Four out of seven members in the Reserve Bank of India's technical advisory panel recommended the central bank cut the repo rate at its monetary policy review this month because of easing inflation and signs of a soft economy. Of the four members, one recommended the repo rate be cut by 50 basis points, while the rest suggested a 25 bps cut, according to a summary provided by the RBI on Tuesday. But India's central bank governor Raghuram Rajan ended up siding with the minority, keeping the policy rate on hold at 7.25 per cent on August 4, while leaving the door open to ease further depending on the inflation outlook and how swiftly banks lower their lending rates. The technical advisory committee has no voting powers on rate decisions and its recommendations are merely meant to guide the central bank governor in taking decisions.(Reuters)
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InfrasoftTech, digital solutions firm for BFSI, has launched QRys (read as Curious) to simplifies contactless payments using QR codes and NFC enabling card-less payments with high security.QRys will provide one click card-less payments for purchases at e-tailing sites or retail outlets. QRys can also be used for card-less ATM cash withdrawals and related services. S. Karuppasamy, Former ED - RBI said, “It is an important that these modern solutions are rightly priced so that the smallest banks can adopt secure and reliable payment channels for their clients who in turn can render last mile access to their customers across rural outlets.”The digital lounge will showcase various digital solutions designed by InfrasoftTech that enable their client Banks to gain a competitive edge using digital channels and advanced analytics to run an agile enterprise.Rajesh Mirjankar, Managing Director & CEO of InfrasoftTech said “It is imperative that banks will have to adopt digital solutions to grow their business with the Generation Now and Generation Y. If they fail to respond, the new banks and Fintech firms can disrupt their business to a large extent within 2-3 years”.(BW Online Bureau)
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Utility payment company, FreeCharge, has partnered with UCO Bank as “alliance partners” to enable efficient recharge and bill payments for their consumers.This first public sector bank tied up with FreeCharge to empower PSUs to adapt digital innovation of online transactions serving all the mundane tasks.Arun Kaul, Chairman and Managing Director of UCO BANK said, “We are dedicated to serve young and modern India and this is going to be another step in this direction.”Besides the reward coupons, now FreeCharge with the support of UCO bank brought additional benefits such as cashbacks to consumers, upto 10 per cent instant cashback on every recharge and bill payment.Kunal Shah, CEO and co-founder, Freecharge said “This partnership will offer our consumers exciting benefits like cashbacks and easier accessibility from e-payments.” The partnership will further enhance both FreeCharge and UCO banks solemn contribution to government’s vision of promoting online payments.(BW Online Bureau)
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With Bandhan from West Bengal becoming India's newest full-service bank to begin operations, Finance Minister Arun Jaitley on Sunday (23 August) said a 'blue-painted' city has given birth to a new institution which was not the case when it was 'painted red' -- referring to the past Left rule. "When the city was painted red, new institutions were not born, but the existing ones shifted. Now painted blue a new institution is born today, indicating the birth of a Bangla entrepreneur," Jaitley said as he inaugurated operations of Bandhan Bank. Bandhan Bank today launched its operations with 501 branches, 2022 service centres and 50 ATMs across 24 Indian states. It plans to have 632 branches and 250 ATMs in 27 states by the end of fiscal year 2016. It starts with 1.43 crore accounts and around Rs 10,500 crore loan book. It has 19,500 employees. The company, which started operations as a micro finance institution, got final approval from RBI in June to launch commercial banking operations. Over 71 per cent of the branches will be in rural India and at least 35 per cent in unbanked rural pockets. State-wise, West Bengal has the maximum number of branches 220, followed by Bihar 67, Assam 60, Maharashtra 21, Uttar Pradesh and Tripura 20 each, and Jharkhand 15. The Kolkata-headquartered bank has two divisions -- micro banking and general banking – and will offer complete retail financial solutions, including a variety of savings and loan products. The savings bank account interest rate has been fixed at 4.25 per cent for balance up to Rs.1 lakh and 5 per cent for balance above Rs.1 lakh. For term deposits, the maximum interest rate has been fixed at 8.5 per cent for one to three years, with an additional 0.5 per cent for senior citizens. The Reserve Bank of India’s licensing norms stipulate that a new bank must have at least Rs 500 crore capital. Against this, Bandhan starts with Rs 2570 crore capital which will soon be ramped up close to Rs 3052 crore. This translates into 44.54 per cent capital to risk weighted assets ratio or CRAR for the new bank, signifying its robustness. Referring to the shift in regime in West Bengal from a long-running Left rule to Mamata Banerjee-led Trinamool Congress government, Jaitley said there has been a change of colour of the city from red to blue. "In my younger years, I saw the city painted red. Now the whole city has been painted blue", he said. Jaitley added that some of the policies of the past should be done away with and realisation of the potential was important. Stating that the state would get all financial benefits as announced earlier as well as the proceeds of coal auctions, he promised that political differences would not come in the way of development of West Bengal. "Political differences will continue. But that will not matter for the development of West Bengal." Reiterating Prime Minister Narendra Modi's statement that growth of India would not happen unless the eastern part of the country also grew, Jaitley said, "Growth of eastern states is important for the growth of India. There has to be more economic activity in eastern UP, Bihar, Odisha and West Bengal." "Cooperation between the Centre and state will work towards that", he said. Chandra Shekhar Ghosh, Founder, Managing Director and Chief Executive Officer, Bandhan Bank said, “Our business philosophy is `customer first’. We are a universal bank and we will have equal respect all our customers – big and small. Today, all of us in the Bandhan family are rededicating ourselves to fulfil the demand of every Indian – banking as a fundamental right. We are committed to usher in a new era in Indian banking.” Amit Mitra, Finance Minister of West Bengal said, “Bandhan started with the twin objective of women empowerment and poverty eradication. With a repayment record of 99 per cent, the organization has been successful in its objectives. Now, the challenge for Bandhan Bank is to push Bengal’s credit deposit rate from around 68 per cent to the national average of over 76 per cent.” HR Khan, Deputy Governor, Reserve Bank of India said, “Bandhan Bank has been born at a challenging time of the Indian economy. With 11 payment banks and two universal banks being added to this sector, banking space in India is getting crowded. The need of the hour is to focus on cost minimization and customer convenience, digital literacy, partnership to cooperate and compete with other banks, and provide protection to customers by having a holistic approach towards banking.” From Micro-finance Entity To Universal Bank Bandhan Bank is the first instance in India of a microfinance entity transforming into a universal bank. It received an in-principle approval from the RBI in April 2014 and the banking regulator’s final nod on June 17, 2015. Its investors include IFC, SIDBI and Caladium Investment Pte. Ltd, a company managed by GIC Special Investments Pvt Ltd. Bandhan made a humble beginning in 2001 as a not-for-profit microfinance enterprise with the idea of making a significant contribution towards alleviation of poverty by empowering women. It transformed itself into a non-banking finance company in 2006. Bandhan is actively engaged in the development space in the areas of education, health, livelihood promotion, enterprise development, market linkage, employment generation, renewable energy and others. Every year a portion of the surplus generated by the company is utilized in fostering these activities.
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Country’s largest commercial banking entity State Bank of India (SBI) is now developing a low-cost model to compete with payments banks. “We are working out on a low-cost structure to compete with the payments banks for getting access to people living in the remote areas”, SBI chairman Arundhati Bhattacharya said on Friday (21 August). Bhattacharya said that the only advantage which the payments banks would have over other banks is that they would be able to get access to remote parts of the country. “There will be payments banks associate sitting in every second home in a village as their operational costs are lower compared to normal banks”, she said at a FICCI meet in Kolkata. To counter that, SBI would be opening customer service points (CSPs) in unbanked panchayats and also train youth with minimum education so that they are able to operate a mobile phone, printer and a scanner. Bhattacharya said that the mobile wallet which SBI had recently launched, Buddy, would also work within the realm of a payments bank. The biggest disadvantage which the payments banks would have is that they would not be able to give loans as they do not have any history of the credit profile of their customers. “These payments banks are only for small remittances and cannot give any loans”, she said. “History of credit is very important”, she added. (PTI)
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The proposed payments banks will change banking habits in the country as more and more people entering formal banking network would act as a "game-changer" for the economy, Finance Minister Arun Jaitley said on Friday (21 Augusty). RBI has given nod to 11 entities to launch such niche banks within next 18 months. "Payments banks will change the banking habits of people, it will change the way they think, it will change the way they keep the money, where they keep their money, it will change the way they pay," Jaitley said at the Indian Bank event here.He said going ahead, banking is going to be more of technology-enabled and effort is now on to expand banking to every unbanked corners of the society. "... using banks for all transactions, small and middle will become a habit of the people. More and more outside of the regular economy will get into the economy. And this itself is going to be a big game-changer as far as the Indian habits and Indian economy is concerned," Jaitley said. Jaitley said banking network is expanding hugely and the health of banks reflects on the challenges for the economy. "While on one hand we can take some satisfaction in the fact that networks are expanding across the country, there is huge amount of activity which is still to be done," he said. Earlier this week the RBI gave 'in-principle' nod to 11 entities, including Department of Post, Reliance Industries, Aditya Birla Nuvo, Vodafone and Airtel, to set up payments banks and proposed such licences 'on tap' in future. Payment banking licence will allow companies to collect deposits (initially up to Rs 1 lakh per individual), Internet banking, facilitate money transfers, and sell insurance and mutual funds. They can issue ATM/debit cards, but not credit cards.(PTI)
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Hoping that the NPA situation will improve in the coming quarters, Finance Minister Arun Jaitley on Friday (21 August) said an all-out effort has been launched to correct the current "unacceptable" level of bad loans in the PSU banks. "NPAs, which have reached to the present level are unacceptable. They reached this level partly because of indiscretion, partly because of inaction, partly because of challenges in some sectors of the economy, which were evident through the high NPA in these sectors," he said. Jaitley was inaugurating 109 new branches and 109 Bunch Note Acceptors (BNA) on the Indian Bank Foundation Day. Gross Non Performing Assets (NPAs) of public sector unit (PSU) banks at the end of March quarter stood at 5.20 per cent compared with 5.63 per cent in December. "An all-out effort have been launched to correct the health and bring NPAs down. The effort by the bank administration, the effort by the government to infuse more capital, the effort to get more finance by divesting (government holding), and then greater discretion and more importantly addressing the concerns of each of (stressed) sectors. "And I don't have a doubt that over the next few quarters, the banks will be able to address these challenges," he said. The Finance Minister said the government's plan to infuse capital into the PSU banks over the next four years will "infuse lot of financial strength" in these banks to deal with the bad loan problems. (PTI)
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Bringing poor people under the digital banking platform will help financial transfer meant for social security payment easier, writes Nilanjan BanikA quiet financial revolution has begun in India. Reserve Bank of India, India’s central bank, has granted permission to set up payment banks to 11 Indian companies. This is with the objective of bringing new areas under financial inclusion which otherwise are neglected by traditional commercial banks. Payment banks can accept deposit up to INR .1 million, and will offer other banking services such as issuance of ATM/debit cards, and money transfer. Among the big names which are granted license (likely to be operational by September 2015) are India Post, Reliance Industries, Airtel, Vodafone, Tech Mahindra, Paytm, IDFC, National Securities Depositary Limited (NSDL), Fino PayTec, Cholamandalam group, and Aditya Birla Nuvo. Although India Post, with 0.15 million post offices, has already got a network in place, others are tying up with commercial banks (for instance, Reliance with State Bank of India, Airtel with Kotak Bank, etc.) to leverage their presence. The usher of payment banking system is an important step for financial inclusion in India. In 2014, only 35% of the adults have a bank account and a meagre 8% availed loan from banks. Access to formal banking is a necessary condition for any economy to grow. It will increase saving rates, which will enable capital investment in sectors such as roads, ports, and railways. India needs to invest over USD 320 billion in infrastructure. As capital is scarce, a perfect capital market will ensure a higher return for each additional dollar of saving invested for building India’s infrastructure. Importantly, access to banking will increase productivity of the Indian Micro, Small and Medium Enterprises (MSMEs) sector, and aid the much touted Make in India campaign for India. Only 5% of the MSMEs avail loan from institutional sources, underscoring the need for financial inclusion for the MSME sector, and to drive India’s inclusive growth agenda. Although, economists and policymakers, in general, are worried about individual well-being, and the factors affecting this well-being, they somehow seem to assume the market is perfect. All the growth models in economics, explaining why some economies grow faster than the others, have tried to explain higher standard of living (read, per-capita income) without explicitly accounting for market imperfection. In fact, the fundamental assumption for any country to grow is to assume that the capital market is perfect – so that whatever is saved can be invested for productive purposes. Imperfection in capital market affects distribution of income. A person who is economically poor and does not have a bank account has no other choice but to store his money in the form cash, livestock, or jewellery. The value of cash withers with inflation, jewellery run the risk of being stolen, and livestock can fall ill. All these adversely affect flow of income, and hence affect consumption smoothening. Payment bank will be a big boon for thousands of migrant workers. In India, only 2% of the people used an account to receive money from family member living in other regions. A survey among Indian migrant workers showed they pay a commission of 4.6% when they transfer money through informal route such as Hawala. The cost of loan through informal channel is also high in India. Firms/people with access to finance/capital are guaranteed with more income than the ones without access to banks and capital. As these payment banks are backed by big corporates (some of them have already pioneered use of technology in the financial sector such as Tech Mahindra and NSDL), it will usher in a technological revolution in India. Technology helps to augment financial inclusion by making accessibility to bank and financial transactions easier. Long are the days of waiting in long queue in banks. In a digital world financial transaction happens through click of mouse, and over mobile phone. In India, changes have already happened in three specific areas. First is introduction of Real Time Gross Settlement (RTGS) system, enabling banks to transfer funds across all deposit accounts in real time. The newer version of RTGS has many advanced capabilities such as national electronic fund transfer (NEFT), and electronic fund transfer (EFT) across national boundaries. Second is the introduction of online automatic clearing mechanism such as BillDesk, underlying any retail transfers between point of sale for credit/debit cards and bank automatic teller machines. And, third is introduction of electronic clearing service (ECS) for cheques, an electronic mode of fund transfer from one bank account to another. Payment banks will make mobile network operators (MNOs) and internet banking more popular. According to ‘Internet in India 2014’ report jointly published by the Internet and Mobile Association of India, and IMRB International, Internet users in India will cross 300 million by December 2014. The year on year growth rate registered stands at an impressive 32 per cent. In rural India, the number of Internet users increased by 39 per cent to reach 101 million in October 2014. India has the third largest Internet user base in the world, after China with more than 600 million Internet users and the US with an estimated 279 million users. For a populous country like India future strategy for financial inclusion will call for technology to reach bottom of the pyramid, something that these payment banks can facilitate. Bringing poor people under the garb of digital banking platform will help financial transfer meant for social security payment easier. A study by McKinsey points out online payment of social security benefits will save the government USD 22 billion per year. A study involving 2016 households in Kenya found people availing M-PESA service (banking through mobile, and the service is provided by Vodafone) are better equipped to absorb negative income shocks arising from poor health, crop failures, and job loss. Statistically comparable household not availing M-PESA service are likely to experience a 6 – 10% reduction in consumption in response to similar income related shocks. The future will see emergence of contactless payment enabled through usage of near field communication (NFC) technology. NFC will enable smartphones and other devices to establish radio communication with each other by touching devices together or bringing them in close proximity. Going paperless by saving time will not only reduce transaction costs but will also play an important role for financial inclusion. Some big commercial banks such as HDFC has already started work on it. (Nilanjan Banik is with Mahindra Ecole Centrale. He is a Fellow at CUTS International and is an ARTNeT UNESCAP Researcher. He is the author of The Indian Economy: A Macroeconomic Perspective.)
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