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CENTRAL NEWS
HDFC BANK LAUNCHES MICRO-CREDIT FACILITY FOR PM SVANIDHI SCHEME
INDIAN CENTRAL BANK MAY PILOT TEST CBDC IN 2022: REPORT
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HDFC Bank recently announced the launch of micro-credit facility for street vendors, PM Street Vendor’s AtmaNirbharNidhi (PM SVANidhi), with common service centres (CSC).HDFC Bank would facilitate PM SVANidhi for its village-level entrepreneurs (VLEs) on the digital sewa portal where vendors can complete the entire process online. It is a collateral-free affordable loan of INR 10,000 with an interest subsidy of 7 per cent. The bank said that VLEs must understand the loan application requirements, ensure the mobile number is linked to the Aadhaar and check the eligibility status of their application as per the scheme rules.
“Through the launch of PM SVANidhi, at HDFC Bank we will be able to provide special micro-credit facility to small street vendors through our CSC VLEs for their holistic development and economic upliftment," said Smita Bhagat, country head (GIB, CSC, e-commerce, startups and inclusive banking initiatives group), HDFC Bank.
It is another opportunity for VLEs to serve every business requirement in the country well as an avenue for earning incentives, said Dinesh Tyagi, managing director, CSC SPV. “At present, we have over 50 lakh street vendors and our VLEs are widely spread to cater to them. They must capitalize on this network strength for facilitating small ticket loans of INR 10,000 for the vendors along with this VLEs should identify opportunities for other products and maximize their incentives," said Tyagi. Axis Bank-owned payments firm Freecharge announced the roll-out of its neo-banking platform on 16 November 2021. The platform already has 18,000 sign-ups, it said.Some of the services that its customers will be able to avail include — fixed deposits, recurring deposits, buy now, pay later (BNPL) services, digital debit and credit cards, personal loans and more.
The Reserve Bank of India is set to launch the pilot for its proposed central bank digital currency or CDBC by the first quarter of next year, a senior RBI official told media during a panel discussion at State Bank of India’s annual Banking & Economic Conclave. When asked how soon India could have its CBDC, P Vasudevan, the Chief General Manager of RBI’s Department of Payment and Settlement, said, “I think somewhere it was said that at least by the first quarter of next year a pilot could be launched.”
“We are on the job and we are looking into the various nuances related to the CBDC. It’s not a simple thing to just say that CBDC can be a habit from tomorrow…We have to be very cautious, and see whether it should be as a wholesale segment or target the retail segment, and for what purpose as well,” Vasudevan said. He added that the central bank would have to work out how the validation mechanism for a CBDC would be implemented as it would be token based.
“The banking system has been taking the lead in terms of currency distribution as a tiered model…whether the same model can be accepted for CBDC as well, we will have to see,” he said. Vasudevan said that the RBI is also checking if intermediaries can be bypassed altogether, and whether the technology would be decentralised or semi-centralised.
While work is on to ensure the launch of the CBDC soon, the central bank is still
A neo-bank is a financial institution that offers an alternative to traditional banks. They are digital banks that do not have any physical branches. While they do not have a bank license, they partner with existing banks to onboard customers. Freecharge has partnered with Axis Bank, its parent company to offer neo-banking services to its customers.
Freecharge has been testing its neo-banking platform for some time now. It started offering buy now, pay later (BNPL) services to its customers in the first quarter of the year and is now testing lending services for small businesses.
Customers can also enrol for fixed and recurring deposits on the platform using the Freecharge app. The company has also started offering mutual fund services, allowing users to invest in mutual funds right from the app. In the future, the company also intends to offer personal loans to its customers.
“We launched BNPL, the first of the (digital) products, in the first quarter. The second one was small-ticket lending for small businesses," Freecharge chief executive officer Siddharth Mehta said in an interview. “The extension of this is that we will launch the consumer financial services platform or the neo-bank. Then, eventually, we will move to the merchant,"
Mehta added. Freecharge will also partner with insurance providers in the coming months to allow its users to apply and renew their insurance policies. Early next year, the company aims to offer digital credit and debit cards to its users.
SBI SIGNS PACT WITH U GRO CAPITAL TO FINANCE MSMES
State Bank of India has entered into a co-lending agreement with fintech firm U GRO Capital to offer financing solutions to micro, small and medium enterprises (MSMEs), the lender said on November 7. Through this collaboration, SBI and U GRO Capital aim to disburse up to INR 500 crore by March 2022 to provide credit to MSMEs, a PTI report said. The agreement is in line with Reserve Bank of India guidelines.
The co-lending agreement aims to enhance last-mile connect, financially empower MSMEs and further drive financial inclusion in the country, the public sector bank said in a press release.
"We are glad to have joined hands with U GRO Capital under the co-lending programme. This collaboration will further enhance our distribution network, as we aim to extend our credit reach to more MSMEs," SBI Chairman Dinesh Khara said in a statement.
The RBI has issued a set of guidelines on co-lending scheme for banks and non-banking financial companies for priority sector lending to improve the flow of credit to unserved and underserved sectors of economy.
The guidelines were also issued to make funds available to borrowers at an affordable cost. The co-lending model aims to give the borrower the best interest rate and better reach.
deliberating the finer print. “We are bullish on it,” Vasudevan added, saying that banks would be involved in the CBDC pilot when it is launched.
A CBDC is legal tender issued by a central bank, but in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different. Also Read: Pros and cons of central bank digital currency “It is also important to understand what a CBDC is not. CBDC is a digital or virtual currency but it is not comparable to the private virtual currencies that have mushroomed over the last decade. Private virtual currencies sit at substantial odds to the historical concept of money. They are not commodities or claims on commodities as they have no intrinsic value; some claims that they are akin to gold clearly seem opportunistic.
Usually, certainly for the most popular ones now, they do not represent any person’s debt or liabilities. There is no ISSUER. They are not money (certainly not CURRENCY) as the word has come to be understood historically,” RBI Deputy Governor T Rabi Sankar had remarked on the matter earlier in July while delivering a lecture at the Vidhi Centre for Legal Policy.
Other panelist’s concurred. “Nine out of ten central banks are in the process of issuing CDBCs, and that might be a good way for India to play in this space… It can be a catalyst to financial inclusion. It can be an opportunity to see how you reduce cost of cash,” said JoydeepSengupta, Senior Partner at McKinsey & Company.
On the subject of private digital currencies, other speakers part of the panel discussion were split. While HDFC Bank’s Country head for payments, technology and digital banking- ParagRao- called cryptos a “fad” which was seeing values go up “based on, say, corporate superstars’ comments”, SBI’s Managing Director for international banking, technology and subsidiaries- Ashwini Kumar Tewari said that one would have to take a more “nuanced view”, instead of completely banning cryptos. “It no longer can be ignored. The value of crypto today is roughly USD3 trillion and growing as we speak,” added JoydeepSengupta of McKinsey. “It is a speculation-led investment or asset class. Because everyone thinks the next crypto can be a Bitcoin and it can have USD 50,000 value and it is becoming like a penny stock,” said Deepak Sharma, Chief Digital Officer at Kotak Mahindra Bank.
“How would the end use of digital currencies be? Its purpose, storage, movement will continue to be a big question, I don’t have an answer to that.” “I think a deeper conversation needs to take place, not only in committees but also in public domain. So the concerns which are there and which have been articulated over time- whether the control over the cryptocurrencies or even money itself could be lost, money laundering concerns, all of these concerns are valid concerns. Does this mean we totally ban crypto? I think there can be a nuanced view here. Control is essential,” AshwiniTewari, MD of SBI said.
RBI MONITORING BIZ MODELS OF LENDERS:
SHAKTIKANTA DAS
The central bank is closely monitoring the business models and strategies of banks, Reserve Bank of India Governor Shaktikanta Das said. He, however, clarified that the central bank's move is not intended at interfering in banks' commercial decisions, but it will red flag lenders if there is any risk building up. At the RBI, we have started taking a closer look at the business models and strategies of banks.
Take your commercial decisions, we will not interfere, but we will see what kind of vulnerabilities and what kinds of risks are building up, and our first priority would be to caution banks themselves, Das said at the SBI's Banking and Economic Conclave. He said the RBI's supervision is now almost on a real-time basis and is not an annual exercise anymore.
Technology has enabled a more intensive look towards the supervision process. While banks take their commercial decisions, they should also factor in the available liquidity and also the kind of interest rate structures they are providing. These decisions should be taken based on prudent principles, he said.
The governor said irrespective of the fact that liquidity is in surplus, the risk pricing of various loans being extended by banks has to be done diligently by banks themselves. The mere fact that there is excess liquidity should not lead to any mispricing of loans because this excessive liquidity is not going to be a permanent feature, Das said.
At a particular time last year, the economy needed liquidity because the financial markets were freezing up and there were episodes of mutual funds suddenly collapsing, and the RBI had to step in with massive liquidity support, he added.
The liquidity support ensured the orderly functioning of the financial markets. The RBI is now moving towards a rebalancing of liquidity. It is making efforts to provide only that much liquidity which the system requires, Das noted.
Let me make it very clear that there will always be adequate liquidity to meet the requirements of the productive sectors of the economy. But slowly we want to rebalance the economy in a manner that banks are left with that much liquidity which they need and not excess, he added. Earlier in his speech, the governor said banks should ensure that their business models and business strategies are conscious choices, following a robust strategic discussion in the Board, instead of being driven by a mechanical 'follow the market' approach.
In their endeavour to grow, banks should avoid herd mentality and look for differentiated business strategies. Certain banks had followed the high risk and high return business strategy, with a skewed priority for serving only the interest of their investors, he said.
According to him, the active role of the Board, especially in challenging the proposals of the management, becomes critical and will contribute towards a more diligent and balanced approach to decision making. He said the board of directors carry the responsibility of being guardians of the trust that depositors have reposed in a bank.
The RBI has high expectations from the oversight role of the Board, its composition, Directors' skill profile, strong risk and compliance structure and processes, more transparency and a robust mechanism of balancing various stakeholder interests, he added.
Das said banks have weathered the COVID-19 shock better than expected, with the gross non-performing assets and capital adequacy ratios of banks further improved in September 2021 from June 2021 levels.
Going forward, there are risks and challenges, which require serious introspection and action on the part of the banking system, he cautioned. Das said one of the challenges banks are likely to face would be in dealing with the stressed borrowers impacted by COVID-19.
During the two waves of COVID-19, the RBI announced Resolution Framework 1.0 and 2.0 to provide relief to the borrowers and banks.
As the support measures start unwinding, some of these restructured accounts might face solvency issues over the coming quarters. Prudence would warrant proactive recognition of such non-viable firms for pragmatic resolution measures, he said.
HSBC EXPLORES RE-ENTERING
INDIA'S PRIVATE BANKING BUSINESS
HSBC Holdings is ahead of its hiring targets for its Chinese retail wealth management business and is exploring re-entering India's private banking business, senior executives said. This is part of the bank's plan to make Asia and wealth key pillars of growth. Under a strategy spearheaded by Group CEO Noel Quinn, HSBC is ploughing USD 3.5 billion into its wealth and personal banking business, in line with its ambition to become Asia's top wealth manager by 2025.
"We are the leading international bank in China, so we want to squeeze that opportunity," said CEO of Wealth and Personal Banking Nuno Matos. He is one of four top executives moving to Hong Kong from London this year as part of the bank's regional pivot. powered by Rubicon Project "On the private banking side, we are now in clear expansion mode," Matos told Reuters in one of his first interviews since moving to the region.
Asia is the biggest region for HSBC, and the wealth and personal banking unit contributed 44 per cent or USD 22 billion to London-headquartered HSBC's adjusted global revenue last year. The bank is looking to boost its mobile wealth planning service, HSBC Pinnacle, in China by having about 700 personal wealth planners by the year-end instead of the 550 originally planned, Matos said. HSBC's wealth management services include investments, insurance and asset management products, while private banking caters to the needs of those with investible assets of USD5 million or more.
The bank had 20 people operating in China onshore private banking business at the end of last year, said SiewMeng Tan, head of HSBC Private Banking for Asia Pacific. "By the end of this year, we will get to 64 and by the end of next year, we'll double that," she said.
HSBC is exploring whether to re-enter onshore private banking in India, where the ranks of the super rich are growing fast and record high stock markets have created a string of billion dollar start-ups.
HSBC exited the Indian private banking business in 2015 as part of a group strategy. The lucrative but very competitive Indian market has few foreign players. "We want to bank mass affluent and high net worth customers. At this moment, the two major pillars we are expanding in India are insurance and asset management," Matos said.
"On the private banking side, we are not there yet and that's something that demands a strategic decision this year," he added.
Currently, HSBC is focusing on catering to wealthy Indians from its global hubs in Singapore, London and the Middle East. HSBC is also looking to bulk up its Singapore and Southeast Asia presence, Matos said. In August, the bank bought French insurer AXA's Singapore assets for USD575m.
Though HSBC has a dominant Asia presence with its retail banking, particularly in the financial hub of Hong Kong, global
leaders such as UBS and Credit Suisse rule the market for wealthier clients.
Global wealth managers remain bullish about their growth prospects in China despite an unprecedented regulatory crackdown in the world's second-largest economy.
In a global wealth report published in June, Boston Consulting Group said Asia's wealth management revenue pools will soar faster than any other market worldwide, nearly doubling over the next five years to USD 52 billion.
"Asian wealth is expanding twice as fast as the rest of the world. This is a compelling opportunity for us," said Matos, who took charge of HSBC's newly combined division in February. "I'm not going to re-do now our goals but what I can say is that in 2021, we will over-deliver our goals on the wealth side," he said.
After announcing plans last year to buy out its life insurance joint venture partner in China, HSBC is also keen to gain full control of its asset management company in the country, Matos said.
RIJU JHUNJHUNWALA
WRITING A NEW SUCCESS STORY
Riju Jhunjhunwala has been the main driving force for RSWM Ltd. With his hard work, dedication, wisdom and knowledge, Jhunjhunwala is always on the quest for new avenues in the business. His zeal for creating a trade model that can showcase India’s potential on the global platform has always kept him on the innovative and creative edge. In his exclusive interview with Observer Dawn Media, he talks about his entire trade journey and future expansion plans.
You started your career with Rajasthan Spinning & Weaving Mills Ltd. (RSWM) and concurrently, you also handled operations for Malana Power Company Ltd. How was your overall experience of handling two big companies at the same time?
Yes, that’s right! In 1999, when textiles were booming, I was supercharged to start my career with RSWM. I spent the first few months thoroughly understanding the business. I did it with help from a dedicated team of employees that had worked with my father and grandfather. So, the trust quotient was extremely high.
Right after I started, we worked on numerous foundational changes such as new projects, expansions, change of teams, and fresh talent sourcing. Those were exciting times. Every day, I tried to soak in whatever I could.It was those changes that have today contributed to RSWM becoming a 2300+crturnover company today. Next year, I took over the reins of Malana Power Company Ltd. And soon after, I became heavily involved in the planning of another hydropower project.
Both RSWM and MPCL were very different in their nature of operations. One was manufacturing while the other one was core infrastructure development. Quite frankly, it did get challenging, and I am thankful to the brilliant team of people who helped me sail through it.
The current government has been actively promoting the ‘Make in India’ concept. Do you feel that this could help in surging the exports of the country?
The Make in India concept and the Production-Linked Incentive schemes have been quite beneficial for the textile sector. They have been effective in encouraging large companies to take up massive expansions.
RIJU JHUNJHUNWALA
However, state subsidies play a key role in the decision-making since every state has a different scheme. Consequently, businesses in each state are impacted differently.
So far, Rajasthan’s subsidy scheme has benefitted us tremendously. But the power costs put us at a slight disadvantage when competing with global players. We installed solar rooftop power plants at our manufacturing locations to mitigate this.
With the China Plus One policy, we are gearing towards increasing our exports, especially since big brands are now looking for alternative nations to source the raw materials. This policy has changed the sourcing and export game for India. Our focus is on capturing the market share of Bangladesh, Vietnam, and the Philippines.
You brought the denim revolution to India by creating a world-class integrated denim plant from spinning to processed denim fabric. How was the entire idea conceived and how did you manage to execute it?
The real pioneers of denim in India were veteran companies Arvind Ltd. and Raymond Ltd. They were in this business long before we came about. Knowing the competition was fierce, we decided to fill a void left unattended by the then players. India did not have a single world-class denim mill capable of design development. The competing nations such as Bangladesh, Pakistan, and Turkey were much ahead. Hence, there was an urgent requirement for a high-end spinning integrated denim mill. Such a mill would help the country reach new heights in the international market. We started with approaching American companies for a joint venture, but nothing worked out. So, one day, we decided to do it all by ourselves!
That was back in 2007. It’s been fourteen years, and we continue to work at world-class standards.
You have a keen interest in the power sector and owing to that, the group has incorporated Bhilwara Energy Ltd. (BEL) in 2006. How do you envisage the future expansion plans of BEL and what are your thoughts on the country’s power sector?
BEL currently owns two hydroelectric power projects totaling 278 MW. One of the projects, MPCL has a joint venture with the Norwegian company, Statkraft having a 49% share in the power plant. Currently, we are operating some wind assets as well under BEL.
We envisaged this company to address the demand-supply gap in electric power in the country.
Today, BEL is one of the few merchant power plants in the country. We sell power through short-term contracts and the Indian Energy Exchange, both.
We recently acquired a majority stake in ReplusEngitech, a company building sustainable and cutting edge energy storage solutions based on evolving Lithium & Advance Chemistry technologies. We had envisioned the surging need for such storage solutions owing to the hike in demand for renewable energy. The power produced through renewable energy resources needs to be stored until used. So, in situations where the supply exceeds the demand, such storage technology is employed. Replus has high growth potential for the next two to three decades to support the increasing use of hydro, solar, and wind energy as power sources.
As you speak of climate sustainability through renewable energy and BESS, what are your thoughts on other sustainable development goals on education, unemployment, gender equality and so on?
CSR and sustainability have been the core of our family values. My grandfather was quite devoted to the people of Rajasthan, and he launched several welfare programs. I observed the same zeal to do good in my father.
As we speak, Jawahar Foundation (an NGO I started in 2019) is serving wholesome meals to people in three different cities in Rajasthan at just a rupee each and has served 60,000+ meals.
I started this NGO with the vision of uplifting the people of Rajasthan by providing better healthcare, education, and employment opportunities. The pandemic served itself as an opportunity to work for the people. We executed close to 200 different projects. Today, we have Digital Literacy centres providing free, short-term computer literacy programs to students. We also have a long-running COVID awareness campaign wherein we distributed 1,00,000 masks and 22,000 packets of food. In addition to this, we planted 20,000+ trees in and around Ajmer in Rajasthan.
Together, we’ve donated close to 6.5cr to support India’s fight against COVID.
The textile industry has always been a lucrative domain for you what are your plans for future expansion and what all other paraphernalia you would like to focus on in the coming years?
Although textiles suffered a severe dry period and COVID posed additional challenges, RSWM remains deeply committed to the industry. 2021 looks up as RSWM has emerged stronger with renewed focus and agility. I feel proud to share that we’ve embarked on a major expansion. Over the next two years, we will invest INR 500 crores in large textile projects with a focus on spinning and knitting. We will invest across business segments i.e. setting up 20,000 spindles of combed cotton at our yarn facility in Mordi; setting up 8.4 million meters of denim capacity for sheet dyeing and finishing capacity at Mordi (Banswara, Rajasthan); and setting up 30,000 spindles of Mélange yarn at the largest unit in Kharigram (Rajasthan).
This is apart from the modernisation and balancing of equipment across locations. With denim already pacing up, we expect topline growth of more than 700 crores over the next two to three years.
How did you develop a knack for textiles over the years?
I had observed my father and grandfather working on building the business grounds up. In addition to RSWM Ltd., they set up several other companies while being deeply committed to the welfare of the people. So, I saw the good side of business early on. Also, dining table conversations were an important learning ground. I started picking up industry insights and trade nuances. So, as soon as I graduated, I rushed back to India, ready to begin my career in textiles. I had my own ideas and I wanted to make those happen.
How did renewable energy and sustainability become focus areas of your recent work?
I strongly believe that a business needs its environment to thrive. Today, the environment itself is in danger. So, it is our very responsibility to step up and achieve the Sustainable Development Goals to survive. Traditionally, we Indians have lived a sustainable lifestyle. We’ve always been conscious and considerate of our environment. Today, those values need revisiting and an unshaken commitment. That’s what we are doing.
We’d set up a rooftop solar power plant in __RAJASTHAN____ and hydroelectric power plants in __HIMACHAL PRADESH_____
We are converting 180 cr PET bottles into 43,200 tons of recycled polyester fibre annually. Materials like these make fashion sustainable.
JAWAHAR FOUNDATION
Jawahar Foundation started with the vision of uplifting the quality of life of the people of Rajasthan with a sharp focus on food accessibility, education, employability, health and sanitation, and water availability. Started in 2019, Jawahar Foundation is a CSR initiative by Mr Riju Jhunjhunwala, Chairman and Managing Director of RSWM Ltd, leading textiles producer and exporter in India. The foundation extensively worked during the pandemic distributing 1,00,000 masks and 22,000 food packets to the needy. It started an extensive COVID ‘No Mask No Movement’ campaign around the city with announcement stickers and placards. It also planted 25,000 trees in and around Ajmer to indirectly increase the oxygen levels in the air. It also donated sewing machines to 500 women after training them. The foundation also donated 120 COVID beds for hospitals and installed 100 oxygen bed pipelines. It also created COVID care wards in one of the hospitals in Gulabpura. As the situation became better in Rajasthan, the foundation continued to fight with a renewed campaign focusing on COVID hygiene and safety. To date, the staff continues to regularly visit orphanages, blind homes, old-age homes, and remote areas to inform the people about the risks and safety measures. It has also been donating COVID safety kits, gloves, masks, and sanitisers to shelter homes. Recognizing the efforts of several medical staff members, cleaners, and volunteers, Jawahar Foundation has felicitated 1,250+ Corona warriors in several districts of Rajasthan. In addition to this, the foundation donated a total amount of 1 cr for vaccination drives in Rajasthan. Today, the foundation runs a popular digital literacy course for government school students in 7 centres in Ajmer. 2,700 students are currently enrolled on this short-term program. Encouraging girls in the state, the foundation awarded 800 girls for their exemplary performance in academics and sports. Today, the foundation successfully runs community kitchens in Ajmer, Bhilwara, and Banswara serving wholesome meals at just Re 1. To date, 61,000 meals have been served to the hungry. The program was started with the vision of serving dignified meals to those in need.
To know more about the work of the foundation, please connect with us on social and visit our website www.jawaharfoundation.com
THE LNJ BHILWARA GROUP
PROFILE OF MR. RIJU JHUNJHUNWALA, CMD, RSWM LIMITED
Riju Jhunjhunwala is the Chairman & Managing Director of RSWM Ltd, a preeminent textile company in India for over 50 glorious years. RSWM is part of the LNJ Bhilwara Group with interests in businesses like Graphite, Power, IT and Skill Development. Apart from RSWM, Riju is a director in the other group businesses.
After his bachelor’s in business management from University of Bradford, Riju joined RSWM in 1999. He was involved in various aspects of business to start with like exports and manufacturing. He took over his role as Joint Managing Director of RSWM in 2002.
After spending nearly 2 decades in various roles in marketing and strategy at RSWM, Riju knows what it really takes to remain competitive and profitable in an ever globalized business landscape.
Under him, RSWM has grown to now become one of the leading synthetic yarn, and fabrics company in India with yearly sales of nearly U$ 500 mn.
Apart from RSWM, Riju also took over as Managing Director of Bhilwara Energy Ltd, the group’s holding company in the renewable power space. BEL owns and operates 300 MW of hydro-electric power and over 100 MW of wind energy. Riju is also actively involved in other group companies like HEG, and oversees the service businesses of the group like Bhilwara Infotech Ltd and LNJ Skills, which is into providing skilling solutions across India. Riju is also active in industry and social associations. He has been the past president of the Entrepreneurs Organization (Delhi Chapter) among some others.
In his personal life, Riju is an avid reader of history and biographies and has a keen interest In general affairs and politics. Like everyone else, he loves to travel with his wife, Amrita and his son, Jawahar.
