64% of Indians used banks, more than in Bangladesh, Nigeria, Pakistan (BS 21.10.17)
Of over 45,000 Indians surveyed between September 2016 and January 2017, as many as 63% had a financial account of some kind, 64% of all bank account users had used their account in the last 90 days preceding the survey, but only 12% used an advanced bank account service in 2016, according to Intermedia, a research organisation that conducts financial inclusion surveys across India, Bangladesh, Indonesia, Kenya, Nigeria, Pakistan, Tanzania and Uganda. The survey also found gaps in bank account usage across gender and geography with 47% males actively using bank accounts versus 33% females, and 46% urban Indian’s actively using banks versus 37% of those who live in rural areas. Use of banks in India is higher than in other countries: 64% of Indians used a bank account, compared to 19% in Bangladesh, 30% in Indonesia, 31% in Kenya, 41% in Nigeria and 9% in Pakistan, according to the survey. As many as 68% said they had access to a mobile phone while only 26% said they had ever received or sent a text message, showing that basic cell phone usage–key to using mobile payment systems–is still low in India. In comparison, 85% had access to a mobile phone in Bangladesh, 80% in Indonesia, 93% in Kenya and Nigeria, and 77% in Pakistan. Use of mobile money in India (which does not include services such as Paytm) is about the same as that in Indonesia, with 1%, and Nigeria (2%), but lower as compared to Bangladesh (40%), Kenya (81%) and Pakistan (9%), the survey found.
Modi government backs small savings, allows banks to sell more schemes like NSC, recurring deposits (FE 20.10.17)
In order to encourage savings, the government has allowed banks, including top three private sector lenders, to accept deposits under various small savings schemes like National Savings Certificate (NSC), recurring deposits and monthly income plan. Until now, most of the small savings schemes were sold through post offices. According to a recent government notification, banks can also sell National Savings Time Deposit Scheme 1981, National Savings (Monthly Income Account) Scheme 1987, National Savings Recurring Deposit Scheme 1981 and NSC VIII issue. As per the notification, all public sector banks and top three in the private sector — ICICI Bank, HDFC Bank and Axis Bank — to receive subscription from the expanded portfolios. So far, these banks were allowed to receive subscription under Public Provident Fund, Kisan Vikas Patra-2014, Sukanya Samriddhi Account, Senior Citizen Savings Scheme-2004. Increased outlets for selling small savings scheme would result in higher mobilisation under the scheme. Last month, the government kept unchanged interest rates on small savings schemes for the October-December quarter. Since April last year, interest rates on all small saving schemes have been recalibrated on a quarterly basis. Investments in the public provident fund (PPF) scheme will fetch annual rate of 7.8% while Kisan Vikas Patra (KVP) investments will yield 7.5% and mature in 115 months. The one for girl child savings, Sukanya Samriddhi Account Scheme will offer 8.3% annually. Similarly, the investment on 5-year Senior Citizens Savings Scheme will yield 8.3%. The interest rate on the senior citizens scheme is paid quarterly. On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis since April 1, 2016, the ministry said while notifying the rates for third quarter of financial year 2017- 18.
Why State Bank of India is afraid of small but nimble fintech companies (ET 20.10.17)
More than 24,000 branches and 42 Cr customers make the State Bank of India the goliath of all banks by sheer size and physical presence but its new chairman Rajnish Kumar is worried about the competition from nimble fintech companies. “Today, the risk is the disruption that is caused by the technology ,“ Rajnish Kumar, chairman, State Bank of India told ET in an interview. “We have to be very alert to this challenge. Protecting the turf and meeting the challenges from all the new fintech companies is the priority .“ India's banking landscape has undergone tremendous change in the past 3-4 years with the likes of Paytm, and ItzCash disrupting banking services. Banks are increasingly worried about the businesses that these startups could eat into. Wallets and other payment mechanisms have become the preferred mode of payments as people walking into branches have dwindled. “We cannot live in this comfort that we have such a huge dominant market share or customer base," said Kumar, who would serve at the helm till 2020. "When you are incumbent, the biggest challenge will be protecting the turf and continue to remain dominant player." Although it is two-century-old, Kumar's predecessor Arundhati Bhattacharya laid emphasis on technology by launching products like Buddy, a wallet, and regaining number one position in mobile banking, hired experts from outside, including Shiv Bhasin from Barclays. SBI now has 30% market share in payments space despite facing competition from new players. “We should not be smug about it. Even if it is a small player challenging you, you should not underestimate it, because it can become big player," said Kumar. “We have to ring fence our market fully.SBI has brand value and we should not do anything that erodes that trust.“SBI is set to launch a new mobile app Omni Channel where a customer can carry out all banking transactions except depositing and withdrawing cash.
Only 2,300 bank branches open Aadhaar centres on premises (BS, ET 21.10.17)
Only about 2,300 branches of private and public sector banks have opened Aadhaar enrolment and updation centres within their premises as against the targeted 15,300 branches by this month end, an official said. The Aadhaar-issuing body has already extended by a month, till October 31, the deadline for banks to open Aadhaar enrolment and updation centres in at least 10% or over 15,000 of their branches. This is the second extension given to the banks for opening such centres. "The September 31 deadline that was given to the banks had been extended by one more month to October 31," the source told. According to UIDAI stipulation, 43 private and public sector banks have to open Aadhaar enrolment and updation centres in 15,315 branches. Against this, as per latest data, enrolment centres have been opened in 2,305 branches so far. The source said, State Bank of India has started Aadhaar enrolment centres in 356 of the required 2,918 branches, while Syndicate Bank has opened these centres in 245 of the targeted 840 branches. Dena Bank has opened 194 enrolment centres as against 339 identified branches. Among the private sector banks, HDFC bank has opened 74 centres as against 403 branches identified, while ICICI Bank has done it in 59 branches against 485 targeted branches. Also Axis Bank has opened 61 enrolment centres as against 337 branches identified. While Punjab National Bank has to open enrolment centres in 1,132 branches, it has not yet started any. UCO Bank and Vijaya Bank have opened 12 and 19 such centres respectively, against the targeted 380 and 213 bank branches that are required to have the facility.
Old private-sector banks’ provisions see sharp rise in September quarter (FE 20.10.17)
Asset quality of old private-sector banks worsened in the September quarter of FY18 along with a sharp rise in provisions. The spike in provisions also led to fall in net profit for most of these banks, data compiled showed. For instance, South Indian Bank reported a 144% year-on-year (y-o-y) rise in provisions to Rs 455.9 Cr in Q2 FY18 which led to a 96% y-o-y fall in net profit to Rs 4 Cr. The bank said in a regulatory filing that the provisions in the quarter included depreciation of Rs 252.39 Cr on account of diminution in net asset value (NAV) of investments in security receipts (SRs) on the basis of NAV declared by Asset Reconstruction Company. However, the bank’s gross non-performing assets (NPAs) remained steady at Rs 1,766 Cr in Q2, up 1.2% y-o-y. VG Mathew, MD & CEO of the bank, told after declaring its results that with the incremental provisioning made, the provision coverage crossed 50% which increases the prospects of recovery. “Had the exceptional provision not been there, the profit after tax (PAT) would have been Rs 169 Cr for the current quarter. The operating profit of the bank has increased by Rs 163 Cr (54.9 %) to Rs 460 Cr,” he added. Karnataka Bank’s provisions rose 73% y-o-y in the September quarter of FY18 to Rs 225.9 Cr and resulted in a 24.5% fall in net profit in the same period. The bank’s net profit fell to Rs 93.3 Cr in Q2 FY18 from Rs 123.8 Cr in the same quarter last year. Parthasarathi Mukherjee, MD & CEO of Lakshmi Vilas Bank, told a business news channel that the positive part was that the bank has a watchlist of accounts that it has been keeping an eye on. “I am glad to see that a bulk has slipped in the quarter — Rs 630 Cr — was from the watchlist. To that extent, my watchlist has shrunk to around Rs 1,700 Cr,” he had said last week. However, Federal Bank and DCB Bank seemed to have bucked the trend and reported a rise in September quarter net profit by 31% y-o-y and 21% y-o-y respectively. While Federal Bank reported a 5% rise in provisions, DCB Bank’s provisions rose 14% in Q2 FY18.
US Treasury closely monitoring India's policies, forex (BS 21.10.17)
India’s rising foreign exchange reserves and trade surplus with the United States have attracted the attention of the US Treasury Department, which will now take an interest in India’s macroeconomic policies. “Treasury will be closely monitoring India’s foreign exchange and macroeconomic policies,” said the October issue of the Treasury publication “Foreign Exchange Policies of Major Trading Partners of the United States”. India is one of the 13 largest trading partners of the United States, and as of June 2017, ran a trade surplus of $23 billion with the US, which the department termed “significant”. Traditionally, emerging markets have maintained foreign exchange reserves at more than their required levels, but India has been more aggressive in this regard. The publication said while India’s foreign exchange reserves were 16% of its gross domestic product (GDP), lower than many of the US’s trading partners, India’s reserves as a percentage of short-term external debt are at 412%, the second-highest among all major trading partners of the US. Short-term debts are those obligations that mature in a year.
A year after DeMon, cash is still king in Assam’s tea estates (BL 21.10.17)
In November 2016, the newly elected BJP government in Assam decided to use demonetisation as an opportunity to ensure financial inclusion of 10-12 lakh tea workers. Nearly 800 tea estates were asked to switch from cash payments to bank transfers of wages. The initiative received the full support of the Centre, which ordered banks and telcos to make necessary arrangements for bank transfers to nearly 21 lakh tea and jute workers in Assam, West Bengal and Andhra Pradesh. A year down the line, nearly 3.7 lakh jute workers have benefited from the initiative as bank transfers have become the norm in nearly 80 mills in West Bengal and Andhra Pradesh. Barring a small fraction, almost all the 21 lakh workers now have a bank account. However, when it comes to tea plantations, cash payments are still the default payment mode across Assam and West Bengal. While no official data are available, only a handful of the 295 estates in West Bengal have switched to cashless wage payment due to the inadequacy in banking services. “All the promises of installing new ATMs and deploying banking correspondents (BCs) for salary disbursement went up in smoke,” an industry insider in West Bengal told. The failure is most glaring in Assam, where the government went gung-ho about cashless transactions. A high-powered committee under the Chief Minister was to meet twice a month to ensure implementation. Initially, the Assam government set December 15, 2016, as the deadline for a complete switch to bank transfer of wages. The deadline was later extended by six months. But the enthusiasm didn’t last long. Barely a fraction of the 1,000 new ATMs promised by the government came into existence. The high-powered committee — comprising district collectors, bank officials and telcos — hasn’t met for much of 2017.
RBI looking for a CFO (BL 21.10.17)
The Reserve Bank of India is looking to recruit a chief financial officer to handle, among other things, its accounts, taxation and budget. The post will be in the rank of an executive director of the RBI. The job profile includes: being responsible for accurate and timely presentation and reporting of financial information of the RBI; establish accounting policies and procedures wherever required; compliance with financial regulations and standards wherever applicable; communicate both the Bank’s expected and actual financial performance; overseeing the budget process, collecting of inputs and comparing the Bank’s actual performance vis-à-vis the budget estimates; and flagging risks to the finances — operational, market, and so on — and developing strategies to counter/mitigate the same. As per the eligibility criteria, the candidate should be below 57 years of age. In exceptional cases, those above that age may be considered. The appointment will be on a contract basis. Those with the necessary qualifications (CA/ ICWA/ MBA Finance with minimum 15 years’ experience in overseeing financial operations in domestic or foreign organisations in comparable positions) are invited to apply. Candidates have a choice of choosing between regular appointment on the pay-scales of the RBI or contractual appointments on a cost-to-company basis. For regular appointment (on permanent basis) on pay-scales of the Bank, the selected candidate’s gross emoluments will be Rs. 2,57,840 per month. Other perks available to the post of Executive Director — such as Bank’s accommodation subject to availability, reimbursement of expenses for maintenance of vehicle for official purpose, newspaper, telephone charges, book grant, allowance for furnishing of residence, and so on — will be as per eligibility.
Insurers told to conduct cyber security audit (BL 20.10.17)
The Insurance Regulatory and Development Authority of India (IRDA) has directed insurers to conduct security audit of their Information and Communication Technology (ICT) infrastructure. The insurers should take “immediate steps” for conducting the audit of their systems including Vulnerability Assessment and Penetration Tests (VAPT) through Cert-in empanelled Auditors, identify the gaps and ensure that audit findings are rectified swiftly,’’ it said in a communication. They should also firm-up their Cyber Crisis Management Plan (CCMP) for handling cyber incidents more effectively, the regulator said. “Many of the insurers still have not finalised their gap analysis report, cyber crisis management plan and board approved information and cyber security policy,’’ it observed.
IFMR Capital extends Rs. 114-cr securitised loan to four NBFCs (BL 20.10.17)
Chennai-based IFMR Capital has announced the closure of what it claims as “India’s first Collaterised Loan Obligation (CLO)” transaction, post the issuance of the Securitisation Guidelines in 2006. The non-banking finance company has in a release said that it has extended Rs. 114 Cr of securitised loan to four NBFCs — Annapurna Microfinance Pvt Ltd, Zen Lefin Pvt Ltd (Capital Float), Essel Finance Business Loans Ltd and Home Credit India Finance Pvt Ltd — and passed on the pooled loans to a domestic mutual fund investor through the securitisation route. “This form of secondary sale is especially useful to provide capital market investors indirect exposure to a range of well-performing financial inclusion focused NBFCs,” Kshama Fernandes, Chief Executive Officer, IFMR Capital, said. This incidentally is the second product structure by IFMR Capital in the current fiscal. “CLOs are a form of securitisation, where corporate loans are pooled together and later passed on to different classes of investors in various tranches. In this instance, the institutional loans extended to the four NBFCs were assigned to an SPV. The SPV issued Pass Through Certificates (PTCs) that were backed by receivables from these loans,” Fernandes said, adding that the CLO product could play a critical role in developing the secondary market for loans. The four NBFCs have individual shares of 20-30% in the overall loan pool. Established in 2008, IFMR Capital has over the last decade raised over Rs. 46,000 Cr debt for its clients.
Digital payment companies fear new rules may cripple industry (ET 20.10.17)
The stringent regulations drawn up by the central bank last week to oversee digital payment companies have prompted the industry to join forces and seek changes in a few of the stipulations, according to senior industry executives. The Payments Council of India, an industry grouping, has already written to the central bank seeking a hearing on issues they deem as “critical” to the nascent payments industry. “Some of the new norms could severely cripple the industry and make the wallet business unviable,” said one person cited above. “We have already reached out to the Reserve Bank of India. We are expecting to meet senior officials in the central bank and raise our concerns regarding the stringent provisions in the prepaid instrument (PPI) licence guidelines,” he said. Among the major points of concern, according to industry members, are the demand for a mandatory full KYC or know your-customer certification, phased introduction of interoperability and restriction of peer-to-peer fund transfer in semi-KYC wallets. Digital payment companies fear new rules may cripple industry “We plan to aggressively push the RBI on mandatory conversion of all wallets into full-KYC ones as we believe that we cannot have all wallets under full KYC,” said the chief executive of one of the largest wallet companies.
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Air India seeks Rs 1,500 cr short-term loans to meet working capital needs (BS 21.10.17)
Disinvestment-bound Air India has sought proposals for short term loans worth Rs 1,500 Cr to meet "urgent" working capital needs, according to a document. This is the second time in little over a month that the flagship carrier has floated tenders for short tenure loans even as the government is working on the modalities for the stake sale. The debt-laden carrier, which is surviving on taxpayers' money, is battling multiple headwinds, including financial woes and stiff competition. In a document issued on October 18, Air India said it is looking for "government guarantee backed Indian Rupee short-term loans totalling up to Rs 1,500 Cr to meet its urgent working capital requirements". The loan would have a tenure up to June 27, 2018, from the date of being availed and the deadline could be extended. "The amount of Rs 1,500 Cr will be drawn in one -three tranches... The Government of India guarantee is valid up to June 27, 2018, or till the date of disinvestment," the document said. With regard to the loan, the carrier has requested banks to submit their financial bids along with the amount they are willing to provide by October 26. "Air India would like to draw the short-term loan within three working days after awarding the acceptance letter to the successful bank/s," the document said. Last month also, the airline had sought proposals for short-term loans of up to Rs 3,250 Cr to meet urgent working capital requirements.
UltraTech Cement net dives 31% on plant buy, higher depreciation (BL 20.10.17)
UltraTech Cement, an Aditya Birla Group company, reported a 31% drop in net profit in the September quarter to Rs. 423 Cr against Rs. 614 Cr due to one-time investment in 21 million tonne per annum (mtpa) newly acquired JP Cement plants and higher depreciation. Net sales increased 20% to Rs. 6,840 Cr against Rs. 5,708 Cr in the same period last year. Depreciation increased 56% to Rs. 522 Cr against Rs. 334 Cr. Interest cost during the quarter almost doubled to Rs. 388 Cr ( Rs. 150 Cr) due to cost involving new cement plant acquisition. The company's production capacity has gone up to 93 mtpa with addition of fresh capacity. The acquisition will enhance the company’s footprint into high growth markets such as central India, Himachal Pradesh, eastern UP and coastal Andhra Pradesh where it has been focussing to increase its presence, said UltraTech Cement in a statement. This being the first quarter of operations post-acquisition, the company has injected the much-needed working capital to improve and stabilise the quality of cement being manufactured at these plants. Towards this, initial one-time expenses were undertaken for improving efficiencies and plant maintenance, it said. In parallel, new dealers have been appointed to penetrate into new markets and completed transition of the acquired cement plants to the ‘UltraTech’ brand, it said. The company plans to invest Rs. 194 Cr to put up a wall care putty plant of 4 lakh tonne to cater to the rising demand. The plant is expected to be commissioned in the second-half of FY-20.
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