Moody’s Confidence on the Indian Bank rises

By Shivam Saklani

Global credit rating agency “Moody’s Investor Service” recently changed its reviews about 3 Indian banks namely, “Bank of India”, “Union Bank”, “Oriental Bank of Commerce”.

Moody’s changed its rating from “negative” to “stable” for these banks. Moody has also affirmed the standalone credit profiles or baselines credit assessments at “ba3”.

The government’s 2.1 lakh crore recapitalization (about which an article has also been published, a couple of weeks ago is being seen as a major role player for this change.

The revision in ratings reflect Moody’s view that the government’s capital infusion plan alleviates some of the downside risks to their BCA or Baseline Credit Assessment, which is a part of bank rating methodology and ratings.

Meanwhile, the ratings agency has affirmed the Baa3/P-3 local and foreign currency bank deposit rating of the 3 Indian PSB. Furthermore Moody believes that the   additional capital will help banks take accelerated provisioning for their problem assets, which will in turn improve their capacity to haircut on those assets, in a resolution process. It also expects that some banks, now will be able to raise capital from equity markets which will support capitalization profiles.

UPI crosses 70 million transactions in October

By Aashi Sehrawat

Unified Payments Interface (UPI) is an instant real-time payment system developed by National Payments Corporation of India facilitating inter-bank transactions. The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.

UPI has shown a more than 100% growth for the month of October against September of this year. As per the data shared by NPCI on its website, it showed 76.9 million transactions against 30.9 million as compare to last month. If considered in terms of amount transferred through UPI, it has experienced a gain of 32.5%, that is from Rs. 5325 crore (last year) to Rs. 7057 crore. 

UPI has emerged as the major game changer in the digital payments space after demonetisation has shown rapid growth with the entry of brands like Google, Truecaller into the UPI based payments space. 

Various updates relating to the UPI are as follows: 

San Francisco basedtaxi hailing firm, Uber integrated with payment option Unified Payments Interface (UPI) in August’17

Airtel now has UPI as its payment system available for its customers.   Airtel Payments Bank UPI can facilitate instant fund transfers between two bank accounts on the mobile platform without asking for the beneficiary’s account details. 

Even the government launched its own application BHIM (Bharat Interface for Money) to work on the UPI platform. Also in partnership with NPCI, around 57 banks have gone live on UPI developing their own UPI apps. 

Since the beginning of the financial year, UPI transaction volume rose 380% to 77 million in October from 3.8 million in April this year, mainly driven by BHIM and Flipkart’s payment arm PhonePe. Also with the addition of Google’s Tez payment application there has been a significant jump in P2P payments on the UPI platform. 

Modification in GSTN for simplification of the system

By Aarushi Singh

Goods and Service Tax Network (GSTN) is a unique IT initiative which has established a uniform interface for the tax payer and a common IT infrastructure shared between the Centre and the State government.

But the feedback for this system has not been positive since the system was modulated to make the process of tax collection easy and efficient instead it is being criticized for its complexities. Therefore, the government has considered a proposal to improve the way tax payers file for GST returns Amendment in the existing system is expected according to the varying requirements of the taxpayer which will simplify the whole process.

Ajay Bhushan Pandey, recently appointed chairman of the GSTN said instead of having a standard format for everyone we will modify the system in such a way that users can be asked a few questions on signing in and then the best suited form can be displayed for his purpose. Therefore the user will only see relevant portions which are of his interest.

The ultimate aim of this system is that small tax payers can file returns without assistance from outside.

The Pepsi Co. fiasco

By Shivam Saklani

What would a good top level manager of a firm, which sells sin goods, do, if suddenly, the society around him starts turning more health conscious?

These crucial situations expect a firm decisional role from the manager.

“Pepsi Co. India”, a fully owned subsidiary of New York based Pepsi Co INC. faced, or more appropriately, is still facing a similar kind of a problem. The society is indeed growing more health conscious, although the revenues from carbonated soft drinks are increasing but their growth rate is in lower single digits.

Henry Mintzberg , defined 4 decisional roles which are generally practiced by a manager. One of which is, “Resource Allocator”, the management of the PepsiCo India, assumed this role, wherein the company focused on the changing trends in the society, and decided that the company would now focus more on Hydration and juice and wellness subsidiaries, as the growth of the hydration segment, is in double digits while juices segments witness a growth of lower double digits.

Major chunk of the resources would now be diverted to the “Aquafina” & “Tropicana”, adding several products in their arsenal, Pepsi has already launched “Aquafina Vitamin” in kiwi and raspberry flavor.

A qualitative decision making technique, “Experimentation” has been exemplarily displayed by the firm, as Mr. Vipul Prakash, senior vice president, PepsiCo India, said, ”Pepsi would also try to reduce calories in its drinks. A target of keeping only 100 calories in every 355ml is expected to be achieved by 2025. Pepsi has launched 7up, with reduced sugar (up to 30%) in Gujarat. The pilot project has been a success and similar projects are being tried on Mirinda and Mountain Dew”. Pepsi, in some years would also be expected to venture into dairy business.

The decisions taken by PepsiCo, although classical and simultaneously, brave, aren’t purely objective, as they are gambling on the future market behavior with the current data. The move of altering the sugar content would (in my expectations) change the taste of the products which would definitely affect the revenue as well as the stock prices of the firm. It would still be very interesting to see how this decision of the beverage giant turns up. 

Government plans stricter consumer protection laws to empower the consumers

By Ridhima Malhotra

PM Narendra Modi on Thursday said that the government is working on a new consumer protection act to empower consumers and enforce stricter guidelines on misleading advertisements. The new consumer protection act will ensure that the grievances are addressed in a time-bound and cost effective manner.

Speaking at the inauguration of a two day international conference for consumer protection, PM Modi spoke at length about the GST Law and said that it would be beneficial for the consumers. He stated that GST would help the prices to come down because of tough competition amongst the manufacturers. He also focused on the importance of protecting the consumer interests.

This new law will replace the Consumer Protection Act 1986, and will instead incorporate the revised 2015 UN guidelines on consumer protection. The law comes at a time when the government is initiating overhauls in several sectors. The Government had recently enacted a new Real Estate (Regulation and Development) Act to protect home buyers interest. The RERA legislation would protect buyers from builder’s monopoly.

The law comes as a welcome move at a time when many believe that the existing consumer law is riddled with loopholes. With the dwindling consumer confidence, the revised law certainly attains significance. Experts have also suggested that the new consumer protection act will safeguard the customer’s rights and will help them save money by initiating favourable measures. What remains to be seen is if it will succeed at the implementation level.

Government to inject ₹2.11 trillion in India’s State-run Banks

By Shweta Arya

India’s banks received a significant boost with the Union government deciding to inject approximately ₹2.11 lakh crore worth of capital into the banking sector. Capital injection is an investment of capital into a company or institution, generally in the form of cash, equity or debt. The word "injection" denotes that the company or institution into which capital is being invested may be in financial distress. This step will help in putting Indian banks on the path to recovery from a buildup of bad loans.

When banks lend money, their loans count as an asset, since they will receive interest from the borrower and expect to have the original amount paid back in full. A loan becomes a non-performing asset, i.e. a bad loan, when the borrower defaults on the repayment for more than nine months. When a bank writes off NPAs, its capital is likely to be eroded and limits its ability to lend further. This has made it hard for banks to offer more credit or attract investment, even as the economy struggles to get back on track.

Soured debt is now the highest since 2000, hampering credit expansion that’s needed to spur our economy.

By capital injection, the government is trying to partially improve the balance sheets of public sector banks. This will also help banks write off some of the ₹10-lakh crore bad loans currently on their books. The government is hoping to do this primarily through recapitalization bonds, which will also make it easier to divest their shares. Further, there is an assumption that the recapitalization will help the banks improve their business, leading to higher profits. Estimates suggest that the public banks would require about ₹2.3 lakh crore of capital if they are to fulfil the requirements.

While banking analysts agree that putting more capital into stressed banks is a positive thing, nobody is sure exactly how much good it will do until a fine print of the whole process is available.

Multiple Investors: Need of the hour for OLA

By Shivam Saklani

A big day indeed, for Bhavish Aggarwal, but even a bigger conundrum, when he was offered $1 billion for his ride hailing company, OLA, by Japan’s Soft bank. This offer was made by Softbank, at the time when it was mired in a fierce battle for supremacy with world’s most valuable startup, Uber.

The offer, although lucrative, was still not accepted in its original form by Aggarwal, the reason being, that down round, however painful, is still acceptable, but not the tacit loss of control. Finally, OLA accepted $250 million from Softbank and chose to seek out newer investors.

Seasoned Entrepreneurs appreciated the move; they asserted that, every startup should have at least 2 strategic investors, where each one has the potential to balance the influence of the other on the firm. For OLA, Aggarwal’s decision, proved to be prescient, as slowly, the investment trickled in, as the company won more market share by launching premium subscription service like ‘Select’ and entertainment offerings like ‘OLA Play’ besides localizing more, by adding autos to their network too!!

According to Masayoshi Son, CEO of Softbank, It is now very easy for Indian startups to attract investment, as the markets of most other countries are saturating, and more and more companies want to start business, in some form or the other in India. In this scenario, the local player has the advantage of knowing local culture and adapting to it. Global players, on the other hand, cannot change their technology platform or their supply chain according to each market, their benefit of economies of scale itself becomes their weakness. Still most investors and founders view strategic capital as a double edged sword, thus the speculation regarding the investing and accepting arises.