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FS Weekly Digest: 2nd July

India

  1. The CVC (Central Vigilance Commission) is supervising the ongoing investigations by CBI in 10 top large bank account frauds.
  2. PNB will be discontinuing & blocking existing PNB Maestro debit cards by 31st July 2017 as it does not have the EMV chip security that is mandatory as per RBI directive. Customers can get it replaced at no cost by informing respective branches
  3. Midnight launch of biggest tax reform in India, GST, on 31st June night
  4. The ‘on-tap’ licensing initiative of RBI got the first hit today with BR Shetty promoted UAE Exchange & Financial Services Ltd (money exchanger) applying for universal license
  5. The latest Financial stability report of RBI highlights the stress that continues to exist in the banking sector primarily with concerns of bad loans & profitability not expect to ebb away very soon
  6. RBI released the sectoral deployment of credit. Key highlights (excerpts from RBI):
    • “Credit to the services sector increased by 4.0 per cent in May 2017, lower than the increase of 9.3 per cent in May 2016”
    • “Credit to industry contracted by 2.1 per cent in May 2017 in contrast with an increase of 0.9 per cent in May 2016”
  7. Banks Board Bureau (BBB) headed by Vinod Rai, has recommended 15 names for appointment as ED in multiple PSU banks
  8. 2 new PSU CEO appointee with Rajkiran Rai taking over Union Bank of India while Melwyn Rego assumed the charge for Syndicate bank
  9. A report by SBI chief economic advisor has highlighted the record low bank credit growth in FY17 (5.1%), led by nearly a INR trillion drop in the net loan outstanding of 1000 listed corporates
  10. CVC can now probe corruption at private sector banks, as RBI has approved the proposal on the same
  11. FinMomenta, Singapore based fintech start-up offering peer to peer lending service in India under brand name ‘TachyLoans’ is planning to raise $2-5 million to fund its expansion. Primarily it provides a platform for a 2-way bidding process allowing lenders & borrowers to negotiate the amount, rate & tenure. It is interesting to note that this is yet to be regulated and RBI had released a consulting paper earlier. Wedding, education, short tenure loans are some of the areas TachyLoan focuses
  12. BofA-ML expects credit off take to grow by 15% with demonetization impact subsiding
  13. 3 UBI officials have been held for fraud by CID, West Bengal. The value is of INR 173 Cr and done by forging bank guarantee papers
  14. Demonetization continues to hit the rural sector. While MFIs are facing collection challenges, the rural branches of banks are running dry for months. Seems this is connected to RBI focusing printing more of low value notes in last few months
  15. Government is looking to revitalize IDBI before it goes for stake sale or privatization as current valuation will be too low due to increasing NPA which has hit 21.25%
  16. Govt plans to strengthen the NCLT for speedy resolution of stressed assets by allowing more recruitment and setting up for more benches in coming months
  17. ICICI bank led consortium resolved the long standing debt of Jaypee group after sales process of Jaypee cement to Ultratech was completed
  18. Aegon Life has now committed to 100% growth in policies sold & premium income through digital channel

 

International

  1. The rescue of the 2 beleaguered Italian banks has raised both positive & negative vibes. While it is appreciated that the bail out will help restore some confidence in the economy, at the same time the usage of state help to be taken by Intesa Sanpaolo have been criticized by detractors as it means usage of tax payer money for bail out. Italy paying 5.2 Bn euros to keep those 2 banks floating
  2. Italy’s financial services problem refuses to go away. Latest in it is Unipol, the largest insurance group. It spoke of a few key decisions:
    • Create an internal bad bank to house the 3BN pound of NPA from its banking operation, Unipol Banca
    • Cut its Bancaassurance agreement with Banco BPM and forge alliance with Bper, best capitalized midsized bank
  3. In a reversal journey, Poland is slowly extending government control over the major players in banking & financial services.
  4. Visa is buying a stake in the major Swedish fintech player Klarna as both companies look to expand outside their core market. Klarna has recently got full service banking license as well
  5. Co-op Bank board meets to finalise £700m rescue package. Read 26th Daily Bytes to have more updates on this or can refer to FT for more details
  6. Consolidation in banking sector has gained pace in Spain with state controlled Bankia agreeing to take over another state controlled lender BMN. This is just on the back of the buying out of Banco Popular by Banco Santander
  7. A new BCG Perspective ‘corporate-banking-getting-big-in-small-business-banking’ has highlighted the potential of small businesses for corporate banking, if the banks work on leveraging digital, process digitization, analytics and tailor the service model & product portfolio to tune for small businesses.
  8. A report in FT highlights the growing clout of young generations in Chinese banking ecosystem. The established legacy banks are steadily losing their rank in global band positioning while internet rivals in P2P/ consumer finance (e.g. Tencent, Alipay, Lufax) are gaining more traction from the new generation
  9. McKinsey published its Economic Snapshot, June 2017, Survey. Key results indicate that respondents (India, Europe) remain more positive than negative in their home economies. Read more at McKinsey Economic Snapshot

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