12.10.2020: Today's Banking / Financial News

12.10.2020: Today's Banking / Financial News at a Glance

🍒 Five of 12 PSU bank stocks trade near face value : Five out of 12 public sector banks are trading near the face value of their equity shares on bourses regardless of a rally in stock benchmark indices, according to an analysis. Shares of state-run Indian Overseas Bank are even trading below the face value of Rs 10 per share. On the BSE, the stock closed at Rs 9.27 on Friday when the benchmark index Sensex closed at 40,509. The Chennai-based bank tapped the market first in September 2000 offloading part of the government’s stake at par or at the face value of Rs 10 per share. Remaining four public sector banks of Bank of Maharashtra, UCO Bank, Punjab & Sind Bank and Central Bank of India are trading near the face value of Rs 10 per share. Shares of Punjab & Sind Bank closed at Rs 10.81 per unit, Bank of Maharashtra’s at 11.29 per unit on Friday. Mumbai-based Central Bank of India is slightly better positioned with closing price of Rs 12.45 per share followed by Kolkata-based UCO Bank at 12.14 per unit. Religare Broking Ltd Chief Operating Officer Gurpreet Sidana said, “We’ve witnessed a remarkable recovery in the benchmark in the last few months but the PSU banking pack is still struggling. After the initial rebound, mostly PSU banking stocks are again hovering closer to their 52-week lows.” There are multiple overhangs on the sectors including asset quality concerns, subdued business environment and low credit offtake causing deterioration in stock prices, he said. Central Bank of India plans to mop up Rs 5,000 crore of equity capital through various modes, including follow on public offer and rights issue, to maintain its capital adequacy ratio. As per Basel III regulations, banks are required to maintain minimum common equity tier-1 (CET 1) ratio of 5.50 per cent plus capital conservation buffer (CCB) of 2.50 per cent in the form of equity capital, tier-1 ratio of 9.50 per cent and overall CRAR of 11.50 per cent. - financial express

🍒 Rajan, Acharya may be off mark: PSU banks need strategy and focus to survive, not privatisation as remedy : It is interesting that two of India's biggest brand-name economists, former Reserve Bank governor Raghuram Rajan and former deputy governor Viral Acharya, have spoken for the "re-privatisation" of public sector banks even as the nation debates a controversial couple of agriculture reform bills splitting the political class. As we shall see, the twain may well be inter-linked. As it happens, the rockstar economists (Acharya literally wields the guitar as well as an amateur musician) are officially ensconced back in their chairs in US academia. They may well be far removed from both India and its political economy though they do have their logic. They are speaking more from the orthodoxy of market economics in full-employment economies and its implicit ideological baggage in saying what they did. No doubt, in a globally integrated economy such as India with a substantial market to maintain, their words ought to carry weight. Reports on the paper the two economists have authored says a "select" few PSU banks may be privatised. It is not clear if they intend this only as part of a structured solution with a focus on ownership — which is not a bad idea — or whether they want a situation where all state-run banks are intended to be privatised. - first post

🍒 Digital payments soar manifold in 5 years to FY20: RBI : Concerted efforts by the Reserve Bank to move to a non/less-cash economy by pushing digital payments have begun to pay rich dividends as the volume of such payments has jumped manifold in the past five years, the latest data from the central bank showed. Between 2015-16 and 2019-20, digital payments have grown at a compounded annual growth rate of 55.1 per cent - from 593.61 crore in the year to March 2016 to 3,434.56 crore in the year to March 2020. In absolute terms, value has grown from Rs 920.38 lakh crore to Rs 1,623.05 lakh crore during this period, clipping at an annual compounded rate of 15.2 per cent. Giving a year-wise data, in 2016-17 digital payments jumped to 969.12 crore from 593.61 crore in the previous year in volume terms, while in value the same rose to Rs 1,120.99 lakh crore. - economic times

🍒 Govt may consider allowing GST deposit on cash basis: PwC report : The government may consider allowing India Inc to deposit GST on cash basis to help them tide over the liquidity woes during the COVID-19 pandemic, a PwC report said. It said while formalising its support strategy for the industry in the next phase, the government could also consider suspending GST payments for select sectors during the COVID-19 period. In its report titled 'Reimagining GST@3', PwC said cash liquidity support schemes that advance business continuity are the need of the hour. "The government has announced a timely budgetary support scheme in line with the relief packages of various developed nations. Despite these steps, much ground remains to be covered," it said. - economic times

🍒 RBI to move to next generation treasury application for managing forex, gold reserves : In a bid to improve its functioning, the Reserve Bank has decided to move to the Next Generation Treasury Application (NGTA) for managing the country's foreign exchange and gold reserves. The NGTA, according to the RBI, would be a web-based application providing scalability, maneuverability and flexibility to introduce new products and securities, besides supporting multi-currency transactions and settlements. The NGTA, for which the RBI has invited bids from eligible vendors, would be supporting various transactions in asset classes like Fixed Income (FI), Forex (FX), Money Market (MM) and Gold. "RBI proposes to implement the NGTA which would be used for managing the foreign exchange reserves in a more efficient way, mitigate risk, achieve operational efficiencies, dealing in various asset classes and reporting," the bid document said.- economic times

🍒 Registered Valuers Organisations: IBBI standardises meeting norms of Disciplinary Committee and Appellate Panel : Insolvency regulator IBBI has clamped down on varying practices in the conduct of meetings of the Disciplinary Committee (DC) and the Appellate Panel (AP) of the Registered Valuers Organisations (RVO), which are the frontline organisations for the development and regulation of valuation profession. It has come up with series of directions to be followed by the DC and AP of the RVO while conducting their meetings including stipulation that meetings be held only if there is an agenda and preferably through a video conferencing facility, keeping in view the current pandemic. Accordingly, the meeting of the DC will be held for considering the issue or disposal of a show cause notice to a member, said an IBBI circular. The meeting of an AP would be held to consider the issues raised in the appeal filed by the aggrieved against the order passed by the DC, the circular added. - Business Line

🍒 'Banks, NBFCs to witness increased polarisation,' says HDFC Securities. Here are the top picks : Despite an uptick in real economic activity and fresh disbursals, there has been a slower year-on-year credit growth. "Disclosures by select lenders and trends in non-food credit growth suggest this too. We expect banks/NBFCs with our coverage to report credit growth of 7.3/5.8% YoY vs. 8.2/7.1% in 1QFY21," says a report by HDFC Securities. The broker's report on banks and NBFCs state that the deposit growth is likely to have exceeded credit growth for their coverage banks, and they expect large private banks to have fared particularly well on this front. HDFC Securities expect the space to witness increased polarisation in the space. "Consequently, larger banks with sufficient capital, strong granular liability franchises, and a good asset quality track record are expected to emerge stronger," says the report by HDFC Securities. ICICI Bank (SoTP of ₹496), Axis Bank (SoTP of ₹619), and City Union Bank (TP of ₹196) are HDFC Securities top picks among the banks. CIFC (TP of ₹289) is their top pick in the NBFC space. - Live Mint

🍒 Irdai panel for lower entry-level capital for micro-insurance companies : An Irdai committee has suggested reduction in entry-level capital requirement for standalone micro-insurance companies to Rs 20 crore from the current Rs 100 crore with a view to accelerate expansion of this segment of insurance market in the country. The committee set up by the Insurance Regulatory and Development Authority of India (Irdai) to suggest steps to promote micro-insurance said that like other nations India too will need to attract multiple players if it wants to substantially increase insurance penetration. “This is all the more urgent in the current context of the COVID-19 pandemic when millions of Indians, especially in the informal sector, have lost their livelihoods, are now leading more insecure lives and are falling back into poverty,” the report of the committee said. It noted that for low-income families, calamities such as illnesses, accidents, death or the loss of assets often have very grave financial consequences. Such events can push these families deeper into poverty as their meagre resources get depleted. Many get drawn into debt traps as they borrow beyond their means, sell productive assets, take children out of school or put them to work, compromise on food, or leave sickness untreated, it said. - financial express

🍒 FPIs pump in net Rs 1,086 crore so far in October : Foreign portfolio investors (FPI) have invested Rs 1,086 crore on a net basis so far in October in Indian markets, tracking encouraging factors including improved GST collection, acceleration in economic activity and positive global cues. According to the depositories data, overseas investors pumped in a net Rs 5,245 crore into equities and withdrew Rs 4,159 crore from the debt market during October 1-9. This translated into a total net inflow of Rs 1,086 crore. In September, FPIs were net sellers at Rs 3,419 crore. - moneycontrol.com

🍒 Sensex, Nifty jump 4% last week; will the rally sustain? Here's what 10 top analysts say ; Market benchmarks logged gains for the seventh consecutive day in a row on October 9, the longest winning streak seen so far in 2020. The S&P BSE Sensex reclaimed mount 40K, while Nifty50 closed above 11900 levels and is on track to retest record highs by December 2020.For the week, the action was limited to benchmark indices as broader markets saw profit booking. The S&P BSE Sensex rose 4.6 percent while the Nifty50 was up 4.3 percent for the week ended October 9 compared to a 0.3 percent fall seen in the S&P BSE Midcap index, and a flat closing seen in the S&P BSE Small-cap index for the same period. The market is teeming with positivity. However, in-between profit-booking cannot be ruled out, experts believe. - moneycontrol.com

11.10.2020: Today's Banking / Financial News

11.10.2020: Today's Banking / Financial News at a Glance

🍒 ACC extends tenure of 3 Executive Directors of PSU banks : The Appointments Committee of the Cabinet (ACC) has approved the extension of the term of three Executive Directors (EDs) in various Public Sector Banks (PSBs). The Department of Financial Services in the Finance Ministry had made these proposals based on the recommendations of the Banks Board Bureau (BBB). While Matam Venkata Rao, Executive Director of Canara Bank, has been given an extension of two years -- beyond his earlier term that expired on October 8, the term of Ajay Kumar Srivastava, Executive Director of Indian Overseas Bank, has also been extended by two years from the same date. The ACC has also approved the extension of the term of Debashish Mukherjee, Executive Director of Canara Bank for a period of two years from February 18, 2021 -- when his current term is due to expire, according to an executive order issued by the Department of Personal Training. - Business Line

🍒 'Interest on interest': Can’t go beyond relief already announced, Centre tells SC : Amid demands for succour from sectors such as real estate, the Centre on Friday said it would not be possible to add to the already announced financial relief packages and waive compound interest for the six-month loan repayment moratorium period. It also urged the Supreme Court against getting into sector-specific financial assistance, arguing that fiscal policy is the exclusive domain of the Union government. The Centre clearly indicated it would not be possible to revise the Rs 2 crore limit on loans that would benefit from its proposal. It said this had been arrived at after considerable deliberations. “Fiscal policy is the remit of the government,” the finance ministry said an affidavit. - economic times

🍒 Reserve Bank of India appeals to Supreme Court to allow NPA classification : India's central bank has appealed to the country's top court to let banks classify loans as nonperforming, saying a ban imposed to help borrowers in the COVID-19 pandemic could greatly harm the nation's financial system. The Reserve Bank of India, in a filing to the Supreme Court late on Friday, warned that failure to immediately lift an interim stay on banks classifying any loan as a non-performing asset (NPA) would also undermine the central bank's regulatory mandate. The court granted the stay last month, responding to a plea filed by an Indian optician, later joined by a wide range of borrowers whose income or revenue was hit by the COVID-19 pandemic. The court is set to rule on the matter on Tuesday. The ruling could have far-reaching consequences not only for millions of borrowers, but also for banks and the country, as state-run banks dominate the sector. - economic times

🍒 Government allows bulk transfer of provident fund from exempted establishments : In a move aimed at improving the ease of doing business, government has allowed bulk transfer of provident fund from exempted establishments to the Employees' Provident Fund Organisation in one go. The move is expected to benefit 1500 exempted establishments of EPFO. Till now exempted establishments had to approve and transfer the funds one-by-one for each member. Consequently, larger establishments requiring to transfer the funds of many employees each day, found the process very cumbersome and time taking. Under the new facility, exempted establishments can bulk upload data and transfer the funds for large number of members, through a single payment. "This will enhance ease of doing business by increasing the speed of funds transfer for exempted establishments," EPFO said in a statement.- economic times

🍒 Moratorium period exceeding six months may result in vitiating overall credit discipline: RBI to SC : A loan moratorium exceeding six months might result in “vitiating the overall credit discipline”, which will have a “debilitating impact” on the process of credit creation in the economy, the Reserve Bank of India has told the Supreme Court. In an af

fidavit filed in the apex court in the loan moratorium case, the RBI has said that a long moratorium period could impact credit behaviour of borrowers and increase the risks of delinquencies post resumption of scheduled payments. The banking regulator fled the affidavit in pursuance to the apex court's October 5 order asking the Centre and the RBI to place on record the K V Kamath committee recommendations on debt restructuring because of COVID-19 related stress on various sectors as well as the notifications and circulars issued so far on loan moratorium.- economic times

🍒 PSBs on-board 1.5 crore account holders on digital payment modes in 45 days : The Finance Ministry on Friday said that public sector banks (PSBs) have on-boarded about 1.5 crore customers on digital payment modes in just 45 days of launch of the ‘Digital Apnayen’ campaign. The campaign, aimed at encouraging customers to use digital banking channels, was launched on August 15 under the aegis of the government’s Digital India initiative. “Pushing digital payment adoption further with the #DigitalApnayen campaign! Started on 15th Aug’20, DFS’s campaign has already onboarded >1.58 Cr. Customers and has resulted in deployment of 50k PoS, >3L QR codes & 18k BHIM Aadhaar pay devices in just 45 days,” Department of Financial Services said in a tweet. Under the campaign, banks were asked to on-board a minimum 100 new customers including merchants and financial inclusion account holders by each branch on digital payment mode. - financial express

🍒 RBI makes TLTROs on-tap, extends fund use to loans : The Reserve Bank of India (RBI) on Friday expanded on its liquidity measures to make the targeted long term repo operations (TLTRO) available on tap and extend the use of money raised under this window to loans given by banks. Industry executives and analysts said while the expanded scheme is meant to enable smaller firms to access funds, details on eligibility will be key. The new format is also aimed at leaving banks with few excuses to not lend aggressively, NBFC chiefs said. RBI governor Shaktikanta Das said that the central bank will conduct on-tap TLTROs with tenors of up to three years for a total amount of up to Rs 1 lakh crore at a floating rate linked to the policy repo rate. The scheme will be available up to March 31, 2021, with flexibility with regard to enhancement of the amount and period after a review of the response to the scheme. Liquidity availed by banks under the scheme has to be deployed in corporate bonds, commercial papers, loans and non-convertible debentures issued by entities in specific sectors over and above the outstanding level of their investments in such instruments as on September 30, 2020. - financial express

🍒 Care Ratings downgrades Lakshmi Vilas Bank’s debt instruments : Care Ratings has downgraded a slew of unsecured redeemable non-convertible subordinated lower tier II bonds already issued by Lakshmi Vilas Bank (LVB) and additional tier- I bonds that are yet to be issued by the troubled private sector lender. Majority of the ratings have been revised down to Care BB- negative (double BB minus, outlook negative) from Care BB+ negative (double B plus, outlook negative). The revision in ratings assigned to various debt instruments of LVB to the tune Rs 618.70 crore factors in the sharp decline in the net worth due to significant losses reported in FY20 and Q1FY21. The bank reported total CAR and tier I CAR of 0.17% and (-)1.83%, respectively, as on June 30, 2020, Care Ratings said. - financial express

🍒 RBI extends SLR holdings in HTM category till March 2022 : n order to provide certainty to banks, Reserve Bank of India (RBI) on Thursday extended the time period for statutory liquidity ratio (SLR) holdings in held to maturity (HTM) category by one year till March, 2022. Earlier in September, the central bank had increased the limits of SLR holdings under HTM category to 22% from previous 19.5% of the net demand and time liabilities (NDTL) till March, 2021.This dispensation is available to banks for securities acquired between September 1, 2020 and March 31, 2021. Bankers feel that move by RBI will provide cushion in terms of planning for them. “The opening of HTM window upto March 31, 2022 is a much needed move, otherwise we were worried about planning after March, 2021, ” a senior bank official told FE. “In the absence of this order, we were supposed to shift these securities from HTM category to available for sale (AFS) category from first quarter of next financial year.” The investment portfolio of banks is classified under held to maturity (HTM), available for sale (AFS) and held for trading (HFT) category. The holding of securities under HTM provides cushion for banks from valuation changes. - financial express

🍒 RBI allows HFCs to lend with banks under co-origination model : The Reserve Bank of India (RBI) on Friday allowed housing finance companies (HFCs) to collaborate with banks for priority sector lending under co-origination model. In 2018, RBI had put in place a framework for co-origination of loans by banks and non-banking financial companies (NBFCs). However, HFCs were not allowed to co-lend with banks under this model. Lenders believe that move from RBI may bring down interest rates for HFCs. Although, this model has not taken a broad shape since inception, bankers said that latest move from RBI may bring best of banks and NBFC together. Dinesh Kumar Khara, chairman, State Bank of India (SBI), said that the decision to operationalise the co-origination model is right as it brings the best of banks and NBFC together. This will surely increase the reach of the financial sector at such a critical point, he added. In an interaction with CNBC TV 18, S S Mallikarjuna Rao, MD and CEO, Punjab national Bank (PNB), said the interest rate may come down for loans given by housing finance companies as a result of co-lending. Although, co-lending has not taken a broad shape since 2018, but we expect it to go little further at least in housing segment, he further said. - financial express

🍒 ‘Regulators have ignored handholding’ : Just like the Securities Appellate Tribunal (SAT), which was set up to hear and dispose of appeals against orders passed by the market regulator Securities and Exchange Board of India (SEBI), it is time to create an appellate tribunal for the Reserve Bank of India (RBI) to make the banking regulator accountable and its decisions more transparent, said former Supreme Court Justice BN Srikrishna on Friday. He was speaking at the BusinessLine Knowledge Series webinar on ‘Is the long arm of the regulator hurting the markets?’. The webinar, powered by BSE, was moderated by Palak Shah, Senior Assistant Editor, BusinessLine.- Business Line

🍒 LIC to offer 24 cr shares at ₹320/per share for Vedanta delisting : Life Insurance Corporation (LIC) is likely to seek ₹320 per share from Vedanta promoters in the delisting issue of the company, sources told Business Line. Data from stock exchange website showed that around 40 crore shares were being offered at ₹320 and there were only 2 orders offering such huge number of shares. The confirmed quantity was around 4 crore shares and cumulative confirmed quantity stood at around 40 crore shares. LIC holds about 24 crore shares in the company and is its largest non-promoter shareholder. -

Deputy Governor of RBI

The appointments committee of the Cabinet has cleared the name of M Rajeswar Rao for the post of Deputy Governor, Reserve Bank of India (RBI), the government said in a release on October 7.

Rao is presently Executive Director at RBI.

An economics graduate and a MBA, he is also a CAIIB. He joined RBI in 1984 and as career central banker has exposure in various aspects of central bank functioning. He was earlier in charge of risk monitoring department and has also worked as the Banking Ombudsman, New Delhi and in RBI’s regional offices at Ahmedabad, Hyderabad, Chennai and New Delhi.

PRADHANMANTRI JAN DHAN YOJANA

➡"PRADHANMANTRI JAN DHAN YOJANA"

Prime Minister Narendra Modi on August 28 launched his government's mega scheme 'Pradhan Mantri Jan Dhan Yojana', an ambitious scheme for comprehensive financial inclusion. According to Prime Minister, in a country where 40 per cent of the population does not have access to banking services, this programme would mark the beginning of the end of "financial untouchability" and rid the country of poverty. The scheme has been started with a target to provide 'universal access to banking facilities'. On the inaugural day, a record 1.5 crore bank accounts were opened across the country, the largest such exercise on a single day possibly anywhere in the world. Currently, around 41% of the population is unbanked, of which 33% are in urban areas and 46% in rural.

Salient points of Prime Minister’s ambitious Jan Dhan Yojana are given below:

✅1. About 15 million accident insurance policies done on a single day and same number of bank accounts opened.

✅2. Programme held at around 77,000 locations.

✅3. Target to cover 7.5 crore households with at least one account will be achieved by Jan 26, 2015.

✅4. Coverage of all households with at least one basic banking account.

✅5. Account holders will be provided zero-balance bank account with RuPay debit card, in addition to inbuilt accidental insurance cover of Rs 1 lakh.

✅6. Additional Rs.30,000 free life assurance cover for those opening bank accounts before Jan 26, 2015.

✅7. Holders can avail overdraft of Rs 5,000 subject to satisfactory operations of the account for six months.

✅8. Universal access to banking facilities for all households through a bank branch or a fixed point business correspondent called "Ba".

✅9. Financial literacy to be imparted up to village level.

✅10. Under the Jan Dhan Yojana, all benefits from the Centre/states/local bodies are proposed to be transferred to the accounts of beneficiaries.

✅11. Platform has been built by the National Payment Corporation of India that connects all banks and all telephone networks in the country. With the introduction of new technology introduced by National Payments Corporation of India (NPCI), a person can transfer funds, check balance through a normal phone.

✅12. Mobile banking for the poor would be available through National Unified USSD Platform (NUUP) for which all banks and mobile companies have come together.

✅13. The second phase of rollout will involve providing micro-insurance to people and schemes like 'Swavalamban'.

✅14. Households being targeted instead of only being villages targeted earlier.

✅15. For the entire exercise, the existing banking network will be strengthened - it will rope in an additional 50,000 business correspondents and set up about 7,000 branches and 20,000 new automated teller machines, in the first phase.

✅16. PMJDY also aimed at eliminating corruption as it would facilitate routing of subsidies directly into the accounts of intended beneficiaries.

✅17. Presently, one account is being opened for one adult of each household and by 2018, the mandate is to make it two per household, with the compulsory inclusion of the lady of the house.

✅18. The government would institute a credit guarantee fund post-August 2015.

10.10.2020: Today's Banking / Financial News

10.10.2020: Today's Banking / Financial News at a Glance

🍒 RBI delivers without a policy rate cut : As widely expected, the Monetary Policy Committee maintained status quo on the key policy rate, with inflation rate holding above the RBI’s comfort level. But the MPC brought pre-Diwali cheer by giving a ‘whatever it takes’ assurance to revive growth, as it looked at the “current inflation hump as transient”. The 5:1 vote of the six-member MPC in favour of a continued accommodative stance “at least during the current financial year and into the next financial year”, also offered markets an extended comfort on rates and liquidity. - Business Line

🍒 Bankers' reaction to RBI keeping status quo on rates, maintaining 'accommodative' stance : The six-member Monetary Policy Committee (MPC) on Friday unanimously voted for keeping the policy repo rate unchanged as retail inflation has been above its upper tolerance level of 6 per cent for several months. The Committee decided to continue with the accommodative stance as long as necessary – at least during the current financial year and into the next financial year – to revive growth on a durable basis and mitigate the impact of Covid-19 on the economy, while ensuring that inflation remains within the target going forward. To provide impetus towards reviving the economy, the Reserve Bank of India (RBI) announced specific additional measures to enhance liquidity support for financial markets; provide regulatory support to improve the flow of credit to specific sectors, among others.- Business Line

🍒 RBI policy overall positive, growth-oriented, say experts : Financial sector participants on Friday said RBI's decision to keep the key repo rate unchanged is an accommodative approach to manage inflation while keeping growth as target, amid the current economic conditions. The Monetary Policy Committee (MPC) evaluated domestic and global macroeconomic and financial conditions and voted unanimously to leave the policy repo rate unchanged at 4 per cent, RBI Governor Shaktikanta Das said in his policy statement for the bi-monthly monetary policy review. "It also decided to continue with the accommodative stance of monetary policy as long as necessary - at least during the current financial year and into the next year - to revive growth on a durable basis and mitigate the impact of COVID-19, while ensuring that inflation remains within the target going forward," Das said. - economic times

🍒 SBI urges SC to dismiss plea against wind up UBHL : The State Bank of India (SBI) on Thursday urged the Supreme Court to dismiss a plea by Vijay Mallya’s firm United Breweries Holdings (UBHL) against its winding up for failure to pay admitted liabilities to creditors as per the corporate guarantees extended to the defunct Kingfisher Airlines. SBI senior counsel Mukul Rohtagi told a bench led by Justice UU Lalit that Mallya is facing bankruptcy proceedings in the UK, besides extradition proceedings. “Appeals should be dismissed as Mallya is behind all this and is playing ducks and graces,” he said, requesting the apex court to give it some more time to seek “other instructions and also find about the ongoing proceedings.” - Financial express

🍒 RBI raises retail exposure threshold for banks : The Reserve Bank of India (RBI) has upped the absolute threshold limit for maximum aggregated retail exposure of banks to one counterparty to ₹7.5 crore from ₹5 crore. This move is aimed at facilitating higher credit flow to the retail segment, which mainly consists of individuals and small businesses (with turnover of up to ₹50 crore). This increased exposure limit is in respect of all fresh as well as incremental qualifying exposures, and is in harmonisation with the Basel guidelines. “This measure is expected to expand credit flow to small businesses,” the RBI said.- Business Line

🍒 HDFC Bank takes festive offers to rural India to pump up credit growth : Private lender HDFC Bank has taken its “festive treats” offering to its semi-urban and rural markets in a bid to prop up credit growth. The bank will use its network of 1.2 lakh village level entrepreneurs (VLEs) and tap over 3,000 plus hyperlocal merchants and traders to offer customized deals at the regional level. According to the lender, customers will get special deals on all banking products from loans to bank accounts. This includes home loans, 2-wheeler loans, car loans, tractor loans, gold loans or business growth loans. Customers can avail of flat 5% to 15% off in various categories of products.- economic times

🍒 RBI’s move to rationalize home loan risk weightage to support higher lending : The Reserve Bank of India’s decision to rationalize the risk weights on home loans and link them to Loan-to-Value (LTV) ratio is expected to bolster the real estate sector with higher lending, property developers said. Until now, the risk was linked to both size of the home loan and loan to value and the move to link it to only the latter is likely to help lenders on the capital adequacy front enabling them to provide more loans. “The decision to rationalise the risk weights on home loans and link them to Loan to value ratios only will give a boost to the real estate sector. Particularly this step would benefit borrowers of higher value loans. It would ensure that more credit is available to borrowers,” said Niranjan Hiranandani, President (National) NAREDCO. “This move is a much appreciated step recognising the role of the real estate sector in generating employment and economic activity.” The decision, according to property developers, has come at the right time and will help projects in all segments and price points. - economic times

🍒 Relief to exporters: RBI discontinues automatic caution-listing system : The Reserve Bank of India on Friday announced discontinuing the system-based automatic caution-listing of exporters, a move aimed at providing flexibility to exporters in terms of realisation of export proceeds. Exports have been adversely impacted by the pandemic-related contraction in external demand, RBI Governor Shaktikanta Das said during a virtual press conference after the meeting of the Monetary Policy Committee. "In this environment, it is crucial to provide flexibility to exporters in the realisation of export proceeds and to empower them to negotiate better terms with overseas buyers," he said.- economic times

🍒 RTGS to be available 24x7x365 from Dec 2020 : The Reserve Bank of India (RBI) in its Statement on Development and Regulatory Policies has announced that the money transfer facility, RTGS, will be available round the clock, 24 hours a day, 7 days a week from December 2020. Under the current rules, the transfers can be made between 7 AM and 6 PM on all working days except for the second and fourth Saturday of the month and on Sundays. The announcement comes after the RBI made the NEFT facility available 24X7 from December 16, 2019. In its statement the central bank said, "In December 2019, the National Electronic Funds Transfer (NEFT) system was made available on a 24x7x365 basis and the system has been operating smoothly since then. The large-value RTGS system is currently available for customers from 7.00 am to 6.00 pm on all working days of a week (except 2nd and 4th Saturdays of the month). - economic times

🍒 Digital Apnayen campaign gives further push to digital payment adoption : The Digital Apnayen Campaign, which was rolled out on August 15 to encourage customers to use digital banking channels, has propelled digital payment adoption with banks having on-boarded 1.58 crore customers in less than two months since launch, the Finance Ministry said on Friday. It has also resulted in deployment of 50,000 Point of Sales (PoS) terminals, over three lakh QR codes, and 18,000 BHIM Aadhaar pay devices in just 45 days, the Department of Financial Services tweeted on Friday. This campaign was launched under the aegis of the government’s Digital India initiative. .- Business Line

🍒 RBI expects real GDP to fall by 9.5% : India’s recovery is likely to be a three-speed recovery predominantly, with individual sectors showing varying paces depending on sector-specific realities, according to Reserve Bank of India (RBI) Governor Shaktikanta Das. For the year 2020-21 as a whole, the central bank expects real GDP to decline by 9.5 per cent, with risks tilted to the downside: (-)9.8 per cent in Q2 (July-September) 2020-21; (-)5.6 per cent in Q3 (October-December); and 0.5 per cent in Q4 (January-March 2021). Real GDP growth for Q1 (April-June) 2021-22 will see a rebound, with the RBI placing it at 20.6 per cent. “There is currently an animated debate about the shape of the recovery. Will it be V, U, L, or W? More recently, there has also been talk of a K-shaped recovery. “In my view, it is likely to predominantly be a three-speed recovery, with individual sectors showing varying paces, depending on sector-specific realities,” said the Governor in his bi-monthly monetary policy address. - Business Line

🍒 Co-origination scheme expanded to include all NBFCs, HFCs : All non-banking financial companies, including housing finance companies, will now be included in the co-origination scheme as part of efforts for greater financial inclusion and give more operational flexibility to lending institutions. The move is also expected to give a boost to housing finance. “Based on the feedback received from the stakeholders to better leverage the respective comparative advantages of the banks and NBFCs in a collaborative effort, and to improve the flow of credit to the unserved and underserved sector of the economy, it has been decided to extend the scheme to all NBFCs (including HFCs) to make all priority sector loans eligible for the scheme and give greater operational flexibility to the lending institutions, while requiring them to conform to the regulatory guidelines on outsourcing, KYC,” said the RBI’s Statement on Developmental and Regulatory Policies. - Business Line

🍒 With ‘slog overs’ and ‘strike form’, RBI chief describes state of play : With the IPL season in full swing, Reserve Bank of India Governor Shaktikanta Das on Friday chose cricketing terminologies to suggest that some of the worst-hit sectors of the economy can use “slog overs” to rescue the “innings”. “Open their accounts” and “strike form” also found a place in the Governor’s statement as he shared his views on the pandemic-hit economy after the Monetary Policy Committee (MPC) decided to leave key benchmark rate unchanged and maintain an accommodative stance. Trying to explain the process of recovery for the Covid-19-hit economy, Das said, “In my view, it is likely to predominantly be a three-speed recovery, with individual sectors showing varying paces, depending on sector-specific realities.” He added that sectors that would “open their accounts” the earliest are expected to be those that have shown resilience in the face of the pandemic and are also labour-intensive. - Business Line

🍒 CBI books HDIL promoters Wadhawans for Rs 200-crore loan fraud in YES Bank : The CBI has booked HDIL promoters Rakesh Wadhawan and Sarang Wadhawan, along with other directors and auditors in the firm, in an alleged Rs 200-crore loan fraud in Yes Bank involving Mack Star, officials said Friday. After registering the case, the CBI searched the residence of Rakesh Wadhawan and his son Sarang in Mumbai, they said. The agency also carried out searches at nine other premises in Mumbai, including two offices of HDIL, they said. It is alleged that Yes Bank had given loan to Mack Star in which HDIL was a minority shareholder. - Business Line

🍒 Cheaper big-ticket home loans to give realty sector a boost : Home loans over ₹75 lakh may get cheaper, with the RBI’s move to link risk weights for home loans with the loan-to-value (LTV) ratio. The LTV is the ratio of the loan amount to the value of the property.In a move that could reduce banks’ capital requirement and ease rates to boost demand, the RBI has rationalised risk-weights for new housing loans sanctioned up to March 31, 2022. Such loans will now attract a risk weight of 35 per cent where the LTV is less than or equal to 80 per cent, and a risk weight of 50 per cent where the LTV is more than 80 per cent but less than or equal to 90 per cent.The measure is expected to particularly give relief to big ticket loans above ₹75 lakh.According to an SBI report, these loans constitute around 12-15 per cent of the total housing loan portfolio, where the risk weight is higher.Assuming a growth of 20 per cent for the next 18 months, this could reduce the capital requirement of around ₹500 crore, which can enable banks to ease rates to boost demand, the report said. Punjab National Bank MD & CEO CH. SS Mallikarjuna Rao said that the move will give impetus for high value houses. - Business Line

🍒 PE investors, foreign banks taking majority stakes may rescue old pvt banks : For the past two weeks, old private banks — those that existed during bank nationalisation — have hit the headlines for wrong reasons. Whether Lakshmi Vilas Bank (LVB) or Dhanlaxmi Bank, issues around corporate governance, mismanagement, differences between promoter groups and even the effectiveness of shareholder activism were being raised — which ultimately question whether the Reserve Bank of India (RBI) has monitored these banks adequately. Several of these banks were placed under the Prompt Corrective Action (PCA) framework of additional regulator scrutiny but this does not seem to have stemmed the rot (see table). “Placing banks under PCA alone would not do good; there needs to be scrutiny on what went wrong and a viable road map for the banks to exit PCA,” said Abizer Diwanji, partner and national leader-financial services, EY India. In effect, he is advocating that banks under distress be treated differently so that an effective rescue plan can be worked out. - Business Standard

🍒 CARE Ratings downgrades LVB debt instruments over plunge in net worth : CARE Ratings has downgraded Lakshmi Vilas Bank (LVB)'s tier-II bonds totalling Rs 618.70 crore, citing a sharp decline in net worth caused by losses in FY20 and in Q1 of FY21. The development comes two days after Brickwork Ratings downgraded the lender's debt to 'BWR B+'/ Credit Watch with negative implications for the lender's long-term bonds of Rs 50.50 crore, and a day after LVB received an indicative non-binding offer from the Clix Group. LVB has reported a capital adequacy ratio (CAR) and Tier-I CAR of 0.17 per cent and -1.83 per cent (negative), respectively, as on June 30, 2020 (1.12 per cent and -0.88 per cent as March 31, 2020) as against the regulatory requirement of 10.875 per cent and 8.875 per cent. - Business Standard

🍒 Series-VII of the sovereign gold bond opens for subscription from October 12 : The Series-VII for Sovereign Gold Bonds 2020-21 will be open for the period October 12-16 with a settlement date on October 20. The issue price of the bond during the subscription period would be ₹5,051 per gram, an official release said. The Government, in consultation with the Reserve Bank of India, has decided to allow a discount of ₹50 per gram from the issue price to those investors who apply online and the payment is made through digital mode. For such investors the issue price of Gold Bond will be ₹5,001 per gram of gold, the release added. - Business Line

🍒 Forex reserves surge to life-time high of $545.638 billion : The country’s foreign exchange reserves rose by USD 3.618 billion to reach a life-time high of USD 545.638 billion in the week ended October 2, 2020, the RBI data showed. In the previous week ended September 25, the reserves had declined by USD 3.017 billion to USD 542.021 billion. During the reporting week, the increase in forex kitty was on account of a rise in foreign currency assets (FCA), a major component of the overall reserves. FCA increased by USD 3.104 billion to USD 503.046 billion in the week ended October 2, the data showed.

🍒 Rupee settles 8 paise higher at 73.16 : The rupee has settled 8 paise higher at 73.16 against the US dollar on Friday as the Reserve Bank of India decided to keep the benchmark interest rate unchanged. At the interbank forex market, the rupee opened at 73.21 against the American currency, gained some ground to touch an intraday highe of 73.09, but gave up some of its gains towards close. On Thursday, the rupee closed at 73.24 against the US dollar.