Innholdsfortegnelse for 5 February 2023 i Business Today

Tomorrow’s nation building needs attention today, on three fundamentals areas - sustainability or green technology (GX), transformation through technology or digital transformation (DX) and key innovation. The relevance is palpable if we see currently what is driving the world order. For example, globally the Climate Change debate that is on - at COP27 in Egypt. India has driven home a point through its pavilion themed 1LIFE - Lifestyle for Environment - echoing the vision of India’s Prime Minister Mr. Narendra Modi, that of a simple solution to the complex climate change problem. Reminding the delegates of COP summit in November 2022 that simple lifestyle and individual practices are sustainable in nature and helps in protecting the mother earth - which the Prime Minister propagates - India’s Union Minister for Environment…

▶ WHILE THE BROADER Nifty 50 Index gave a return of just 2.5 per cent in April-December, 2022, the Nifty Bank Index gave a return of 16 per cent during the same period. If you think this is a lot, then you need to consider the return of 52 per cent given by the Nifty PSU Bank Index. The banking sector has outshone the broader market as well as other industry sectors, led by impressive growth in credit, rising interest rates, and improving asset quality. Riding on these, banks alone have given a total profit of nearly ₹59,000 crore in Q2FY23; a jump of 59 per cent. So, will these factors continue to drive the banking industry’s growth in Q3FY23? A report from brokerage firm Sharekhan by BNP Paribas states…

▶ THE GOVERNMENT’S MOVE to regulate e-sports and place higher due diligence requirements on online gaming companies is a shot in the arm for the sunrise sector as clear rules are expected to spur more entrants, boost investor confidence and create new jobs. Recently, the Indian government recognised e-sports as part of mainstream sports and made the Ministry of Electronics and Information Technology (MeitY) the nodal agency for all online gaming-related matters. In the first week of January, MeitY released draft amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, to regulate the industry that has revenues of $1.2 billion, per Invest India—the national investment promotion and facilitation agency. The proposals legalise the status of the online gaming industry, spell out regulatory compliance requirements and…

PERSONAL TAXATION ⟡ Relief to the salaried class by increasing tax slabs and providing higher standard deduction and deduction under section 80C ⟡ Different holding periods and tax rates for different asset classes when it comes to capital gains should become one common treatment for capital gains taxes ⟡ Under section 80D, ₹25,000 (₹50,000 for senior citizens) of health insurance premium is allowed as a deduction for individuals. Covid-19 has proven that this limit needs to rise significantly ⟡ Make pension tax-free because the pension premium is already paid through taxable income ⟡ Give full deduction of interest on house property for self-occupied property from the current ₹2.5 lakh —Teena Jain Kaushal REAL ESTATE ⟡ Increase principal deduction limit under section 80C to ₹4 lakh per annum from ₹1.5 lakh…

▶ IN A WORLD filled with doom and gloom, the commentary for the Indian banking industry—with assets of ₹216 lakh crore—is growing better and better every day. There is no threat to financial stability, as there was in the aftermath of the IL&FS collapse or the Russia-Ukraine war. The banking system is profitable, growing and adequately capitalised. The net profits of the sector have performed a somersault of sorts—from a loss of ₹23,397 crore in 2018-19 to a record ₹1.82 lakh crore of profit in 2021-22. In the first half of FY23, net profits have registered 40 per cent-plus growth compared to the corresponding period last year. The Reserve Bank of India’s latest stress test on banks, the life blood of the economy, shows that India’s banks would be able…

STATE BANK OF INDIA (SBI), the country’s largest lender, has survived and thrived through many an upheaval in its 217-year history. What stands out is the contribution of its leaders, especially after the nationalisation of banks. Take, for instance, D.N. Ghosh in the mid-1980s, who incubated SBI Asset Management Company; it is now the third-largest mutual fund house in terms of assets under management. Janki Ballabh, who helmed SBI at the turn of the century, laid the foundations of SBI Life Insurance that is today the largest private sector life insurer in India. Then came A.K. Purwar and O.P. Bhatt, who laid the foundations of consumer banking, which has now grown to account for over 40 per cent of SBI’s total loan mix. By the time Arundhati Bhattacharya reached the…

HOW CAN WE grow at 20 per cent year after year?” That’s what HDFC Bank’s Sashidhar Jagdishan (also called Sashi) asked the then MD & CEO Aditya Puri a few years ago when they were on the road from Mangaluru to Manipal. As they travelled, the Arabian Sea beside them was bustling with trawlers and fishermen going into the sea. “I’ll explain. Look,” Puri began, prompting Sashi, who was designated as a ‘change agent’, a move aimed to position him as Puri’s successor, to look towards the sea. “There are big and small trawlers in the ocean,” said Puri, adding, “Who has a bigger net?” And before Sashi could reply, he further asked, “Who would have a better catch?” And, here you are! Current MD & CEO Jagdishan, who took…

BANKS IN INDIA have taken great strides in improving their reach and performance in the past few years. As a result, not only has the sector emerged from the overhang on non-performing assets and the shadow of Covid-19, but it is also well-placed to scale at a rapid pace today. A robust banking sector is critical for the sustained economic growth of the country. This column captures the 10 major trends that may shape the banking sector in the year/s ahead and the impact they would create. 1. Scale Matters Scale and reach matter in banking. Consolidation of the public sector banks and the recently announced merger of HDFC Bank and HDFC Ltd has created banks with large economies of scale. This is likely to exert pressure on the other players…

SOURCE CMIE ECONOMIC OUTLOOK, MYGOVINDIA ₹55.40 PER LITRE The retail price of milk on December 31, 2022, compared to ₹49.90 on December 31, 2021 28-31 PER CENT Surge in prices of key components of animal feed in the past 12 months; feed constitutes over 75 per cent of milk production cost 25 PER CENT Contribution of India, the largest producer, to global milk production in 2021-22…

▶ A FEW MONTHS into the Covid-19 pandemic, the world was in disarray. And it wasn’t just about fighting the virus. Lockdowns in China and disruptions to the supply chain hit economic activity; especially affected was the electronics industry, which was at the core of keeping people connected in those tough times. Cut to more than two years later. There has been a rise in infections in China, and that is spreading to different parts of the world. While a majority of people are vaccinated in India and enterprises have their business continuity plans in place, what about manufacturers, more specifically the electronics industry? Industry players say that most companies should be able to hold out for a couple of months or so, owing to learnings from past experiences. Accounting…

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JURY WINNERS 1 Bank of the Year ICICI Bank 2 Special Jury Award for Consistent Transformation State Bank of India 3 Lifetime Achievement Award Arundhati Bhattacharya, former Chairman, SBI; Chairperson & CEO, Salesforce India 4 Best Bank in Innovation ICICI Bank 5 Best Bank in Fintech Initiative Bank of Baroda 6 Best Bank in Talent & Workforce Bank of Baroda 7 Best Fintech in Payments PayU India 8 Best Fintech in Value Added Services Perfios BT-KPMG Quantitative Winners 1 Best Large Indian Bank HDFC Bank 2 Best Mid-sized Indian Bank Bank of Maharashtra 3 Best Small Indian Bank Tamilnad Mercantile Bank 4 Best Large Foreign Bank J.P. Morgan India 5 Best Small Finance Bank AU Small Finance Bank…

AROUND FIVE YEARS ago, Pune-headquartered Bank of Maharashtra was grappling with a huge bad debt burden—with net non-performing assets of 11.76 per cent—and capital concerns, and the Reserve Bank of India had put it under the prompt corrective action (PCA) framework. But a look at the bank now makes it difficult to believe that it was under the regulatory lens just a few years ago. In fact, it has emerged as the Best Mid-sized Indian Bank in the BT-KPMG Best Banks and Fintechs Survey 2021-22. Mid-sized banks are those with a balance sheet size of ₹1-3 lakh crore, per the study. A.S. Rajeev, the bank’s MD & CEO, says the credit goes to its customers as they didn’t waver in their support. “There was no withdrawal pressure even when the…

JAIPUR-BASED NBFC-turned-small finance bank, AU Small Finance Bank, was founded by first-generation entrepreneur Sanjay Agarwal in 2017 and, in just a few years, has more than double the assets of its nearest competitor. It also has the best asset quality with the highest return on capital employed among its peers. No wonder that it is the Best Small Finance Bank in the BT-KPMG Best Banks and Fintechs Survey 2021-22. And that’s two years in a row. That’s fine, but what’s AU’s growth plan? Sustainability and trust are two big pillars, says MD & CEO Agarwal. While the opportunity to grow is huge, it should come with profitability, trust and sustainability, he says, adding, “I will pick quality over quantity. This will make the bank sustainable.” Founded as a vehicle finance…

ONLINE PAYMENTS GATEWAY PayU India has two things going for it—a strong, locally-rooted technology stack and the backing of global investment firm Prosus. On this leverage, the company has built a successful payments and credit business in India by creating indigenous products, while at the other end, it has either built, acquired or partnered with entrepreneurs to lay the foundations for a broader fintech ecosystem. PayU India, which is fully owned by Prosus, is the largest payments service provider in the country by share of revenue. Payments, which constitutes two-thirds of its revenue (nearly 15 per cent comes from its subsidiary Wibmo), grew by 49 per cent year-on-year to $304 million in FY22. CEO Anirban Mukherjee says total payment volumes grew 60 per cent in H1FY23. On the credit side,…

GROUP-I LARGE INDIAN BANKS With a balance sheet size of more than or equal to ₹3 lakh crore ₹49.87 LAKH CRORE The size of SBI’s balance sheet—nearly two and a half times that of second-placed HDFC Bank (₹20.68 lakh crore) Numbers in bold indicate ranks of respective parameters; three-year growth is compounded annual growth rate (CAGR); two-year CAGR for Bank of Baroda; values in each parameter are rounded-off up to two decimals; NPA: Non-performing assets; CASA: Current account savings account; CAR: Capital adequacy ratio; ROCE: Return on capital employed; NIM: Net interest margin; LCR: Liquidity coverage ratio; for explanation of parameters and how the total score was arrived at, see ‘The Calculation Behind Our Rankings’, page 102 GROUP-II MID-SIZED INDIAN BANKS With a balance sheet size of more than ₹1 lakh…

$562.85 billion FOREX RESERVES IN DECEMBER 2022—12.3 PER CENT LESS THAN THE PEAK OF $642 BILLION IN OCTOBER 2021; IN THE PAST FIVE YEARS, THE KITTY HAS INCREASED BY 37.5 PER CENT $610.5 billion EXTERNAL DEBT AS OF SEPTEMBER 30, 2022, COMPARED TO $613 BILLION IN DECEMBER 2021 AND $513 BILLION IN DECEMBER 2017 $12.9 billion FOREIGN INVESTMENTS FOR THE QUARTER ENDED SEPTEMBER 30, 2022, COMPARED TO $38.60 BILLION—A FIVE-YEAR-HIGH—IN THE DECEMBER 2020 QUARTER 157.26 lakh crore EXPECTED SIZE OF INDIA’S GDP BY FY23 AND ₹166.23 LAKH CRORE BY FY24, ACCORDING TO CMIE ECONOMIC OUTLOOK Source: CMIE Economic Outlook, RBI THE ROAD TO RECOVERY STEPS TAKEN BY THE GOVERNMENT AND THE RESERVE BANK OF INDIA HAVE HELPED THE GDP RECOVER FROM THE COVID-19 LOWS Quarterly GDP figures at constant prices…

The shortage of chips that impacted industries across sectors from automobiles to medtech to consumer durables in the past is unlikely to happen soon, say experts. This is primarily because the supply chain has strengthened in the past six months, and there is sufficient inventory built by most major OEMs and contract manufacturers. But the present situation in China could impact some of the electronics products where India gets sub-assemblies and completely knocked down/semi-knocked down (CKD/SKD) units. “More than chips, it is the CKD/SKD kits that go into many phones being assembled in many factories in India [that] may be impacted in the short term. Then there could be potential delays in adjacent ecosystems like lithium batteries,” says K. Krishna Moorthy, CEO & President of India Electronics & Semiconductor Association. Most…

▶ THE FACE OF the auto industry changed when the BS VI norms first kicked in, in April 2020. As the industry upgraded to the stricter emission norms, consumers saw a steep rise in prices across segments. The second phase of the norms, called real driving emission (RDE), are all set to come into effect from April 1, 2023. It will require all new vehicles to meet the emission targets as per the modified Indian drive cycle standards in real-world conditions and in a laboratory environment. A segment of the auto industry that will be particularly affected is carmakers as they will have to upgrade their engines, and that will entail additional costs. As a result, many of them are mulling to discontinue certain models. Experts say that diesel vehicles…

▶ “THE DELHI-MEERUT Regional Rapid Transit System (RRTS) will have a long-term impact on India’s railway industry,” declares Vinay Kumar Singh, MD of National Capital Region Transport Corp. (NCRTC) emphatically, as the gentle winter sunlight filters in through the large windows of his very spacious cabin. An Indian Railway Service of Engineers officer, Singh, 55, is known for his no-nonsense approach. The reasons behind Singh’s confidence are many. For starters, trains on the Delhi-Meerut RRTS corridor will run at an average speed of 90-100 km per hour. “It is an intercity train of high frequency and speed—its main USP. It is faster than even private cars that usually give an average speed of 40 km per hour in peak city traffic,” says Singh. Delhi-Meerut RRTS is also the country’s first…

THE INDIAN STOCK market has come a long way since the time a handful of brokers in the 1850s had gathered under a banyan tree in Mumbai to trade in shares. Today, it is amongst the largest and most dynamic globally. Over the years, the Indian markets have evolved to be amongst the most technologically advanced and operationally efficient. The regulator has many times acted proactively to make it a level playing field with special attention towards retail investors. The health of the stock market is often taken as a barometer of the future health of the country. And on this, we aren’t doing too badly compared to some of the other global markets. India is a shining example of corporate resilience with strong earnings growth likely in the next…

Total assets in ₹ crore; data for FY22 Source BT-KPMG Best Banks and Fintechs Survey 2021-22 MEANINGFUL MARKET share. Benefits of scale. Innovation. Product quality. Competitive cost. These five factors effectively sum up the strategy of J.P. Morgan India, the local subsidiary of US banking major JPMorgan Chase, which has been present in the country since 1945. J.P. Morgan India has emerged as the Best Large Foreign Bank in the BT-KPMG Best Banks and Fintechs Survey 2021-22, for the second year in a row. The bank recorded the lowest cost to income ratio and the highest profit per employee. It also topped the charts on parameters like return on capital employed and return on assets. With a balance sheet size of nearly ₹91,000 crore, the bank has significant market share…

AFTER A TWO-YEAR hiatus, or rather, virtual jury meetings due to the Covid-19 pandemic, the Business Today-KPMG jury was finally back in person to decide the winners in the banking and fintech categories for 2021-22. The BT-KPMG awards have been around for more than two decades, but the jury element was only added seven years ago to go beyond numbers and also recognise business and people initiatives, strategy, innovation, management quality, risk management, governance, compliance, and so on. There were also two fintech awards to recognise emerging innovators in the payments and value-added spaces. The entire process of reaching out to banks and fintechs began in September 2022, and culminated in a jury meeting in early December. The jury was presided over by K.V. Kamath, Chairperson of the National Bank…

EVEN TODAY, PEOPLE in the Reserve Bank of India have been trying to figure out the real Bimal Jalan. A politician? A diplomat who can keep everybody happy? A statesman? He was a pragmatic governor, liberal at heart—a general physician who would decide what to do with a patient by feeling their pulse. Y.V. Reddy, in contrast, was a specialist who would first recommend a diagnostic study to see what was wrong with the patient. All in the RBI swear by Jalan’s ability to get to the core of an issue, cutting the flab. He would come to the office at 9.30 am and leave at 5 pm, come what may. He would watch good movies at theatres and eat at restaurants across Mumbai. Booking an advance ticket. For him, for…