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BANKING Awareness MAY 2017
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What is a Payments Bank?Payments Bank is a new type of bank, licenced
by the Reserve Bank of India. As a Payments Bank, Paytm can now accept customer deposits upto Rs. 1 lakh per customer in a wallet, savings
or current account and offer other banking services like Debit Cards, Online Banking and
Mobile Banking.
How is a Payments Bank different from a normal bank?
Payments Banks are not allowed to lend to customers. However, they can partner with other
financial institutions/banks to offer financial products like loans, insurance, mutual funds,
pension funds etc.
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PAYTM Payments BankIthaszerochargesonallonlinetransactionsand
nominimumbalancerequirement.
• Itwillbethefirstbanktooffercashbacksondeposits.EverycustomertoopenaPaymentsBankaccountwillgetacashbackofINR250,assoontheybringdepositsofatotalof $387(INR25K).
• Customerswillbegivenzerochargesonallonlinetransactions(suchasIMPS,NEFT,RTGS)andnominimumbalancerequirement.
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• Amongpaymentbanklicenceholders,twoentitiesnamelyAirtelPaymentsBankand
IndiaPostPaymentsBank(IPPB)havestartedoperationssofar.
• Airtel- 7.25%interestonsavingsaccount,IPPB5.5%
• PayTm paymentsbank- 4%
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InPaytm PaymentsBank
One97Communicationsowns- 49percentstake
VijayShekhar Sharmaowns51percent.HQ– NOIDA
VijayShekhar Sharma,Chairman– PaytmPaymentsBank
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Thecentralbankgavein-principleapprovalto11entitiestostartpaymentsbankoperationsin
August2015.Outofthem,TechMahindra,Cholamandalam
InvestmentandFinanceCompanyandaconsortiumofDilip Shanghvi,IDFCBankandTelenorFinancialServiceshavebacktrackedon
theirpaymentsbankplans.
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InApril2017
• AdityaBirlaIdeaPaymentsBankgotpermissionfromRBItoopenpaymentsbank
• 51:49jointventure(JV)betweenAdityaBirlaNuvo Ltd(ABNL)andtelecommajorIdeaCellular.
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• AdityaBirlaIdeaPaymentsBankLtd- SeventhentitytoreceiveafinallicencefromtheReserveBankofIndia(RBI)tosetupapaymentsbank,(Stockexchangenotification)
• ExceptVodafoneM-Pesa Ltd,allpaymentbanklicenceholdershavereceivedthefinalapproval.
• InMarchlastweek- RBIgrantedafinallicencetoFino PayTechLtdandNationalSecuritiesDepositoryLtdtoopenpaymentsbank
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Renu Satti,CEOofPaytm PaymentsBankAim- tobecomethepreferredbankfor50
CROREIndiansby2020Raised$1.4billionfromSoftBank
(MasayoshiSon)
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• Airtel1st paymentsbankinthecountrytogolive– 1st inRajasthan
• IndiaPost - 2nd overall– 1st publicsectorPaymentsbank- January2017. Thefirsttwobranches- inRanchiandRaipur
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• RelianceIndustries,IdeaCellular,FINOPaytech,andNationalSecuritiesDepository
Limited
• Received PaymentsBankslicenses.
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IMF
TheInternationalMonetaryFundhaspredictedthattheglobaleconomywouldgrowat3.5%in
2017,upfrom3.1%lastyear,and3.6%in2018.
IMFmanagingdirector– ChristineLagardeHQ– WashingtonDC
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IMF - India
• IndialikelytoovertakeGermanytobecomeworld'sfourthlargesteconomyin2022:IMF
Indiatogrowby7.2%in2017-18Indiatogrowat7.7%in2018-19
GrowthinAsiaisforecasttoaccelerateto5.5%in2017from5.3%in2016.Itwas5.3%in2015
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IMF’s AdvicetoIndia
• Sortoutpilingstressedassetsinthebankingindustry
• overhaulthetaxsystem• Revivelacklusterproductivity
• Workongeneratingrobustemploymentopportunitiestopeople
• Encourageprivatesectorinvestment• Trytoovercomeasignificantinfrastructure
shortfall
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AsianDevelopmentBank• 50thannualmeeting–May4th toMay7th,Yokohama,Japan)
• ADBPresidentTakehiko Nakao,HQ-Manila• 1966• 67Owners, IndiaisADB'sfourthlargestshareholder
• ADBforecast- India’seconomicgrowthrate7.1percent2016-177.4percent2017-187.6percent2018-19
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• TheAsianDevelopmentBank(ADB)approveda$275millionloantohelpsupportandimproveurbanservicesdeliveryamongpoorcommunities,particularlyonwatersupplyandsanitation,inMadhyaPradeshincentralIndia.
ADBapproveda$175millionloantoPowerGridCorporationofIndiaLimitedforcleanenergy—particularlysolar— andachieveenergysecurity.(2,500megawatts(MW)ofpowerfromsolarparksinBhadla,Rajasthan,and700MWfrom
Banaskantha,Gujarat)
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• ADB financing157.5milliondollarsfortheOrissaIntegratedIrrigatedAgricultureandWaterManagementInvestmentProgram.
• ADBfinancingUSD500millionforRajasthan'sroadproject
• ADBfinancingUSD-390-millionbondtosupport709MWofsolarandwindprojectsacrosssixstatesinIndia.AlsoissuedINR-300crore(aboutUSD47m)offshoreIndianrupee-linkedbondsfortheproject
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TheInternetandMobileAssociationofIndia(IAMAI)hasappointedGoogleIndiamanagingdirectorandGoogle’svice-
presidentforSouthEastAsiaandIndiaRajan Anandan asitsnewchairman.
Ex- FreeCharge co-founderandchairmanKunal ShahDeepKalra,chairmanandgroupCEOofMakeMyTrip - newvice-
chairmanIAMAIisthecountry’sleadingassociationofdigitalcompanies.Ithasamembershipofnearly300Indianandoverseascompanies,
andhasofficesinDelhi,Mumbai,BengaluruandKolkata.
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MajorrestructuringinthePSUbankingPNBManagingDirectorUshaAnanthasubramanian hasbeenshiftedtoKolkata-
based Allahabad Bank
headof Bank ofIndia(BoI)Melwyn Rego movedto Syndicate Bank
IDBI Bank headKishor PKharat shiftedto Indian Bank.MaheshKumarJainof Indian Bank shiftedto IDBI Bank.
AppointmentsCommitteeoftheCabinet(ACC),headedbyPM
Rajkiran RaiG- MDandCEOofUnion Bank ofIndiaforaperiodofthreeyears.
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MajorrestructuringinthePSUbanking
RSubramaniakumar - IndianOverseasBank,MDandCEO.
SunilMehta– toheadthecountry'ssecondlargestpublicsector bank PNBinplaceofAnanthasubramanian whohasbeenshifted.
Dinabandhu Mohapatra - MDandCEOof Bank ofIndia.
RASankara Narayanan- MDandCEOofVijaya Bank.
GrossNPApfPSBsnearlydoubledtoRs 5.02lakhcroreattheendofMarch2016,upfromRs 2.67lakhcroreattheendofMarch2015.
RosebyoverRs 1lakhcroretoRs 6.06lakhcroreduringApril-Decemberof2016-17,thebulkofwhichcamefrompower,steel,roadinfrastructureandtextilesectors.
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UNITEDNATIONS
Indiaisprojectedtoachievea7.3 percentgrowthin2017,adownwardrevisionfromthe
7.7percentforecast
Indiawillachieveanimpressive7.9percent GDP growthin2018,revisingupwardsfrom
the7.6percentforecast
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• India- fastestgrowinglargedevelopingeconomy,wayaheadofChinawhichisprojectedtogrowat6.5percentin2017and2018.
Worldgrossproductisexpectedtoexpandby2.7percentin2017and2.9percentin2018
(2.3percentin2016)The grossworldproduct (GWP)isthecombinedgross national product ofallthecountriesinthe
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IIP,WPI• Thenew-lookindexofindustrialproduction(IIP)andthewholesalepriceindex(WPI),
• The baseyear fortheindicesinthenewserieshasshiftedto2011-12,againsttheearlier2004-05.
• ChiefStatisticianTCAAnant
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IllicitFinancialFlowstoandfromDevelopingCountries:2005-2014
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• Ontheotherhand,illicitoutflowsfromIndiawaspeggedat$165billionbetween2005and2014
• Thereportsaidtotalillicitfinancialoutflowwas3%(about$165billion)ofIndia’stotaltradeof
$5500.744billionbetween2005-2014.
• Thereportnotesthatmostofthe illicitinflows andoutflowsinIndiahappeneddueto mis-invoicing of exports and imports.
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• Under-voicingbyimportersandover-voicingbyexporters.
• India’scustoms,DirectorateofRevenueIntelligence(DRI)andEnforcementDirectorate(ED)personnel
havebeenunabletomonitorandcurbsuchpracticeswhichleadtomassivelossesintaxrevenuesforIndia.
• Importunder-invoicinginvolvespresentingfakebillswhichunderestimatethevalueof imports which
reducesthedutyburdenontheimporter.Exportersresorttoover-invoicingbypresentinginflatedbillsto
customsofficialswiththesamemotive.
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SomethingInteresting
ConsumerInflation inIndiaalmostdoubledbetween2005to2013
In2005, ConsumerInflationinIndia- 4.2%In2010, ConsumerInflation- 11.7%In2013, ConsumerInflation- 9.13%
After2014(MODI)
In2014, ConsumerInflation- 5.86%In2016, ConsumerInflation- 2.23%
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ForeignExchangeReserves
• Foreigncurrencyassets(FCAs)
• Gold
• SpecialDrawingRights(SDRs)(aformofinternationalmoney,createdbytheInternationalMonetaryFund,anddefinedasa
weightedaverageofvariousconvertiblecurrencies.)
• RBI’s ReservepositionwithInternationalMonetaryFund(IMF)
(ForexReservesatLife-TimeHighof$379.310Billion)
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AIIB
AsianInfrastructureInvestmentBank53membersHQBeijing
President- Jin LiqunIndia2nd highestshareholderafterChina(8%)
China-26%,Russia3rd,Germany4th
Russia– 6%Germany– 4.5%
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• AIIBapprovedUSD160millionloanforapowerprojectinAndhraPradesh,thefirstcreditfromthe
bankforanIndianproject.(ConcernsoverOBOR)
IndiaBoycott
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OperationCleanMoney
Income Tax Department (ITD)initiated OperationCleanMoney
Initialphaseoftheoperationinvolvese-verificationoflargecashdepositsmadeduring9thNovemberto30thDecember2016. Dataanalyticshasbeenusedforcomparingthe demonetisationdata with
informationinITDdatabases
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• Theresponseoftaxpayerwillbeassessedagainstavailableinformation.
• Incaseexplanationofsourceofcashisfoundjustified,theverificationwillbeclosedwithoutany
needtovisitIncomeTaxOffice.
• TheverificationwillalsobeclosedifthecashdepositisdeclaredunderPradhanMantri Garib
Kalyan Yojna (PMGKY).
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TheReserveBankofIndiaislookingtohireaCFO–chieffinancialofficer- andhasinvitedapplicationsfromqualified
charteredaccountantsforthefirsttimeinitshistory.
RBIinvitesapplicationsforpostofdeputygovernor
TheReserveBankofIndia(RBI)islookingforareplacementfordeputygovernorS.S.Mundra,
whosetermendson31July
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NPA
VideoconIndustries(Rs 1,757crore)DebtofRs47,000crores
RelianceCommunications(Rs 6,400crores)DebtofRs 42,800crores.
Bhushan Steel(Rs 1,838crores)– DebtofRs46,000crores.
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• Theexistingoversightcommittee,hastwomembers,asconstitutedbytheIndianBanks'Association(IBA).
• RBIwillreconstitutethe oversightcommittee (OC)underitsaegistooperationalise thebankingordinanceforresolvingtheissueof badloans thathavesoaredtooverRs 8lakhcrore.
• The RBI willalsoexpandthescopeofcasestobereferredtotheOCbeyondthoseunderS4A(SchemeforSustainableStructuringofStressedAssets)
The RBI wantsratingagenciestoplayavitalroleintheresolutionprocess.
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• BankingRegulation(Amendment)Ordinance,2017,
• RBI willannounceframeworktofacilitatean"objectiveandconsistent"decision-makingprocessforcasesthatmaybereferencedforresolutionundertheInsolvencyandBankruptcyCode,2016(IBC).
RBIhasalreadysoughtinformationonthecurrentstatusofthelargestressedassetsfromthebanks.
Theordinanceauthorises theRBItoissuedirectionstoanybankingcompanyorbankingcompaniestoinitiateinsolvency
resolutionprocessinrespectofadefaultundertheprovisionsoftheIBC.
IthasalsoempoweredtheRBItoissuedirectionstobanksforresolutionofstressedassets.
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• ImmediatelyafterthepromulgationoftheOrdinancebythegovernment,the RBI hadissuedadirectivebringingchangestotheexistingregulationsondealingwithstressedassets.
• Thestatementsaidacorrectiveactionplancouldincludeflexiblerestructuring,
strategicdebtrestructuringS4A.
• TheconsentrequiredforapprovingaproposalinaJointLenders’Forum(JLF)hasbeenliberalised.Ifanassetistobesubjecttothecorrectiveactionplan,50percentofthecreditorsintheJLFhavetoagreeontheplanandtheymustaccountfor60percent(against75percentearlier)oftheassetbyvalue.ThesechangesweremadetofacilitatedecisionmakingintheJLF.
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• UndertheJLFframeworkforrevitalisingdistressedassetsintheeconomy,evenbeforealoanaccountturnsintoanNPA,thenewsystemhelped identifythestressbysegregatingtheaccountsintothreecategories—– SpecialMentionAccounts(SMA)
• SMA-0-->if<30days+signofincipientstress• SMA-1-->loanoverduefor31-60days• SMA-2.-->if>60days
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• Fitch,initslatestratingreview,hasaffirmedIndia’ssovereignratingatBBB-,whichisthelowestinvestmentgraderating.
• Accordingtotheratingagency,India’sgeneralgovernmentdebtburdenwas67.9%ofGDP
• AnofficialcommitteeofthegovernmentreviewingtheFiscalResponsibilityandBudgetManagement(FRBM)Acthasrecommendedloweringofthegovernmentdebtto60%ofGDP.
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FitchRatingsestimatedearlierthismonththatbankswillneedabout$90billioninnewcapitaltotacklebaddebtandmeetglobalBaselIIIbankingrulestaking
effectinMarch2019.
RBIsaysARCsmusthaveminimumNOFofRs 100croreby2019
• Existingassetreconstructioncompanies(ARCs)notmeetingtheMinimumNOFcriteriashouldhaveacorpusofRs100crorelatestby31March2019
• AspertheamendedSarfaesi Act,noARCcancommenceorcarryonthebusinesswithouthavingNOFofnotlessthanRs 2croreorsuchotherhigheramountastheRBImayspecify.
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• BanksallowedbyRBItoinvestinrealestateinvestmenttrusts(REITs)andinfrastructureinvestmenttrusts(InvITs),attractingmoreinstitutionalinvestorstosuchassetsandexpandingtheinvestmentscopeofbanks.
• TheReserveBankofIndia(RBI)onThursdayproposedtoallowbankstoinvestinsuchinvestmenttrustsfollowingarequestfromthemarketsregulator.ThecentralbankwillissuedetailedguidelinesbyendMay.
• Banks,whicharecurrentlyallowedtoinvestasmuchas20%oftheirnet-ownedfundsinequity-linkedmutualfunds,venturecapitalfundsandstocks,mayinvestinthesetrustswithinthislimit.
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