MET-Bytes: Weekly Bulletin 21-26 October, 2018

TRENDING…..

Micro lenders take a hit over NBFC liquidity woes

Liquidity crunch of NBFCs is having a ripple effect on Micro-finance Institutions, due to which they have slowed
disbursements of loans to MFIs. MFI delegations would meet NBFCs with a plea to release funds to small micro
lenders who depend on NBFCs for 50-60% of their working capital requirement. Micro lenders claim that since
they belong to low risk category in terms of Asset-liability Management, NBFCs should not stop releasing funds to
them. To deal with problem of liquidity, MFIs are borrowing funds at a higher rate. The smaller MFIs are the most
hit by this situation because the larger ones get a relief from investors infusing equity of about Rs 4,061 crore in
FY18, about 87% going to latter.

RIL takes Reliance Jio Route for Jio Payments Bank Launch
RIL is moving its JioMoney prepaid mobile wallet customers to Jio Payments Bank. Jio Payments bank is a joint
venture between RIL and SBI, one of the 8 payments banks licensed to operate in India. Reliance Jio is testing its
payments bank on its employees by allowing them to use the service, so that company can test loopholes its
infrastructure and network before its launch .Payments Bank offers services such as small savings account,
payments, and remittance services to small business and low-income households. They ease the account opening
process as it technology based and paperless. RIL integrated with SBI’s YONO platform on its MyJio app, where
the features of SBI’s YONO can be accessed through the My Jio application. SBI plans to engage Reliance Jio as
preferred partner for network and connectivity solutions.

Infosys Finacle , R3 announce partnerships for Blockchain Solutions

Infosys subsidiary Finacle would collaborate with R3 a Blockchain software firm to enable banks to easily access
and deploy Finacle’s blockchain solutions on Corda, R3’s blockchain platform. Banks will get easy access to
blockchain solutions via Corda, enabling them to save costs and create efficiencies and minimize risk while dealing
with their business partners and customer. Finacle Trade Connect, blockchain based trade finance solution will
help banks to connect with trade partners and companies on unified distributed network. It would help banks in
trade and supply chain finance products such as Open Account, Letter of Credit, Invoice Financing, Bills Collection,
PO financing, Bank Guarantees and Packing credit. Finacle Payments Connect will enable banks to process their
real-time payments with other banks.Therefore banks can use these solutions to facilitate trade and payments
services for other to their international subsidiaries or other financial institutions.

IDFC Bank to be renamed as IDFC First Bank

IDFC Bank has proposed to change its name to 'IDFC First Bank Ltd' as it is in the process of amalgamating non-
banking financial company ‘Capital First’ with itself. The Board of Directors of IDFC Bank at its meeting Wednesday
decided to seek approval of the Reserve Bank of India to rename the bank as 'IDFC First Bank Limited'. Capital First
and IDFC Bank, with this merger in an all-stock deal, would create a Rs 88,000-crore combined entity. The share
swap ratio for the merger is fixed at 139:10, meaning IDFC Bank will issue 139 shares for every 10 shares of Capital
First.

Mobile phones, not cards, lead India’s digital payments push

Mobile phones have become a bigger source of non-cash payment methods in retail transactions than customers
swiping their cards at Point of Sale (POS) machines. And the implementation of Goods and Services Tax (GST) a
catalyst for digital payments in the Indian economy.ATM withdrawals fell drastically while the retail digital
payment methods such as UPI, PPI and Mobile Banking increased due to Demonetization. However, as cash came
back in the system, the growth in digital payments decelerated. Prior to GST, ATM withdrawals were high but, the
trend reversed in the post-GST period. Digital payments started increasing overtook the value of ATM withdrawals.
The rising dominance of e-commerce, which involves online payments, could be one factor. As more and more
players enter the digital payment space, cash incentives for consumers have increased significantly. It is also
possible that the combined incentives from online sellers and digital payment platforms have taken away a part of
demand from what used to require cash transactions. Also with a decline in ‘without tax’ transactions due to
willingness to be a part of the tax-credit chain under the GST, over the counter cash purchases might have become
more expensive.

AP signs pacts for fintech ecosystem in Vizag

The Andhra Pradesh government has entered into agreements with several global groups and firms to create a
complete ecosystem of financial technologies at Fintech Valley Vizag. The AP government has signed pacts with
HDFC Bank, Whub of Hong Kong, Fintech Association of Hong Kong, SOSA of Israel, Singex, Wadhwani Foundation,
Bizoforce and Udayam Association. The agreement with HDFC Bank is to promote the Fintech Valley among
startups in the bank's network, facilitate banking requirements of the startups there, and promote HDFC banking
products within other government departments. The collaboration with Whub and SOSA is to set up an
international landing pad in Hong Kong, Israel and Ney York respectively for startups from AP to expand
operations, gain knowledge and access market opportunities. While the agreement with Singex enables hosting
innovation festivals in AP, the collaboration with the Wadhwani Foundation is aimed at promoting
entrepreneurship, innovation and startups in the state. The arrangement with the Fintech Association of Hong
Kong Collaboration is targeted at leveraging Hong Kong’s Fintech ecosystem and building an AP-HK gateway for
Fintech startups and knowledge transfer.

India’s economic growth not inclusive enough, inequality rises

Economic growth in India has not been inclusive enough, even though the economic growth is fast it hasn’t
percolated down through the economy. The index measuring social and environmental needs ranks at 101 for
India, which makes it poor performing than other BRICS nations. The countries which have performed better have
managed to have broad based public participation in economic expansion and financial development through
measures aiming at higher literary, better healthcare, greater gender equality. Only when social barriers are
broken can these reforms maximize gains in poverty reduction. Basic education and good health are important for
economic growth and development of the economy. India needs to bridge the disparity in social classes an only
then would its financial development rise at faster pace
How RBI's move will affect wallet-to-wallet transfers
The RBI has issued new guidelines for allowing interoperability for mobile wallets which are KYC compliant. This
means it will let the customers transfer funds between different mobile wallets (Paytm, PhonePe etc). This will
help increase the number of wallet transactions as it will provide ease to the customer, by the way of transferring
funds from one wallet to another in a few seconds. For instance, a user can transfer funds from his Paytm wallet to
PhonePe wallet in seconds. The move came in after the industry witnessed that more and more customers are
preferring mobile phones and other electronic mediums over cards. The data collected by RBI shows that wallet
transactions rose to 340.65 million in August from 225.43 million in the same month last year, which is 51.11 % YoY
increase.

Ujjivan, Equitas tank on RBI clarification over listing small finance banks
The RBI on Friday clarified that promoters of small finance banks have to compulsorily list their banking
units separately within 3 years of its operation. As both Ujjivan Financial and Equitas Holdings run small
finance banks, their shares slumped down by 19% and 28% respectively. This practically led to wiping
out the entire capital gains on these shares since their IPO in 2016. The other clarifications included that
promoters of small finance banks should also maintain atleast 40% of stake till the banks do not
complete 5 years since commencing operations. For Equitas this means that by 24 September 2019 it
will have to list their small finance bank division separately, whereas for Ujjivan Financial it will have
time till 30 January 2020 to comply to the order.

Goldman to debut online consumer banking in Japan

Goldman Sachs plans to enter japan with its Retail banking business, using a low-overhead digital model cultivated
in the U.S. to break into what it sees as growth market for financial technology. The online banking service of
Goldman in USA Marcus, offers loans and high-interest savings to 2 million customers with 30 billion dollars of
deposits and wants to replicate the same in Japan. Banking sector’s rapid technological progress has convicted the
company to expand its customer base beyond its traditional clientele of big business and wealthy customers and
wealthy customers to regular customers.