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Niti Aayog suggests setting up of full-stack ‘digital banks’

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A detailed architecture and sequencing of reform has been proposed in this paper, the purpose of which is to undertake stakeholder consultations. Based on the comments received, the paper will be finalised and shared as a policy recommendation from Niti Aayog.A detailed architecture and sequencing of reform has been proposed in this paper, the purpose of which is to undertake stakeholder consultations. Based on the comments received, the paper will be finalised and shared as a policy recommendation from Niti Aayog.

The government think-tank Niti Aayog on Wednesday suggested setting up of full-stack ‘digital banks’ to deepen access to financial services in the country.

In a discussion paper, Niti Aayog examines the global scenario, and based on the same, recommends a new segment of regulated entities — full-stack digital banks.
A detailed architecture and sequencing of reform has been proposed in this paper, the purpose of which is to undertake stakeholder consultations. Based on the comments received, the paper will be finalised and shared as a policy recommendation from Niti Aayog.

Upon progression from the sandbox into the final stage, a full-stack digital business bank will be required to bring in `200 crore (equivalent to that required of the Small Finance bank). “Digital Banks” or DBs referred in this Paper means Banks as defined in the Banking Regulation Act, 1949 (BR Act).

“In other words, these entities will issue deposits, make loans and offer the full suite of services that the BR Act empowers them to. As the name suggests however, DBs will principally rely on the internet and other proximate channels22 to offer their services and not physical branches,” the think-tank said in the paper. However, as a natural corollary to being a “Bank” in full sense of its legal definition, it is proposed that DBs will be subject to prudential and liquidity norms at par with the incumbent commercial banks, it said.

Creating a new licensing / regulatory framework is being proposed as regulatory innovation and not as regulatory arbitrage. “

Having said that, DBs offer a differentiated proposition and as such, there is scope for differentiated treatment in adjacent areas of their operation consistent with treating them identically with incumbent commercial banks, in the critical areas of prudential and liquidity risk, it added.

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SBI, Adani Capital sign pact for co-lending to farmers

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The Reserve Bank of India (RBI) had issued guidelines on co-lending scheme for banks and NBFCs for priority-sector lending, to improve credit flow towards underserved sectors of economy, the bank said in a release, adding that the model aims to give the borrower the best interest rate and better reach.The Reserve Bank of India (RBI) had issued guidelines on co-lending scheme for banks and NBFCs for priority-sector lending, to improve credit flow towards underserved sectors of economy, the bank said in a release, adding that the model aims to give the borrower the best interest rate and better reach.

State Bank of India (SBI) on Thursday signed an agreement with Adani Capital, the non-banking finance company (NBFC) arm of the Adani Group, for co-lending to farmers for purchase of tractors and farm implement.

“This partnership shall help SBI to expand customer base as well as connect with the underserved farming segment of the country and further contribute towards the growth of India’s farm economy. We will continue to work with more NBFCs in order to reach out to maximum customers in far flung areas and provide last mile banking services,” said SBI chairman Dinesh Khara.

The Reserve Bank of India (RBI) had issued guidelines on co-lending scheme for banks and NBFCs for priority-sector lending, to improve credit flow towards underserved sectors of economy, the bank said in a release, adding that the model aims to give the borrower the best interest rate and better reach.

Registered in 2017, Adani Capital is a non-deposit taking systemically important NBFC with total assets under management (AUM) of Rs 1,292 crore as on March 31. The NBFC had 28,000 customers spread across 63 branches in 6 states including Maharashtra, Gujarat, Rajasthan, Karnataka, Tamil Nadu and Uttar Pradesh.

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Srei: Administrator admits Rs 22,910 cr claims from banks

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Citing governance concerns and defaults by the two NBFCs in their various payment obligations, the RBI superseded their boards and appointed Sharma, former chief general manager, Bank of Baroda, as the administrator.Citing governance concerns and defaults by the two NBFCs in their various payment obligations, the RBI superseded their boards and appointed Sharma, former chief general manager, Bank of Baroda, as the administrator.

The Reserve Bank of India-appointed administrator has admitted total claims of Rs 22,910.49 crore of commercial banks’ on Srei Infrastructure Finance and its wholly-owned subsidiary Srei Equipment Finance, against the combined amount of Rs 25,115.29 crore claimed by them.

Administrator Rajneesh Sharma has rejected claims of around Rs 1,604.63 crore by the commercial banks, while Rs 601.37 crore is under verification as of November 19.

The Kolkata bench of the National Company Law Tribunal (NCLT) on October 8 gave its approval to start insolvency proceedings against Srei Infrastructure Finance and Srei Equipment Finance after the Reserve Bank of India (RBI) filed insolvency applications against them.

The central bank filed the insolvency petitions just after the Bombay High Court dismissed a writ petition filed by two promoters of Srei group challenging the RBI’s decision to supersede the boards of these companies and initiate insolvency proceedings against them.

The second meeting of the committee of creditors of Srei Equipment Finance was convened and conducted on Monday.

At the meeting, the administrator apprised the committee of creditors of the current status of the Corporate Insolvency Resolution Process (CIRP), the composition of the committee based on the claims received, and the way forward on the resolution strategy — including group resolution and timelines — according to a stock exchange filing by Srei Infrastructure Finance.

On a request made by public sector lender Uco Bank, the RBI had filed applications for initiation of the CIRP under the Insolvency and Bankruptcy Code against the two companies through Sanjay Ginodia, senior partner of R Ginodia & Co.

Citing governance concerns and defaults by the two NBFCs in their various payment obligations, the RBI superseded their boards and appointed Sharma, former chief general manager, Bank of Baroda, as the administrator.

The central bank has also constituted a three-member advisory committee to assist the administrator. The committee members are R Subramaniakumar, former MD & CEO, Indian Overseas Bank; T Srinivasaraghavan, former MD, Sundaram Finance; and Farokh N Subedar, former COO and company secretary, Tata Sons.

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PSB privatisation: New Bill may provide for 26% minimum govt holding

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Presenting the Budget for 2021-22, finance minister Nirmala Sitharaman had announced the privatisation of two PSBs and one general insurer, as part of the Centre’s disinvestment plan to rake in Rs 1.75 lakh crore.Presenting the Budget for 2021-22, finance minister Nirmala Sitharaman had announced the privatisation of two PSBs and one general insurer, as part of the Centre’s disinvestment plan to rake in Rs 1.75 lakh crore.

The Banking Laws (Amendment) Bill, 2021, which will be introduced in the Winter Session of Parliament starting November 29, will likely propose that the minimum government holding in public sector banks (PSBs) be trimmed to 26% from 51%, an official source said.

The move is aimed at facilitating the privatisation of two PSBs, in sync with the announcement in the Budget for 2021-22. On Wednesday, shares of Indian Overseas Bank (IOB) and Central Bank of India rallied, amid speculations that the government had made a decision to privatise these two lenders, as suggested by the Niti Aayog. However, the Centre is yet to formally name the privatisation candidates.

While the draft Bill provides for the lower shareholding, a final call will be taken by the Cabinet, which will clear the Bill before it can be introduced in Parliament, added the source.

“(However) If it’s found, after consultations with investors, that they are not interested unless the government sells its entire stake in the select PSBs, the government is open to consider complete privatisation as well. But initially, it may opt for retaining a 26% stake,” said another source who is privy to discussions.

Analysts fear any government proposal to retain 26% stake in the PSBs may not go down well with potential suitors. For instance, the government was forced to put its entire stake in state-run Air India on the block after its initial plan to hold at least 26% in the national carrier didn’t elicit any response from investors.

The new Bill proposes to “effect amendments in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and incidental amendments to Banking Regulation Act, 1949 in the context of Union Budget announcement 2021 regarding privatisation of two Public Sector Banks”, according to the list of legislative business for the winter session of Parliament.

These laws had led to the nationalisation of banks, so relevant provisions of these laws have to be changed to pave the way for the privatisation.

Presenting the Budget for 2021-22, finance minister Nirmala Sitharaman had announced the privatisation of two PSBs and one general insurer, as part of the Centre’s disinvestment plan to rake in Rs 1.75 lakh crore.

Already, Parliament had in its last session cleared a Bill to facilitate the privatisation of state-run general insurance companies by removing the requirement of the central government to hold at least 51% stake in an insurer.

Niti Aayog has already recommended the sell-off of IOB and Central Bank of India to the core group of secretaries on disinvestment, headed by the Cabinet Secretary. This core group will send its recommendation to the alternative mechanism (AM), headed by the finance minister, for its approval. Finally, it will be cleared by the Cabinet.

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