Banking sector wrap: Jaitley promises help to banks; P2P Creditors to Become NBFCs

Customers would be delighted to understand that banks have been sprucing up their festive offers to give discounts on loans and waive off fees to avail loans in the Diwali season.

Corporates, on the other hand, would be welcoming banking regulator RBI’s decision to categorize masala bonds — rupee-denominated bonds issued abroad — as a part of external commercial borrowings rather than the general limit of corporate bonds, as was the case earlier.

The transfer is intended to let about Rs 44,000 crore more money under corporate debt. In consequence, the sum pertaining to these bonds could be individually allocated to investors, and it would essentially increase the corporate bond investment limit to foreigners.

The issuance of these bonds abroad will now be within the aggregate present limit of Rs 2.44 lakh crore for foreign investment in corporate debt.

Jaitley to give helping hands to banks

Finance Minister Jaitley said the authorities will take action to find sufficient resources to encourage debt-laden banks in order to assist them participate in India’s economic development.

Gadkari also pulled banks up for delaying funding to street projects and ensured that banks shouldn’t fear additional bad loans in the sector as all delayed jobs from the previous government’s regime are kick-started again.

Banks Prepared to give

But a day after, bankers said that they are willing to finance the selective hybrid annuity mode (HAM) street jobs but are skeptical about the toll-operate models even as they grapple with big non-performing assets (NPAs) in the sector.

On Wednesday, bankers to the financially distressed Air India matched government officials including the aviation minister as well as the ministerial team to decide the destiny of additional loans to the financially-troubled national air carrier.

Although the details of the meeting are yet to be confirmed, banks might seem at giving additional funding to support the government’s attempts to revive Air India.

The Reserve Bank of India (RBI) will take care of all peer-to-peer lending (P2P) platforms as non-banking financial companies (NBFCs), the authorities said in a gazette notification on Wednesday. The RBI will soon release the final guidelines for P2P lenders.

Read here to learn exactly what P2P lending is and why RBI needs to govern it.

To tighten cyber security in the country, the authorities is working to come up with cyber security standards for mobile devices along with a regulation to undertake ransomware, according to Ajay Kumar, Additional Secretary in the Ministry of Electronics and Information Technology (MeitY).

Payments banks, the brand new entrants in the country’s banking sector, are facing an issue that hinders the purpose of which they had been made — easing transactions for customers. Players in the obligations lender room state they’re more like “restricted banks” since the challenge is to get customers to transact.

Opening upon the challenges in the sector, the CEOs of the four active payments banks said they will have to focus on growing scale till they generate earnings.

Microfinance

With the microfinance sector being the most enviable space among creditors throughout the past couple of decades, Ratna Vishwanathan, CEO, Microfinance Institutions Network (MFIN), a self-regulatory body for microfinance institutions, said the sector requires more structural changes in order to lower risk.

MFIN also released a Mutually Agreed Code of Conduct (MACC) stating that MFIs will not give more than Rs 60,000 per customer along with the amount of creditors will likely be restricted to three beneath the Joint Liability Group model.

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