to need nearly Rs 3.3 lakh Cr this fiscal as provisioning for large NPA accounts in the current financial year, said a Crisil report. The report said with the economic value of assets underlying NPAs eroding with time, and resolutions are hard to come by, banks would need to step up on provisioning, mainly for large corporate NPAs. It will facilitate faster clean-up of their balance sheets. "Our estimates show that banks would need to set aside close to Rs 3.3 lakh Cr this fiscal, or 50% more than Rs 2.2 lakh Cr they provided for NPAs last fiscal," Crisil said in the report. The provisioning quantum was arrived at after an account-by-account analysis of the economic value of assets underlying large corporate NPAs. The potential write-downs could be in the 25-75% range, the rating agency said. While some of the NPA accounts have been adequately provided for, the majority of them will require higher provisioning compared with current levels, based on the residual economic value of the assets, it said. "It could lead to a net loss of nearly Rs 60,000 Cr for the banking sector this fiscal with public sector banks (PSBs) bearing the brunt of increase in provisions and the resultant impact on profitability because of their higher stock of NPAs," the report said. Though the assessment assumes effective resolution of stressed assets this fiscal, any delay would extend the pain on profitability into the next fiscal too. It further said banks operating profitability is likely to stabilise by the end of this fiscal due to improvement in the net interest income. It will be supported by lower interest reversals on non-performing assets (NPAs), pick-up in credit growth, and reduction in funding costs.
Tata Tele-Bharti Airtel deal will help stress resolution, say lenders (BS 13.10.17)
The transfer of Tata group’s consumer mobile business to Bharti Airtel is expected to lessen the debt burden on lenders and pave the way for further consolidation in the troubled sector. Though many cases, including Reliance Communication, await resolution, senior bank executives said the deal would bring relief to lenders as the telecom assets would move to an operationally-strong entity. According to senior PSU bank executives, the Tata group has conveyed it would stand by it loan clearing commitments. The executives said they expected the group to haggle for concessions (on payment terms), but hoped there wouldn’t be a big impact. As on March 31, the combined debt of Tata Teleservices and Tata Teleservices (Maharashtra) was over Rs 34,000 Cr (excluding the deferred payment liabilities to the government for spectrum), according to a Crisil report. Tata group is a special mention account. That means repayments by the group have stayed due between one and 60 days and repayments have never crossed the threshold of 90-days (after which a borrower account is termed as non-performing loan).
Non-food credit growth recovers to 7.46% (FE 13.10.17)
Growth in non-food bank credit recovered to 7.46% year-on-year (y-o-y) during the fortnight ended September 29 from a six-month low of 4.3% in the previous fortnight. The corresponding figure in the year-ago period was 12.55%. According to provisional data released by the RBI, outstanding loans to companies and individuals rose to Rs 79.62 lakh Cr from Rs 77.28 lakh Cr a fortnight ago. The net corporate bonds outstanding, at the end of June, was Rs 24.81 lakh Cr, up 20% from Rs 20.63 lakh Cr in June 2016, as per data released by Securities and Exchange Board of India (Sebi). Data from RBI showed that the net outstanding on commercial papers (CPs) stood at `3.93 lakh Cr as of September 30, up from Rs 3.49 lakh Cr in the previous year. Taken together with the outstandings on corporate bonds and CPs, the total outstanding credit in the system adds up to at least Rs 108.36 lakh Cr, up 10.3% from Rs 98.21 lakh Cr in the comparable period last year. Outstandings on corporate bonds as at the end of September are not available yet. Total bank credit rose 6.9% y-o-y to `80.1 lakh Cr, as against a 3.82% growth in the previous fortnight and 12.1% in the year-ago period. Aggregate deposits with the banking system grew 8.66% y-o-y to Rs 109.68 lakh Cr, up from R107.07 lakh Cr a fortnight ago. The credit-deposit (CD) ratio of the banking system, or the proportion of deposits deployed as loans, rose 35 basis points (bps) from the fortnight ended September 15 to 73.02%. This is the highest CD ratio clocked by the banking sector since demonetisation was announced on November 8, 2016. The increase in the ratio has come on the back of gradual improvement in credit deployment and a relatively slow growth in deposits during September.
Rural inflation at lower level in states with more Jan Dhan accounts: Report (FE 13.10.17)
The states with more number of Pradhan Mantri Jan Dhan Accounts have witnessed rural inflation at lower levels, according to a report. Since demonetisation, Jan Dhan accounts witnessed a steep growth and to date more than 30 Cr accounts have been opened. Top ten states accounted for 23 Cr accounts (75%) with Uttar Pradesh topping the list at 4.7 Cr accounts, followed by Bihar (3.2 Cr) and West Bengal (2.9 Cr). Nearly 60% of Jan Dhan accounts have been opened in rural areas alone. “The data shows that the states where more number of Jan Dhan accounts opened, the rural inflation is at lower level. This indicates that formalisation of economy has happened,” an SBI research report Ecowrap said. There is both statistically significant and economically meaningful drop in consumption of intoxicants such as alcohol and tobacco products in states where more PMJDY accounts opened, the report said. “This could be because of Jan Dhan-Aadhaar-Mobile (JAM) Trinity which has helped in better channelising government subsidies and helped in curbing the unproductive expenditure such as alcohol and tobacco expenses in rural areas,” the report said. There is also increase in household medical expenditure in more exposed regions like Bihar, West Bengal, Maharashtra and Rajasthan, among others, since October 2016 due to changing lifestyles and increased demand for medical services, the report said. The Consumer Price Index (CPI) or retail inflation stood at 3.28% in September as against 4.39% in September 2016. The report expects CPI inflation to remain sub-4% till December 2017 and remain sub-4.5% thereafter this fiscal.
Yes Bank, Axis Bank plea to sell Fortis Healthcare pledged shares rejected by SC (FE 13.10.17)
Refusing to ‘tinker’ with its earlier orders, the Supreme Court rejected banks’ request to allow them to sell pledged shares of Fortis Healthcare Holding to recover their dues. The court said it was not inclined to hear the lenders’ now and would hear the Daiichi Sankyo’s main plea to block sale of shares by Fortis promoters Malvinder and Shivinder Singh in the hospital group. Four banks, including YES Bank and Axis Bank, had sought intervention in the case and requested the bench headed by justice Ranjan Gogoi to allow them to dispose of mortgaged shares in the hospital chain. However, the bench refused to hear them, saying it would first like to hear “the case on merits” on October 25. The lenders may be heard at the next date, but after the main case is taken up. The Singh brothers have pledged shares worth Rs 1,582.75 Cr with YES Bank and Rs 390 Cr with Axis Bank. Besides, the duo owe another Rs 413 Cr to ECL Finance and Rs 55 Cr to RBL Bank. The apex court had on August 31 refused to allow Fortis promoters to sell their encumbered and unencumbered shares held by one of their companies in Fortis Healthcare to reduce their debt burden. The SC is hearing Japanese drugmaker Daiichi Sankyo’s appeal to block efforts by the Singh brothers to sell their stake in Fortis Healthcare Holding.
Improved global prospects to boost Indian economy: Jaitley (BL 13.10.17)
Dismissing concerns over a perceived slowdown in the economy, Finance Minister Arun Jaitley said that the improved prospects of the global economy will also have a positive impact on India. “If the world economy moves up, a consequential impact on the Indian economy will follow. This is one of the reasons why the Indian economy is also destined to move up,” he told investors at an interactive session organised by industry chamber FICCI. His comments come in the wake of the IMF upgrading growth forecasts for the global economy though it has scaled down India’s GDP growth projection for 2017. Commenting on the impact of demonetisation and the roll out of the goods and services tax that pulled down GDP growth to a three year low of 5.7% in the first quarter the Minister said, “When you undertake structural reforms of this kind, there can be short term impact for one to two quarters. But it shouldn’t have a long- term impact." Referring to the improved data on industrial output at 4.3% in August, Economic Affairs Secretary Subhash Chandra Garg said that September onwards, the data will show significant economic recover. Urging investors to consider investing in India, Jaitley said that opportunities in India are “tremendously wide” and said that the government is hopeful of foreign investments in the aviation and defence sector. “The aviation sector is expanding and there is huge expansion over the next few decades. US companies are natural investors,” he said, adding that evened in the defence sector, the government wants foreign companies to set up partnerships with Indian firms for manufacturing units in the country. He downplayed concerns over pending land and labour reforms and said that States have huge government land that they can provide for setting up industrial units. They are also free to amend their Land Acquisition Laws.
IIP cheer: August factory output rebounds at 4.3% (BL, FE 13.10.17)
Industrial output strengthened in August 2017 to record robust 4.3% growth as re-stocking of manufactured items gained momentum shrugging of the teething troubles posed by the GST implementation from July 1. A higher-than-expected demand on account of the festival season also bolstered factory output for the month under review, said economy watchers. Factory output recorded a muted 0.9% growth in July 2017, which was the first month after GST implementation. The Index of Industrial Production (IIP) recorded 4% growth in August last year. Also, the overall factory output growth for August 2017 was buoyed by strong performance in mining and electricity sectors. While mining industries output grew 9.4% (-4.3% in August 2016), electricity generation grew 8.3% (2.1%). However, for the period April-August 2017, factory output grew at disappointing 2.2% as compared to 5.9% growth in same period last fiscal. On an encouraging note, the sequential improvement in industrial growth in August 2017 was broad-based, led by all three sectors (mining, manufacturing and electricity) and five of the six use-based industries (except infrastructure/construction goods). However, 13 of the 23 sub-sectors of manufacturing with a weight of 27% in the IIP, recorded a contraction in August 2017. Meanwhile, the Consumer Price Index (CPI) inflation for September 2017 came in at 3.28%, the same level as previous month. The latest print is lower than 4.39% recorded in September last year. It is also below the Reserve Bank of India’s medium target of 4%. Consumer food price Index (CFPI) inflation, which has a weightage of about 40% in overall CPI, fell to 1.25% in September 2017 from a level of 1.52% in the previous month. It was 3.96% in September 2016. Aditi Nayar, Vice-President and Principal Economist, ICRA, said that the CPI inflation mildly trailed estimates for September 2017, on the back of the downward revision in the print for August 2017, and an unexpected easing in food inflation. The mild easing in food inflation in September 2017 relative to the previous month, was offset by the considerable rise in inflation for housing, on the back of the HRA revision, as well as fuel and light, and pan, tobacco and intoxicants, she said.
Working on a plan to rebuild capacity of banking sector: Jaitley (BL 13.10.17)
Finance Minister Arun Jaitley has said the Indian government is working on a plan to rebuild the capacity of the banking sector so that it could support growth. Jaitley, who is on a week-long visit to the US to attend the annual meetings of the International Monetary Fund and the World Bank, also said that reforming the banking system is the top agenda of the government. “Today, with global growth turning around, we are working to put up an actual plan in play to deal with the banking situation, which is top of our agenda. We need to rebuild the capacity (of the banking sector),” Jaitley said. “I inherited a banking system whose monies were lying in non-performing assets...are unable to service the debt. We are faced with a catch-22 situation as to how do we improve the capacity of the banks so that they can support growth,” he said. So, all these factors together adversely impacted the private sector, the minister said. Jaitley, however, also noted that bigger enterprises did not suffer, because they approached the bond market and foreign funding which were available at much cheaper rates. They did not had to go to the Indian banks. It is small and medium-sized enterprises that need the support of the banking system, Jaitley said, noting that SMEs are huge job creators. “That’s where the problem really is as far as the private sector is concerned,” Jaitley said.
RBI guidelines on full-KYC ‘can kill wallets’ (BL, FE 13.10.17)
Prepaid Payment Instrument (PPI) players in the country such as Paytm, ItzCash, Mobikwik and Citrus will soon meet senior RBI officials to discuss certain concerns over the recently announced guidelines. According to sources, wallet players are of the view that the guidelines on the stricter and mandatory Know Your Customer (KYC) norms for users of mobile wallets will be a deterrent to the growing wallet industry and that it might also “kill” smaller transactions. The RBI, in its guidelines, said the customers wanting to move money between different wallets and banks through Unified Payments Interface (UPI) will have to provide full KYC within the next 12 months failing which they will not be able to transfer money to wallets or to banks. All existing wallet users have been asked to convert to the full KYC format by this year-end. “They (RBI) are asking full KYC for transactions as low as ₹10,000. This will kill the industry and maybe take us back to the traditional mode of money transfers i.e. through banks,” said a source, who is a part of an industry body for wallets. Earlier, wallets used to have a minimum KYC format (by verifying the mobile number). He said the full KYC process is tedious, complicated and expensive for the wallet players and also cumbersome for many people, who have a normal bank account and use wallets for money transfers (remittances). “They announced it during Diwali, a time when remittances are the highest. A large percentage of the wallet users for remittances is people with blue-collared jobs, taxi drivers and daily wage labourers, among others. It will be difficult for them. “So, we (all stakeholders) are meeting the RBI officials to discuss this and re-think the guidelines,” he said, adding that 60% of the transactions that occur on wallets are remittances. However, a user can buy goods worth ₹10,000 and above without KYC. Another wallet player, who did not wish to be named, said, “At a time when there are issues regarding privacy and security breach in digital transactions, a full KYC would mean that the wallets have all the personal data of a user.” The government does not ask for any KYC details to purchase gold worth ₹2 lakh and below in cash. The meeting will also discuss the norms on making UPI compulsory for wallet players. Besides, it will discuss the guidelines restricting balance in KYC wallets (non-banking) to ₹10,000.
RBI releases discussion paper on forex trading platform for retail participants (BS, FE 13.10.17)
The Reserve Bank of India released a discussion paper on foreign exchange trading platform for retail participation seeking comments from stakeholders. The central bank proposes that Clearing Corporation of India (CCIL), which operates an interbank USD/INR spot trading platform named FX-CLEAR, would develop an electronic spot trading platform for retail customers modelled on their existing platform. The paper proposes to extend the existing FX-CLEAR platform to retail customers of the FX-CLEAR member banks through an internet based application. The retail market will be separate from the interbank market but will have the same market hours. Customers can directly execute the trade up to the limit by placing bid/offer quotes and trades will be executed by anonymous order matching on price-time priority. The minimum order size is proposed at $1,000 and in multiples of $500 while the maximum order size is intended to be $500,000. The central bank indicated that direct execution by the customer is likely to bring down the cost of transactions as there is no market risk to the customer’s bank apart from settling the inter-bank trade through the CCIL settlement system.
Flipkart commits $500 m to payments arm PhonePe (BL 13.10.17)
India’s largest e-commerce marketplace Flipkart announced an investment commitment of $500 million for its group company PhonePe, a payments platform. This is one of the largest single investment commitments in the Indian fintech-payments space, and the commitment adds to the $75 million worth of infusions Flipkart has made in PhonePe since acquiring it in 2015. The fintech ecosystem in India, especially payments, is undergoing a paradigm shift with surge in mobile internet usage. Accordingly, market research shows that the country’s digital payments sector is estimated to grow to $500 billion by 2020, representing around 15% of the GDP, up from around $50 billion last year. Commenting on the development, Sameer Nigam, co-founder and CEO, PhonePe, said: “The investment will be used to scale up our technology platforms and expand our merchant network and consumer base rapidly. We have been growing at over 100% every two months this year, and this investment will help us maintain the same aggressive growth rate for the next two years. PhonePe is strongly committed to helping the Indian government in realising its Digital India vision, and achieving its target of 25 billion digital payment transactions by next year.” PhonePe, which has over 45 million installs, has recorded over 16 million transactions on the back of the successful Flipkart Big Billion Days festival sale in September. The fintech firm’s annual run rate, as a result, touched a new high of $3.5 billion in terms of Total Payments Volume (TPV) in September. This ramp-up is the fastest in the Indian digital payments space, the company claimed.
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India Inc forecast to swing back to profit growth; economy to improve in second half of year (FE 13.10.17)
Corporate India is forecast to swing back to profit growth as businesses resume stocking up shelves after getting a better handle on the new countrywide tax regime. Earnings for the three months ended in September will increase 10% from a year ago, according to CLSA India Pvt. forecasts for the 104 companies it tracks, a turnaround from the 18% decline in the previous three months. Citigroup Global Markets India Pvt. expects profits for the 131 companies it covers to increase 13%. Government flip-flops on the goods and services tax, or GST that went into effect on July 1, compounded uncertainties lingering on from November’s cash ban. That contributed to a slowdown in growth in Asia’s third-largest economy. But, equity investors remain bullish, pushing the 30-member S&P BSE Sensex Index up 20% this year. “Domestic growth is likely to improve in the second half of the year,” said Dhananjay Sinha, head of institutional research at Emkay Global Financial Services Pvt. Businesses are gradually adjusting to GST rules, while the effects of the so-called demonetization of currency notes are fading, he said. Shipping volumes for the consumer staples industry have improved after the implementation of the GST, Citi analysts Surendra Goyal and Vijit Jain wrote in a report this week. Profit growth for the July-September period will be driven by companies in the steel and energy industries, they said.
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