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Table of Contents
30 banks join RBI UDGAM portal for unclaimed deposits.
The Reserve Bank of India (RBI) has launched the UDGAM portal, an online platform that allows individuals to search for unclaimed deposits and accounts across multiple banks. Currently, 30 banks are participating in the portal, covering approximately 90% of unclaimed deposits in the RBI’s Depositor Education and Awareness (DEA) Fund.
Key Points:
UDGAM Portal: – Online portal developed by RBI to facilitate the search for unclaimed deposits/accounts. – Allows users to search across multiple banks in one place. – Covers unclaimed deposits/accounts that are part of the RBI’s DEA Fund.
Participating Banks: – As of March 4, 2024, 30 banks are participating in the UDGAM portal. – These banks cover around 90% of unclaimed deposits in value terms.
User Registration: – Users must register on the portal with their name and mobile number.
Search Functionality: – The portal only facilitates the search for unclaimed deposits/accounts. – It does not provide claim/settlement services.
Claim Process: – Unclaimed deposits can only be claimed from the respective bank.
Unclaimed Deposits: – As of March 2023, the total amount of unclaimed deposits was Rs 42,270 crore.
RBI directs JM Financial Products to halt financing against shares and debentures.
The Reserve Bank of India (RBI) has taken action against JM Financial Products Ltd (JMFPL) for serious deficiencies in loans sanctioned for IPO financing and NCD subscriptions. The RBI has directed JMFPL to cease all such financing activities with immediate effect. This follows similar action taken against IIFL Finance Ltd for concerns in its gold loan portfolio.
Key Points
Serious Deficiencies – RBI observed serious deficiencies in loans sanctioned by JMFPL for IPO financing and NCD subscriptions. – The company repeatedly helped customers bid for IPOs and NCDs using loaned funds. – Credit underwriting was perfunctory, and financing was done against meager margins. – The company acted as both lender and borrower, operating customer accounts using Power of Attorney.
Governance Issues – RBI raised concerns about governance issues in JMFPL, detrimental to customer interests.
Business Restrictions – RBI has imposed business restrictions on JMFPL, prohibiting IPO and NCD financing. – Restrictions will be reviewed after a special audit and rectification of deficiencies.
Other Actions – RBI is examining regulatory violations by banks involved in the matter. – Further regulatory or supervisory actions may be initiated against JMFPL.
Banks’ NPAs at record lows as recoveries up
Banks in India have witnessed a significant decline in bad loans, reaching record lows due to increased recoveries and loan regularizations. However, lenders anticipate potential stress and are building buffers accordingly.
Key Points:
Bad Loan Reduction: – Bad loans have decreased by 21% to Rs 4.85 lakh crore in the last calendar year. – Gross bad loan ratio is expected to improve to 2.8% this year from 2.9% last year.
Write-Offs: – Write-offs have increased to Rs 34,000 crore from Rs 29,000 crore in the December quarter of last year.
Pre-AQR Levels Surpassed: – The gross non-performing assets ratio has surpassed pre-asset quality review (AQR) levels in Q3FY24.
Factors Contributing to Improvement: – Healthy growth in advances due to increased economic activity. – Lower incremental slippages.
Anticipated Stress: – High interest rates and regulatory actions may lead to some defaults. – Banks are preparing for potential stress by creating additional provisions.
Daylight saving time 2024 in USA: When does it start?
Daylight saving time (DST) begins in most of the US on March 10th, requiring clocks to be advanced by one hour. The Sunshine Protection Act, which would make DST permanent, has not yet passed the House. Oregon’s Senate has failed to advance a bill to abolish DST, while similar bills have been proposed in Idaho and California.
Key Points:
Daylight Saving Time: – Begins on March 10th in most of the US. – Clocks will be advanced by one hour at 2 am.
Sunshine Protection Act: – Aims to establish DST as the permanent standard time. – Has not yet passed a vote in the House.
Oregon’s Daylight Saving Time Bill: – Proposed to abolish DST in most of the state. – Failed to advance in the Senate. – Bill sent back to committee for amendment.
Similar Bills in Neighboring States: – Idaho has introduced a bill to eliminate DST. – California’s Assembly is considering a similar bill. – Washington state’s bill to abolish DST failed last month.
Maersk increases rates by $1,000 per container to US and Canadian ports from India and West Asia
Maersk, a Danish shipping line, has announced a $1,000 per container rate increase for cargo from India and West Asia to the US and Canada, effective March 2. This increase is due to the ongoing Red Sea crisis, which has caused delays and increased operating costs for shipping lines. Other shipping lines may follow suit, further impacting shippers already facing delays.
Key Points:
Rate Increase: – Maersk announces a $1,000 per container rate increase for cargo from India and West Asia to the US and Canada. – The increase applies to all types of cargo and is effective March 2.
Impact of Red Sea Crisis: – The Red Sea crisis has caused delays and increased operating costs for shipping lines. – The detour via the Cape of Good Hope adds 15 days to the journey from Asia to Europe and the US.
Industry Response: – Other shipping lines may follow Maersk’s lead and increase rates. – CMA-CGM previously tripled its Freight All Kinds rates in December.
Impact on Shippers: – Shippers are already facing delays due to the Red Sea crisis. – The rate increase will further impact their costs. – Suppliers using FOB terms are not affected, while those using CIF terms will bear the increased costs.
Impact on Indian Exporters: – The Red Sea crisis has adversely impacted Indian exporters. – The detour via the Cape of Good Hope involves additional time and costs. – Lack of national capacity contributes to the high costs faced by Indian trade.
Microfinance industry may clock 25% growth in FY24 on positive momentum.
The microfinance industry in India is projected to grow by 25% in the current fiscal year, continuing its positive momentum. The sector has witnessed significant growth in recent years, with a total outstanding of â‚ą3.52 lakh crore as of March 2023. However, there are concerns about the uneven distribution of microfinance lending, with a concentration in a few states and districts. Efforts are underway to expand the reach of microfinance to underserved areas.
Key Points:
Growth and Performance: – The microfinance industry is expected to grow by 25% in FY24, with a total outstanding exceeding â‚ą4.25 lakh crore.
Concentration of Lending: – 82-84% of the microfinance portfolio is concentrated in 10 states, with the top 5 states accounting for 56%.
Expansion of Reach: – Efforts are being made to expand microfinance services to unreached areas. – A study has been commissioned to identify challenges in penetrating deeper into certain districts.
Challenges in Expansion: – Hilly terrain, law and order issues, and migration near state borders pose challenges to expansion.
Proposed Solutions: – Developing smaller institutions in underserved areas. – Replicating the model of NGOs transforming into MFIs with support from SIDBI. – Collaboration with NABARD and SIDBI to address the issue.
Union Bank chief sees 11-12% credit growth sector-wide in FY25.
Union Bank of India anticipates a moderation in credit growth to 11-12% in FY25 due to tighter liquidity, higher credit-to-deposit ratio, and elevated interest rates. Deposit growth is projected at 10%. The bank maintains a balanced portfolio with a 56:44 ratio of retail, agriculture, and MSME loans to corporate loans. Union Bank has significantly improved its asset quality through enhanced underwriting standards and proactive risk management, resulting in a decline in GNPA and net NPA ratios. The bank aims to ensure that recoveries outpace slippages, with a target of 0.50% credit cost in FY25.
Key Points:
Credit Growth: – Credit growth expected to moderate to 11-12% in FY25 from 16% in FY24.
Deposit Growth: – Deposit growth projected at 10% in FY25 from 12% in FY24.
Loan Mix: – RAM-to-corporate loan mix to remain stable at 56:44 in FY25.
Asset Quality: – GNPA ratio decreased from 11.62% to 4.83% from December 2021 to December 2023. – Net NPA ratio declined from 4.09% to 1.08% during the same period.
Recoveries: – Bank aims to ensure recoveries significantly outpace slippages. – Recoveries of â‚ą13,783 crore achieved in the first nine months of FY24.
Credit Cost: – Credit cost guidance of 0.50% anticipated for FY25.
Delhi Budget 2024 highlights: Every woman to get Rs 1,000/month for study, or for watching movies, says Atishi
The Delhi Budget 2024, presented by Finance Minister Atishi, focuses on the concept of “Ram Rajya,” prioritizing the welfare of the poor and providing essential services. The budget includes allocations for education, healthcare, and women’s empowerment, while reducing the health budget by 11%.
Key Points
Delhi Budget 2024 Highlights: Allocation for Health reduced by 11% – Health budget reduced by 10.84% to 8685 crores. – 194 new ambulances to be purchased.
Delhi Budget 2024 Highlights: Senior Business Blaster will also be launched in all colleges and IIITD – Budget of 15 crores allocated for Business Blaster program. – Program currently operates only in schools, providing seed money for startups.
Delhi Budget 2024 Highlights: Even after providing free electricity for 24 hours in Delhi, all power companies are still profitable: Atishi – All electricity companies in Delhi remain profitable despite free electricity.
Delhi Budget 2024 Highlights: Delhiites to continue to receive 20,000 liters of free water – 17 lakh consumers benefit from free water. – 1031 unauthorized colonies connected to sewer system.
Delhi Budget 2024 Highlights: Atishi announces new scheme for women – “Mahila Samman Yojana” announced, providing Rs 1000 per month to women over 18 years of age.
Delhi Budget 2024 Highlights: Delhi govt has allocated 21.57 percent of total budget to education – 11,000 new classrooms built in 9 years. – 21.57% of budget allocated to education.
Delhi Budget 2024 Highlights: Delhi’s GDP has nearly tripled in the last ten years, says Atishi – Delhi’s GDP increased from 4.95 lakh crores to 11.08 lakh crores in the last ten years. – Per capita income increased from 2.47 lakh rupees to 4.62 lakh rupees.
Delhi Budget 2024 highlights: “Nobody will sleep hungry in Ram Rajya,” said Atishi – Budget of 684 crore allocated to ensure no one sleeps hungry.
Delhi Budget 2024 Highlights: Atishi presents Rs 76,000 crore budget for Delhi – Budget of â‚ą76,000 crore introduced for the fiscal year 2024-25.
Delhi Budget 2024 highlights: AAP govt brought a big transformation in the lives of people in the last 10 years – AAP government praised for its efforts in serving the people. – Significant transformations highlighted, including economic growth, improved infrastructure, and free medical care.
Delhi Budget 2024 Highlights: Kejriwal a beacon of hope for the citizens of Delhi, says Atishi – Kejriwal’s integrity and leadership praised. – Vision of ‘Ram Rajya’ in Delhi emphasized.
Delhi Budget 2024: Atishi seeks blessing of Manish Sisodia’s mother before presenting Budget – Finance Minister Atishi sought blessings from Sisodia’s family before presenting the budget.
RBI asks OMCs to pay for some oil imports in Rupees next FY.
The Reserve Bank of India (RBI) has instructed state-owned refiners to negotiate with Persian Gulf oil suppliers to accept at least 10% of payments in rupees. This move aims to promote the Indian currency in international trade and reduce reliance on the US dollar. However, suppliers are hesitant due to currency risk and conversion charges, while refiners are resisting bearing the transaction costs.
Key Points:
RBI’s Request: – RBI has asked state-owned refiners to request Persian Gulf suppliers to accept 10% of oil payments in rupees.
Aim of the Move: – To promote the Indian rupee in international trade. – To reduce dependence on the US dollar.
Government’s Concerns: – India’s growing energy demand could put downward pressure on the rupee. – The government wants to leverage consumption growth to its advantage.
Refiners’ Approach: – Indian Oil Corp., Bharat Petroleum Corp., and Hindustan Petroleum Corp. have approached oil exporters.
Suppliers’ Resistance: – Suppliers are concerned about currency risk and conversion charges.
RBI’s Offer: – RBI has offered to bear part of the currency transaction charges.
Refiners’ Resistance: – Refiners are resisting bearing the transaction costs, citing margin erosion.
India’s Oil Import Status: – India is the world’s third-largest crude importer. – It is expected to be the leading driver of global consumption growth this decade.
Global Oil Transactions: – Most global oil transactions are conducted in US dollars.
China’s Success: – China has had some success in using the yuan to pay for oil imports.
Previous Rupee Transaction: – Indian Oil partly paid Abu Dhabi National Oil Co for a crude shipment in rupees in August 2022.
Other Currencies Used: – Indian refiners have also used UAE dirhams to pay for Russian crude.
Too much regulatory guardrails could impede growth rate: Uday Kotak
Veteran banker Uday Kotak emphasizes the need for a balance between regulatory oversight and economic growth. While regulations are essential to prevent accidents, excessive caution can hinder progress towards India’s goal of becoming a developed nation. Kotak advocates for a proactive approach to managing risks and fostering entrepreneurship and creativity.
Key Points:
Regulatory Guardrails: – Excessive regulatory guardrails can impede economic growth. – Regulators should strike a balance between caution and responsiveness to sector-specific accidents.
Economic Growth: – India’s aspiration for 7.5-8% GDP growth requires significant capacity building. – Entrepreneurship, creativity, and risk-taking are crucial for economic transformation.
Risk Management: – Risks are inevitable in a fast-developing economy. – Halting growth is not a solution; risks should be addressed promptly. – A fast resolution mechanism for accidents is essential.
Investment Landscape: – India has transitioned from a nation of savers to investors. – Mutual funds and equity markets are attracting increasing investment.
NFRA changes tack, ramps up focus on supervision to boost audit ecosystem: Chairman AB Pandey
The National Financial Reporting Authority (NFRA) has shifted its focus from enforcement to a balanced approach of enforcement and supervision. The regulator has introduced new initiatives to enhance its supervisory role, including firm-wide audit quality inspections and engagement with listed companies’ audit panels and boards.
Key Points:
1. Shift in Approach: – NFRA has transitioned from an enforcement-driven regulator to one with a judicious approach towards both enforcement and supervision.
2. Enhanced Supervision: – NFRA has introduced firm-wide audit quality inspections to assess compliance with standards and processes.
3. Engagement with Listed Companies: – NFRA will engage with audit panels, independent directors, and boards of listed companies to understand their perspectives and improve audit quality.
4. Strengthening Auditors: – The regulator’s engagement with key persons of listed companies will support auditors in flagging issues and ensuring proper scrutiny of audit reports.
5. Effective Communication: – NFRA emphasizes the importance of effective two-way communication between auditors and those charged with governance (audit committees and boards).
6. Oversight and Scrutiny: – The regulator has observed instances of inadequate oversight by audit committees and boards, leading to corporate failures.
7. Formalistic Meetings: – NFRA has identified cases where audit committee meetings are reduced to formalities, hindering proper review of financial statements.
Govt reviews FDI policy in space
The Indian government has revised its Foreign Direct Investment (FDI) policy for the space sector, allowing up to 74% FDI under the automatic route for various activities, including satellite manufacturing, data products, and ground and user segments. The move aims to enhance ease of doing business and attract investments in the sector.
Key Points:
1. FDI Limits:
- Up to 74% FDI allowed under automatic route for:
- Satellite manufacturing and operation
- Satellite data products
- Ground and user segments
- Up to 49% FDI allowed under automatic route for:
- Launch vehicles and associated systems
- Spaceports
- Up to 100% FDI allowed under automatic route for:
- Manufacturing of components and systems for satellites, ground and user segments
2. Satellite Sub-Sectors:
- Satellite Data Products: Reception, generation, or dissemination of earth observation/remote sensing satellite data and data products.
- Ground Segment: Satellite Telemetry, Tracking and Command station, Satellite Control Centre, etc.
- User Segment: Supply of user ground terminals for communicating with the satellite.
3. Sectoral Guidelines:
- Investee entities will be subject to sectoral guidelines issued by the Department of Space.
4. Effective Date:
- The revised FDI policy will take effect from the date of FEMA notification.
“Your teammate and adviser may not get it correct”: Paytm founder Sharma breaks silence after RBI’s curb on banking unit.
Paytm founder Vijay Shekhar Sharma remains optimistic about the company’s future despite regulatory setbacks in India. He believes Paytm will emerge stronger by addressing concerns and forging new partnerships. Sharma emphasizes the importance of self-reliance and values the role of regulators in fostering a healthy startup ecosystem.
Key Points:
Regulatory Setbacks: – Paytm Payments Bank faced restrictions from Indian regulators due to accounting and supervisory issues. – Sharma resigned from the bank’s board and Paytm discontinued inter-company agreements with it.
Sharma’s Response: – Sharma acknowledges the importance of regulatory oversight and values their role in creating a healthy environment for startups. – He has gained clarity on Paytm’s strategy, including forging new bank partnerships and expanding geographically.
Paytm’s Future: – Sharma is confident that Paytm will overcome the setbacks and stage a comeback. – The company is working to add more banks as partners and expand into other Asian markets. – Sharma aims to make Paytm an Asia leader in the financial sector.
Sharma’s Leadership: – Sharma continues to lead Paytm, which he founded over a decade ago. – He emphasizes the importance of self-reliance and perseverance in the face of challenges.
Securitisation of loans originated by SFBs to cross Rs 10,000 cr in FY2024: ICRA
ICRA predicts that small finance banks (SFBs) will raise over Rs 10,000 crore through securitization in FY2024, a significant increase from the previous year’s Rs 6,400 crore. This growth is driven by the increasing number of SFBs participating in securitization and the need to diversify their funding mix.
Key Points:
1. Securitization Volume: – Securitization volume by SFBs is expected to exceed Rs 10,000 crore in FY2024. – The third quarter of FY2024 witnessed a record high of Rs 4,200 crore in securitization volumes.
2. Market Share: – SFBs’ market share in the securitization market is projected to reach 6% in FY2024, up from less than 2% before FY2022.
3. Number of SFBs Securitizing: – Six SFBs raised funds through securitization in FY2024, compared to four in FY2023 and two in FY2022.
4. Growth in Gross Advances: – SFBs are experiencing healthy growth in gross advances at around 24-25%, which is expected to continue.
5. Diversification of Funding Mix: – Securitization has become an important tool for SFBs to diversify their funding mix, reducing reliance on deposits.
6. Competition for Deposits: – Increased competition for deposit mobilization and slowing deposit growth are driving SFBs to increase their securitization volumes.
7. Overall Securitization Market: – The overall domestic securitization market is estimated to reach Rs 1.9 – 2 lakh crore in FY2024, supported by high funding needs and an increase in both originators and investors.
Next big reform in Indian insurance will be indemnity cover for shipping.
The Indian government is considering amending the Insurance Act to establish a domestic Protection and Indemnity (P&I) facility for shipping companies. This facility would provide insurance coverage for damages caused to others by ships, such as capsizing, cargo spills, or collisions. The amendment is expected to be pushed forward after the formation of a new government following the upcoming elections.
Key Points:
Need for Amendment: – The Insurance Act currently lacks provisions for mutual insurance associations like P&I clubs.
Government Support: – Finance Minister Nirmala Sitharaman has emphasized the need for a P&I facility in India. – The government may consider providing initial capital for the business.
Model for P&I Club: – The committee may consider the GIC cargo pool as a model for the P&I club.
Benefits of P&I Club: – Pools risks from member insurance companies to offer larger coverage. – Transfers risks of catastrophes from a single company to a larger entity.
International Context: – The London-based International Group of P&I Clubs dominates the global market. – Newcomers, including China and Japan, are entering the business.
Indian P&I Club: – Will initially focus on coastal shipping vessels. – Will be limited to ships with the Indian flag. – The government may offer a sovereign guarantee to build volumes.
RBI’s VRRR auction gets weak response, liquidity moves into surplus.
The Reserve Bank of India (RBI) has absorbed over Rs 40,000 crore from the market, leading to a surplus in liquidity after three months. However, this surplus is expected to be short-lived due to increased demand for funds for tax payments and year-end targets. The response to the RBI’s Variable Repo Rate (VRRR) auctions has been weak, indicating market volatility.
Key Points:
Liquidity Surplus: – RBI absorbed over Rs 40,000 crore from the market, creating a liquidity surplus.
Short-Lived Surplus: – Increased demand for funds for tax payments and year-end targets may reduce the surplus.
Weak VRRR Auction Response: – Market participants offered only Rs 72,840 crore and Rs 11,185 crore in the two VRRR auctions, indicating weak demand.
Market Volatility: – Financial year-end activities are expected to drive market volatility.
Government Spending: – Increased government spending has contributed to the liquidity surplus.
Credit Growth: – Higher credit growth has tightened liquidity in the past.
Surplus May Not Last: – Corporate tax and GST payments may reduce the liquidity surplus.
Tight Liquidity in Banking System: – Liquidity in the banking system has remained tight since January 2024.
RBI Management: – RBI has managed liquidity through VRR and fine-tuning operations.
Tight Liquidity Expected in March: – Quarterly advance tax payments, monthly GST, and year-end activities are expected to keep liquidity tight in March 2024.
Payments bank model flawed, prone to risk.
The Paytm crisis highlights flaws in India’s fintech industry, particularly the controversial structure of payment banks. While UPI remains strong, Paytm’s exposure to governance risks and potential money laundering raises concerns. The article emphasizes the need for course corrections to ensure stability in the sector and maintain confidence in India’s payment infrastructure.
Key Points:
1. Paytm’s Controversial Structure: – Paytm’s status as a “payment bank” exposes it to governance risks not faced by conventional banks. – This structure allows for the acceptance of deposits without the mandate for lending, creating a risky business model.
2. Potential for Money Laundering: – The low regulatory oversight of payment banks makes them attractive for individuals and institutions seeking to launder money. – The combination of technology and governance is crucial for instilling confidence in the fintech sector.
3. Global Impact of Payment Infrastructure: – India’s UPI is gaining international recognition, but episodes like the Paytm fiasco could undermine confidence. – Alternative payment infrastructures, such as UnionPay and UPI, aim to challenge the dollar’s hegemony and reduce the impact of sanctions.
4. Exogenous Shocks and International Payment Infrastructure: – Iran and Russia have gained insulation from sanctions through alternative payment infrastructures. – China’s neutral stance allows it to trade with both the West and sanctioned countries.
5. Need for Course Corrections: – The concept of payment banks needs to be revisited due to its lack of rationale and potential risks. – A forensic audit of all payment banks is necessary to identify dubious players. – Policymakers should promote UPI usage domestically and reconsider the concept of payment banks.
Swiggy and IRCTC join hands to deliver food on Indian Railways
Swiggy and IRCTC have partnered to provide pre-ordered food delivery on trains, starting with four stations and expanding to 59 more in the coming weeks. This collaboration aims to enhance passenger convenience and address the limited food options available during extended journeys.
Key Points:
Partnership: – Swiggy and IRCTC have signed an MoU to deliver pre-ordered food on trains.
Initial Launch: – The service will initially launch at four stations (Bengaluru, Bhubaneshwar, Visakhapatnam, Vijayawada) on March 12th.
Expansion: – The service will be expanded to 59 additional city stations in the coming weeks.
Passenger Convenience: – Passengers can order food from designated trains and have it delivered to their seats.
Food Packaging and Delivery: – Food will be packed in insulated Swiggy bags and delivered by trained support agents.
Support and Resolution: – Swiggy’s support agents will be trained to handle order status, gratification, and cancellation policies.
Restaurant and Delivery Partner Coordination: – Support agents will coordinate with restaurants and delivery partners to ensure timely and efficient delivery.
India working to develop own pure-hydrogen based DRI tech for green-steel making.
India is developing a unique pure-hydrogen based DRI technology for green steel production. The process involves removing oxygen from iron ore using hydrogen instead of fossil fuels, resulting in sponge iron that is then converted into steel in an electric arc furnace. The technology is still under development, with pilot plants being proposed in a consortium mode involving integrated steel players, secondary players, and CSIR Lab. The project has been approved by the Ministry of New and Renewable Energy (MNRE).
Key Points
Technology Development – India is developing its own pure-hydrogen based DRI technology for green steel production. – The process involves removing oxygen from iron ore using hydrogen instead of fossil fuels. – The resulting sponge iron is then converted into steel in an electric arc furnace.
Pilot Plants – A pilot plant using pure hydrogen-based DRI making is being proposed in a consortium mode. – The consortium involves integrated steel players, secondary players, and CSIR Lab. – The project has been approved by MNRE.
Hydrogen Sources – Hydrogen can be extracted from natural gas, biogas, or water using electrolysis. – Currently, most hydrogen is produced from natural gas.
Hydrogen Usage in Steel Making – Hydrogen can be injected into blast furnaces as a partial substitution for coal injection. – Hydrogen can also be blended with natural gas or fossil fuel based reductants in DRI furnaces. – These options can be deployed on a pilot scale in India with support from the National Green Hydrogen Mission.
IIFL Finance to appoint external assayers to assess gold quality.
IIFL Finance is undergoing significant changes in its gold business, including replacing internal assayers with external personnel, strengthening its compliance team, and appointing a new compliance officer. These changes follow concerns raised by the Reserve Bank of India (RBI) regarding irregularities in gold loan practices, such as overvaluation of assets and breaches in loan-to-value ratios.
Key Points
Internal Assayers Replaced – IIFL Finance will replace internal assayers with certified external personnel to assess the value and quality of gold before extending loans.
Compliance Team Revamp – The company plans to revamp and beef up its compliance team, including hiring a new compliance officer with deep expertise in the financial services industry.
RBI Concerns – The RBI identified material supervisory concerns in IIFL Finance’s gold loan portfolio, including deviations in assaying, breaches in loan-to-value ratios, and non-adherence to standard auction processes.
Overvaluation of Assets – Sources indicate that IIFL Finance may have overvalued gold assets at the time of loan extension, leading to discrepancies during audits and auctions.
Cash Disbursements – The company allegedly disbursed and collected loan amounts in cash far in excess of the statutory limit.
Stock Impact – Following the RBI’s curbs, IIFL Finance’s stock price fell significantly, locking in the lower circuit.
Management Response – Nirmal Jain, MD of IIFL Finance, acknowledged the RBI’s concerns and emphasized that the issues are operational and procedural, not related to governance or ethics.
As India gets poll ready, FTA talks with UK in last leg
India and the UK are in the final stages of negotiating a free trade agreement (FTA), with key issues including visas for Indian workers, social security agreements, and access to government procurement. While most talks have been completed at the negotiator level, the final decision rests with the two governments.
Key Points:
Visa Demands: – India seeks more visas for its workers in the UK.
Social Security Agreement: – India wants an agreement to avoid double social security contributions for Indian professionals working in the UK.
Government Procurement: – The UK seeks access to India’s government procurement, particularly centrally funded projects in states.
Bilateral Investment Treaty: – The UK wants a bilateral investment treaty before signing the FTA.
Political Decision: – The final decision on signing the FTA is a political call.
UK’s Additional Demands: – The UK has raised additional demands, including tariffs and government procurement.
India’s Concerns: – India is cautious about giving concessions to the UK that could be replicated in future agreements with the EU and EFTA.
Banks turn to bulk deposits to meet credit demand on tepid retail FDs.
Banks in India are facing a shortage of deposits, leading them to aggressively tap into the bulk deposit market. Outstanding certificates of deposit (CDs) have reached a decadal high, with interest rates on these instruments rising to their highest levels since 2019. This has put pressure on banks’ net interest margins and is unlikely to ease anytime soon due to strong loan demand.
Key Points:
1. Outstanding CDs Reach Decadal High: – Outstanding CDs in the banking system have risen to â‚ą3.81 lakh crore, the highest since April 2014.
2. High Interest Rates on CDs: – Interest rates on CDs have risen to a maximum of 8.22%, the highest since May 2019.
3. Banks Facing Resource Crunch: – The sharp rise in CD issuance indicates a continued resource crunch faced by banks.
4. High Borrowing Costs via CDs: – Borrowing costs via CDs are 50 to 80 basis points more expensive than retail term deposits.
5. High Loan-to-Deposit Ratio: – Indian banks’ aggregate loan-to-deposit ratio has reached a two-decade high of 80%.
6. Pressure on Net Interest Margins: – Banks’ net interest margins are expected to slip due to competition for deposits driving up funding costs.
7. Banks Increasing Deposit Rates: – Banks have little choice but to increase deposit rates to attract more funds.
8. Alternative Funding Sources: – Some banks are exploring alternative funding sources such as infrastructure and affordable housing bonds.
9. Strong Loan Demand: – Demand for loans is likely to remain strong, putting upward pressure on interest rates.
Bloomberg to include India’s FAR bonds in EM local currency govt index.
Bloomberg has announced the inclusion of India’s Fully Accessible Route (FAR) bonds in its Emerging Market (EM) Local Currency Government Index and related indices. This phased inclusion will commence on January 31, 2025, and be completed by October 2025. The move reflects India’s growing importance in the global economy and its commitment to opening its bond markets.
Key Points:
Inclusion in Bloomberg Indices: – Indian FAR bonds will be included in the Bloomberg EM Local Currency Government Index, Bloomberg EM Local Currency Government Index 10% Country Capped Index, and related sub-indices.
Phased Inclusion: – FAR bonds will initially be included with a weight of 10% of their full market value, increasing by 10% each month until reaching full weight in October 2025.
Market Impact: – India is expected to become the third-largest country in the market-cap-weighted version of the index, after China and South Korea. – As of January 31, 2024, the index would include 34 Indian securities and represent 7.26% of the index on a market value-weighted basis.
Significance: – The inclusion reflects India’s growing importance in the global economy and its commitment to opening its bond markets. – It will increase access to and participation in Indian markets for global investors.
Consultation and Commitment: – The decision was made after extensive consultation with market participants and stakeholders. – Bloomberg Indices will introduce an ex-India version of the EM Local Currency Government Index and create other standard and custom versions of the index.
More than 2,500 fraud connections being cut daily, say DoT officials.
The Department of Telecommunications’ (DoT) Sanchar Sathi portal has been effectively combating fraudulent mobile connections, disconnecting over 2,500 daily. The portal detects and re-verifies connections, disconnecting those that fail to comply. Despite concerns about the process, the DoT claims zero complaints or grievances against the portal. An app version is in development, and a grievance redressal portal is planned to address any mistaken disconnections. The DoT is also collaborating with the RBI and DFS to return funds from fraudulent accounts to citizens, totaling approximately Rs 1,008 crore.
Key Points:
Sanchar Sathi Portal: – Discontinues over 2,500 fraudulent connections daily. – Detects and triggers re-verification of connections. – Disconnects numbers that fail to re-verify.
Process and Grievances: – Built-in checks and balances ensure zero complaints or grievances against the portal. – App version and grievance redressal portal are in development.
Collaboration with RBI and DFS: – Working to return funds from fraudulent accounts to citizens. – Total amount involved is approximately Rs 1,008 crore.
