Showing posts with label New RBI Governor Raghuram Rajan. Show all posts
Showing posts with label New RBI Governor Raghuram Rajan. Show all posts

Friday, September 12, 2014

Card payment network RuPay sees boost from government banking scheme



A government drive to expand banking services in India is giving a boost to home-grown card payment network RuPay, which expects to quadruple the number of users by March and make debit cards more acceptable in a nation where cash is still king.

Started in 2012 by a company owned by 10 local and foreign banks, RuPay competes with global payment firms Visa Inc and MasterCard Inc for the few customers in Asia's third largest economy able to afford a debit or credit card.

As of July, banks issued just under 435 million payment cards in India, a nation of 1.3 billion people. Most were debit cards.

RuPay's share of daily card transactions, however, remains small compared with the global firms, which are more established, offer both debit and credit cards and are accepted by more retailers. RuPay currently offers only debit cards.

RuPay users account for just 1.5 percent of daily card transactions of almost one million at retailers, said A.P. Hota, chief executive of the National Payments Corp of India (NPCI), which runs RuPay.

Hota told Reuters the payments network was set to grow rapidly from the government's so-called financial inclusion scheme, which aims to ensure the majority of households has a bank account within months.

Under the scheme launched late in August, Indians who open a bank account for the first time automatically get a RuPay card.

Hota said the number of RuPay users has now almost doubled  from 23 million at the end of July.

By March next year, he expects that number to rise to 160 million, with more than 60 percent of the increase coming from the government scheme.

"Jan Dhan itself would provide a big opportunity for the domestic card brand to be a formidable force," said Hota, referring to the financial inclusion scheme, Jan Dhan Yojana, which means People's Wealth Scheme.

"(RuPay Card transactions are) just a drop in the ocean at the moment. But drop by drop we are increasing our size."

NPCI is also trying to lure more customers by charging banks lower fees than Visa and MasterCard, Hota added.

Visa, the world's largest credit and debit card company, declined to give its India market share, but said the country was amongst the world's fastest-growing payments markets.

"We believe Visa is well-positioned competitively," Uttam Nayak, group country manager of India and South Asia, at Visa, said in emailed comments, adding his company welcomed competition.

MasterCard did not reply to Reuters' requests seeking comment.

NPCI's shareholders include India's biggest bank, the State Bank of IndiaBSE 0.93 %, and foreign lenders Citibank and HSBC. The central bank has a nominee on its board.

The organisation plans to launch RuPay cards that will be accepted overseas through a partnership with Discover Financial Services, Hota said, and is also in talks with Japanese card network JCB about a partnership.

RuPay had aimed to issue credit cards by March 2015, but those plans have now been delayed by the government scheme, Hota said. "Rural acceptance of the Jan Dhan cards will be our priority," he added.

Wednesday, September 4, 2013

New RBI Governor Raghuram Rajan unveils big initial package, promises more

 

New RBI Governor Raghuram Rajan on Wednesday came out with a slew of measures, including more trade settlement in rupees to rescue the battered financial markets and hinted at a shift in focus from inflation control, doggedly pursued by his predecessor, to boosting growth.

Shortly after he took over as the 23rd Governor of the central bank, Rajan, 50, addressed the media with a prepared statement in which he laid out a detailed road map for his innings in the short term, which he called a "big initial package."

He also rescheduled by a few days the date for his much- anticipated first monetary policy statement to September 20. The new Governor set up a number of committees for revising and strengthening monetary policy framework, financial stability, financial inclusion, NPAs and an outside panel of experts headed by former Governor Bimal Jalan to screen applications for new bank licenses. Rajan said the new bank licences will be issued around January next year.

Apparently reflecting a shift in the approach from his predecessor D Subbarao, who had serious differences with the government of late, Rajan said the primary role of the bank is monetary stability to sustain confidence in the value of the rupee.

"Ultimately, this means low and stable expectations of inflation, whether that inflation stems from domestic sources or from changes in the value of the currency, from supply constraints or demand pressures.
"...but we have two other important mandates; inclusive growth and development, as well as financial stability," he said.



Asked about Subbarao's focus on targeting inflation, Rajan said he would reserve his comments till September 20. Rajan said the bunch of reforms has been unveiled today to enhance growth.
"I think there are so many low-hanging fruits in the economy that if we only pluck them we can accelerate growth substantially." The former IMF chief economist and economic advisor to the Finance Ministry said there were some positive developments in the economy which will help to boost growth.

The measures disclosed to support the rupee include liberalisation of the financial market by enhancing the limits for exporters to re-book cancelled forward exchange contracts and opening a special concessional window for swapping foreign currency non-resident (FCNR) deposits and dollar funds. "My sense is that we certainly don't need false optimism. But I think there is good reason to believe that in the medium run, the future of the country is strong," he said.

Asked about Standard and Poor's downgrade threat, he said the international rating agency "nearly reiterated what has been its long standing claim about there being one-third possibility of a rating downgrade...it is not something new. So I won't read too much into the statement."

The measures announced by Rajan include enhancing the re-booking limit on cancelled forward exchange contracts for exporters to 50 per cent, extending a similar facility to importers and introducing cash settlement in 10-year interest rate future contracts to develop the money and G-sec markets.
Rajan indicated the RBI will take steps to reduce the Statutory Liquidity Ratio (SLR) and introduce greater regulatory and supervisory control over the domestic operations of foreign banks. He promised to give freedom to banks to open branches without prior RBI permission.

The new RBI chief also said he will steadily liberalise the markets and lift restrictions on investment and position-taking, together with Sebi, and will examine introduction of interest rate futures on overnight interest rates.









While the RBI has enhanced the re-booking limit on cancelled forward currency contracts to 50 per cent for exporters, importers will be allowed a 25 per cent limit.The central bank will push for more trade settlements in rupees and open up the financial markets for those who receive rupees to invest it back in.

Rajan said the RBI will raise the overseas borrowing limit of 50 percent of unimpaired Tier I capital to 100 per cent for banks and will introduce cash-settled 10-year interest rate future contracts.
The central bank will also examine introduction of interest rate futures on overnight interest rates; steadily but surely liberalise markets, restrictions on investments and position-taking; and issue inflation-indexed savings certificates tied to CPI to retail investors by end November.

He stressed on the need to reduce the requirement for banks to invest in government securities in a calibrated way and will push foreign banks to set up wholly owned subsidiaries.
Rajan proposes to collect credit data, examine large common exposures among banks and encourage banks to clean up their balance sheets.

Referring to the announcements, he said, "This is a part of my short-term time-table for the Reserve Bank. It involves considerable change, and change is risky. But as India develops, not changing is even riskier. We have to keep what is good about our system, of which there is a tremendous amount, even while acting differently where warranted."

He also announced a committee headed by RBI Deputy Governor Urjit Patel to strengthen monetary policy framework. The panel will submit its report in three months.




Rajan said that a committee under former Governor Bimal Jalan would screen bank license applicants after an initial compilation of applications by the RBI staff.

He said new bank licences will be announced "within, or soon after, the term of Deputy Governor Anand Sinha, who has been shepherding the process. His term expires in January 2014."
Financial sector expert Nachiket Mor will head a panel to suggest steps to promote financial inclusion. Another committee, to be headed by Deputy Governor K C Chakrabarty, will take a close look at rising NPAs and suggest steps to improve the recovery of bad debts.

"While the resumption of stalled projects and stronger growth will alleviate some of the banking system difficulties, we will encourage banks to clean up their balance sheets and commit to a capital-raising program where necessary. The bad loan problem is not alarming yet, but it will only fester and grow if left unaddressed," Rajan said.

Stressing that India is a fundamentally sound economy with a bright future, the new RBI chief said, "Our task today is to build a bridge to the future, over the stormy waves produced by global financial markets. I have every confidence we will succeed in doing that."