10 Apr, 2017
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– Citi, Deutsche, HSBC, Barclays eager to tie up with India Post Bank
– Note ban effect: Debit cards preferred over credit cards, account for 60% of card spend
– IndusInd said to be in advanced talks to acquire Bharat Financial
– Canadian pension funds buy 1.5% stake in Kotak Mahindra Bank
– Budget 2017: Arun Jaitley pushes for a cashless economy
RBI clears proposal to introduce Rs200 notes
Livemint: April 05, 2017
New Delhi: The board of the Reserve Bank of India (RBI) has cleared a proposal to introduce banknotes of Rs200 denomination, two people aware of the development said.
The decision was taken at the RBI board meeting in March, these people said. They didn’t want to be identified as they aren’t authorized to speak to the media.
The process of printing the new Rs200 notes is likely to begin after June, once the government officially approves this new denomination, said one of the two people cited earlier.
An RBI spokesperson declined to comment.
The move to introduce lower denomination notes comes against the backdrop of the government’s move to rework the currency mix.
On 8 November, it announced the withdrawal of Rs500 and Rs1,000 currency notes, amounting to around 86% of currency in circulation of Rs17.9 trillion.
Since then, RBI has replaced these with the new Rs2,000 and redesigned Rs500 bank notes. As on 24 March, currency in circulation was Rs13.12 trillion, still around 27% off pre-demonetization levels. The government is encouraging digital payments and may not increase currency in circulation to the pre-demonetization level.
On 13 March, RBI lifted all cash withdrawal caps. ATM operators, however, say that there is a paucity of lower denomination banknotes.
So far, the central bank has not revealed how many of the old currency notes it has got back from the public. The window for Indians who were out of the country between 8 November and 30 December ended on Friday.
The RBI board has 14 members. Apart from governor Urjit Patel and four deputy governors, the board also has economic affairs secretary Shaktikanta Das and financial services secretary Anjuly Chib Duggal.
Citi, Deutsche, HSBC, Barclays eager to tie up with India Post Bank
HT Business: March 27, 2017
New Delhi: Major global banks such as Citi, Deutsche Bank, HSBC and Barclays Bank are among the 26 players eager to tie up with state-run India Post Payments Bank, telecom minister Manoj Sinha informed the Parliament.
Major Indian banks and insurers, including State Bank of India, Punjab National Bank, Bank of Baroda and Axis Bank are also in talks with the Postal Department, Sinha said in a reply to a question in the Rajya Sabha.
The Postal Department “is in various stages of discussions with them,” he said.
“A decision on formal partnerships will be taken after carefully evaluating the entire value proposition that they propose for the common man,” he said.
After getting the payments bank license last year, India Post Payments Bank launched two branches in Raipur (Chhattisgarh) and Ranchi (Jharkhand) with basic products and banking services in partnership with PNB on January 30, 2017.
Payment banks are not allowed to undertake lending activities directly but can accept deposits in savings and current accounts. The maximum balance is capped at Rs 1,00,000 per individual.
Note ban effect: Debit cards preferred over credit cards, account for 60% of card spend
Times of India: March 27, 2017
Mumbai: Debit cards have conclusively displaced credit cards as the primary mode of payment in the country following demonetisation+ . Until October last year, despite outnumbering credit cards by a factor of more than 25, debit cards accounted for only 42% of the total card spend. This has jumped to 60% after demonetisation, which was announced on November 8, 2016.
The change is largely driven by small public sector lenders like Oriental Bank of Commerce and Punjab & Sind Bank, where usage of cards has gone up nearly five times. Debit card transactions tripled—from October 2016 levels—in December. Transactions in January slipped to double those in October last year. However, according to payments companies, they are seeing stickiness in use of debit cards for utility and petrol bill payments and travel bookings.
Last October, public sector banks saw transactions worth Rs 10,893 crore from the 61.7 crore debit cards they had issued till then. As against this, private and foreign banks had reported transactions worth Rs 11,048 crore although their debit card base was much smaller at 12.25 crore. This has changed after demonetisation.
In January this year, public sector banks reported debit card transactions valued at Rs 29,339 crore against Rs 19,664 crore worth transactions recorded by debit cardholders of private banks. Pre-demonetisation, in October, for every 100 debit cards in circulation there were only 19 transactions in a month. This jumped to 54 transactions a month in December, but dropped to 40 a month in January 2017.
Bankers point out that if debit cardholders use their cards even once a month on an average, the share of debit cards in transactions will cross 80%. Public sector bank customers in smaller cities are expected to drive the debit card usage.
“In metro centres, the credit card penetration is high and increasing. Given a choice, customers will use their credit cards to make payments because of rewards. But in smaller towns debit card is the only instrument that the customer has,” said an official with the National Payments Corporation of India (NPCI).
IndusInd said to be in advanced talks to acquire Bharat Financial
IBEF: March 10, 2017
Mumbai: IndusInd Bank Ltd. is in advanced talks with Bharat Financial Inclusion Ltd, a micro-finance company, for a proposed acquisition in a share swap deal. The deal is expected to value Bharat Financial at a 10 per cent premium to its current market value of US$ 1.7 billion. The acquisition will help IndusInd in targeting banking clients in rural areas with micro-finance loans.
Canadian pension funds buy 1.5% stake in Kotak Mahindra Bank
Livemint: March 09, 2017
Mumbai: Kotak Mahindra Bank Ltd on Wednesday said Canadian pensions funds Canada Pension Plan Investment Board (CPPIB) and Caisse de Depot Quebec (CDPQ) have bought a 1.5% stake in the bank from Uday Kotak, its executive vice-chairman and managing director.
According to stock exchange data, CPPIB and CDPQ have bought 9.2 million and 18.4 million shares, respectively, in bulk deals, amounting to Rs2,254 crore.
This follows the Reserve Bank of India’s (RBI) recent directive to Uday Kotak to cut his stake to 30% by June end.
Kotak, who founded the lender in 2003, will have to trim the stake to 20% by the end of 2018 and 15% by the end of March 2020, according to a February exchange filing.
Uday Kotak is India’s eighth richest person worth $8.2 billion, according to the Bloomberg Billionaires Index.
CPPIB is an existing shareholder of Kotak Mahindra and had received RBI’s approval for acquiring shares in excess of 5% and below 10% of the paid-up capital of the bank in August last year.
With the latest transaction, it owns a 6.26% stake.
Bloomberg reported this week that Uday Kotak is in discussions sell more than a 3% stake to first-time investor CDPQ, Canada’s second largest pension fund.
Other investors are also competing for the stake, the Bloomberg report said, citing unnamed people close to the transaction.
On Wednesday, the board of directors of Kotak Mahindra Bank also approved, subject to statutory and regulatory approvals, an increase in ceiling limit for investment by foreign institutional investors, foreign portfolio investors, qualified foreign investors, non-resident Indians and people of Indian origin in the equity share capital of the bank, from 40% to 42%. Shares of Kotak Mahindra Bank closed at Rs824.5 on BSE, up by 0.88%, while the benchmark Sensex closed at 28,901.94 points, down by 0.34%.
TransUnion Cibil launches credit ranking for MSMEs
Livemint: March 01, 2017
Mumbai: TransUnion Cibil on Tuesday launched credit ranking for micro, small and medium enterprises (MSME) which have aggregated exposure between Rs10 lakh to Rs10 crore. Using machine learning algorithms, credit ranking will predict the probability of MSME becoming non performing asset (NPA) in span of next one year.
Ranking will be given to MSMEs on a scale of one to 10 on the basis of credit history of past 24 months. Higher ranking will imply higher credit risk.
MSMEs falling in the highest risk bracket have credit outstanding of Rs54,799 crore which is at risk of becoming bad loans. Currently the total MSME credit portfolio is estimated at Rs12 trillion.
RBI proposes lower MDR from April 1 to keep digi-pay momentum
Business Standard: February 17, 2017
Mumbai: The Reserve Bank of India (RBI) has proposed that the merchant discount rate (MDR or charge) on debit card transactions be rationalised on the basis of turnover.
Transactions up to Rs 2,000 do not attract a charge but this is to end on March 31.
The central bank issued draft guidelines on its website that propose the MDR be “on the basis of merchant turnover, rather than the present slab-rate based on transaction value”.
Besides, there should be differentiated MDR for the government and QR-code related transactions. Also, “there is a need to differentiate MDR between acquiring infrastructure involving physical terminals, including mobile point-of-sale, or mPOS, and digital acceptance infrastructure models such as QR code”.
RBI proposes that where a merchant is willing to pay upfront for the card acceptance infrastructure, the MDR has to be on the lower side.
The draft proposes different categories of merchants, based on the categories proposed in the coming goods and services tax (GST). For example, a merchant with yearly turnover below Rs 20 lakh could be termed small. Other categories such as government transactions, special categories of merchants and all other categories with turnover within the ambit of GST (turnover above Rs 20 lakh yearly) should be created.
For small merchants, MDR should be not more than 0.4 per cent with physical point-of-sales infrastructure and 0.3 per cent for digital transactions. The same limit for special categories of merchants such as utilities, hospitals or toll collection points.
For large merchants, the MDR could be as much as 0.95 per cent of the transaction amount. For government transactions, 0.5 per cent of those above Rs 2,000, with a cap of Rs 250. For transactions below Rs 2,000, a flat charge up to Rs 10.
NPCI expects all public sector banks to join BHIM by February-end
Livemint: February 08, 2017
New Delhi: With the aim to scale up the usage of Bharat Interface for Money or BHIM, the National Payments Corp. of India (NPCI) is working to ensure that all the public sector banks (PSBs) are integrated to the app by the end of this month.
“The PSBs which will go live very soon on the platform are Corporation Bank, Punjab and Sindh Bank and five associates of State Bank of India. We are working with these seven banks to ensure that all of them are a part of the platform by the end of this month,” said A. P. Hota, managing director & chief executive officer, NPCI, in a statement.
Currently, 37 banks are already integrated to BHIM including PSBs like State Bank of India, Bank of India, Bank of Baroda and Union Bank of India. With the seven banks joining the platform very soon, all the PSBs will be a part of BHIM’s interface.
“Since the customer base of PSBs is very large, their participation in BHIM is of crucial importance for the success of this app. We are confident that once all PSBs are a part of BHIM, the user base will jump multiple times,” said Hota.
The app was launched on December 30 by Prime Minister Narendra Modi to promote digital transactions using the Unified Payments Interface (UPI), a bank-to-bank fund transfer system backed by internet and smartphones, using phone numbers linked to banks.
According to NPCI, till 31 January, 13.8 million customers downloaded the app out of which 3.6 million customers have linked the app to their bank account.
“The gap in the number of app downloads and the number of customers linking the app to their bank account has been because it is observed that most of these customers have downloaded BHIM without checking if their bank is active on the platform,” the statement added.
Last month, a new version 1.2 was launched with additional features like ‘Pay to Aadhaar Number’, and spam report’. The new version also has seven new languages apart from English and Hindi.
Ujjivan Financial Services launches small finance bank
Livemint: February 07, 2017
Bengaluru: Microfinance firm Ujjivan Financial Services Ltd announced its official transformation into Ujjivan Small Finance Bank Ltd on Monday. The Bengaluru-based bank, which was operating in pilot mode at five of its microfinance branches in the city, will extend banking services to all of its existing branches over the next six to eight months.
Ujjivan, which has about 3.5 million customers and a loan portfolio of Rs6,525 crore, will offer 5.5% to 8% interest on fixed and recurring deposits. That interest rate compares with an average offering of 7% at larger banks.
When it comes to savings, it will offer a range of benefits—such as biometric ATMs, a RuPay debit card, phone, internet and mobile banking—at the market interest rate of 4%. That’s in keeping with its plan of making savings an attractive proposition for its own borrowers who typically tend to use the informal sector, chit funds and the like, for their savings.
“In 2005 when we first started Ujjivan, our initial objective was (to) establish a bank because as a bank you could provide a full range of services to the unserved and under-served population in India. Unfortunately, at that time it was not possible and so we looked at microfinance institutions,” Samit Ghosh, founder of Ujjivan and managing director and CEO of the new small finance bank, said at the launch.
ALSO READ: Big challenges before small finance banks
Ujjivan is the largest among five small finance banks that have or are making their debut. Equitas Small Finance Bank Ltd started operations in September, Utkarsh Small Finance Bank Ltd and Suryoday Small Finance Bank Ltd began in January and AU Financiers (India) Ltd is in the process of setting shop. But the biggest challenges facing all these small banks will be garnering deposits, human resource management as staff at microfinance firms are not used to mobilizing deposits, and technology, according to a Mint column on Monday.
Ghosh said that getting their customers to shift their savings from the unorganized sector to the organised sector was a challenge and said financial literacy was the key to overcome that obstacle. Ujjivan is also investing Rs 400 crore in digital technologies over the next five years and is retraining existing staff to convert them into banking employees.
“We started this (retraining) process right after we got our license approval and we have been going through various stages of training. We are in the final phase now. (But) we will continue to take in a lot of people from outside also. Departments like liabilities, which is a new area of business for us, we would prefer people from outside with banking experience,” said Carol Furtado, the bank’s human resources head.
The company currently has 457 branches in 24 states and is planning to open 66 new ones in financial year 2017-18. Like other microfinance companies, Ujjivan was also severely hit after the government’s demonetisation move in November. But repayment rates, which were at 90% end-November have now climbed to 97%.
“Our objective in the long run is that in five years’ time, the RBI gives us the option that we can go for a universal bank license. We probably will apply for the license so that we are able to build the leading mass market retail bank in India, which today is a market which is not fully served,” Ghosh said.
Budget 2017: Arun Jaitley pushes for a cashless economy
Livemint: February 02, 2017
Finance minister Arun Jaitley proposed a slew of measures to hasten India’s movement to a cashless economy. Among them are a ban on cash transactions more than Rs3 lakh, tax breaks for the creation of a cashless infrastructure, greater usage of non-cash modes of payments and making Aadhaar-based payments more widespread.
The government has been pushing for a shift to a less-cash economy, especially after the cancellation of legal tender of high-value notes on 9 November. These measures will create a paper trail for all transactions, thus providing an effective check against tax evasion.
The budget proposed to ban all cash transactions above Rs3 lakh, in line with the recommendations of the special investigative team (SIT) on black money.
The government will make the necessary amendments to the Income Tax Act to facilitate this, the finance minister said. The Supreme Court-constituted SIT, in its report last year, had proposed banning cash transactions above Rs3 lakh and capping cash holdings of individuals and companies at Rs15 lakh.
High-value cash transactions are a common feature in the real estate sector where buyers try to get away with paying lower stamp duty.
Curbing black money is one of the electoral promises of the National Democratic Alliance and the government has announced a number of steps over the last couple of years to check black money, including the recent move to demonetize high-value banknotes.
In the Union budget, the government has sought to incentivize greater use of non-cash transactions for small businesses by lowering the tax rate on presumptive income to 6% from 8% for all non-cash transactions.
Jaitley also announced tax exemptions for manufacturers of point-of-sale (PoS) card readers, mobile PoS (mPOS), fingerprint readers and iris scanners.
The budget also announced the setting up of a separate payments regulator within the Reserve Bank of India (RBI) to regulate the payments space. A review of the Payments and Settlements Act will also be undertaken, aimed at its overhaul.
To give a major push to Aadhaar-based transactions, the government announced that one million biometric PoS machines will be installed by March and subsequently scaled to two million by September.
Aadhaar Pay, a merchant version of Aadhaar-Enabled Payment System (AEPS), will be launched soon to enable those who do not have debit cards, mobile wallets and mobile phones to make digital payments.
The government will also take steps to encourage and possibly mandate digital payments at petrol pumps, fertilizer depots, road transport offices, universities, colleges, hospitals and other institutions.
It plans to strengthen the digital payment infrastructure, especially in rural and semi-urban areas.
It also announced two new schemes—Referral Bonus Scheme for individuals and a Cashback Scheme for merchants—to promote the usage of the Bharat Interface for Money (BHIM) app aimed at encouraging merchants and individuals to use the app and make more digital payments.
The government estimates that around 25 billion digital transactions will take place in 2017-18 via different modes of payments such as the Unified Payments Interface (UPI), immediate payment service, AEPS and debit cards used on PoS terminals.
Since the 8 November announcement of the demonetization of high-value currency notes, several incentives to promote cashless payments have been announced, including waiver of service charges on card payments and reducing the merchant discount rate. The government hinted that it will consider and work with the various stakeholders for the early implementation of the interim recommendations submitted to Prime Minister Narendra Modi by the chief ministers’ panel, headed by Andhra Pradesh chief minister N. Chandrababu Naidu, on digital transactions.
“The problem with digital payments has been with the merchants and not the consumers while accepting the payments. Therefore, the incentives and tax exemptions are a part of the budget. The merchant discount rate (MDR) is too expensive and there is a need to look at ways to bring it down,” said Rahul Matthan, partner at law firm Trilegal.
“There is a benefit in having a separate body for digital payments. Though RBI should still be on top of it, there must be freedom to think flexibly on this issue,” Matthan added.
Jaitley also announced that railways will no longer levy service charge on train tickets booked online through the IRCTC website. Earlier, a service tax of Rs20 had to be paid while booking sleeper class tickets and Rs40 for AC class tickets.
The budget suggested additional cashless initiatives such as Aadhaar-based smart cards for senior citizens.
It also announced a computer emergency response team for the financial sector (CERT-Fin) to increase security of digital transactions.
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