BUSINESS
Vault Matters | Why not 100% FDI in banking sector?
Recently, 100% Foreign Direct Investment in the insurance sector became a reality. With this, almost every sphere of financial services is eligible to tap foreign money to the fullest, except for banks, where caveats remain very high
BUSINESS
Vault Matters | Catch ‘em young! Rethinking deposit strategies for the prime earning demographic
Indian banks favour senior citizens with higher deposit interest rates, but neglect the 28-55 age group. To attract younger customers, banks must innovate, perhaps by offering equity-like deposit products with guarantees, supported by regulatory and government backing
BUSINESS
Vault Matters | Why lenders need to be blamed for the ‘overleveraging’ mess
The recent issue of a customer complaining about being harassed by banks for repaying multiple loans despite low income, highlights a lack of proper loan assessments, inadequate tracking of borrowers' credit scores, and the dangers of increasing indebtedness due to unchecked lending practices
BUSINESS
Vault Matters | Will the zing factor make a comeback in bank stocks?
The banking sector's performance has stagnated due to low growth, asset quality stability, and missing differentiation among banks. With valuations dropping and no fresh triggers for re-rating, investor interest remains muted, leaving the sector without a clear path forward
BUSINESS
Vault Matters: Banks must rethink business strategies to address high attrition
High attrition among private banks is something the RBI has been concerned about for the last two years. But solving this issue is not in the regulator’s hand. Will banks recognise the flaws in the system?
BUSINESS
Vault matters | Thinning bank credit growth needs RBI’s immediate attention
While it is often perceived that bank credit growth is a derivate of GDP growth, the fact is both are interlinked. If credit growth posted by banks is muted, GDP growth is unlikely to outperform the loan growth data. At 11.5% as per recent RBI data, bank loan growth isn’t very inspiring
BUSINESS
Vault matters | Barely discussed concerns in gold loans
The year 2024 belonged to gold loans clearly. From one of the largest players, IIFL Finance, being banned for a little over six months this year to the regulator waking up the irregularities in the sector, gold loans have become the product everyone wants to focus on. But if unsecured loans are being realigned as secured gold loans product, is that proposition well thought through?
BUSINESS
Vault matters | Why credit bureaus need to be more borrower friendly
While the central bank has taking a slew of steps to ensure that there is accuracy and faster dissemination of credit history, more can be done to increase the efficiency of credit bureaus. Unlike corporate rating agencies, retail customers barely get a chance to make a case on why the rating score may be wrong. This needs to change for deeper retail penetration
BUSINESS
Vault Matters | How I would remember Shaktikanta Das
If former Prime Minister Narasimha Rao would be remembered for quietly reforming the country in 1991, Das will be remembered as RBI’s very own Narasimha Rao. He brought about certain critical changes in the way banks and NBFCs operated and ensured that everyone towed the line
BUSINESS
Vault matters: Generalist or a specialist - lenders’ dilemma
Until three years ago, being a specialist like a microfinance lender or catering exclusively to affordable housing or consumer loans helped, especially in raking premium valuations. Today, being a jack of all trades is helping lenders position themselves better amidst concerns emerging in various pockets of the financial services sector
BUSINESS
Vault matters: Government should give a free hand to RBI on rate setting
The debate over optimal borrowing rates for India Inc. persists, with differing views between the government and the RBI. While rate cuts are popular, the stress in retail lending and bank profitability make them less feasible, with the RBI ultimately having the final say
BUSINESS
Vault Matters: Government-RBI tussle over interest rate begins. Will it prolong?
With the base case for a rate cut not yet crystallising, the tug of war between RBI and the government on this front would be interesting to note. Goyal, has just as kick-started the war of words
BUSINESS
Vault Matters: The partial stand on usurious pricing
It’s time RBI calls out the rates charged by banks on credit cards as usurious. Singapore is a step ahead on this. Timely action is critical because the repercussions of increasing delinquencies among middle class borrowers can be far more scathing than what’s playing out in the low income category. The latter somehow or other gets support from the government. The middle class is left on its own
BUSINESS
Vault matters: Why the business of banning businesses by RBI is justified
A person with direct knowledge of the matter said, the four companies charged highest interest rate to microfinance customers. A few of them had issues on operational and procedural fronts with two lenders facing the greatest concerns regarding operational aspects. If repeated warnings were not adhered, the regulator’s action to ask these entities to stop business till they mend their ways is logically the right thing to do
BUSINESS
Vault matters: The changing face of Indian private banks
In recent years, the landscape of private banks in India has significantly shifted, reliance on public sector banks (PSUs) for support has also risen. While PSU bankers are competent, the dependence on them raises concerns about innovation and adaptability within private banking.
BUSINESS
Vault Matters: Who should own banks and non-banks?
The RBI governor in his MPC speech mentioned that non-banks to satisfy the expectations of their investors end up chasing high returns which in turn leads to high growth, not necessarily reflective of the real demand. The subtext is PE-led lenders can pose financial stability issues in pursuit of eye-popping returns. The way out may be to harmonise rules of ownership structures between banks and top-tier NBFCs
BUSINESS
Vault Matters: Priority sector lending or profitable sectors lending?
Priority sector loans have for banks become a source of profitability because RBI’s assumption that harmonising regulations for certain asset classes across intermediaries will unleash competition and drive down interest rates hasn’t worked. Rates today are relatively high for borrowers at the bottom of the pyramid. This has social implications
BUSINESS
Vault Matters: Banks may be slightly shortsighted on their deposit plans
While there is definitely a rush deposits, what is increasingly becoming a matter of concern is kind of efforts is being put into building deposits in the 2 - 3 years’ bulge. What this means is that the banks are increasingly preferring to build assets around the tenure. But is this good to meet the longer duration credit requirements
BUSINESS
Vault Matters: Are banks steady to absorb a rate cut?
While loans may get less expensive thereby sprucing demand, on deposits front banks cannot afford to be complacent about reducing deposit rates and yet be comfortable about deposit mobilization. A rate cut may do more harm than good for banks at this juncture
BUSINESS
Vault Matters: Proposed project finance norms - a push towards bond markets for India Inc
Draft project finance norms which were rolled out in May this year is seen quite detrimental for lenders in terms of pricing large ticket loan. But these norms will not be applicable on exposures tapped through the bond market. Are the tight norms RBI’s third attempt to push demand towards the corporate debt market?
BUSINESS
Who will protect the privacy of retail customers?
While the Reserve Bank of India is working hard to ensure that privacy is maintained for large borrowers, as retail customers we are equally entitled to as much secrecy of our information
BUSINESS
Vault Matters: Unified Lending Interface’s unanswered questions
Scaling up and effectively maintaining the database may not be viable in the long-run if ULI should perennially be dependent on government grants and support from the RBI. Without the financial and commercial elements etched out, the concept of ULI may just be remembered over time as an interesting and novel idea
