Paytm Said to Seek RBI Licence to Start Money Market Fund

Paytm has applied for a licence to set up a money market mutual fund that will enable the company to expand its financial offerings to consumers.

According to sources, Paytm has applied to the Reserve Bank of India (RBI) to start the fund in the coming months, a move that will enable the company to increase revenues from financial services.

When contacted, Paytm declined to comment.

The primary objective of a money market fund is to invest in short-term securities.

The Alibaba and SoftBank-backed company had, last month, started its payments bank operations in the country and aims to garner 500 million customers by 2020.

Paytm Said to Seek RBI Licence to Start Money Market Fund

The company has earmarked an initial investment of Rs. 400 crores to build its banking network over two years.


Also, it launched ‘Digital Gold’ in April this year to allow its over 200 million users to buy and sell gold through its platform.

At the time of launch, Paytm founder and CEO Vijay Shekhar Sharma had said it was “the first step in Paytm’s journey in wealth management”.

Paytm seems to be drawing inspiration from its investor, Alipay that set up Yu’e Bao in 2013 that allows Alipay customers to convert the money in their accounts into units of a money market fund, offering them higher interest rates.

According to reports, Yu’e Bao had over $165 billion (roughly Rs. 1,06,565 crores) under management, making it one of the biggest money market funds in the world.

RBI Identifies 12 Large NPA Accounts: What Happens Next

On 12 June, the Reserve Bank of India (RBI) identified 500 of the largest loan defaulters of the country. Of which, 12 accounts – each with exposure of greater than Rs. 5,000 crore – were rounded up as a matter of priority. These 12 accounts are said to account for 25 per cent or a fourth of the banking sector’s bad loans (worth a massive Rs. 7 lakh crore). In a bid to speedily resolve the issue, the government last month gave the central bank power to direct lenders to initiate bankruptcy proceedings against those with loan defaults. The process – being carried out under the Insolvency and Bankruptcy Code (IBC) enacted in 2016 – is expected to break the deadlock between the creditors and loan defaulters.

As the government and RBI focus their energies on resolving the NPA issue, here is how the public sector banks could proceed against the loan defaulters in the coming days:

India's NPAs amount to about Rs 7 lakh crore by December 2016

  • Due to this regulation, banks will be forced to evaluate for a time-bound resolution instead of just ageing NPAs on their books, failing which there will be a forced liquidation which is also faster under the Insolvency and Bankruptcy Court (IBC).
  • Banks have to decide on a resolution plan in 180 days, failing which the National Company Law Tribunal or NCLT can force the creditor (bank) for liquidation.
  • Once a creditor files a motion with the NCLT, an insolvency professional with substantial powers is appointed to take control of the process. This interim insolvency professional or bankruptcy professional supervises the defaulting company on repayment of the loan.
  • The IRP or bankruptcy professional runs the operations of the defaulting company as a going concern for a certain period. During this period, he or she collects the claims and forms a panel of creditors, which then decides what to do with the corporate.
  • According to Nomura analysts, a majority of resolutions could be around right-sizing of debt ( around 50 per cent haircut) and forcing sale of non-core assets.
  • While such partial waivers were largely expected before, Nomura said that “now on these 12 large accounts we will hear of the haircut decisions faster”.
  • Under IBC rules, if no resolution plan is accepted by the NCLT within the stipulated 180 days, the defaulter goes into liquidation. A one-time 90-day extension can be given to the committee to come up with a plan under some circumstances.
  • For the rest of the loan defaulters identified – the remaining 488 out of 500 – by the RBI, the committee has recommended that banks finalise a resolution plan. If no resolution plan is finalised in six months, banks will have to file for insolvency proceedings under IBC rules.


RBI Directs IDBI Bank To Start Insolvency Proceeding Against Lanco Infratech

New Delhi: Lanco Infratech today said the Reserve Bank has directed its lead lender IDBI Bank to initiate insolvency proceedings for the company under the Insolvency and Bankruptcy Code (IBC). “Lanco Infratech Limited (LITL)…vide letter dated June 17, 2017, intimated under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, that Reserve Bank of India directed IDBI Bank Limited, the lead bank of LITL to initiate Corporate Insolvency Resolution Process (CIRP) for LITL under the Insolvency and Bankruptcy Code, 2016,” the company said.

The company is among 12 firms identified by the central bank with a combined debt of over Rs. 1,50,000 crore, a quarter of the total NPAs, for proceedings under the newly enacted Insolvency and Bankruptcy Code, 2016.

“The amounts mentioned…shall be read as Rs. 8,146 crore for fund based outstanding exposure and Rs. 3,221 crore for non-fund based outstanding exposure as on March 31, 2016,” Lanco Infratech said in a BSE filing.

RBI directed IDBI Bank to start insolvency proceedings against Lanco Infratech

On the heels of RBI naming these largest defaulters for insolvency proceedings, bankers are meeting from Monday to finalise their next course of action.

Last week, the RBI’s internal advisory committee (IAC) had sent the list of 12 accounts to bankers for immediate reference under IBC. These accounts are with SBI (six of them), PNB, ICICI Bank, Union Bank, IDBI Bank and Corporation Bank, according to bankers.

These 12 accounts referred by RBI have an exposure of more than Rs. 5,000 crore each, with 60 per cent or more classified as bad loans by banks as of March 2016.

Total NPAs of the banking system stand at over Rs. 8 lakh crore, of which Rs. 6 lakh crore is with public sector banks.


GST To Lower Overall Tax Burden Over Time, Says RBI Governor

Mumbai: Reserve Bank governor Urjit Patel today said the soon-to-be implemented goods and services tax (GST) will not only create a national market but will also broaden the tax base which in turn will lower the overall taxes in the long-term.

“The prudent point is that GST itself is part of the digitisation revolution, which along with the reforms on the information tax side in terms of the processes and operations, have the potential to broaden the tax base considerably,” Patel told an event organised by industry lobby IMC Chamber of Commerce and Industry here today.

The governor also said GST is a precursor to a low tax regime in the country at a later stage.

Urjit Patel said GST will also reduce many inefficiencies within the states while moving goods.

With a four-rate structure, GST will come into force from the midnight of June 30. Except J&K, all the states have passed enabling laws for its implementation.

He said the broadening of tax base is an important outcome of the new uniform taxation regime and other initiatives on e-payments and digitisation.

Besides creation of a national market, GST will also reduce many inefficiencies within the states while moving goods from within a state and also across the country, the governor said.

Talking about fintech, he said with the emergence of technology-enabled innovation in financial services there will both opportunities and risks to financial sector stability which need to be addressed by policy makers, regulators and supervisors, as many innovations have not been tested through a full financial cycle.

“You really come to know what works and what doesn’t when you go through a full cycle. The decision taken at an early stage can set important precedence on what is the right time and the wrong time. Therefore, caution in this respect is not unwarranted especially when you consider that the world is yet to recover even from the 2008 global financial crisis,” he said.

Patel said even the country’s fintech industry has almost tripled its size since 2013 and the value of transactions has touched USD 30 billion already.

Patel said the central bank has taken several steps such as the licencing payment banks, Bharat Bill Payment System and launch of UPI, IMPS, among others to facilitate innovations, payment systems and digital banking.

The RBI has also issued a discussion paper on peer-to-peer lending and will be soon issuing guidelines on it.

“We had to wait for one or two clearances in this area before we move forward and we have those clearances now,” Patel said.

He also said enough focus or publicity has not been given to IndiaStack, which is a set of APIs that allows governments, businesses, start-ups and developers to utilise a unique digital infrastructure to resolve problems towards presence-less, paperless, and cashless services delivery.

The APIs which are part of IndiaStack are the UPI, the Aadhaar authentication, Aadhaar e-kyc, digital locker, digital user.

“IndiaStack is a game-changer in our macro fundamentals as financialisation of our savings continues. The most important and durable implication of this is going to be an
increase in financial savings compared to where we are now,” he said.

Patel said IndiaStack can also help improve growth rates in the future and its full implication will come in short to medium-term.


RBI Move On Insolvency Proceedings Credit Positive: Moody’s

New Delhi: Moody’s Investors Service on Monday said the initiation of insolvency proceedings on 12 large loan defaulters is credit positive for Indian banks as it will improve their overall asset quality.

The Reserve Bank last week said it has identified 12 large loan defaulters who account for 25 per cent of the total NPAs or bad loans in the banking sector and will be referred to the banks concerned for filing insolvency proceedings.

These cases will be accorded priority by the National Company Law Tribunal (NCLT).

RBI Move On Insolvency Proceedings Credit Positive: Moody's

“This is credit positive for India’s banks because any meaningful resolution under this plan can help improve their overall asset quality. Additionally, it also will set a precedent for resolving non-performing loans from smaller borrowers,” Moody’s said in a report.

The directive will negatively affect banks’ profitability over the next year if they need to take large write-downs relative to their existing loan-loss reserves for those assets, it said.

“This also will accentuate the capital needs of weaker public sector banks, which may require a large capital infusion from the Indian government,” it said.

Moody’s estimated that state-owned banks will need up to Rs. 95,000 crore of equity capital through 2019.

The capital requirement is much higher than Rs. 20,000 crore budgeted by the government towards capital infusion until March 2019. Under the Indradhanush plan for bank recapitalisation, government is infusing Rs. 70,000 crore in PSU banks beginning 2015.

RBI has also asked banks to also review other NPAs and finalise a resolution plan over the next six months.

“Given the strict timelines to resolve a case under the IBC within a maximum period of 270 days, after which a company will be automatically liquidated, we expect that this directive will significantly expedite the resolution process and will help in loan recoveries,” Moody’s said.

The US-based credit rating agency estimates that some of these 12 accounts relate to borrowers in the steel, power and other infrastructure sectors such as engineering, procurement and construction contractors.

“Indian banks’ asset quality has significantly deteriorated over the years, although the pace of deterioration has somewhat moderated in recent quarters,” Moody’s said.


RBI Governor Cited ‘High Uncertainty’ On Inflation For June 7 Policy Review

Mumbai: Reserve Bank of India Governor Urjit Patel cited “high uncertainty” on inflation while holding the key interest rate for a fourth successive policy review, according to minutes of the June 7 meeting of Monetary Policy Committee released on Wednesday. It was the first time that a Monetary Policy Committee (MPC) member had voted against the majority decision. At its second bi-monthly monetary policy review of the fiscal year on June 7, the RBI maintained status quo on its repo rate, or short-term rate for lending to commercial banks, at 6.25 per cent. In doing so, the policy statement said the six-member MPC was guided by the risks to inflation.

“As the year progresses, underlying inflation pressures, especially input costs, wages and imported inflation, will have to be closely and continuously monitored,” Mr Patel said, as per minutes of the the MPC meeting.

“The risk of fiscal slippages, which, by and large, can entail inflationary spillovers, has risen with the announcements of large farm loan waivers,” he said.
“At the current juncture, global political and financial risks materialising into imported inflation and the disbursement of allowances under the 7th central pay commission’s award are upside risks,” he added.

RBI Governor Urjit Patel argued for avoiding premature policy action

The RBI governor argued for avoiding premature policy action.

“Considering the high uncertainty clouding the near-term inflation outlook, there is a need to avoid premature policy action at this stage. I, therefore, vote for holding the policy repo rate at the current level of 6.25 per cent and maintaining the neutral stance of monetary policy,” Mr Patel said.

“Premature action at this stage risks disruptive policy reversals later and the loss of credibility.”

“The current state of the economy underscores the need to revive private investment, restore banking sector health and remove infrastructural bottlenecks. Monetary policy can play a more effective role only when these factors are in place,” he added.

Instead, the sole dissenting external member and IIM-Ahmedabad faculty Ravindra Dholakia voted for a minimum a 50 basis point cut in the repo rate.

According to the minutes, Mr Dholakia said there were several noteworthy recent developments on the prices and output fronts that warrant a decisive policy action by the MPC.

“In my opinion, this is the most opportune time for the MPC to effect a major cut of 50 basis points in the policy rate to bring it down from 6.25 per cent to 5.75 per cent,” he said.

“All in all, the prevailing inflation and output conditions and prospects are such that there is enough space for a substantial rate cut of 50 basis points if not more,” he added.

Meanwhile, India’s annual retail inflation eased to a record low of 2.18 per cent in May on lower food prices. The wholesale price index (WPI), with the revised base year of 2011-12, also decelerated further in May 2017 to 2.17 per cent from 3.85 per cent in April as food prices eased.


Provide Adequate Transaction Details In Passbooks: RBI To Banks

Mumbai: The RBI today asked banks to provide “adequate details” of transactions in the passbooks and statements of accounts so that customers can cross-check them.

Earlier, the Reserve Bank had advised them to avoid inscrutable entries in passbooks/statements of account and ensure that brief, intelligible particulars are invariably entered with a view to avoiding inconvenience to depositors.

However, the RBI said it has come to its notice that many lenders still do not provide adequate details.

Earlier, RBI had advised banks to avoid inscrutable entries in passbooks.

“In the interest of better customer service, it has been decided that banks shall at a minimum provide the relevant details in respect of entries in the accounts,” the central bank said while prescribing a list of details to be provided.

The details to be provided by banks in passbooks, include name of the payee, mode of transaction, nature of the charges (like fee/ commission/ fine/ penalty), and loan account number.


Government Allows Co-Operative Banks To Deposit Old Notes With RBI

The Finance Ministry on Tuesday allowed banks, post offices and district central cooperative banks to deposit the scrapped Rs. 500 and 1,000 rupee notes with the Reserve Bank of India within 30 days and exchange the value of notes deposit with the new notes.

In an official notification the Finance Ministry said, “Specified bank notes may be deposited by such Bank, Post Office or District Central Cooperative Bank, as the case may be, in any office of the Reserve Bank, within a period of 30 days from the commencement of these rules, and get the exchange value thereof by credit to the account of such Bank, Post Office or District Central Cooperative Bank, as the case may be, subject to the satisfaction of the Reserve Bank of the conditions specified in the said notification and the reasons for non-deposit of the specified bank notes within the period under that notification.”

Banks can deposit old notes with RBI within 30 days.

The relaxation comes against the backdrop of reports that many district co-operative banks did not have enough cash to disburse to farmers, particularly in Maharashtra. The reason, the banks say, is that nearly six months after demonetisation, they still have crores of cash in old currency, which the Reserve Bank of India (RBI) is refusing to accept.

Nashik’s District Central Cooperative Bank told NDTV they still have a stockpile of Rs. 340 crore in old 500 and 1,000 notes. Unless this money is converted to new, payments will be hard to make, said Narendra Darade, Chairman of Nashik’s DCCB.

The demonetisation of high value currency notes of Rs. 500 and Rs. 1,000 announced on November 8, 2016 led to scrapping of over Rs. 15 lakh crore from the system.


12 Defaulters Identified By RBI To Be Named Soon: Finance Ministry

New Delhi: The Finance Ministry today said names of the 12 big defaulters identified by the RBI for initiation of bankruptcy proceedings will soon be made public.

The RBI yesterday said it has identified 12 large loan defaulters who account for 25 per cent of the total NPAs in the banking sector and those will be referred to respective banks for filing insolvency proceedings. These cases will be accorded priority by the National Company Law Tribunal (NCLT).

The Finance Ministry further said that NCLT was being strengthened to fast track bankruptcy proceedings under the Insolvency and Bankruptcy Code (IBC).

RBI has identified 12 large loan defaulters who account for 25 per cent of the total NPAs.

“You have got 12 cases that have been identified, the names will be shortly announced, and they account for as much as 25 per cent of the bad assets,” Finance Ministry’s Principal Economic Advisor Sanjeev Sanyal said.

Each of the defaulters identified by RBI owes over Rs. 5,000 crore to banks.

The banking sector is saddled with non-performing assets (NPAs) of over Rs. 8 lakh crore, of which Rs. 6 lakh crore is with public sector banks (PSBs).

Sanyal told news channel CNBC TV18 that if a bankruptcy process has been set in motion, it does not mean that “we are just going to take all of this tomorrow morning and sell it off and auction it off”.

The IBC provides for 180 days for completion of insolvency process which can be extended by another 90 days in special cases.

Economic Affairs Secretary Tapan Ray said most of the regulations of IBC are in place since December and the required infrastructure is ready to handle cases.

“NCLT is prepared, we are further strengthening the NCLT with induction of more judicial and technical members. So they will be able to handle these cases,” Ray said.

For cases under IBC, the NCLT is the adjudicating authority. The NCLT was set up on June 1, 2016. It has 10 benches in India.

Commenting on RBI’s action, UCO Bank MD and CEO Ravikrishan Takkar said that there may not be much left for promoters in all the bigger NPA accounts. “In all the bigger accounts there may not be much left for the promoters. My balance sheet won’t be affected.”

United Bank of India MD Pawan Kumar Bajaj said, “In some cases if you see that the total net worth is eroded in those cases bigger hair cuts would be there.”

RBI action follows government promulgating an ordinance to fast track resolution of non-performing assets.

The Finance Ministry’s economic advisor also said that resolution of bad loans would also help government to arrive at a more appropriate amount required by PSU banks towards their capitalisation.

Replying to queries on mergers among PSU banks, Sanyal said there will be some consolidation, but “that is being done on commercial basis and are on advanced basis”.

“Merging bad bank with a good bank as a way of getting a large good bank is no more valid way of thinking as you may get a large bad bank. So it will be done on a completely different basis,” Sanyal said.