JPMorgan Chase & Co today said it has received Reserve Bank’s approval to open three more branches in the country.
The bank will open new branches at New Delhi, Devanahalli (near Bengaluru) and Paranur (near Chennai) in the next few months, it said in a statement.
“We are seeing an increasing level of cross-location and cross-border activity among our clients as they capture business opportunities driven by the country’s economic growth.
These branches will further enhance our capability to better serve our clients in India and overseas,” JPMorgan Chase Bank India MD and CEO Madhav Kalyan said.
JPMorgan will provide all existing products and services through these new branches, including cash management, trade finance and foreign-currency payments.
At present, the bank serves its clients from Mumbai branch.
“Our strategy is to follow our clients’ priorities. The expansion endorses our long-term commitment to India, a key market for JPMorgan, as well as for many of our clients,” JPMorgan South & South East Asia CEO Kalpana Morparia said.
India will maintain its growth rate of 7.6 per cent GDP growth in 2016-17, which would accelerate to 7.7 per cent in 2017-18 and 7.8 per cent in 2018-19, the World Bank said on Monday.
But for this, India will need to “activate the stalled engines”, including agricultural growth and rural demand, trade and private investment, while ensuring demand from urban households and public investments.
In its report ‘India Development Update- Financing Double Digit Growth’, the World Bank said the economy’s potential growth rate is about 7.4 per cent to 7.5 per cent.
“The outlook for the coming year is favourable and robust,” said Frederico Gil Sander, Senior Country Economist, World Bank, and main author of the report.
The report, also prescribed means for India to attain the elusive double-digit growth. This would depend on various factors, including higher participation of women in the labour force, productivity growth such as business environment reform agenda and GST as well as a pick-up in private investment.
The World Bank’s forecast is however, not as optimistic as the Finance Ministry that is eyeing 8 per cent growth this fiscal after 7.6 per cent growth last fiscal.
However, Onno Ruhl, Country Director, World Bank (India), said improved global prospects would also be necessary for double-digit growth in the domestic economy.
The report also warned that near-and medium-term risks stem from the banking sector and “its ability to finance private investment which continues to face several impediments in the form of excess global capacity, regulatory and policy challenges, in addition to corporate debt overhang”.
It has also suggested two key reforms in the financial sector — accelerating the ongoing transformation of banks to become more market oriented and competitive; and also to address the problem of non-performing assets (NPAs).
“India’s financial sector has performed well on many dimensions and can be a reliable pillar of future economic growth,” said Sander.
RBI top-level changes
While urging for more reforms in the banking sector such as giving fresh capital to banks for governance reforms or giving them tools to manage stress in their balance sheets, the World Bank declined to comment on the impact the top-level change at the Reserve Bank of India (RBI) will have on these measures.
“We respect the RBI Governor’s decision to return to academia. India has a long history of sound macro-economic policy making and effective and conservative supervisor. There is no reason to expect that it will change,” said Ruhl when asked whether the decision by RBI Governor Raghuram Rajan to not seek a second term would impact banking reforms.
HDFC Bank, the country’s second largest private sector lender, has launched a digital bank for its small and medium enterprises (SME) customers. It aims to grow its market share in the hinterlands with this.
“It takes away the hassle of physical availability of a relationship manager and makes banking process faster. We expect this service to take off in a much better way in smaller towns and the hinterlands, as it will save time and manpower. It will help people live in the areas where there is no bank branch close to their home,” said Aseem Dhru, head, business banking. This comes at a time when the bank, traditionally known for its retail (individual) offerings, has started focusing on growing its corporate book. With this, the bank has managed to cross the Rs 1-lakh-crore mark in its corporate book for the first time in FY16, more than double the Rs 47,000 crore three years ago. However, on the business banking side, the bank had seen some pressure on asset quality and had checked the growth in the last few quarters. Dhru said despite this, the bank has been growing its business banking book at a faster pace than its peers.
“At the end of December 2015, lending to SME sector has seen de-growth by five per cent but HDFC Bank has grown its SME lending by 29 per cent. So, we are very bullish on this segment and looking at increasingly reaching out to rural and semi-urban areas in a big way.”
With credit growth in the corporate sector around single digits annually, banks had reduced lending to the the sector because of their dependency on large companies for payments.
However, bankers say SME players have started reducing concentration risk by focusing on only a few corporate players and have been broad-basing their growth , giving the banks the ability to lend to them more comfortably.
National Bank of Abu Dhabi (NBAD) PJSC and First Gulf Bank (FGB) PJSC said they’re in talks to merge in a deal that would create the largest lender by assets in West Asia.
A working group of senior executives from each bank is reviewing the commercial, structural and legal aspects of a potential transaction, according to a filing to the Abu Dhabi stock exchange on Sunday. Bloomberg News was first to report the two banks were considering a potential merger on June 16.
A deal would create a lender with assets of about $170 billion and mark the first major banking merger in the United Arab Emirates’ since National Bank of Dubai and Emirates Bank International combined to create Emirates NBD PJSC in 2007. The country’s fragmented banking industry is ready for further consolidation and a deal could prompt further mergers among lenders, according to investment bank EFG-Hermes Holding SAE.
“There’s no doubt it will lead to synergies and would give them a competitive edge, considering there are more than 40 banks in the UAE,” Chiradeep Ghosh, a banks’ analyst at Securities & Investment Co in Bahrain, said by phone on Sunday. “The combined entity will have a bigger equity book. That will help them to lend to larger entities and take up a greater share of the syndicated loan book.”
First Gulf Bank could pay a premium of as much as 14 per cent to buy National Bank of Abu Dhabi, Arqaam Capital Ltd said in a note to investors on Thursday. NBAD shares surged 15 per cent on Sunday, the maximum allowed in a day, to 9.2 dirhams as of 10:52 am local time. First Gulf Bank also soared, rising 7.8 per cent to 12.7 dirhams. NBAD is the UAE’s second-biggest bank by assets, while FGB is third-ranked.
A combination would help them overtake Emirates NBD as the country’s largest lender and represent nearly a quarter of the system’s loans and deposits, according to EFG-Hermes.
The UAE is home to about 9 million people and has about 50 banks, including the local units of Citigroup Inc, HSBC Holdings Plc and Standard Chartered Plc. Both NBAD and FGB have pushed to expand in other countries to beat the limitations of a small home market and build investment banking businesses to compete with bigger foreign rivals.
NBAD was the fifth-biggest arranger of syndicated loans in the six-nation Gulf Cooperation Council last year, while FGB ranked seventh, according to data compiled by Bloomberg. NBAD was also the second-largest arranger of bonds and sukuk sales last year.
The league tables are dominated by foreign lenders including HSBC Holdings Plc, Citigroup Inc and Sumitomo Mitsui.
NBAD, with a market value of about $11.3 billion at the end of Thursday, is 69 per cent owned by sovereign wealth fund Abu Dhabi Investment Council. State-owned investment fund Mubadala Development is the biggest shareholder in FGB, whose market capitalization is $14.4 billion, according to data compiled by Bloomberg.
The news “was a surprise considering, they have a very contrasting style of management and business strategy,” Ghosh at SICO said. “One is a public-sector focused bank, while FGB is an aggressive private sector bank, with reasonable focus in consumer lending. FGB primarily operates within the UAE, while NBAD is looking to expand outside the UAE.”
In order to make the registration process of new non-banking finance companies smoother and hassle-free, the Reserve Bank of India has revised the application form for registration of these companies and the checklist of documents to be submitted.
The number of documents to be submitted by NBFC applicants has been reduced from the existing set of 45 documents to seven to eight in the revised process, the central bank said in a statement.
The RBI said henceforth there would be two different types of applications for non-deposit taking NBFCs (NBFC-ND) based on sources of funds and customer interface.
The first type (Type-I) will be a NBFC-ND not accepting public funds/ not intending to accept public funds in the future and not having customer interface/ not intending to have customer interface in the future.
“Public funds” include funds raised either directly or indirectly through public deposits, commercial paper, debentures, inter-corporate deposits and bank finance but excludes funds raised through issue of instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue.
“Customer interface” means interaction between the NBFC and its customers while carrying on its business.
The second type (Type-II) will be NBFC-ND accepting public funds/ intending to accept public funds in the future and/or having customer interface/intending to have customer interface in the future
Fast track mode
The RBI said processing of cases for Type-I of NBFC-ND applicants would be on fast track mode. As these companies will not have access to public funds and will not have customer interface, they will be subjected to less intensive scrutiny/ due diligence.
However, the certificate of registration issued to Type I – NBFC-ND companies will be conditional. These companies will be prohibited from accessing public funds and having customer interface, the RBI said.
In case Type-I companies intend to avail public funds or intend to have customer interface in the future, they are required to take approval from the Reserve Bank of India, Department of Non-Banking Regulation.
US-based Amazon on Friday said it had witnessed a 250 per cent year-on-year growth in bringing new sellers on board, as it looks to tap into the booming e-commerce market in India.
The company, which is making multi-billion dollar investments in India, has about 85,000 sellers on board.
“We started with 100 sellers three years ago and now we have about 85,000 sellers growing at 250 per cent year-on-year and adding nearly 90,000 products a day,” an Amazon India spokesperson stated.
Amazon, which competes with the likes of Flipkart and Snapdeal, has cut its commissions by 25-30 per cent across categories such as mobile phones, PCs, electronic devices and personal care appliances.
“We think these revised rates can significantly help sellers to perform even better and succeed in their business. In addition, we continue to innovate and offer best in class services such as Fulfilment by Amazon, Easy Ship, Seller Flex, etc, to help them with fulfilment/logistics, so that they can focus on their business,” the Amazon spokesperson said.
Flipkart, on the contrary, had recently increased its commissions across key segments and asked sellers to bear the costs of logistics in case of returns.
Recently, Amazon Chief Executive Officer Jeff Bezos had said the company will invest $3 billion in India. This is in addition to the American e-commerce giant’s $2-billion infusion in 2014, taking its total investments here to over $5 billion.
The funds will be channelled towards enhancing customer and seller experience, Amazon India managing director Amit Agarwal had told PTI.
“India is a key market for Amazon and we will work towards continuing to reduce operating costs for sellers backed by good logistics and fulfilment capabilities,” he had added.
China’s total borrowings were more than double its gross domestic product (GDP) last year, a government economist said, warning that debt linkages between the state and industry could be “fatal” for the world’s second largest economy.
The country’s debt has ballooned as Beijing has made getting credit cheap and easy in an effort to stimulate slowing growth, unleashing a massive debt-fuelled spending binge.
While the stimulus may help the country post better growth numbers in the near term, analysts say the rebound might be short-lived.
China’s borrowings hit 168.48 trillion yuan ($25.6 trillion) at the end of last year, equivalent to 249 per cent of the economy’s GDP, Li Yang, a senior researcher with a top government think tank, the China Academy of Social Sciences (CASS), told reporters yesterday.
The number, while enormous, is still lower than some outside estimates.
Consulting firm the McKinsey Group has said that the country’s total debt was likely as high as $28 trillion by mid-2014.
CASS, in a report last year, said China’s debt amounted to 150.03 trillion yuan at the end of 2014, according to previous Chinese media reports.
The most worrying risks lie in the non-financial corporate sector, where the debt-to-GDP ratio was estimated at 156 per cent, including liabilities of local government financing vehicles, Li said.
Many of the companies in question are state-owned firms that borrowed heavily from government-backed banks and so problems with the sector could ultimately trigger “systemic risks” in the economy, he said.
DRAGON IN TROUBLE
China’s borrowings hit ¥168 trn ($25.6 trn) at the end of last year, equivalent to 249% of the economy’s GDP
McKinsey Group said country’s total debt as high as $28 trn by mid-2014
Most worrying risks lie in the non-financial corporate sector, where the debt-to-GDP ratio was estimated at 156%
Problem will also affect state coffers because Chinese banks are “closely linked to the government”
The People’s Bank of China has announced that new loans extended by banks jumped to ¥985.5 bn last month, up from ¥555.6 bn in April
“The gravity of China’s non-financial corporate (debt) is that if problems occur with it, China’s financial system will have problems immediately,” Li said. He added that the problem will also affect state coffers because Chinese banks are “closely linked to the government”.
“It’s a fatal issue in China. Because of such a link, it is probably more urgent for China than other countries to resolve the debt problem,” he said.
Speaking earlier this week, David Lipton, first deputy managing director with the International Monetary Fund, also singled out China’s corporate borrowing as a major concern, warning that addressing the issue is “imperative to avoid serious problems down the road”.
Despite the concerns, China is having difficulty kicking its credit addiction. On Wednesday, the People’s Bank of China announced that new loans extended by banks jumped to 985.5 billion yuan last month, up from 555.6 billion yuan in April.
JPMorgan Chase & Co today said it has received Reserve Bank’s approval to open three more branches in the country.
