Banking Newsletter - November 28 to December 2, 2016

India Infoline News Service | Mumbai | December 02, 2016 12:08 IST

This week, Reserve Bank of India set cash withdrawal limits on Jan Dhan accounts, Punjab National Bank cut MCLR rates for December. IIFL presents a weekly snapshot of all the major happenings in the Banking industry.

Urjit Patel
Top News
 
Reserve Bank of India sets cash withdrawal limits on Jan Dhan accounts
The Reserve Bank of India has issued a notification saying these account holders will be allowed to withdraw only Rs 10,000 a month, as a temporary measure. The regulator stated that this was done to protect innocent farmers and rural account holders of PMJDY from activities of money laundering and legal consequences under the benami property transaction and money laundering laws. The central bank said that on accounts which are fully compliant with the know your customer (KYC) norms - the monthly withdrawal limit has been set at Rs 10,000.

According to limits set by the central bank, customers can withdraw up to Rs 24,000 every week from their bank accounts using instruments such as cheques and demand drafts. Farmers have a slightly higher withdrawal limit of Rs 25,000 per week. The limits on Jan Dhan accounts are over and above these restrictions, RBI stated. Read More
 
Punjab National Bank cuts MCLR rates for December
Punjab National Bank has cut the marginal cost of funds based lending rate (MCLR) by 0.05-0.10 percentage points for December across maturities of various tenors. The bank has reduced the marginal cost of funds based lending rate with effect from December 1, 2016, it said in a regulatory filing. For a tenor of 5 years, the new MCLR is down by 0.05% to 9.45%. Read More
 
Corporation Bank sets overnight MCLR at 9%
Corporation Bank on Thursday declared its marginal cost of funds based lending rate (MCLR) for one year at 9.45%. As per RBI guidelines, the bank has approved MCLR for all Rupee loans sanctioned with effect from December 1, 2016. Besides the one-year tenor, the bank has declared MCLR for four other tenors — overnight (9%), one month (9.15%), three months (9.20%), six months (9.35%). Read More
 
News In focus
 
Incremental CRR Hike: A Normaliser
RBI’s move over the weekend to increase CRR to 100% on incremental deposits raised between September 16, 2016 and November 11, 2016 is not surprising. Post the announcement of demonetisation of high value notes, the banking system has received over Rs 5 lakh cr as deposits. This trend of a significant surge in deposits is expected to continue over the next few weeks. The tapering of deposit base will commence once most of the currency in circulation in high value notes finds its way into the banking system along with easing of restriction on withdrawals.
 
This unprecedented situation had started to create a never-seen-before surge in systemic liquidity because of which the overnight money market rates had fallen nearly 25 bps below the policy repo rate. With the expectation of further pickup in deposit mobilization by banks, the overnight money market rates could have deviated further from the policy repo rate, fanning unwarranted exuberance and volatility. Read More
 
Domestic Newsmakers
 
Sundaram BNP Paribas Home Finance cuts interest rates on deposits by 50bps
Sundaram BNP Paribas Home Finance Ltd has announced a reduction on its deposit rate by 50 basis points across all tenors from December 16, 2016. Individuals (other than senior citizens) will now get 7.25% on 2 year and 3 year deposits as against 7.75% previously, while Senior Citizens will get 7.75% (8.25%) on 2 year and 3 year deposits. On 12 months and 18 months deposits, individuals will get 6.75% (7.25%) while Senior Citizens will get 7.25% (7.75%). Trusts will get 7.75% (8.25%) on 3 year deposits and 7.25% (7.75%) on 4 and 5 year deposits. Sundaram BNP Paribas Home Finance deposit portfolio crossed Rs 1000 crore in March this year. Read More
 
RBL Bank gets approval to set-up IFSC Banking unit in Gujarat
RBL Bank has received an in-principle approval from the Reserve Bank of India for opening of ‘International Financial Services Centre Banking Unit’ (IFSC Banking Unit) at Gujarat International Finance Tech-City (GIFT) in state of Gujarat. Read More
 
Mastercard and Pine Labs collaborate on safe, secure and speedy contactless payments
Mastercard announced its partnership with Pine Labs, the largest payment facilitator for electronic Point of Sale (PoS) solutions in India to roll out more than 26,000 contactless terminals across the key merchant stores in the country over the next 12 months. Powered by Mastercard contactless technology, the merchants across Quick Service Restaurants (QSR), retail stores, cinemas and super markets will now be able to offer contactless terminals as an alternative method of payment to customers, allowing them greater ease and convenience of payments. The contactless payments solution will also help merchants build greater efficiency in managing their costs and time by way of reducing check-out time at the counters and costs related to handling of cash. Read More
 
RBL Bank, Bajaj Finance launch co-branded credit cards
RBL Bank, one of the country’s fastest growing scheduled commercial banks, and Bajaj Finance, one of the most diversified NBFCs, today announced a partnership to launch a series of co-branded credit cards for Indian customers. The first of these credit cards is proposed to be launched in Q4 of FY17. The co-branded cards are targeted at the large segment of people in metros and non-metros who have no credit cards. These will have many customer-friendly features, including no-cost EMI options, easy borrowing rates, digital payment solutions and more. The cards will also boast attractive offers and deals. While this partnership will help RBL Bank strengthen its scale of operations in the rapidly growing credit cards business, it will enable Bajaj Finance, a market leader in consumer finance, to expand its EMI network. Read More
 
Citi India waives Debit Card fees for merchants
Citi India announced the temporary suspension of the merchant discount rate (MDR) on all domestic debit card transactions it acquires. This suspension will go into effect on November 26, 2016, and will remain until December 31, 2016. During this period, all merchants who receive payments for domestic debit card transactions will not incur any charges. This step supports Citi India’s merchant partners as consumers move towards electronic modes of payments at this time, and is aligned with The Government’s increased focus on digitizing payments.
 
“By waiving these charges, we will help the growth of the digital payments ecosystem. Citi India consistently works with our partners, both online and offline, to increase card spending by uniquely designed offerings that capture consumer trends, and result in incremental business for our partners as well,” said Arjun Chowdhry, Head of Credit Cards and Unsecured Lending. Read More
 
RBI announces measures to Manage Liquidity Conditions
With the withdrawal of the legal tender status of Rs 500 and Rs 1,000 denomination bank notes (hereafter referred to as Specified Bank Notes - SBNs) beginning November 9, 2016, there has been a surge in deposits relative to the expansion in bank credit, leading to large excess liquidity in the system. The magnitude of surplus liquidity available with the banking system is expected to increase further in the fortnights ahead.
 
In view of this, it has been decided to absorb a part of this surplus liquidity by applying an incremental cash reserve ratio (CRR) as a purely temporary measure, as under:
 
The CRR remains unchanged at 4 per cent of outstanding net demand and time liabilities (NDTL);

On the increase in NDTL between September 16, 2016 and November 11, 2016, scheduled banks shall maintain an incremental CRR of 100 per cent, effective the fortnight beginning November 26, 2016. This is intended to absorb a part of the surplus liquidity arising from the return of SBNs to the banking system, while leaving adequate liquidity with banks to meet the credit needs of the productive sectors of the economy. As the incremental CRR is intended to be a temporary measure within the Reserve Bank’s liquidity management framework to drain excess liquidity in the system, it shall be reviewed on December 9, 2016 or even earlier. Read More

 

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