Banking Newsletter - November 21 to 25, 2016

India Infoline News Service | Mumbai | November 25, 2016 17:04 IST

This week, State Bank of India cuts bulk deposit rates, Punjab & Sind Bank plans to raise Rs 500 crore through Basel III bonds, Reliance Capital acquires 5% voting rights in Azalia Media. IIFL presents a weekly snapshot of all the major happenings in the Banking space, nationally and internationally.

Top News
 
India's demonetisation has mixed impact on sovereign, banks and corporates: Moody's
Moody's Investors Service says that the move by the Government of India (Baa3 positive) to withdraw all Rs 500 and Rs 1,000 notes approximately 86% of all outstanding notes is affecting all sectors of the economy to various extents, with banks being the key beneficiary. "Although, the measures in the near term will pressure GDP growth and thereby government revenues, in the longer term they should boost tax revenues and translate into higher government capital expenditure and/or faster fiscal consolidation," says Marie Diron, an Associate Managing Director in Moody's Sovereign Group. "Corporates will see economic activity decline, with lower sales volumes and cash flows, with those directly exposed to retail sales most affected," adds Laura Acres, a Managing Director in Moody's Corporate Finance Group. Read More
 
Domestic Newsmakers
 
FM holds video conferencing with Banks for major push to cashless transactions
The Finance Minister Arun Jaitley emphasised that physical currency must shrink while the economy should expand, shifting more and more focus to digital currency. He said that one of the major objectives of withdrawal of legal tender status on Rs 500 and Rs 1000 notes was to move the Indian economy further towards digital transactions. Jaitley was speaking while reviewing the latest status after withdrawl of legal tender nature of old Rs 500 and Rs 1,000 notes in a Video Conferencing with CMDs/CEOs of Public and Private Sector Banks today. Series of decisions were taken during the meeting.

In this direction, most banks have already begun a promotional exercise by waiving-up to end December MDR charges on debit cards. Banks will now be focussing on significantly stepping-up transactions in mission mode through alternate banking channels such as NEFT, mobile wallets, pre-paid cards, QR codes, pay-roll cards, debit and credit cards and Unified Payments Interface (UPI). Apart from urban areas, Banks will increase and sustain their focus on semi-urban and rural areas. This outreach would be backed-up by an advertising campaign from Indian Bankers Association (IBA) including demonstration videos on how to use cards and other modes for cash less transactions. Read More
 
Citibank enables instant Add-Money to Paytm for its internet banking users
The Indian banking landscape has transformed rapidly in the last few years, driven by a combination of factors – consumer’s digital adoption, a progressive regulatory environment and visionary Government policies. In its 2018 vision document, the RBI has emphasized that digitization of payments and moving to a less-cash society are its key priorities.
 
Citibank has been at the forefront of digital transformation in the country, having pioneered and introduced several innovations in the past few years. Digitization has been a key strategic priority for Citibank, with over 95% its customer transactions being completed digitally. Further, over 85% of credit card payments at Citi are done online, which is one of the highest in the industry. Over one third of Citi’s customers are acquired online and this percentage has increased exponentially during the past few years
 
Today Citibank, in partnership with Paytm introduces ‘Wallet Add-Money’ a simple and seamless mode for customers to load their wallets via Citibank’s online and mobile banking platforms. Through this unique, market-first initiative, Citibank customers can securely add-money to their Paytm account in three simple steps, without the risk of exposing their confidential card credentials. Read More
 
Punjab & Sind Bank plans to raise Rs 500 crore through Basel III bonds
Punjab & Sind Bank intends to raise Basel III Compliant Tier II Bonds through Private Placement aggregating up to Rs 500 core. The proposed Bonds issue has been rated as “CARE AA” by CAREand "BWR AA” with "Stable Outlook-' by Brickwork Ratings. Read More
 
RBL Bank enters into agreement with Bajaj Finance to launch co-branded credit cards
RBL Bank Limited has informed the Exchange that the Bank and Bajaj Finance Limited, one of India's leading financial services company, have on November 23, 2016 entered into an agreement for launching a series of co-branded credit cards in partnership for the Indian market. These co-branded credit cards are proposed to be launched in December 2016.

This partnership is being entered into for strengthening the scale of operations in the Bank's rapidly growing credit cards business. These co-branded Credit Cards are proposed to be offered to Bajaj Finance Limited's existing as well as new customers. The bank believes that it will benefit by partnering with Bajaj Finance Limited in this co-branded card offering as Bajaj Finance has around 29 years of existence with a strong customer franchise of around 18 million customers and 33,000+ distribution points with deep-rooted customer understanding. Read More
 
YES BANK waives MDR charges for all debit card transactions
YES BANK, India’s 5th largest private sector Bank, has significantly ramped up proactive measures to support the Government of India’s landmark demonetisation and propel digital payments in our country India. Some of the measures taken by YES BANK include 
 
YES BANK has waived MDR charges (Merchant Discount Rate) for all Debit Card transactions across RuPay, MasterCard and Visa platforms at all its Merchant locations, including online transactions upto December 30th. MDR is the fee charged to the merchant by the Bank for providing card acceptance services. The waiver of MDR will facilitate greater acceptance of Debit Cards by the Merchants thereby resulting in greater use of cards by customers as their preferred payment method. YES BANK does not levy any additional charges on spends at Merchant locations for its Debit Card customers, and this practice will continue. Read More
State Bank of India cuts bulk deposit rates

State Bank of India cuts bulk deposit rates
State Bank of India has slashed bulk deposit rates by as much as 1.75% following the surge in deposits resulting from withdrawal of high denomination currency. The new rates apply to deposits ranging from Rs 1 crore to Rs 10 crore. The revised interest rates from India’s largest bank by market share of deposits and loans are lower than returns on savings bank accounts, which are currently set at a minimum 4%. Banks have received about Rs 5.4 lakh crore as deposits between November 9 and November 18, according to RBI data. Of this, State Bank alone received Rs 1.5 lakh crore as deposits. No data has been released after November 18. Read More
 
Axis Bank announces waiver on Merchant Discount Rate
In support of Government’s demonetisation scheme and to offer ease and convenience to its merchants and customers, Axis Bank, India’s third largest private sector Bank waived Merchant Discount Rate (MDR) transaction fees on debit card usage. The bank has waived the service charges on the use of Debit Cards at Axis Bank terminals (merchant acquiring) effective tonight up to December 31, 2016. Additionally, the bank has partnered with merchants to allow customers to withdraw cash at POS terminals. The bank will also leverage its contact-less technology at POS terminals for faster transactions.
 
Axis Bank is consistently educating the stakeholders to adopt to digital banking channels. The bank has enabled the local Kirana Stores, Autorickshaws, Vegetable and Milk vendors and other small ticket size vendors to accept payment digitally through QR code. This digital initiative is offering convenience to the customers and facilitating small vendors to make cashless transactions. The bank has additionally deployed micro ATM facility for cash withdrawal across corporates, Police, Airports and Housing societies. Read More
 
Reliance Capital to reduce debt by Rs 1,900 crore through Value Unlocking in Radio and TV Business
Reliance Capital, a part of Anil Ambani led Reliance Group, today announced value unlocking in the Radio and TV businesses that will reduce its debt by approx. Rs 1,900 crore (US$ 283 million) upon final completion of stake sale transactions. These transactions form part of Reliance Capital’s stated strategy to reduce leverage and exposure in non-core business of media and entertainment. Reliance Broadcast Network Limited (RBNL), the largest operator of FM channels in India, has signed definitive and binding agreements with Zee Media Corporation Limited (ZMCL) to sell 49% stake in its radio broadcast business. Read More
 
India Demonetisation fallout offset by uncertain benefits: Fitch
The demonetisation of large-denomination bank notes has caused short-term disruption in India's economy. The move has the potential to raise government revenue and encourage bank lending, but Fitch Ratings believes the positive effects are unlikely to be strong and sufficiently enduring to support credit profiles.

The withdrawal of bank notes - that account for 86% of the value of currency in circulation - has created a cash crunch, and seems to be holding back economic activity. Consumers have not had the cash needed to complete purchases, and there have been reports of supply chains being disrupted and farmers unable to buy seeds and fertiliser for the sowing season. Time spent queueing in banks is also likely to have affected general productivity. The impact on GDP growth will increase the longer the disruption continues, but we will already need to revise down our forecasts to reflect what will almost certainly be a weak 4Q16. Read More
 
India Demonetisation fallout offset by uncertain benefits: Fitch
The demonetisation of large-denomination bank notes has caused short-term disruption in India's economy. The move has the potential to raise government revenue and encourage bank lending, but Fitch Ratings believes the positive effects are unlikely to be strong and sufficiently enduring to support credit profiles.

The withdrawal of bank notes - that account for 86% of the value of currency in circulation - has created a cash crunch, and seems to be holding back economic activity. Consumers have not had the cash needed to complete purchases, and there have been reports of supply chains being disrupted and farmers unable to buy seeds and fertiliser for the sowing season. Time spent queueing in banks is also likely to have affected general productivity. The impact on GDP growth will increase the longer the disruption continues, but we will already need to revise down our forecasts to reflect what will almost certainly be a weak 4Q16. Read More
 
RBI has not allowed NBFC MFIs to collect old notes of Rs 500 and Rs 1000
“Today RBI has come out with a circular granting relaxation to various entities regulated by RBI based upon the representations made by MFIN and other entities. We thank the RBI for the circular on loan classification which has been issued today for all banks and NBFC MFIs. The circular needs to be understood in the light in which it has been issued. There seems to be a common perception that this allows deferment of loan repayment. What this seeks to address is that in the wake of demonetization: 
 
If an end client needs extra time to make arrangements for the new notes for repayment of the loan then the lending institution may give that time instead of classifying the loan as delinquent and report this as such to the credit bureau. The client’s credit history then does not get affected. Read More
 
Magma Fincorp strengthens top management team; appoints Kaushik Banerjee as President & CEO
Magma Fincorp announced the appointment of Kaushik Banerjee as President & CEO - Asset Finance, Kailash Baheti as Chief Financial Officer and Debraj Sinha as Chief People Officer. 
 
Kaushik Banerjee, who has joined as President & CEO - Asset Finance, is an industry veteran having spent 25 years in the retail financial services industry. He has spent over 14 year at Chola Finance, where he was President – Asset Finance, and was instrumental in ensuring the significant growth and leadership position of Chola’s Vehicle finance business. His last position in Chola was in Mumbai as the President – Strategy & Corporate Affairs. Read More
 
Axis Bank to raise upto Rs 1,800 crore via debentures
Axis Bank said it proposes to raise funds by issuing unsecured redeemable non-convertible subordinated debentures (Basel- III compliant Tier II debentures) (Series - 25) of the face value of Rs 10 lakh each for cash at par aggregating to Rs 1,800 crore. The board of directors of the bank will consider the proposal to issue and allot the above securities through circular resolution.
 
Punjab National Bank reduces deposit rates by up to 0.25%
State-run Punjab National Bank has decided to cut its deposit rates by 10-25 basis points on select maturities of retail term deposits. Besides, the bank has cut deposit rates on high value bulk deposits by 15-50 basis points.  The revised rates will be effective November 23. The bank had received as much as Rs 47,000 crore in additional CASA deposits over the past 10 days, Usha Ananthasubramanian reportedly said. “Our CASA deposits have surged. This has given me an opportunity to revisit deposit rates. It will also have an impact on lending rates, but deposit rates have to come down first," added further. Read More

 

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