Image for representational purposes only.
| Photo Credit: REUTERS

The rupee traded in a narrow range to settle 4 paise higher at 83.95 (provisional) against the U.S. dollar on Thursday (September 12, 2024) amid a positive trend in domestic equities and foreign fund inflows.

Forex traders said the rupee trade was range-bound, with a slight positive bias toward positive domestic equities. However, a rebound in the U.S. Dollar and a surge in crude oil prices capped sharp gains.

The USD/INR pair traded within a well-defined range on active intervention by the Reserve Bank of India (RBI), they added.

At the interbank foreign exchange market, the local unit opened at 83.97 and witnessed an intraday high of 83.95 and a low of 83.99 against the American currency.

The domestic unit finally settled for the day at 83.95 (provisional), higher by 4 paise over its previous close.

On Wednesday (September 11, 2024), the rupee settled 1 paisa lower at 83.99 against the American currency.

“We expect the rupee to trade with a slight negative bias on the positive U.S. Dollar and a recovery in crude oil prices. However, a rise in risk appetite in global markets may support the rupee. Any intervention by the RBI may support the rupee at lower levels,” said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.

Mr. Choudhary further noted that traders may take cues from India’s CPI data and European Central Bank (ECB) monetary policy. Investors may remain cautious ahead of the U.S. Federal Open Market Committee (FOMC) meeting next week.

Forex traders said risk sentiment has improved after the U.S. August CPI data. The U.S. headline CPI came in lower than expectations at 2.5% year-on-year. Core CPI came in line with expectations at 3.2%.

The stability in the U.S. CPI data helped the dollar index maintain its current levels.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was up 0.06% to 101.74 points.

Brent crude, the international benchmark, gained 1.71% to $71.82 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex advanced 1439.55 points, or 1.77%, to close at 82,962.71 points, while the Nifty climbed 470.45 points, or 1.89%, to 25,388.90 points.

Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Wednesday, as they purchased shares worth ₹1,755.00 crore, according to exchange data.

The Reserve Bank of India (RBI) seal.
| Photo Credit: REUTERS

The story so far: The Reserve Bank of India (RBI), as part of its strategy to create digital public infrastructure in the country, has announced that a new technology platform called the Unified Lending Interface (ULI) would be introduced by the Reserve Bank Innovation Hub, Bengaluru which will enable friction-less credit to farmers and MSME borrowers to begin with.

What is ULI?

ULI is a platform that facilitates the seamless flow of a customer’s digitised financial and non-financial data from multiple data service providers to lenders, making credit underwriting seamless and customer journeys frictionless for a diverse range of borrowers, according to Rajesh Bansal, CEO, Reserve Bank Innovation Hub. This platform facilitates seamless and consent based flow of digital information, including even land records of various States. This will also bring down the time taken for credit appraisal, especially for smaller and rural borrowers without any credit history. The ULI architecture has common and standardised Application Programming Interfaces (APIs) designed for a ‘plug and play’ approach to ensure digital access to information from diverse sources. This will reduce the complexity of multiple technical integrations besides enabling borrowers to get the benefit of seamless delivery of credit and quicker turnaround time without requiring extensive and time-consuming documentation.

Lenders would gain access to customer data from various silos, including government databases (for example, land records) and satellite imagery through standardised APIs. And FinTechs can gain access to a variety of lenders on one platform and unlock opportunities to provide deeper customer insights.

How will it work?

For first time loan seekers without any credit history or required documentation, availing a bank loan is near impossible. Now with ULI, digital credit information can be made available through a single platform which provides access to data providers and lenders to serve the needs of perspective borrowers.

While ULI facilitates access to data about the loan applicant’s economic activities, it also allows financial sector players to access the data by connecting to the platform through a ‘plug and play’ model. Therefore, the loan applicants need not have to spend weeks to search and secure the documents. Instead the bank, the NBFC or the FinTech would fetch data about the applicant from sources available on the ULI platform.

For a dairy farmer seeking a loan, the lender can find data from the milk cooperative to know about cash flows; land ownership status from land records of States; and insights into his financial condition through farming patterns. So what was once a blind spot for the lender would turn into a visible customer to do business with. With the help of ULI, the lenders can immediately know the income of the loan applicant and credit eligibility. Thus decision making would be automated and loans could be sanctioned and disbursed within minutes.

Tenant farmers who often find it difficult to access agricultural credit for inputs and raw materials as they do not have the land title to submit to the banks can also avail loans. By programming the end use for purchase of agricultural inputs, the ULI platform can give the required comfort to banks and thus establish the identity of a farmer not through his land holding but through the end use of funds being disbursed.

How did it start?

The RBI had on August 10, 2023 announced the setting up of a Public Tech Platform for Frictionless Credit which is now branded as the ULI. The central bank was of the view that with rapid progress in digitalisation, data required for credit appraisal must be available at a single point for digital credit delivery.

To address this situation, a pilot project for the digitalisation of Kisan Credit Card (KCC) loans of less than ₹1.6 lakh began in September 2022. The initial results of the KCC pilot, which got underway in select districts of Madhya Pradesh, Tamil Nadu, Karnataka, U.P., Maharashtra, were encouraging. According to the RBI, the pilot enabled doorstep disbursement of loans in assisted or self-service mode without any paperwork.

Mumbai:

Prime Minister Narendra Modi on Friday said the government is taking various measures at the policy level to promote the fintech sector, which attracted over USD 31 billion in investments in the last 10 years, and the abolition of the Angel Tax is also a step towards the growth of the segment.

Addressing the Global Fintech Fest 2024 here, the Prime Minister also asked the regulators to take more measures to stop cyber fraud and further increase digital literacy among people.

“Fintech has played a significant role in democratising financial services,” he said, and expressed confidence that it will help in improving the quality of life for Indians.

PM Modi emphasised that the adoption of fintech by Indians is “unmatched in speed and scale” and no such example can be found anywhere else in the world.

He said the transformation brought about by the fintech sector in India is not just limited to technology, but its social impact is far-reaching.

He also stressed that fintech has dented the parallel economy and is bridging the gap between villages and cities on the financial services front.

The Prime Minister also said that in the last 10 years, the fintech space has attracted investments of more than USD 31 billion and fintech startups have grown by 500 per cent.

He said it is festive season in India, and there is also festivity in the economy and markets, in an apparent reference to the robust GDP growth and capital market scaling new highs.

PM Modi also informed the gathering that loans worth over Rs 27 lakh crore have been disbursed under the Pradhan Mantri MUDRA Yojana, the world’s largest microfinance scheme.

Speaking at the event, RBI Governor Shaktikanta Das said, digital technologies have been instrumental in expanding financial inclusion, improving efficiency and enabling real-time services across the country.

“Today, India stands as a global leader in digital payments, a feat achieved by combining proactive policy-making with innovation and technological advancements. Collaboration between policymakers, regulators and innovators is the defining element of India’s Fintech journey,” Mr Das said.

The Reserve Bank’s regulatory frameworks have facilitated new and innovative businesses to grow in an orderly manner, he said.

“These regulatory initiatives reflect our commitment to support innovation with prudence. Our collaborative approach is visible in the fact that we have held a large number of interactions over the last one year with the Fintech sector players,” he said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

While digital innovations can ease the cross-border supply of financial services, they can also increase the likelihood of deposit insurers being exposed to member banks with a significant share of non-domestic depositors. File
| Photo Credit: Reuters

Reserve Bank of India (RBI) Deputy Governor Michael Patra on Tuesday (August 13, 2024) asked deposit insurers and other financial safety net participants to put in place frameworks to manage the failure of deposit-taking institutions and prevent potential contagion effects.

“With the rapid digitisation of financial transactions, the crisis can propagate quickly requiring emergency liquidity assistance and pre-emptive interventions in troubled institutions,” said Mr. Patra while delivering a keynote address at a conference on ‘Navigating Emerging Challenges for Deposit Insurers and Fortifying Crisis Preparedness’ in Jaipur.

To deal with the emerging challenges, he said, “The Deposit Insurance and Credit Guarantee Corporation (DICGC) is prioritising risk management, including contingency planning and crisis management frameworks.” Mr. Patra said that it is “imperative for deposit insurers and other financial safety net participants to put in place frameworks for crisis preparedness and management that enhance their ability to manage the failure of deposit-taking institutions while mitigating potential contagion effects.”

“Crises tend to propagate quickly and hence must include augmented provisions of emergency liquidity assistance and pre-emptive interventions in troubled institutions.” He also said the digital payments space is undergoing a silent revolution.

In over 70 countries today, domestic payments reach their destination in seconds at near-zero cost to the sender or the recipient with the growing availability of instant payment systems (IPS).

“Deposit insurers are having to re-evaluate operational risks posed to depositors and member banks from the emergence of these 24/7 payment systems,” he said.

While digital innovations can ease the cross-border supply of financial services, they can also increase the likelihood of deposit insurers being exposed to member banks with a significant share of non-domestic depositors and additional challenges in the case of a payout following bank default.

“In fact, the increasing ambit of cross-border banking activities makes cross-jurisdiction cooperation between deposit insurers and other financial safety net participants all the more relevant,” the Deputy Governor said at the conference.

The International Association of Deposit Insurers (IADI) Asia Pacific Regional Committee (APRC) International Conference was hosted by the DICGC.

Mr. Patra further said deposit insurers must remain ready for tokenised deposits by reflecting on how to modify their mandates and coverage, considering that tokenised deposits are essentially claims on issuing banks like other forms of deposits.

“Moreover, the risks posed by tokenised deposits have to be modelled for determining fund size and premium rates,” he said.

“They will also have a bearing on the choice of modalities for resolution and claim processing, with different banks using different technologies as also the possibility that tokenised deposits could be held by depositors who are not KYC compliant and not clients of issuing banks. Consequently, verification of the authenticity and genuineness of claims may prove to be a testing challenge,” he added.

“The global financial landscape is changing rapidly and for deposit insurers and other financial safety net participants, it is a race to stay ahead of the curve amidst these tectonic shifts,” he said.

The DICGC covers 1,997 banks comprising 140 commercial banks and 1,857 cooperative banks ‘ the largest number of deposit-taking institutions covered by deposit insurance in the world, second only to the U.S.

Currently, the deposit insurance coverage limit (₹5 lakh or approximately $6,000), fully protects 97.8% of deposit accounts and 43.1% of deposit value.

As on March 31, 2024, interim payments were made to 376,661 depositors amounting to ₹5,359 crore.

The Reserve Bank of India (RBI) has constituted an Expert Committee under the chairmanship of deputy governor Michael Debabrata Patra to benchmark the statistics regularly disseminated by it against global standards/best practices; study the quality of other regular data, where such benchmarks do not exist (e.g., sectors of national priority); and provide guidance on the scope for any further data refinement.

The members of this committee include R. B. Barman, former chairman, National Statistical Commission member; Sonalde Desai, National Council of Applied Economic Research (NCAER), New Delhi, and University of Maryland, USA; Partha Ray, Director, National Institute of Bank Management, Pune; Bimal Roy, former chairman, National Statistical Commission; and former director, Indian Statistical Institute, Kolkata; Paul Schreyer, former chief statistician, Organisation for Economic Co-operation and Development (OECD); Sudarshan Sen, former executive director, RBI; Bruno Tissot, head of Statistics and Research Support, Bank for International Settlements (BIS); Muneesh Kapur, executive director, RBI and O.P. Mall, executive director, RBI.

“The Committee will submit its report by the end of November 2024,” the RBI said in a statement. 

Detailed instructions regarding addition of new DLAs or deletion of any existing DLA, shall be issued shortly,” RBI governor Shaktikanta Das said.
| Photo Credit: Reuters

To aid borrowers in verifying the claim of Digital Lending App’s (DLAs) association with Regulated Entities (RE), the Reserve Bank of India (RBI) is creating a public repository of DLAs deployed by the REs which will be available on RBI’s website.

“The repository will be based on data submitted by the REs (without any intervention by RBI) directly to the repository and will get updated as and when the REs report the details, i.e., addition of new DLAs or deletion of any existing DLA. Detailed instructions in this regard shall be issued shortly,” governor Shaktikanta Das announced on Thursday (August 8, 2024).

RBI Monetary Policy Meeting: RBI keeps repo rate unchanged at 6.5%

Guidelines on Digital Lending addressing protection of customers’ interest, data privacy, concerns on interest rates and recovery practices, mis-selling, etc. were issued on September 02, 2022.

“However, media reports have highlighted continued presence of unscrupulous players in digital lending who falsely claim their association with RBI regulated entities,” he said.

In the domestic equity market, the 30-share BSE Sensex hit an all-time high, rising 355.7 points or 0.44%, to 81,688.42 in early trade on July 29.
| Photo Credit: Reuters

The rupee appreciated by 2 paise to trade at 83.72 against the U.S. dollar in the early session on July 29 amid a weak dollar in the overseas markets.

At the interbank foreign exchange market, the rupee opened firm at 83.70 against the U.S. dollar. The local currency moved in a tight range of 83.70 to 83.72 in early trade.

The rupee was trading at 83.72 against the U.S. dollar at 9.30 a.m.

“Foreign fund outflows from Indian equities after the Government’s decision to hike the tax rate on capital gains weighed on the local currency and restricted the up move,” Forex traders said.

The domestic currency had recovered from its all-time low by 5 paise to settle at 83.73 against the U.S. dollar on July 26, on the strength in domestic markets and expectations of fresh foreign inflows.

In the domestic equity market, the 30-share BSE Sensex hit an all-time high, rising 355.7 points or 0.44%, to 81,688.42 in early trade on July 29.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was at 104.23, marginally down by 0.08%. Brent crude futures — the global oil benchmark — rose 0.24, or 0.3 %, to USD 81.37 per barrel.

“India’s forex reserves had jumped USD 4 billion to reach an all-time high of USD 670.857 billion for the week ended on July 19,” according to the Reserve Bank data released on July 26.

“Foreign institutional investors (FIIs) were net buyers in the capital markets on July 26 as they purchased shares worth ₹2,546.38 crore,” according to exchange data.

The RBI indicated that the interest rates offered by the Union government on two of India’s most popular small savings schemes continue to languish below the rates they should have earned as per a formula-based system adopted since April 2016. File
| Photo Credit: Reuters

The interest rates offered by the Union government on two of India’s most popular small savings schemes — the Public Provident Fund and five-year recurring deposits — continue to languish below the rates they should have earned as per a formula-based system adopted since April 2016, the Reserve Bank of India (RBI) has indicated.

The PPF rate has been static at 7.1% since April 2020. The return on the five-year recurring deposit (RD), which had been frozen at 5.8% from April 2020 to March 2023, had been hiked gradually over the first three quarters of 2023-24, taking it to 6.7% by last October.

At the time, the RBI had reckoned that the returns on the PPF were 41 basis points (bps) lower than their formula-based rates, while the five-year RD rate was 21 bps lower, for the October to December 2023 quarter. One basis point equals 0.01%.

RBI formula

The formula for quarterly resets of small savings rates, mooted by a panel led by former RBI Deputy Governor Shyamala Gopinath, links them to secondary market yields on government securities of comparable maturities over a three-month period prior to each quarter.

The PPF rate was last hiked in October 2018, when it was pegged at 8% ahead of the 2019 Lok Sabha election. After that poll, the government had reduced the rate to 7.9% from July 2019, and slashed it further to 7.1% at the onset of 2020-21, when it cut rates on all small savings instruments in the range of 0.5 and 1.4 percentage points (or 50 to 140 bps).

Prior to the 2024 Lok Sabha election, the Union government announced a hike in rates on most small savings schemes for six successive quarters, culminating in the January to March 2024 quarter, when the returns on the Sukanya Samriddhi Account Scheme (SSAS) were raised from 8% to 8.2%, and the three-year time deposit from 7% to 7.1%. While there have been no changes effected in rates since, the PPF rate has been excluded from the ambit of all these hikes.

Tax-free scheme

“The Government of India kept rates on small savings schemes unchanged for Q2:2024-25 [July to September 2024]. Rates on various schemes are now aligned with the formula-based rates except for public provident funds and five-year recurring deposits,” the RBI noted, in its latest monetary policy report released as part of its monthly bulletin last week. Unlike last October, the RBI has not quantified the gap between the formula-based rate and the PPF and five-year RD rates.

The Finance Ministry has generally defended the stasis in PPF rates by emphasising that the returns on the scheme are tax-free so tax-adjusted returns are higher. But the same tax treatment is also offered on the SSAS, which was launched in 2015. The SSAS rate was frozen at 7.6% from April 2020 to March 2023, but was raised to 8% last April and 8.2% from this January.

A logo of RBI inside its office in New Delhi. File
| Photo Credit: Reuters

Microsoft said on July 19 that it is investigating a host of issues with Azure in the Central U.S. region, but users in India, and globally, are also raising complaints.

The outage has caused disruptions in air traffic, forcing airports to shift to manual operations. Brokerages and stock exchanges have also been hit as a result of the tech outage. Microsoft while acknowledging the outage has said “a resolution is forthcoming”.

Microsoft Outage LIVE

In a statement, the RBI said “Large scale outage in Microsoft Services is impacting IT systems globally leading to disruptions in various sectors. The Reserve Bank has made an assessment of the impact of this outage on its Regulated Entities. Critical systems of most banks are not in cloud and further, only a few banks are using the CrowdStrike tool. Our assessment shows that only 10 banks and NBFCs had minor disruptions which have either been resolved or are being resolved. Overall, the Indian financial sector in the Reserve Bank’s domain remains insulated from the global outage.”

The Reserve Bank has issued an Advisory on July 19 to its Regulated Entities for taking necessary steps to remain alert and ensure operational resilience and continuity.

As of the end of March 2024, NBFCs had a CRAR of 26.6%, a GNPA ratio of 4.0% and a return on assets (RoA) of 3.3%. (Representational image only)

Ahead of the upcoming Union Budget scheduled to be presented on July 23, the Non-Banking Financial Company (NBFC) sector is expecting enhanced financial inclusion and reinforcing digitalisation efforts to sustain the sector’s growth.

Finance Industry Development Council (FIDC), which represents the industry, has suggested establishing a special refinancing body, just as the government has created National Housing Bank (NHB) for housing finance companies.

On the other hand, the sector this year has seen stringent regulatory action from the Reserve Bank of India (RBI). Additionally, speaking at an event in May this year, RBI Deputy governor J. Swaminathan cautioned the NBFCs not to be overly reliant on algo-based credit models. However, the apex bank, in its 29th Financial Stability Report (FSR) said that the NBFCs are well capitalised, giving an edge to the financial sector in the country.

As of the end of March 2024, NBFCs had a CRAR of 26.6%, a GNPA ratio of 4.0% and a return on assets (RoA) of 3.3%.

“The growth of the Indian NBFC industry is significantly influenced by robust financial inclusion, consumer demand and improving trade balances. The upcoming Union Budget should emphasise enhancing financial inclusion across the country, implementing policy reforms, and reinforcing digitalisation efforts to sustain the sector’s growth.

Financial and digital inclusion will enhance credit access by increasing convenience and reducing turnaround times,” said Rakesh Kaul, CEO, Clix Capital.

“The government must consider incentivising and promoting such measures so that NBFCs can carefully take advantage of global integration, ensuring sustainable growth and financial inclusion across India’s diverse economic landscape,” said Jitendra Tanwar, Managing Director & CEO of Namdev Finvest Private Limited.

He further added that the government must consider incentivising and promoting such measures so that NBFCs can carefully take advantage of global integration, ensuring sustainable growth and financial inclusion across India’s diverse economic landscape.

Expressing his confidence in the Budget this year, Krishan Gopal, CFO, Aye Finance, said, “I believe this Budget will lay the groundwork for India’s vision of development by 2047. We expect the Government to recognise the efforts of NBFC lenders that are transforming micro-enterprise lending in India by providing customised credit lines, announcing schemes and subsidies and even considering classifying them as Priority Sector Lenders.”

“Despite strong competition from banks, non-banking financial companies (NBFCs) have shown remarkable resilience in retaining a significant market share. To drive further growth, we seek policies that promote responsible credit utilisation, enhance access to credit for underserved communities, and foster financial literacy among customers,” said Mathew Muthoottu, MD Muthoottu Mini Financiers Limited.

”NBFCs are expecting the Budget to carry provisions that spur consumption, such as via tax relief etc.; implement initiatives that enable growth of NBFCs serving priority sector clients; and undertake widespread campaigns aimed at inculcating good credit behaviour amongst the country’s growing borrower base,” opined Neha Juneja, Co-founder and CEO, IndiaP2P, on her Budget expectations.

Anticipating the allocation of additional funds for the sector, Pavitra Walvekar, the CEO of Kudos Finance, which is based out of Pune, said, “Key initiatives should include the allocation of additional funds to improve liquidity for NBFCs and the introduction of regulatory reforms to streamline operations and enhance transparency. These steps will bolster credit availability, particularly for underserved segments like MSMEs, and promote financial stability in the long run.”