Banking sector wrap: Jaitley promises help to banks; P2P Creditors to be NBFCs


Customers would be delighted to know that banks are sprucing up their festive offers to give discounts on loansand waive off charges to avail loans in the Diwali season.

Corporates, on the other hand, would be welcoming banking regulator RBI’s decision to categorise masala bonds — rupee-denominated bonds issued abroad — as a part of external commercial borrowings rather than the total limit of corporate bonds, as was the case earlier.

The move is intended to let about Rs 44,000 crore more money under corporate debt. In consequence, the quantity pertaining to these bonds could be allocated to investors, and it would essentially increase the corporate bond investment limit to foreigners.

The issuance of these bonds abroad will now be within the aggregate present limit of Rs 2.44 lakh crore for foreign investment in corporate debt.

Jaitley to lend helping hands to banks

Finance Minister Jaitley said the government will take steps to find sufficient resources to encourage debt-laden banks in order to assist them participate in India’s economic development.

Gadkari also pulled banks up for delaying funding to street projects and ensured that banks shouldn’t fear further bad loans in the sector as all delayed jobs from the previous government’s regime are kick-started again.

Banks Prepared to lend

But a day later, bankers said that they are willing to finance the selective hybrid annuity mode (HAM) street jobs but are skeptical about the toll-operate models even as they grapple with large non-performing assets (NPAs) in the sector.

On Wednesday, bankers to the financially troubled Air India matched government officials including the aviation minister and the ministerial team to decide the fate of further loans to the financially-troubled national air carrier.

Although the details of the meeting are yet to be confirmed, banks may look at giving additional funding to support the government’s efforts to revive Air India.

The Reserve Bank of India (RBI) will treat all peer-to-peer lending (P2P) platforms as non-banking financial companies (NBFCs), the government said in a gazette notification on Wednesday. The RBI will soon release the final guidelines for P2P lenders.

Read here to understand what P2P lending is and why RBI wants to govern it.

To tighten cyber security in the country, the government is working to come up with cyber security standards for mobile devices and a regulation to undertake ransomware, according to Ajay Kumar, Additional Secretary in the Ministry of Electronics and Information Technology (MeitY).

Payments banks, the newest entrants in the country’s banking sector, are facing an issue that hinders the purpose for which they had been made — easing transactions for customers. Players in the obligations bank room state they are more like “restricted banks” as the challenge is to get customers to transact.

Opening upon the challenges in the sector, the CEOs of the four active payments banks said they will need to focus on growing scale till they generate earnings.


With the microfinance sector being the most coveted space among creditors throughout the last few decades, Ratna Vishwanathan, CEO, Microfinance Institutions Network (MFIN), a self-regulatory body for microfinance institutions, said the sector requires more structural changes in order to lower risk.

MFIN also released a Mutually Agreed Code of Conduct (MACC) stating that MFIs will not lend more than Rs 60,000 per customer and the number of lenders will likely be restricted to three beneath the Joint Liability Group model.


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