VOL.XXXIII NO. 04 April 2020 ISSN-0971-4498 Bailout, Credit Risks and Technology - How will the Banking Industry survive Covid-19? Blockchain Technology: Will it change the way we Bank? Ombudsman for Digital Transaction “The need to constantly update skills, learn from breaches faced by other Political Funding in the Age of Crony Capitalism: An Experience from Indian organizations and invest in security Banking Sector patches is critical to proactively manage Information Security Risk.” Public Sector Banks Deserve Respect Ramaswamy Meyyappan Chief Risk Officer, IndusInd Bank RMAI launches Certificate Course on Risk Management Enroll within 30th June to avail 25% Discount Visit www.rmaindia.org/courses for details “IBA and member banks "Good to see that “Around 20% of its total are planning to come out entities handling funds of cards are co-branded, with advisories to create customers are only being and such cards see customer awareness and proposed to be regulated around 30% more promote contact-less unlike the original draft.” spending.” banking.” Naveen Surya Parag Rao Sunil Mehta Chairman, Fintech Head of the Cards IBA chief executive Convergence Council Business, HDFC Bank BANK UPDATE BANKING NEWSNEWSNEWS Union Bank of India re- Bank of Maharashtra to raise up to Rs 600 crore duces MCLR By 10 Bps through bonds Bank of Maharashtra stated that it will raise up to Rs 600 crore through bonds Union Bank of India (UBI) has re- on a private placement basis. "The bank is proposing to raise capital by issue of duced the Marginal Cost of funds- Basel III-compliant unsecured, redeemable non-convertible tier II bonds of base based Lending Rates (MCLR) by 10 issue of Rs 200 crore with green shoe option of Rs 400 crore aggregating to Rs basis points (100 bps = 1 per cent) all 600 crore on private placement basis," the bank said in a regulatory filing. over the tenors, which will be effec- tive from March 11, 2020 till March Banks are required to improve and strengthen their capital planning processes 31, 2020. Since July, 2019 this is the in order to In order to comply with Basel-III Capital Regulations. `The Indian ninth consecutive rate cut an- banking system has been implementing Basel III standards in phases since April nounced by the bank. The new one- 1, 2013. year MCLR of the bank now stands at 8% per annum, down from 8.10% IBA holds meeting with large banks, discusses on pos- per annum. sible credit lines, special benefits to give various sec- Naveen Kukreja, CEO of Paisabazaar, tors said, “UBI’s cut in the MCLR is in line In order to figure out ways to address the business hit by coronavirus outbreak, with the prevalent falling interest re- large banks had an emergency meeting. 20 senior bankers attended the video gime. MCLR is the minimum lending conference and discussed discussed on possible credit lines and special benefits interest rate which banks can lend.” that could be given to transportation, travel and tourism, exports and MSMEs. “As banks set their MCLR primarily Indian Banks’ Association called the meeting where, IBA chief executive Sunil on the basis of their cost of funds, a Mehta said, “Banks are collating information, and IBA will then forward the steady decline in deposit rates is re- recommendations to RBI.” ducing their cost of funds and He added, “IBA and member banks are planning to come out with advisories to thereby reducing MCLR. The cut will create customer awareness and promote contact-less banking. IBA will also benefit those borrowers who have assure clients that institutions are putting in place business continuity plans, and their interest rate reset date till the encourage banks to have flexible working hours.” next review of the bank’s MCLR. “Several businesses are stuck… there are so many cases where letters of credit Other existing borrowers of UBI un- have been opened, payments made, but shipments have not arrived. Some of der the MCLR regime will continue the banks felt that the present circumstances may call for regulatory forbear- to repay in the same lending rate," ance as many borrowers could find it difficult to service loans in time,” said he said. another banker. BANKING FINANCE | APRIL | 2020 | 5 BANK UPDATE ICICI Bank introduces HDFC Bank ties up with Indigo to offer co-branded ‘ICICIStack’ credit card In order to ensure uninterrupted HDFC Bank has signed an agreement with IndiGo in order to launch a co-branded banking experience to customers, credit card. Labelled Ka-ching, the card will offer benefits like complimentary ICICI Bank has announced the launch air tickets, lounge access, 5% cashback or reward points on Indigo bookings, of ‘ICICIStack’ amid the threat of and 3% cashback on dining, grocery and entertainment, the companies stated. coronavirus. Parag Rao, head of the cards business at the bank, said, “Around 20% of its total cards are co-branded, and such cards see around 30% more spending. ‘ICICIStack’ offers nearly 500 ser- vices that covering all banking re- Rao said, “Travel and hospitality contribute 12-13% of total spend on the bank's quirements of customers, in one credit cards. Regarding the delinquency rate in the cards business, Rao said like place. The list of services range from the parent HDFC Bank, which has the best asset quality with under 1.5% bad digital account opening (instant sav- loan levels, cards business also has the lowest NPA levels. He, however, did not ings and current account opening), quantify it in percentage. loan solutions (instant personal IndiGo Chief Commercial Officer William Boulter said, “This is the first such tie- loans, instant credit cards, instant up for the airline and expressed hope that Ka-ching card will help it increase home loan sanctions, instant car customer satisfaction.” loans, instant overdraft facility, in- stant business loans), payment solu- Bandhan Bank opens 3 new branches after RBI relaxes tions (digital payment solutions like UPI, bill payments using Bharat Bill restrictions on branch opening Payment System), investments (in- Making the total number to 1013 all over India, Bandhan Bank has recently stant FD, PPF, NPS and AI led robo- stated that it has opened three new branches advisory for other investments), in- surance (term and health insurances The Bank has also opened 122 banking outlets in the form of small-format units. digitally) to care solutions (protec- The development comes at the backdrop of RBI waived off restrictions on new tion for life, health, car and home). branch openings for the lender. "We are happy that with the withdrawal of It enables instant opening of savings restriction, we will be able to expand business growth rapidly," MD & CEO account with an instant FD or in- Chandra Shekhar Ghosh said. stant PPF, among others. Axis Bank to infuse Rs 600 crore in Yes Bank through “We have been working on equity route ‘ICICIStack’ in order to offer custom- An infusion of Rs 600 crore in Yes Bank through equity route has been approved ers all digital banking services from by the board of Axis Bank. 60 crore equity shares of Yes Bank at Rs 10 per share one single platform for the past few including a premium of Rs 8 per share will be acquired by the Axis Bank. years. In the wake of the coronavirus outbreak over the past In an official statement, the bank said that following the latest investment it few weeks, we have added a few will hold less than 5% of newly issued and paid-up capital of Yes Bank. new features and services to offer a bouquet of solutions to our cus- As of December 31, 2019, LIC, the promoter of Axis Bank held 8.06% of the tomers so that they can experience equity share capital of Yes Bank. While announcing the Cabinet approval to the the banking services uninter- restructuring scheme of Yes Bank, Finance Minister Nirmala Sitharaman said rupted," Anup Bagchi, Executive the decision intends to safeguard depositors' interest and ensure a stable finan- Director of ICICI Bank said. cial banking system. 6 | 2020 | APRIL | BANKING FINANCE RBI CORNER RESERVE BANK NEWSNEWSNEWS RBI announces additional RBI stated in a press release that the isting non-bank entities offering pay- regulator has superseded the bank’s ment aggregation (PA) services shall LTRO for up to Rs.1,00,000- board because of a serious deteriora- apply for authorisation on or before cr at the policy repo rate tion in its financial position. A former June 30, 2021," RBI said. Reserve Bank of India has recently chief financial officer of SBI has been "Good to see that entities handling announced that additional Long Term the named by the RBI as the adminis- funds of customers are only being pro- Repo Operations (LTROs) for up to a trator of Yes Bank. posed to be regulated unlike the origi- total of Rs.1,00,000 crore at the policy nal draft. Also, the net worth require- repo rate. The move comes at the “This has been done to quickly restore ments are reduced and adequate time backdrop of improving monetary trans- depositors’ confidence in the bank, in- provided of one year to comply," said mission amid the COVID-19 crisis. RBI cluding by putting in place a scheme Naveen Surya, Chairman, Fintech Con- will also conduct the first tranche of for reconstruction or amalgamation," vergence Council, an industry body for the 3-year LTRO for Rs.25,000 crore on it said. fintech companies. 18 March 2020 accordingly. A top RBI official said, “We are work- "The capital requirements are not too RBI will take the decision about addi- ing on a plan and we will disclose it in the next few days.” high, most of these things were imple- tional tranches of the LTROs separately mented by banks we work with any- depending on the further review of way, these guidelines make it more evolving liquidity conditions.