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<ul><li>Three banks would be most impacted by the move as their capital ratios would be affected by 30-85 basis points.</li><li>Capital buffers will have to be further strengthened by banks if they want to lend to consumers for unsecured loans.</li><li>Borrowers with more than five personal loans rose from 1% in 2018 to 7.7% in March 2023, as per a report.</li></ul> Shares of <keyword id="116253" type="General" weightage="50" keywordseo="sbi-cards" source="Orion">SBI Cards</keyword>, RBL Bank, <keyword id="6357149" type="General" weightage="50" keywordseo="hdfc-bank" source="Orion">HDFC Bank</keyword> and <keyword id="6653" type="General" weightage="50" keywordseo="icici-bank" source="Orion">ICICI Bank</keyword> are expected to come under pressure after the Reserve Bank of India asked lenders on Thursday to set aside more capital for consumer loans. This move is expected to impact the capital buffers of these banks. According to analysts, these banks would be most impacted by the move as their capital ratios would be affected by 30-85 basis points. For banks the first line of defense against bad loans is CET Tier 1 capital or Common Equity Tier 1 capital (CET1), which is the highest quality of regulatory capital, as it absorbs losses immediately when they occur. According to Motilal Oswal Financial Services, the CET 1 impact would be maximum for RBL/HDFC Bank/ICICI Bank at 84 basis points/72 basis points/64 basis points. Among non banks, SBI Cards would be the most vulnerable with a 416bp impact on capital ratios. Capital buffers will have to be further strengthened by banks if they want to lend to consumers for unsecured loans. If a bank had to set aside say ₹20 for loans, it will now have to set aside 25% more for every unsecured loan it issues. Not just this the banks will have to set aside more capital if they want to lend to shadow banks or non banking financial institutions as well. When cost of capital increases, so will lending rates. In the years after the pandemic broke, unsecured personal loans to retail borrowers have been on a steady rise. Not just banks but even non banks have been merrily issuing such loans to borrowers, and in many cases these borrowers have multiple such loans used for consumption. From 12-14% these loans are now growing at 30% rate. The central bank has cracked down on some non banks for not adhering to norms while underwriting such small ticket loans. The red flags have been flying high for a while now. According to proprietary research done by UBS, borrowers with more than five personal loans rose from 1% in 2018 to 7.7% in March 2023. New disbursement of personal loans to borrowers with weaker credit profiles accounted for 22% of disbursements. Of all banks, UBS was of the view that state-owned banks and non banking financial companies had a much higher share of weak borrowers compared to private banks. Analysts believe that pressure on net interest margins and higher credit costs to impact earnings of banks and shadow banks over FY24 and FY25. Paytm, a fintech company, has recently built a large loan portfolio which is mostly comprised of personal loans. With the <keyword id="30067" type="General" weightage="80" keywordseo="rbi" source="Orion">RBI</keyword> cracking down on these loans, the loan growth will be impacted for Paytm too. Deepak Shenoy, CEO of Capital Mind, took to social media to explain the impact, “See how it affects SBI cards: SBI Cards had credit card receivables of ₹ 45,000 crore with 23% capital adequacy ratio (CAR). So ₹10,500 cr in capital (23% of ₹45Kcr). Increase risk weight to 125% means ₹45K cr=₹56K cr risk weighted assets.” Shenoy explains that if “SBI Cards wants to grow, and keep high CARs (min is 15% I think?) they’ll need to raise capital and dilute. Which means for the same profit = higher capital. Means lower ROEs.” ALSO READ: <a href="https://www.businessinsider.in/stock-market/markets/news/foreign-investors-continue-to-bet-big-on-banks-and-nibbling-on-small-and-mid-cap-stocks/articleshow/104462273.cms" data-type="tilCustomLink" target="_blank">Borrowers with multiple personal loans a big risk to profitability of banks and NBFCs</a>

RBI tightens norms on personal loans for banks and NBFCs; stocks to be under pressure

Interest rates on deposits need to go up, say experts, as share of FDs in household financial assets drops

<ul><li><keyword id="6358921" type="General" weightage="80" keywordseo="upi" source="Orion">UPI</keyword> clocked over 19.65 billion transactions in volume and Rs 32.5 lakh crore in terms of value.</li><li>The UPI transactions volume and value almost doubled since last year as it recorded about an 88 per cent increase in Q3.</li><li>The top three UPI apps in terms of volume and value were PhonePe, Google Pay and <keyword id="3236791" type="General" weightage="50" keywordseo="paytm-payments-bank" source="Orion">Paytm Payments Bank</keyword> App.</li></ul> The <keyword id="2736678" type="General" weightage="50" keywordseo="unified-payments-interface" source="Orion">Unified Payments Interface</keyword> (UPI), debit and credit cards, prepaid payment instruments like mobile wallets, and prepaid cards logged 23.06 billion transactions amounting Rs 38.3 lakh crore in the third quarter this year, a new report showed on Monday. At the top, the UPI clocked over 19.65 billion transactions in volume and Rs 32.5 lakh crore in terms of value. The UPI transactions volume and value almost doubled since last year as it recorded about an 88 per cent increase in volume and over 71 per cent increase in value in Q3 as compared to the same quarter last year, according to <keyword id="1925688" type="General" weightage="50" keywordseo="worldline-india" source="Orion">Worldline India</keyword>'s 'Digital Payments Report' for the third quarter. The top three UPI apps in terms of volume and value were PhonePe, Google Pay and Paytm Payments Bank App. The top five remitter Banks were <keyword id="6354731" type="General" weightage="50" keywordseo="state-bank-of-india" source="Orion">State Bank of India</keyword>, <keyword id="6357149" type="General" weightage="50" keywordseo="hdfc-bank" source="Orion">HDFC Bank</keyword>, Bank of Baroda, Union Bank, and ICICI Bank, whereas the top 5 beneficiary banks were Paytm Payments Bank, YES Bank, State Bank of <keyword id="3658" type="General" weightage="50" keywordseo="india" source="Orion">India</keyword>, Axis Bank, and ICICI Bank. UPI person-to-merchant (P2M) and person-to-person (P2P) emerged as the most chosen payment method among consumers, accounting for 42 per cent of total transaction volume. This was followed by credit and debit card payments, which accounted for 7 per cent of volume and 14 per cent of value. "The swift adoption of digital payments can be witnessed with each passing quarter. Popular payment instruments like UPI, cards, PPIs are already clocking over 23 billion transactions in a quarter," said Ramesh Narasimhan, CEO, India, Worldline. Q3 data indicates healthy usage of credit cards and growth in the average ticket size. For credit cards, it is Rs 4,833; for debit cards, it is Rs 2,073; for UPI P2M, it is Rs 738; for UPI, P2P it is 2,576; for prepaid cards, it is 473; and for M-wallet, it is Rs 382. The total transaction between credit cards and debit cards comes to around 65 per cent and the remaining 35 per cent has been shared between UPI P2P, UPI P2M, and prepaid cards, the report showed. As of September 2022, the overall number of POS terminals installed by merchant-acquiring banks had surpassed 7 million. In Q3 2022, POS deployment increased by more than 41 per cent reaching 7.03 million, when compared to the same quarter of the previous year. In the online space, e-commerce (shopping for goods and services), gaming, utility and financial services contributed to over 86 per cent of the transaction in terms of volume and 47 per cent in terms of value. By the end of the third quarter, there were 1.01 billion credit and debit cards in circulation. Credit card volume and value were 725 million and Rs 3.5 lakh crore in Q3 2022, respectively. In the third quarter of 2022, the volume and value of debit card transactions were 907 million and Rs 1.88 lakh crore, respectively, the report said. At least 58.78 million FASTags have been issued till September, with 36 banks. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/kolkata-hyderabad-and-pune-remain-indias-most-affordable-residential-cities-jll/articleshow/96001910.cms">Kolkata, Hyderabad and Pune remain India’s most affordable residential cities: JLL</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/go-after-big-smugglers-sending-mountains-of-illegal-drugs-into-the-country-fm-to-enforcement-agencies/articleshow/96001566.cms">Go after big smugglers sending 'mountains' of illegal drugs into the country: FM to enforcement agencies</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/tech/gadgets/news/upcoming-new-games-in-2023/articleshow/95999256.cms">Top upcoming games in 2023: Here’s what PC, PlayStation, and Xbox users should expect</a>

Digital payments in India touch Rs 38.3 lakh cr at over 23 bn transactions

<ul><li>The Reserve Bank of India (RBI) has proposed limiting the tenure of bank CEOs to no more than than 15 years in a new discussion paper to strengthen private banks.</li><li>HDFC Bank's CEO <keyword id="6406769" type="ORGANIZATION" weightage="20" keywordseo="aditya-puri">Aditya Puri</keyword> is already on the hunt for his successor after a 26-year stint. </li><li>Kotak Mahindra Bank’s CEO <keyword id="45051" type="PERSON" weightage="20" keywordseo="Uday-Kotak">Uday Kotak</keyword> looks like he’s the only one who may get caught on the cross-hairs after already having been at the helm for 17 years.</li></ul>The Reserve Bank of India (RBI) has issued a discussion paper that proposes limited the tenure of promoter-chief executives and even non-promoter CEO. HDFC’s managing director and CEO, Aditya Puri, would have borne the brunt of new proposed regulations had the hunt for his successor not already been in progress. He’s has been at the helm of HDFC for since 1994 — that’s a tenure of 26 years. However, Uday Kotak, the CEO of Kotak Mahindra Bank won’t be able to enjoy the same privilege. Of the top 10 private banks in India, he now has the most to lose. <table style="border-width: initial; border-style: none; width: 468pt; table-layout: fixed;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">CEO </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Date of appointment </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">HDFC Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Aditya Puri </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1994 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Kotak Mahindra Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Uday Kotak </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Feb 2003 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Federal Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Shyan Srinivasan </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Sep 2010 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">South Indian Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">VG Mathew </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Oct 2014 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">ICICI Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Sandeep Bakhshi </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Oct 2018 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">J&amp;K Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">RK Chhibber </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Jun 2019 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Axis Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Amitabh Chaudhary </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Jan 2019 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Yes Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Prashant Kumar </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Mar 2020 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">IndusInd Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Sumant Kathpalia </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Mar 2020 </td></tr></tbody></table> In its paper, the RBI suggests that the tenure of promoter CEOs should be limited to 10 years. Non-promoter CEOs should also only be allowed to stay on for no more than 15 years. Once the tenure is over, the RBI has given leeway for around two years allowing banks to appoint a successor — once the rules are finalised. “To build a robust culture of sound governance practice, professional management of banks and to adopt the principle of separating ownership from management, it is desirable to limit the tenure of the WTDs or CEOs,” RBI said in the discussion paper. If CEOs want to return to the helm, they will have to wait it out for three years before they can be reappointed. What does this mean for Uday Kotak? Uday Kotak, who has been Kotak Mahindra Bank’s executive vice-chairman and managing director since its inception in 2003-04, was re-designated as managing director and CEO in May 2018. That culminates in a total of 17 years that Uday Kotak leading the bank. If RBI’s new guidelines come into effect, Kotak may get another two years to name his successor. The brokerage firm Jefferies believes the most likely candidate for the position is Dipak Gupta, the current joint managing director. Uday Kotak has been in the midst of another stalemate with RBI to bring his stake in the bank down to 26%. Earlier in June, he sold off 56 million shares through a block deal, bringing his promoter stake down to 26.1% ⁠— after <a href="https://www.businessinsider.in/business/news/uday-kotak-to-sell-2-83-stake-in-kotak-mahindra-bank-sale-to-fetch-over-rs-6800-cr/articleshow/76141837.cms">multiple extensions</a> to the initial December 2018 deadline set by the RBI. However, he still has to trim around 0.1% in order to comply with RBI’s guidelines. RBI’s new regulations come after controversies led by Yes Bank, the Bank of Rajasthan and other promoter-sponsored banks have faced trouble in the recent past. Limiting the tenure of promoter-chief executives could be its way of safeguarding the interests of financial institutions. SEE ALSO: <a href="https://www.businessinsider.in/business/corporates/news/tcs-infosys-hcl-tech-and-tech-mahindra-to-gain-from-amazon-google-and-microsoft-spending-more-on-technology/articleshow/76334123.cms">TCS, Infosys, HCL Tech and others will gain from Microsoft, Amazon and Google spending more on technology</a> <a href="https://www.businessinsider.in/personal-finance/news/savings-rates-in-banks-offer-higher-returns-than-fds-as-banks-continue-to-slash-fd-interest-rates/articleshow/76282346.cms">Keeping your money in a savings account will fetch you more interest than locking it up in a fixed deposit</a> <a href="https://www.businessinsider.in/stock-market/markets/news/indusind-icici-bank-hdfc-bank-and-sbi-among-top-10-losers-in-nifty-bank/articleshow/75805726.cms">From IndusInd to ICICI Bank to SBI ⁠— banks were among the worst-hit despite the government pause on new bad loans</a>

HDFC Bank is already looking for a new CEO, but RBI's proposed limit to tenure is a threat to Uday Kotak

<ul><li><keyword id="6357149" type="COMPANY" weightage="20" keywordseo="hdfc-bank">HDFC Bank</keyword> on Saturday said its board has finalised three candidates, in order of preference, to succeed CEO and MD Aditya Puri, but did not disclose the names, saying they will be communicated to the <keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword>. </li><li>Puri has been the head of the lender since its incorporation 25 years ago.</li><li>A media report in the run up to the board meet had mentioned the names of Sashidhar Jagdishan, Kaizad Bharucha and Sunil Garg as the ones who had made the cut.</li></ul>HDFC Bank on Saturday said its board has finalised three candidates, in order of preference, to succeed CEO and MD Aditya Puri, but did not disclose the names, saying they will be communicated to the RBI. Puri has been the head of the lender since its incorporation 25 years ago and has led it to be the largest and most valuable bank, on the back of a strict hold over asset quality. It is one of the most coveted jobs in the Indian banking sector and market watchers are keenly awaiting who will be the chosen appointee. The HDFC Bank board had appointed a search committee and also engaged external headhunters to help it zero in on a candidate. "The Board of Directors of the Bank has today (Saturday) finalised the names of three candidates, in the order of preference, for the position of the managing director and chief executive officer (MD &amp; CEO) of the bank," the bank informed the bourses in a statutory filing. It did not elaborate on who the three were. A media report in the run up to the board meet had mentioned the names of Sashidhar Jagdishan, Kaizad Bharucha and Sunil Garg as the ones who had made the cut. Jagdishan and Bharucha are internal candidates, while Garg is working with American banking major Citigroup. Garg is the chief executive of Citi Commercial Bank, while Jagdishan is an additional director who heads the finance, human resources, legal and secretarial functions at HDFC Bank, and Bharucha is an executive director responsible for wholesale banking. Earlier this month, the Reserve Bank had asked for the appointments of both Jagdishan and Bharucha to be kept in abeyance, asking for the new chief executive to take a call on it. Puri had recently told reporters that his successor will be announced before April. "...the recommendations are with the search committee and before April, an appropriate person who will take the bank into the future will be announced," he had told reporters over a conference call last month.

You Searched For "HDFC Bank CEO" and got 5 results

RBI tightens norms on personal loans for banks and NBFCs; stocks to be under pressure

Malini Bhupta

Interest rates on deposits need to go up, say experts, as share of FDs in household financial assets drops

Rounak Jain

Digital payments in India touch Rs 38.3 lakh cr at over 23 bn transactions

IANS

HDFC Bank is already looking for a new CEO, but RBI's proposed limit to tenure is a threat to Uday Kotak

Prabhjote Gill

HDFC Bank board shortlists 3 preferences to succeed Aditya Puri, waits for RBI nod

PTI

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