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  • Top NBFCs seek RBI nod to raise retail deposits

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    MUMBAI: Large non-banking finance companies (NBFCs) have urged the central bank to allow them to raise deposits from retail investors-a move they say would create a level playing field among finance companies and improve transmission of policy rates, people familiar with the matter told ET.

    This request was conveyed by select finance companies to the Reserve Bank of India (RBI) governor Sanjay Malhotra, during a closed-door meeting held on Monday.

    Except for a few NBFCs with legacy licences, most NBFCs are barred from raising retail deposits. Bajaj Finance, Shriram Finance, and Mahindra Finance are among the few NBFCs that are permitted to accept retail deposits. The governor met the CEOs of NBFCs, housing finance companies, microfinance institutions, and industry representatives on Monday.

    To be sure, the RBI has long resisted demands from well-rated NBFCs to be allowed to garner retail deposits, something that is the funding mainstay for banks.

    “The critical issue here is that bank deposits, up to Rs 5 lakh, are insured by DICGC or Deposit Insurance and Credit Guarantee Corporation, unlike NBFC deposits. That is one of the concerns preventing the regulator from issuing new deposit-taking licences to finance companies,” said an economist, who declined to be named. “The regulator would always err on the side of caution.”

    NBFCs that are allowed to raise deposits face strict limits. Retail deposits can’t exceed 1.5 times their net owned funds. The term deposits must have tenures ranging from 12 to 60 months, and interest rates are capped at 12.5% per annum.

    As of March 2025, retail deposits accounted for about 12.5% of resources deposits raised by NBFCs-D, the RBI said in its annual Trend and Progress report. The report noted that five major NBFC-Ds account for 96.9% of aggregate deposits.

    Speaking to ET, Jairam Sridharan, MD of Piramal Finance, hinted that while NBFCs seek a stable liability structure, few aspire for a banking licence that would allow retail deposit mobilisation.

    “Few NBFCs have the skills to do deposit management. It’s a very different ballgame than giving customers your money. Asking customers for their money requires trust and a certain level of fiduciary abilities internally in governance architectures. Maybe there are 10 or 12 NBFCs which have anything close to that kind of ability, the remaining 9,500 probably don’t have it,” Sridharan said in an interview on November 6, 2025.

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  • RBI slaps penalties on American Express Banking Corp, HDB Financial Services

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    The Reserve Bank of India (RBI) on Friday said it has imposed a penalty of Rs 31.80 lakh on American Express Banking Corp for non-compliance with certain directions on ‘Credit Card and Debit Card – Issuance and Conduct’.

    The central bank has also imposed a penalty of Rs 4.2 lakh on HDB Financial Services for non-compliance with certain provisions of the ‘Reserve Bank of India (Know Your Customer (KYC) Directions, 2016’.

    In a statement, the RBI said it conducted a statutory inspection for supervisory evaluation (ISE 2024) of American Express Banking Corp with reference to its financial position as on March 31, 2024.

    Based on the supervisory findings of non-compliance with RBI directions and related correspondence, a show cause notice was issued.

    Also Read: Indian states to raise Rs 2.82 lakh crore through debt in current quarter, RBI says


    After considering the bank’s reply to the notice, additional submissions made by it and oral submissions made during the personal hearing, RBI found that the charge warranted imposition of monetary penalty. The American Express Banking Corp did not make any efforts to reverse credit balances of certain credit cardholders, arising out of refund / failed / reversed transactions, to their bank accounts. RBI also said that the penalty is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

    In another statement, RBI said based on supervisory findings of non-compliance with directions and related correspondence in that regard, a show cause notice was issued to HDB Financial Services.

    After considering the company’s reply to the notice, RBI said it found that the charge was sustained, warranting imposition of monetary penalty.

    The company failed to obtain Permanent Account Number (PAN) or equivalent e-document thereof or Form No. 60 in certain loan accounts disbursed during FY 2023-24, RBI said.

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    In this case also, the central bank said the penalty is based on deficiencies in regulatory compliance and not intended to pronounce upon the validity of any transaction or agreement entered into by the company.

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  • Kotak Mahindra Bank has to move at a much faster pace: MD & CEO Ashok Vaswani

    Kotak Mahindra Bank has to move at a much faster pace: MD & CEO Ashok Vaswani

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    Changing customer expectations, the dramatic pace of business growth and the emerging risk landscape have meant that Kotak Mahindra Bank has to move at a much faster pace, according to MD & CEO Ashok Vaswani.

    “At this stage, it is appropriate to address the recent RBI order. Over the last few years, we had completely embraced the notion that leveraging technology is fundamental to growing the business.

    “Towards this, we had significantly stepped up resources and investments in technology. However, it is evident that we have more to do,” said Vaswani in a communication to shareholders. He took charge as MD & CEO of India’s fourth largest private sector bank with effect from January 1, 2024.

    The RBI, in its April 24 order, had directed the private sector bank to cease and desist, with immediate effect, from onboarding new customers through its online and mobile banking channels and issuing fresh credit cards.

    In its order, RBI said its actions were necessitated based on significant concerns arising out of its IT Examination of the bank for the years 2022 and 2023 and the continued failure on part of the bank to address these concerns in a comprehensive and timely manner.

    Vaswani, in his communication to shareholders, underscored that technology is going to be at the centre of the Bank’s efforts to transform and hence, scale.

    Scale for relevance

    “We are absolutely committed to further enhancing our resources and commitments in this area, and I am very confident that collectively, as a team – we will deliver and use this as an opportunity to leapfrog.”

    “Equally important while transforming for scale would be to Scale for Relevance and not for the sake of size,” he said.

    In the Bank’s last earnings call, Vaswani said: “We take every communication from our regulator very seriously and have complied with the directions with immediate effect.

    “…there is absolutely no impact on our existing customers across all channels. We have been seeking guidance from our regulators on building resiliency of our technology platforms and on enhancing the experience for our customers.”

    In view of the Order, the Bank has stopped digital onboarding of new customers and fresh issuance of credit cards. This has primarily affected the Bank’s acquisitions in 811 and credit card business.

    Vaswani noted that the Bank has developed a plan to mitigate the impact on the aforementioned businesses. The plan focuses on protecting its existing customer base and deepening relationships with them.

    Further, the Bank is accelerating the execution of its technology strategy to achieve resilience, appropriate capacity and to meet regulatory data cybersecurity standards.

    “We have been on this journey for the last two – three years. We have made a number of very senior hires, significantly augmented the internal tech team and invested heavily in improving our risk and reliance.

    “However, our efforts have fallen short of the expectations of the regulator. This, in our view, is on account of #1, that tech changes take time to play out, and #2 demand is growing at an ever increasing pace,” the Kotak Bank Chief said, adding the Bank has stepped up its efforts on both fronts.

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  • Several foreign banks, funds eye majority stake in Yes Bank

    Several foreign banks, funds eye majority stake in Yes Bank

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    A host of leading banks from Asia as well as some deep-pocketed sovereign funds and private equity firms are learnt to be eyeing a majority stake of 51 per cent stake in Yes Bank in a potential deal that could value the bank between $8 billion and $9.5 billion, even as the private lender has denied the Reserve Bank of India (RBI) granting approval for 51 per cent stake sale in it.

    Five Banks – SBI, HDFC Bank, ICICI Bank, Kotak Mahindra Bank and Axis Bank — collectively hold 33.74 per cent stake in Yes Bank, with SBI alone accounting for the biggest chunk (23.99 per cent stake). The other large category of shareholders in the bank are: Foreign direct investors – 17.95 per cent (CA Basque Investment/ 8.74 per cent stake and Verventa Holdings/9.21 per cent) and foreign portfolio investors – 10.28 per cent.

    The Indian banks are keen to exit their holding in Yes Bank “as their investment, which was part of the ‘Yes Bank Ltd. Reconstruction Scheme 2020’ (drafted by RBI and approved by the Government), made in March 2020, at ₹10 per equity share is only a financial investment and the purpose for which it was made has been served, said analysts.

    The stake-sale process was initiated earlier this year and the names of potential buyers have been doing the rounds since then.

    Potential buyers

    According to a report by Bloomberg, First Abu Dhabi Bank PJSC, Mitsubishi UFJ Financial Group Inc and Sumitomo Mitsui Financial Group Inc seem to have emerged as front-runners for picking up the 51.69 per cent stake in the bank. Separately, sources told businessline that other big funds and some PE firms were also known to have shown interest.

    On Tuesday, the bank strongly denied reports that its 51 per cent sale plan has received the RBI’s approval. “The RBI has not given any in-principle approval as stated in the article and this clarification is issued by the company voluntarily to dispel the baseless media article,” it said in an exchange filing.

    On March 5, 2020, the RBI, in consultation with the Central government, superseded the board of directors of Yes Bank for 30 days owing to serious deterioration in its financial position. Seven banks and the erstwhile HDFC Ltd had pumped in ₹10,000 crore to rescue Yes Bank. Of this, SBI alone invested ₹6,050 crore, giving it 48.2 per cent stake in March 2020.

    The bank’s shares touched a 52-week high of ₹32.85 in February this year from a low of ₹15.70 in October last year.

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  • Banks park less than notified amount at VRRR auction for 3 days on the trot

    Banks park less than notified amount at VRRR auction for 3 days on the trot

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    Banks have parked much lower than the notified amount at the Reserve Bank of India for three days on the trot since the beginning of July 2024.

    This indicates that while RBI is trying to ensure that surplus liquidity is absorbed from the banking system in keeping with its “withdrawal of accommodation” monetary policy stance, banks do not have a great amount of surplus to park.

    At the two-day VRRR auction of ₹50,000 crore on Wednesday, Banks’ deploying ₹25,145 crore. The Central Bank accepted the funds at a weighted average rate (WAR) of 6.49 per cent.

    At the three-day VRRR auction of ₹75,000 crore conducted on July 2nd, Banks placed funds amounting to ₹38,227 crore. The Central Bank accepted the funds at a WAR of 6.49 per cent.

    At the four-day VRRR auction of ₹75,000 crore conducted on July 1st, RBI received and accepted funds from Banks amounting to ₹4,200 crore at a WAR of 6.49 per cent.

    Monetary policy stance

    “Overall system liquidity is a bit positive as government spending is happening. So, the RBI is conducting VRRR auction. This is also in keeping with the monetary policy stance.

    “By doing so, it is trying to ensure that the weighted average call rate (WACR) stays at or above 6.50 per cent,” said Gopal Tripathi, President and Head, Treasury and Capital Markets at Jana Small Finance Bank.

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  • RBI appoints retired CGM Singh on Bandhan Bank board

    RBI appoints retired CGM Singh on Bandhan Bank board

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    The Reserve Bank on Monday appointed A K Singh as an additional director on the board of Bandhan Bank.

    The appointment of Singh, a career central banker who retired as chief general manager of RBI, is for one year, the Kolkata-headquartered lender said in a regulatory filing. Bandhan Bank, however, did not specify the factors which have necessitated Singh’s appointment. There are not too many instances of such actions by the central bank.

    A recent precedent would include appointing a serving RBI official on the board of private sector lender RBL Bank, following reports of certain concerns in the running of the bank.

    It may be noted that the development comes ahead of Bandhan Bank’s founder and chairman C S Ghosh’s retirement from the bank on July 9.

    The microlender turned bank is grappling with a high proportion of stressed advances and has been wanting to reduce the share of unsecured loans in the overall pie.

    The Bandhan Bank scrip closed 0.67 per cent down at ₹207.75 a piece on the BSE on Monday, as against gains of 0.17 per cent on the benchmark.

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  • RBI’s timely action helped curb potential risks in unsecured consumer credit: Das

    RBI’s timely action helped curb potential risks in unsecured consumer credit: Das

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    Timely action by the Reserve Bank of India last November through increase in risk weights on unsecured consumer credit and bank credit to NBFCs pre-empted build-up of potential risk, resulting in moderation in credit growth in these segments, according to Governor Shaktikanta Das.

    Referring to the regulatory and macro prudential restrictions on unsecured consumer credit and bank lending to NBFCs (non-banking finance companies), Das said: “We saw that in the credit market some potential problem would have built up…the headline (credit growth) numbers were looking good, the parameters (bad loans levels) were looking good. Even now they’re alright, there is no problem. But, we thought, if left unattended, these vulnerabilities can become a bigger problem. So, we thought it is better to act in advance and slow down the credit growth which was happening in these segments.”

    Unsecured credit

    The Governor, in his inaugural address at the Second Global Conference on Financial Resilience organised by the College of Supervisors, observed that there was some evidence of dilution of underwriting standards, proper loan appraisal not being done, and the mentality to join the bandwagon and just go for unsecured credit.

    “I cannot afford to say that we are smelling a crisis on every occasion, but it is our endeavour to smell a crisis….It’s at the back of our mind all the time to see if something is building up either at the systemic level or in an individual institution/ organisation,” Das said, adding that while pursuit of business growth is important, it should never come at the expense of taking on unacceptable risks.

    Pointing out that supervision of regulated entities has become a complex task, he emphasised that RBI is trying to ensure that supervisory methods are not only in sync with times, but also see the stress before it builds up so that proactive measures can be taken.

    In his bi-monthly monetary policy statement on June 7, Das observed that in November last year, RBI had flagged certain concerns on excessive growth in the unsecured retail loans and over-reliance of NBFCs on bank funding.

    Recent data suggest that there is some moderation in these loans and advances, he added.

    Rise in risk weights

    Consequent to the increase in risk weights, credit growth in unsecured personal loans such as ‘credit card outstanding’ declined from 34.2 per cent in November 2023 to 23.0 per cent in April 2024, while bank credit growth to NBFCs declined from 18.5 per cent in November 2023 to 14.4 per cent in April 2024.

    “We are closely monitoring the incoming data to ascertain if further measures are necessary. The Boards and top management of REs (regulated entities) should ensure that risk limits and exposures for each line of business are kept well within their respective risk appetite framework,” the Governor then said.

    He also observed that the persisting gap between credit and deposit growth rates warrants a rethink by the Boards of banks to re-strategise their business plans. A prudent balance between assets and liabilities has to be maintained.

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  • Rupee ends almost flat on likely RBI intervention

    Rupee ends almost flat on likely RBI intervention

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    The Rupee ended almost flat on Wednesday despite robust dollar demand from corporates, especially oil companies, as RBI likely intervened in the non-deliverable forward market to prevent it from depreciating to a new low.

    The Rupee closed at 83.5450 per Dollar against Tuesday’s 83.5650, which was an all time closing low

    Traders say that the RBI probably sold Dollars in the NDF market to stem the rupee’s fall in the spot market.

    To a question on the proposed expansion of RBI’s intervention kit, Governor Shaktikanta Das, at the last monetary policy press meet, said: “Our intervention in the NDF (non-deliverable forward) market has also undergone a change. We are now very clear and explicit that the RBI is there in the forward market, and we are there. “

    In his monetary policy statement, Das emphasised that the Indian rupee (INR) has moved in a narrow range with low volatility during 2024-25 so far (up to June 5), despite trading under pressure amidst foreign portfolio investment (FPI) outflows.

    The relative stability of the INR bears testimony to India’s sound and resilient economic fundamentals, macroeconomic and financial stability, and improvement in the external outlook, he added.

    Meanwhile, the 10-year benchmark (7.10 Government Security 2034) opened little changed at 7.01 per cent despite a fall in treasury yields overnight (following better than expected treasury auction), according to Nuvama said in a report.

    “Yields were ranged through the day as market participants remained on sidelines awaiting CPI inflation in India and the US. In addition, caution ahead of the FOMC meeting outcome also kept participants on the sidelines,” it added.

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  • RBI: Consumers expect higher rise in overall spending over the next one-year, reveals survey

    RBI: Consumers expect higher rise in overall spending over the next one-year, reveals survey

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    Consumer confidence paused on its uptrend as sentiments on all parameters, except spending, recorded some moderations in the latest bi-monthly consumer confidence survey released by the Reserve Bank of India. For the year ahead, consumer confidence remained at elevated level in the optimistic terrain though it declined, albeit marginally, due to relatively tempered sentiments on the general economic situation and employment prospects.

    Consumers expect higher rise in overall spending over the next one-year vis-à-vis the previous survey round; more respondents expect an increase in both essential and non-essential spending, the survey revealed.

    The bi-monthly inflation expectations survey of households for the three-month and one year ahead periods increased by 20 basis points (bps) and 10 bps, respectively, but remained in single digits. Their perception on current inflation, however, moderated by 10 bps and stood at 8.0 per cent in the latest survey round. A higher share of respondents expected prices and inflation to rise for all major product groups over the next three months as well as one-year periods. Among occupation categories, self-employed respondents group expected highest inflation. At the aggregate level, female respondents had marginally lower inflation assessment and expectations than their male counterparts.

    The survey of professional forecasters showed that real gross domestic product (GDP) is expected to grow by 6.8 per cent in 2024-25, revised up by 10 basis points (bps) from the previous round. It is expected to grow by 6.7 per cent in 2025-26, revised up by 20 bps from March 2024 survey round. The panellists placed GDP growth forecasts in the range of 6.4-8.1 per cent for 2024-25 and in the range of 6.0-7.7 per cent for 2025-26.

    Annual growth in real private final consumption expenditure (PFCE) and real gross fixed capital formation (GFCF) for 2024-25 are expected at 6.0 per cent and 8.6 per cent, respectively. Real gross value added (GVA) growth projection has been revised up marginally to 6.6 per cent for 2024-25 and kept unchanged at 6.4 per cent for 2025-26.

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  • Reliance Capital acquisition: Hinduja Group’s IIHL gets IRDAI approval

    Reliance Capital acquisition: Hinduja Group’s IIHL gets IRDAI approval

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    Hinduja Group’s IndusInd International Holdings (IIHL) on May 10 received the long-awaited Insurance Regulatory and Development Authority of India’s approval for the acquisition of Reliance Capital.

    The acquisition will include the takeover of Reliance Capital’s insurance arms — wholly-owned subsidiary Reliance General Insurance and 51:49 JV with Nippon Life, Reliance Nippon Life Insurance.

    The insurance regulator has cleared the transfer of Reliance Capital’s 26 per cent stake in Reliance Nippon Life to Aasia Enterprises. Post the transaction, Reliance Capital, Nippon Life Insurance and Aasia Enterprises LLP will be the promoters of the company.

    The approval is valid for three months and subject to certain “regulatory, statutory, and judicial clearances/compliances”. Further, IRDAI has also sought details of the share transfer post the completion of the acquisition. The approval has been long pending and crucial to the resolution plan given that the insurance arms are the highest revenue-accruing businesses of Reliance Capital.

    RBI clearance awaited

    Recently, Hinduja Chairman Ashok Hinduja had said that the Group would make the upfront resolution payment of ₹9,650 crore to lenders within 48 hours of getting the go-ahead. The NCLT, which approved the RCap resolution plan in February 2024, has stipulated the deadline of May 27 for implementation.

    The resolution implementation is now pending RBI’s approval for the proposed corporate restructuring of implementing entities. RBI had, in November 2023, approved the original plan of transfer of control of Reliance Capital to IIHL BFSI, subject to a six-month validity ending May 17.

    The restructuring is believed to have been triggered by IRDAI’s discomfort with the earlier approved ownership structure for the insurance subsidiaries. The structure had implementing entities — IIHL BFSI (India) Ltd and Aasia Enterprises LLP wherein RCap’s entire shareholding was to be transferred to holding company IIHL BFSI (India), and certain assets, including general insurance, were to be transferred to Aasia given IRDAI’s 74 per cent cap on foreign shareholding in Indian insurance companies.

    Per the new proposed structure, Cyqure India Pvt Ltd will have four Hinduja Group partners and hold majority stake in Aasia Enterprises. Ecopolis Properties and Cyqurex Technologies will be set up as wholly-owned subsidiaries of Aasia, whereas IIHL BFSI Holding will be a wholly-owned arm of IIHL.

    The central bank had, in November 2021, superseded the board of Reliance Capital on concerns regarding corporate governance and payment defaults, and appointed Nageswara Rao Y as the administrator. The company had a debt of over ₹40,000 crore at the time of going under insolvency.

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  • RBI asks fintechs not to pursue blistering growth

    RBI asks fintechs not to pursue blistering growth

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    After asking banks and non-banking finance companies to take a calibrated approach to growth, the Reserve Bank of India has signalled fintechs to tamp down.

    In a meeting recently held with fintech heads, the regulator is said to have told many companies, especially those involved in loan products and/or operating as loan service providers, to cut down growth.

    RBI’s concern, according to sources, is that despite curbs in risk weights in unsecured loans, there is little or no moderation in growth. “This isn’t good from a systemic perspective,” said a highly placed source aware of the matter. While a few fintech leaders have communicated to the regulator that high growth is coming off a low base, the reasoning hasn’t found favour.

    “Target growth at around 15–20 per cent is the message given to all of us,” said a CEO of a lending fintech who didn’t want to be named. Currently, fintech lenders are among the fast-growing entities and almost every fintech across the board may have closed FY24 with 35-50 per cent growth. “This warning has put us in a spot,” said the CEO.

    It’s in the DNA

    Fintech heads and investors are in a huddle, trying to work out alternatives. The sector is once again back with fundraising plans with clarity emerging on operational aspects such as loss-default guarantees. However, the DNA of fintech lenders is fast growth, and valuation multiples are often linked to how quickly the loan book can expand.

    “On one hand, we don’t want to take the risk of not complying with RBI’s warnings because we have seen how non-compliance can backfire. But, on the other hand, how do we satisfy our investors. If growth slows to 15-20 per cent, generating 30 per cent plus returns is almost impossible,” said another fintech CEO. Also, with most players looking at turning profitable or breaking even ahead of their slated IPO plans, slowing down growth may set the clock backwards. “Volumes and scale are important to turn profitable and that cannot happen if growth slows,” said another CEO.

    What next

    While venture debt is no substitute for equity, many fintechs are looking at adding debt to their balance sheet to improve return profile and thereby bump up valuations a bit. Since many operate in the unsecured lending segment (whether for personal loan or small business requirements) where pass-through of cost of funds isn’t an issue, fintechs are also looking at alternative business models.

    “Lately, there has been an increased interest in gold loans and loan against property. Such type of loans will ensure that there is productive use of gearing,” said a senior executive of a fintech company, adding that since many companies are still in early stages of exploring these options, it will automatically reset growth rates. “But this may also increase our cost structures, and everything will depend on how good we handle that,” she added.

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  • RBI bars Kotak Mahindra Bank from onboarding new customers through online & mobile channels

    RBI bars Kotak Mahindra Bank from onboarding new customers through online & mobile channels

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    The Reserve Bank of India has barred Kotak Mahindra Bank from onboarding new customers through its online and mobile banking channels and issuing fresh credit cards for failing to build IT systems and controls commensurate with its growth leading to serious deficiencies and non-compliances with regulatory requirements.

    According to RBI’s press release, “These actions are necessitated based on significant concerns arising out of Reserve Bank’s IT Examination of the bank for 2022 and 2023 and the continued failure on part of the bank to address these concerns in a comprehensive and timely manner”.

    RBI’s press note specified that the bank is found to be “materially deficient in building necessary operational resilience on account of its failure to build IT systems and controls commensurate with its growth”.

    It further added that serious deficiencies and non-compliances were observed in Kotak Mahindra Bank’s IT inventory management, patch and change management, user access management, vendor risk management, data security and data leak prevention strategy, business continuity and disaster recovery rigour and drill. Interestingly, the press note pointed out that for two consecutive years, the bank was seen deficient in its IT Risk and Information Security Governance vis-à-vis the regulatory requirements.

    “During the subsequent assessments, the bank was found to be significantly non-compliant with the Corrective Action Plans issued by the Reserve Bank for 2022 and 2023, as the compliances submitted by the bank were found to be either inadequate, incorrect or not sustained”. The order also noted that in the absence of a robust IT infrastructure and IT Risk Management framework, the bank’s core banking system and its online and digital banking channels have suffered frequent and significant outages in the last two years with the recent one being 10-hour service disruption seen on April 15, 2024.

    Ban implications

    The curbs have been imposed under section 35A of the Banking Regulation Act. This section is invoked in lieu of public interest, interest of banking policy or when affairs of a bank are detrimental to depositors or prejudicial to the interest of the bank. RBI’s press release notes that the action on the bank was to prevent any possible prolonged outage which may seriously impact not only the bank’s ability to render efficient customer service but also the financial ecosystem of digital banking and payment systems.

    Imposed as a ‘cease and desist’ order, any deviation or non-compliance would attract very high penal action by the regulator. The curbs may be removed post a comprehensive external audit conducted by the bank with RBI’s approval and the remedial actions pointed out therefrom are complied with to RBI’s satisfaction.

    Reacting to the RBI order, Kotak Mahindra Bank said it has taken measures for adoption of new technologies to strengthen its IT systems and will continue to work with RBI to swiftly resolve balance issues at the earliest. “We want to reassure our existing customers of uninterrupted services, including credit card, mobile and net banking. Our branches continue to welcome and onboard new customers, providing them with all the bank’s services, apart from issuance of new credit cards,” the bank said.

    Past cases

    This is the third instance of imposing business restrictions among banks (see table) and incidentally, following the curbs placed on IIFL Finance and JM Financial earlier this year, Kotak Bank is the third instance of bans imposed on regulated entities so far in 2024.

    However, compared to HDFC Bank and Bank of Baroda’s mobile banking app (bob World) instances, action taken on Kotak Bank seems to be the most stringent. Curbs on bob World are yet to be removed while it took HDFC Bank almost two years to remedy the deficiencies pointed out by the regulator.

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  • Kumar Mangalam Birla says financial services to grow 10-22% in 3-5 years

    Kumar Mangalam Birla says financial services to grow 10-22% in 3-5 years

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    India’s financial services sector is expected grow at a CAGR of 19-21 per cent in three-five years, according to Aditya Birla Capital Digital (ABCD) Chairman Kumar Mangalam Birla.

    “The financial services sector is expected to outpace GDP growth by 2X in the next five5 years. The three largest components —credit, investments and insurance — are expected to grow at a CAGR of 19-21 per cent, 20-22 per cent, and 10-12 per cent, respectively over the next three-five 3 to 5 years,” Birla said.

    Aditya Birla Capital, under its newly-launched D2C platform Aditya Birla Capital Digital (ABCD) has applied for a PPI (Prepaid Payment Instrument) licence from the Reserve Bank of India and is awaiting the regulatory go-ahead.

    “We have submitted the application,” said Pankaj Gadgil, MD & CEO of Aditya Birla Housing Finance Ltd and Group Head – Digital, Payment and Analytics at Aditya Birla Capital. He added that once the licence is received, the wallet will act as another touch point to enable ease of transactions for customers.

    PPIs are instruments that facilitate purchase of goods and services, conduct of financial services, enable remittance facilities, etc., against the value stored in instruments such as cards or wallets.

    Ease of use

    “The eventual plan is to route a bulk of transactions, at least UPI payments, through the wallet as that seems to be a preferred mode of choice for customers,” a senior official told businessline on the sidelines of an event to launch the ABCD mobile platform.

    Payments is the first touch point for most customers and usually sees the most volumes of transactions. It then makes sense to offer a comprehensive product to allow for most transactions within the ecosystem, both from the perspective of data collection and ease of use, the senior official added. 

    The ABCD platform offers 22 products and services across payments, investments, lending to insurance. The target audience is the ‘First Income to First Kid’ customer base, the company said.

    On subscription-based device strategy for soundboxes and EDC machines on the payments side, which are being rolled out by peers such as Bajaj Finance and Jio Financial, Gadgil said that the platform is currently in early stages and the payments suite will continue to evolve and grow, going ahead.

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  • RBI likely to hold repo rate at 6.50%

    RBI likely to hold repo rate at 6.50%

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    With the Reserve Bank of India (RBI) fixated on aligning retail inflation with the four per cent target, majority of the members of its rate setting panel are expected to vote to hold the repo rate at 6.50 per cent at their first meeting in the new financial year, scheduled from April 3 to 5.

    The repo rate, which is the interest rate at which banks draw funds from RBI to overcome short-term liquidity mismatches, was left unchanged in all six bi-monthly monetary policy reviews in FY24 as retail inflation stayed above the monetary policy committee’s four per cent target.

    This rate was last increased from 6.25 per cent to 6.50 per cent in February 2023.

    While a majority of the economists expect the ‘withdrawal of accommodation’ stance to continue to ensure transmission of the 250 basis points repo rate hike effected between May 2022 and February 2023, some see the possibility of a surprise change in stance to ‘neutral’ to prepare the runway for rate cuts towards the middle of the new financial year.

    In his last monetary policy statement, RBI Governor Shaktikanta Das observed that the job (of bringing down inflation) is not yet finished, and the central bank needs to be vigilant about new supply shocks that may undo the progress made so far.

    He emphasised that monetary policy has to remain vigilant to ensure that the central bank successfully navigates the last mile of disinflation.

    “With the policy repo rate remaining on hold at 6.50 per cent for more than a year, the main focus has been on liquidity management and the evolution of “effective interest rate” in money markets.

    “Both repo rate and stance are likely to remain unchanged under base case scenario; but can’t rule out the possibility of a change of stance to neutral, given past evidence of the central bank surprising with its decision, particularly in April,” said Kaushik Das, chief economist, India & South Asia, Deutsche Bank.

    CARE Rating Economists said the RBI is expected to maintain status quo on both rates and stance in its upcoming policy meeting. They see the RBI opting for a shallow rate cut cycle of 50 basis points starting Q3 (October-December) FY25.

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  • Administrator likely to be appointed at Paytm Payments Bank after March 15

    Administrator likely to be appointed at Paytm Payments Bank after March 15

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    With less than a fortnight to go for Paytm Payments Bank to wind down its operations, highly placed sources in the banking circles say the bank could be the first significant instance in over two decades where the Reserve Bank of India may not hesitate to take a drastic step such as cancellation of its bank license. “If that be the case, an administrator could be appointed at the bank to oversee certain critical aspects,” said a person with knowledge of the matter.

    Failed transactions

    A move of this nature is likely after three–four instances of failed due diligence done on Paytm Payments Bank in a bid to take over its business. Being a deposit-taking entity, it is learnt that a few large banks, including a rival payments bank, are interested in Paytm’s wallet business and have shown interest in taking over Paytm Payments Bank. “However, with reports of inadequate KYC compliance looming over the bank, the interested parties stepped back,” said a banker aware of the matter.

    According to a few more sources, the regulator had sounded off the interested entities acquiring Paytm Payments Bank as they would be at their own risk and no dispensation on the compliance front would be extended to them. “This was a deterrent for any transaction to go through,” said the person quoted above.

    It may be noted that on February 26, the board of Paytm Payments Bank was reconstituted with new members and Vijay Shekar Sharma stepped down as the chairman of the bank. Subsequently, One97 Communications (OCL) terminated all its contracts with the bank. Sharma holds 51 per cent equity in Paytm Payments Bank, while the rest is held by OCL.

    Next steps

    Another banker added that, with the RBI explicitly mentioning in the FAQ dated February 16 that no credits can be made to Paytm Payment Bank’s savings account and no fresh deposits with partner banks through Paytm Payments Bank will be allowed after March 15, 2024, indicates that the bank is unlikely to be in existence for long.

    However, for depositors who may not have withdrawn or closed their accounts with the bank within the slated timelines, their sums will be transferred to ‘unclaimed deposits’ account under the “Depositor Education and Awareness” (DEA) Fund Scheme, 2014. The role of the administrator would be to ensure that any deposit claims made thereafter is satisfactory repaid to the depositors. As of March 31, 2023, Paytm Payments Bank held ₹3,285.27 crore of deposits, with ₹2,955.96 crore of deposits with 1–3 year maturity.

    License revocation likely

    Paytm Payments Bank faced with risk of license revocation after March 15

    Move likely as talks with 3 – 4 large banks for takeover fail

    Inadequate compliance by Paytm Payments Bank seen as reasons for failed takeover talks

    RBI may appoint an administrator to oversee unclaimed deposits after March 15

    Vijay Shekhar Sharma holds 51 per cent stake in Paytm Payments Bank; rest with One97 Communication

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  • ₹2000 withdrawal: Total value of banknotes in circulation declined to ₹8,470 crore by Feb-end: RBI

    ₹2000 withdrawal: Total value of banknotes in circulation declined to ₹8,470 crore by Feb-end: RBI

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    The Reserve Bank of India (RBI) on Thursday said 97.62 per cent of the ₹2,000 banknotes in circulation as on May 19, 2023, had been returned by February 29, 2024, with the remaining notes in circulation continuing to be legal tender.

    Also read: RBI revises BBPS framework to streamline bill payments, enhance protection

    The central bank, in its update on withdrawal of ₹2,000 denomination banknotes, underscored that the total value of ₹2,000 banknotes in circulation, which amounted to ₹3.56 lakh crore as at the close of business on May 19, 2023 when their withdrawal was announced, has declined to ₹8,470 crore as at the close of business on February 29, 2024.

    The facility for exchange of the ₹2,000 banknotes is available at RBI’s 19 Issue Offices since May 19, 2023, per a central bank statement.

    From October 09, 2023, RBI Issue Offices are also accepting ₹2,000 banknotes from individuals/entities for depositing into their bank accounts.

    Further, members of the public are sending ₹2,000 banknotes through India Post from any post office within the country, to any of the RBI Issue Offices for credit to their bank accounts.

    The RBI initiated the exercise for withdrawal of ₹2,000 banknotes on May 19, 2023, as the objective of introducing them (to meet the currency requirement of the economy after the withdrawal of legal tender status of all ₹500 and ₹1,000 banknotes in circulation in the November-December 2016 period) was met once banknotes in other denominations became available in adequate quantities.

    “About 89 per cent of the ₹2,000 denomination banknotes were issued prior to March 2017 and are at the end of their estimated life-span of 4-5 years.It has also been observed that this denomination is not commonly used for transactions. Further, the stock of banknotes in other denominations continues to be adequate to meet the currency requirement of the public.”

    Also read: NBFC-MFIs seek revision in annual household income criteria for giving microfinance loans

    “In view of the above, and in pursuance of the “Clean Note Policy” of the Reserve Bank of India, it has been decided to withdraw the ₹2,000 denomination banknotes from circulation,” the central bank said in a statement on May 19, 2023.

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  • Lenders need to disclose more structured information about climate-related financial risks: RBI

    Lenders need to disclose more structured information about climate-related financial risks: RBI

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    The Reserve Bank of India said there is a need for lenders (regulated entities/REs) to disclose more structured information about their climate-related financial risks.

    The central bank noted that there is a need for a better, consistent and comparable disclosure framework for REs, as inadequate information about climate-related financial risks can lead to mispricing of assets and misallocation of capital by them.

    Accordingly, RBI has decided to put in place a standard Disclosure framework for REs on Climate-related Financial Risks. The REs have to disclose the information detailed in the framework on a standalone basis and not consolidated basis., per RBI’s “Draft Disclosure framework on Climate-related Financial Risks, 2024”.

    As per the draft framework, REs will be required to make disclosures on four thematic areas (Pillars) — “Governance”, “Strategy”, “Risk Management” and “Metrics and Targets”, per RBI’s Draft Disclosure framework on Climate-related Financial Risks, 2024.

    The disclosures are applicable to Scheduled Commercial Banks/SCBs (excluding Local Area Banks, Payments Banks and Regional Rural Banks), large urban co-operative banks (UCBs), all-India financial institutions(AIFIs), and large NBFCs.

    “Climate-related disclosures by REs is an important source of information for different stakeholders (e.g., customers, depositors, investors and regulators) to understand relevant risks faced and approach adopted to address such issues,” RBI said.

    Impact inevitable

    The central bank emphasised that given the increasing threat of climate change and the associated physical damage, changes in market perception and the transition towards more environment-friendly products and services, the impact of climate change on REs is inevitable.

    “The REs also play an important role in financing the transition towards an environmentally sustainable economy. It is therefore imperative for the REs to implement a robust climate-related financial risk management policies and processes to effectively counter the impact of climate-related financial risks,” RBI said.

    As per the glide path provided for disclosures, SCBs, AIFIs & large NBFCs and UCBs have to start making disclosures on “Governance, Strategy, and Risk Management” from FY26 and FY27 onwards, respectively.

    SCBs, AIFIs & large NBFCs and UCBs have to start making disclosures on “Metrics and Targets” from FY28 and FY297 onwards, respectively.

    As part of enhanced disclosure, REs have to disclose the absolute gross greenhouse gas emissions generated during a financial year.

    The also have to reveal absolute gross financed emissions (portion of gross greenhouse gas emissions of an investee or counterparty attributed to the loans and investments made by an RE to the investee or counterparty) for each industry by asset class.

    RE have to disclose the climate-related physical and transition risks – amount and percentage of assets vulnerable to both the risks;

    The lenders have to reveal whether and how climate-related considerations are factored into remuneration of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers.

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  • Paytm advisory panel discussing terms of reference with company: Damodaran

    Paytm advisory panel discussing terms of reference with company: Damodaran

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    An advisory committee, set up by Paytm owner One97 Communications after the Reserve Bank’s action on its payments bank business, is at a stage of engagement with the company on matters related to the terms of reference for the panel, the panel’s head and former chairman of Sebi M Damodaran said.

    “We have been engaging with the group on matters relating to the Advisory Committee’s terms of reference,” Damodaran said on Sunday in response to a query about his engagement with Paytm.

    He said that the panel members are external advisors and at present Paytm is engaged in dealing with the RBI.

    On January 31, the RBI asked PPBL (Paytm Payments Bank Ltd) to stop further deposits, credit transactions, or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, and National Common Mobility Cards, after February 29. Later, the central bank extended the deadline till March 15.

    Paytm on February 9 announced setting up of a group advisory committee headed by Damodaran. The committee was set up to advise the company on strengthening compliance and on regulatory matters.

    Meanwhile, the Reserve Bank on Friday asked the National Payments Corporation of India (NPCI) to examine the possibility of migrating Paytm Payments Bank customers using the UPI handle ‘@paytm’ to 4-5 other banks, in a bid to prevent any disruptions in the payment ecosystem.

    Damodaran was speaking at the release of his biography ‘The Turmeric Latte’ compiled by one of his former colleagues.

    During a panel discussion at the event, when he was asked about his views on the functioning of Sebi at present, Damodaran said the capital markets regulator has bandwidth problems with respect to the large amount of issues that it has to handle.

    “Sebi has a huge challenge. The bandwidth seems inadequate to tackle the large number of issues that they have to tackle. In the process, it sometimes feels like they are biting more than they can chew,” Damodaran said.

    The book, curated by former Tripura cadre IAS officer Dinesh Tyagi who last served as Managing Director of CSC E-Governance, has contributions from former colleagues of Damodaran including former mines secretary Sushil Kumar.

    The book also mentions about “threats” received by Damodaran, when he was the joint secretary in the information and broadcasting ministry, for some decisions taken by him.

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  • RBI, Govt support to fuel fintech firms growth: NPCI Chief Dilip Asbe

    RBI, Govt support to fuel fintech firms growth: NPCI Chief Dilip Asbe

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    With backing from the government and the Reserve Bank of India (RBI), the fintech companies in India can expand their global footprint said Dilip Asbe, MD and CEO of the National Payments Corporation of India (NPCI).

    Also read: Decoding fintech and its jargons

    “Creating an acquiring footprint, creating value-added services over that, I think it is very logical for fintechs in India. I would be really surprised if we lose that game. With the clear thinking of the government and RBI, Indian fintechs will go global, as simple as that,” he said at Razorpay’s annual event in Bengaluru.

    He noted that Indian fintech companies must spearhead the task of elucidating the country’s payment standards to the global market before exporting them.

    He also noted the need for investment, saying that payment startups are well-funded. He acknowledged the dilemma faced by fintechs regarding balancing focus between domestic and global markets, given India’s substantial market size.

    Asbe issued a caution to fintech founders regarding regulatory compliance, advising them to refrain from developing products that regulators have not explicitly authorised.

    He emphasised that if a particular activity or product has not been explicitly approved, the default stance should be to abstain from pursuing it.

    “Whatever is not written in regulation means a no…When we are part of managing other people’s money, we should be responsible. Compliance is good and risks become higher with size, if fintech founders are here to build long-term, I don’t see it without compliance,” said Asbe.

    Also read: Editorial. Paytm Bank fiasco raises fintech regulation concerns

    NPCI has also been pushing the lever on international expansion of UPI payments. The domestic service is currently live in countries including the United Arab Emirates (UAE) and Mauritius.

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  • SBI in talks with RBI for relaxation in CRR requirement for green deposits

    SBI in talks with RBI for relaxation in CRR requirement for green deposits

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    State Bank of India has approached the RBI seeking relaxation in the Cash Reserve Ratio (CRR) requirement for green deposits, which are long-term deposits used to fund green or climate-friendly projects. “We have put across the ask. One, of course, is a reduction in CRR for green deposits and second, if at all as a policy, it can be incorporated (into the regulatory policy mechanism),” SBI Chairman Dinesh Kumar Khara said at an event by NSE and Indian Institute of Management Kozhikode (IIM-K).

    CRR is the minimum cash banks needs to reserve with the regulator, against their total deposits. Currently, the CRR is at 4.5 per cent, with no specific requirement for green deposits. “Early beginning has happened from the regulator’s side but it may take 2-3 years to start having an impact on the pricing too,” Khara said, adding that he expects such deposits to be priced around 10 bps lower than normal deposit rates.

    Green FD scheme

    RBI, in June 2023, allowed bank to accept green fixed deposits to finance such projects. Last month, SBI had launched a green fixed deposit (FD) scheme with three varying tenures — 1,111, 1,777 and 2,222 days. Rates on these deposits are around 10 bps lower than rates on regular FDs with similar tenors. In December 2023, the PSU bank had raised $250 million via senior unsecured green floating rate notes maturing in December 2028.

    Accounting standard

    Khara said that the bank is also engaging with rating agencies and bodies such as Institute of Chartered Accountants of India to put in place an accounting standard for green financing, so as to ensure a better, reliable and more practical rating mechanism and avoid instances of potential greenwashing in the name of green financing.

    “The green component is to be captured across organisations. There will be a need for its auditing since those who are sources for green funding will like to have some credible numbers. SBI is also engaging with some entities to see if an accounting standard can be set for green financing,” he said. 

    SBI has already started evaluating borrowers based on their environmental, social and governance (ESG) ratings, and is sharing this information with them to enhance awareness, he said, adding that the bank has also requested RBI to nudge and help the banking system.

    While SBI is currently not pricing loans based on ESG parameters, they will start impacting pricing in 2-3 years, he said.

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