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ACCEPT THE UPDATED PRIVACY & COOKIE POLICY Dear user, ET BFSI privacy and cookie policy has been updated to align with the new data regulations in European Union. Please review and accept these changes below to continue using the website. You can see our privacy policy & our cookie policy. We use cookies to ensure the best experience for you on our website. If you choose to ignore this message, we'll assume that you are happy to receive all cookies on ET BFSI. * Analytics * Necessary * Newsletter NameProviderExpiryTypePurpose Google AnalyticsGoogle1 YearHTTPSTo track visitors to the site, their origin & behaviour.iBeat AnalyticsIbeat1 YearHTTPSTo track article's statisticsGrowthRx AnalyticsGrowthRx1 YearHTTPSTo track visitors to the site and their behaviour NameProviderExpiryTypePurpose optoutTimes Internet1 YearHTTPSStores the user's cookie consent state for the current domainPHPSESSIDTimes Internet1 dayHTTPSStores user's preferencesaccessCodeTimes Internet2.5 HoursHTTPSTo serve content relevant to a regionpfuuidTimes Internet1 YearHTTPSUniquely identify each userOSTIDTimes Internet1 YearHTTPSOauth secure tokenOSSOIDTimes Internet1 YearHTTPSOauth user identifierOSTPID Times Internet1 YearHTTPSused to sync accross portalsfpidTimes Internet1 YearHTTPSBrowser Fingerprinting to uniquely identify client browsers NamePurpose Daily NewsletterReceive daily list of important newsPromo MailersReceive information about events, industry, etc. I've read & accepted the terms and conditions NEWS SITES * Auto News * Retail News * Health News * Telecom News * Energy News * CIO News * Real Estate News * Brand Equity * CFO News * IT Security News * Government News * Hospitality News * HR News * Legal News * ET TravelWorld News * Infra News * B2B News * CIOSEA News * HRSEA News * HRME News Upcoming Event: CFO Meet & discussion on Revised Companies Act Sign in/Sign up * Follow us: * * * * * * * ETBFSI Exclusive * BANKING * INSURANCE * InsurTech * NBFC * FINTECH * Payments * Digital Lending * RegTech * Open API * BFSI Videos * Editor's View * Brand Solutions * ETBFSI AWARDS 2022 * ACCELERATE END-TO-END CUSTOMERS' JOURNEYS WITH AN AGILE LENDING SOLUTION * GLOBAL INSURANCE BROKERS PVT. LTD * ETBFSI.COM CONVERGE Thriving in the world of digital * ETBFSI CXO CONCLAVE Connecting Financial Institutions Digitally * LAY THE GROUNDWORK TO ACCELERATE BANKING INNOVATION * ETBFSI FINNEXT SUMMIT The Future of NBFCs and FinTechs * SIDBI-ET MSMES/STARTUPS Roudtable Discussion * REIMAGINE NEXT * LEARNFEST * REIMAGINE NEXT - THE FUTURE OF LEARNING * ETBFSI.COM CONVERGE BFSI: The world of Hyper-personalization * ETBFSI EXCELLENCE AWARDS 2021 AWARDS FOR EXCELLENCE IN INNOVATION * FUTURE READY SECURITY FOR DIGITAL-FIRST BFSI * 3RD EDITION OF ETBFSI CXO CONCLAVE Unlocking the BFSI Potential * THE DIGITAL NEXT: SERIES 2.1 Live Virtual Summit * JOIN THE ECONOMIC TIMES FINANCIAL INCLUSION SUMMIT 2021 * 2ND EDITION OF ETBFSI VIRTUAL SUMMIT 2021 * ET BANKING LEADERSHIP SERIES PRESENTED BY MANIPAL ACADEMY * Millennial Finance * FinTech Diary * ETBFSI Research * Green Finance * IBC * ETBFSI Explains * BFSI Movement * More * Blogs * BFSI Tech Tales * Innovation Masters * POLICY * FINANCIAL SERVICES x * BFSI News * Latest BFSI News * Banking EXCLUSIVE BANKS FOR NO PROVISIONING ON STANDARD ASSETS AS FUND SHORTAGE WORSENS The lifting of provisioning on standard assets can free up substantial capital for banks to meet the huge credit demand; may petition RBI. * ETBFSI Research * ETBFSI * December 21, 2022, 13:35 IST * * * * * * * * Banks, which are facing an acute shortage of funds to meet the huge credit demand, want the Reserve Bank of India (RBI) to reduce asset provisioning norms to free up capital for lending. For non-performing assets of up to 1 year, a provision of 15 per cent has to be made, for those above one year it is 25-40 per cent in the first three years and 100 per cent beyond that. In contrast, banks require to maintain much lower provisioning for standard assets; loans for agriculture, housing (individual) and micro and small enterprises attract provisioning of 0.25 per cent while credit to commercial realty requires a 1 per cent provisioning. Advances restructured and classified as standard in sync with the RBI’s norms for areas affected by natural calamities require provisioning of 5 per cent. Banks want the provisioning on standard assets to go so that they can use the capital to meet lending purposes. The banks under the aegis may move the RBI with their demand. The money matrix With the credit growth averaging 17 per cent and the Reserve Bank of India drying up liquidity to fight inflation, banks are left scrambling for deposits. For the last few years, deposits had been growing at a fast clip, especially when compared to credit. However, in the current year, with the reversal of this trend, the y-o-y change in credit has outpaced deposits, reducing the availability of cheaper CASA deposits. Customers are moving their funds to fixed deposits (FDs), shifting from saving deposits as banks raise FD rates and credit offtake picks steam. Saving bank deposits of banks declined Rs 54,021.77 crore while FDs were up Rs 1,16,218.25 crore for the fortnight ended September 9, 2022. All scheduled banks reported a deposit rise of Rs 62,196.47 crore during the fortnight as banks raised deposit rates. Apparently, a significant part of the funding gap has been met by the mobilisation of CDs. The outstanding CDs stand at Rs 2.37 lakh crore as of August 26, 2022, as compared to just Rs 0.6 lakh crore a year ago. With a drop in NPAs to a six-year low of 5.9% in March 2022 banks have better balance-sheets and are in a position to address the credit demand. Follow and connect with us on Twitter, Facebook, Linkedin, Youtube Banking reserve bank of india rbi casa NPA fixed deposit FD CD Read on App Read on App PEOPLE WHO READ THIS ALSO READ * ‘Physical to Phygital to Digital’: Mahindra Finance COO’s mantra to increase rural digital penetration * CBI arrests former ICICI CEO Chanda Kochhar, husband in loan fraud case * Year Ender 2022: Top 7 InsurTech Trends that bolstered growth this year * Godfather Android malware targets 215 banking apps in 16 countries SUBSCRIBE TO OUR NEWSLETTER 50000+ Industry Leaders read it everyday I have read Privacy Policy and Terms & Conditions and agree to receive newsletters and other communications on this email ID. BANKING * 3 hrs ago DBS BANK INDIA PARTNERS WITH GOFRUGAL TECHNOLOGIES TO HELP SMES ADOPT ONDC * 6 hrs ago VIDEOCON FOUNDER DHOOT ARRESTED IN ICICI BANK LOAN FRAUD CASE * 6 hrs ago INDIAN PRIVATE BANKS' BOND BUYS HIT NEAR THREE-YR HIGH IN DEC * 9 hrs ago AS BANKS HESITATE TO FINANCE, ELECTRIC VEHICLES GET A 'LEASE' OF LIFE View More EDITOR'S PICK * 21 mins ago CASHFREE JOINS WITH HANDS SHARK TANK INDIA SEASON 2 AS PAYMENTS PARTNER * 4 hrs ago MONEY VIEW SECURES A FRESH $75 MILLION FUNDRAISING ROUND FROM APIS PARTNERS IN ITS SERIES E ROUND. * 10 hrs ago ‘PHYSICAL TO PHYGITAL TO DIGITAL’: MAHINDRA FINANCE COO’S MANTRA TO INCREASE RURAL DIGITAL PENETRATION * 11 hrs ago EXPLAINED: HOW THE UPCOMING PERSONAL DATA PROTECTION BILL WILL IMPACT FINTECH FIRMS? * 1 day ago TOP 5 TECHNOLOGY TRENDS IN 2023 IN THE BANKING AND FINANCIAL SERVICES INDUSTRY BFSI VIDEOS * HOUSEHOLD FORMATION KEY DRIVER FOR BUOYANT HOUSING DEMAND: JAIRAM SRIDHARAN OF PIRAMAL Watch a quick commentary by Jairam Sridharan, MD, Piramal Capital & Housing Finance on demand for housing and digitalisation in the sector on second day of the ETBFSI Converge 2022. * 3 days ago MAKING WOMEN 'FINANCIALLY FEARLESS, FIT AND FREE': JASMINE B. GUPTA OF LXME * 5 days ago FINTECH DISCUSSION: SERVING CONSUMERS FROM HINTERLAND TO METAVERSE * 7 days ago BANKS' CXOS DISCUSSION: UNLOCKING THE POTENTIAL OF BANKING AS A SERVICE View More EXCLUSIVE HOW METAVERSE WILL UNLEASH NEW ERA IN BANKING: OPPORTUNITIES AND CHALLENGES Metaverse is the new hot potato with companies investing billions of dollars in this new technology. Will it be viable? Will it disrupt traditional banking models? What are the use cases and what could be the potential threats of having such advanced technology for the ordinary masses to make seamless transactions? In this chapter of ETBFSI Explains, we decode the universe of metaverse in banking. * ETBFSI Click Here to Read This Story * * * * * * * * - Navya Menon Gone are the days when people had to wait for lunchtime to get over and have their banking queries solved, or the need to visit the bank umpteen times to get loan approvals. Digitisation has taken the world by storm, with credit disbursements getting done in an astonishing two-minute time frame. However, the new kid on the block is metaverse, which grabbed a lot of eyeballs among various industries and the banking sector is no exception. Post the pandemic, people have been reluctant to venture out of the comfort of their homes and the metaverse capitalizes on this exact opportunity. Imagine depositing money into the bank without actually visiting the branch and having avatars like the bank manager, your relationship manager and other bank employees guide, interact and engage with you in the virtual world, while you sit on your couch and actually have an immersive experience without moving an inch! Sounds interesting right? How Metaverse can act as medium to address consumer pain points? With the help of metaverse, banks which currently do not function 24/7 owing to higher operating costs can set up their virtual branches and help customers access their services any time, any day and anywhere. Speaking at the ETBFSI Converge, Hitesh Sachdev, Head of Startups and Innovation at ICICI Bank says that rental agreements and mortgages can also be signed up in the virtual space. Source: UXDA What are its use cases in banking sector? Apart from allowing customers ubiquitous access, there are other benefits of embracing this new technology. A report by Accenture beautifully sums up some of the key opportunities that banks can tap into, to capitalize on metaverse. * Showcasing real-estate projects by just sitting at home * Creating short-run engagement with customers * Experience by foreign banks can be created for ultra HNIs * Offering clients the ability to check balances, pay bills, make transfers and transact using AR/VR channels * Tapping on employee experience by delivering immersive learning in the safety of fully simulated customer environments * Smoother on-boarding of customers by creating stronger community bonds amongst new joiners and corporate start groups * The presence of virtual branches provide high-touch service for clients looking for mortgages or other sophisticated products * Having remote advice which is convenient and having annual portfolio reviews, financial planning sessions and mortgage advice delivery * Promoting collaboration and real-time analysis when showcasing new investment products to prospective clients * Facilitating digital payments of secure wallet functionality and payment rails for metaverse products services and economies * Launch of digital asset issuance by developing digital assets of new and existing products for customers. * Marketing and brand extension can be promoted by virtualizing familiar brand interaction such as checking refinancing rates and branch placement * Digital asset services secure, insure and lend against digital assets, NFTs, virtual real estate and other third party assets * Leveraging holistic data from digital asset uses and metaverse customer activities. Also read: Metaverse can bring emotional connect to digital banking: bankers Why banks are chasing metaverse? Metaverse is expected to become a $5 trillion market by 2030 as bankers believe that it is all about image. Adopting the metaverse indicates that banks are tech-savvy and pioneer a high-technology environment. However, Hitesh feels that gaining big in the metaverse predominantly depends on adoption and having the right target audience is key. He sums it up as‘ right audience, right use cases and right customer segment’ forms the holy trinity of hitting the right chord of the metaverse. For instance, overseas, HSBC Bank has purchased land in the sandbox to engage with online sports fans and e-sports enthusiasts and JP Morgan Chase has a global banking giant which has been established. In India, Kiya.ai launched India’s first banking meraverse application called Kiyaverse. A bunch of public and private sector banks have expressed interest and the Union Bank of India has even started with its own digital banking Metaverse lounge called ‘Uni-Verse’. This specific app allows customers to vist a bank without actually visiting a bank, choosing digital avatars for themselves, entering the banking lounge and accessing banking services and lastly, getting details on social security loans and other key information. However, transactions cannot be made in this space owing to regulatory and security issues. Also read: Metaverse impact on India's economy could be $79-$148 billion by 2035: Deloitte Challenges involved: Data privacy remains a huge risk according to Hitesh and creating trust remains vital as the transactions have to remain safe and secure. He adds that authentication layers have to be built. Interoperability will have to remain important as it depends on the third party. Lastly he adds a caveat that the return on investment will not be viable right now. In a nutshell, though metaverse offers a lot of opportunities for the banking sector to thrive on, however, the challenges around the cost matrix, investment returns and data security. Only time can tell whether this technology will be worth the investment made. Follow and connect with us on Twitter, Facebook, Linkedin, Youtube Banking metaverse digital union bank of india jp morgan chase hsbc bank rbi india etbfsi explains banks Read on App Read on App EXCLUSIVE BANKS TURN CAUTIOUS IN CORPORATE LENDING AS CREDIT GROWTH HITS RECORD HIGH Wary of higher NPAs like the ones ratcheted up in the last decade, banks are avoiding risky proposals from corporates with ratings of BB and below. * ETBFSI Click Here to Read This Story * * * * * * * * The yields have also increased by 255 basis points (bps) since April 2022 and was at 6.92 per cent in October 2022, he says in the report.With credit demand at record highs, banks have turned cautious and are raising parameters for lending. Banks are avoiding risky proposals and turning down loan requests from corporates with lower credit rating. However, with interest rates rising and loans becoming more expensive, banks are worrying about the repayment capacity. “The only thing when we do underwriting is we should see that it should suit our appetite. Appetite is not in terms of how much NPA we can have; it should rather be how much lower NPA we should have,” said Dinesh Khara, Chairman, SBI, while addressing the media on November 5, according to a report. “We should identify the risk and have the mitigations in place. And as long as we’re in a position to do that, we will not like to touch the credit which is not in line with our risk appetite,” he added. SBI is now turning down loan requests from companies with ratings of BB and below, said the report. The gross and net NPAs at 3.52 per cent and 0.8 per cent, respectively in Q2 FY23, which is the best level since fiscal 2002. Industry credit growth The credit outstanding of the industry segment registered a robust growth of 12.6 per cent y-o-y in September 2022 from 1.7 per cent in the year-ago period. The growth was due to robust growth in the MSMEs (29.6%) which were driven by ECLGS, inflation-induced working capital requirements, ease of doing business supported by increasing digitisation in the banking system for faster loan turnarounds and demand for new capex. The demand for the new capex is taking place with rising demand from infrastructure (road, telecom, renewables), auto and consumer durable companies. The large enterprise segment (share of 75.7 per cent within the industry) reported a growth of 7.9% from a drop of 2.1 per cent over a year ago. All the industry sub-segments witnessed growth in credit in September 2022. Petroleum, coal products and nuclear fuels witnessed the highest growth of 75.9 per cent y-o-y vs 20.3 per cent in the year-ago period due to higher working capital requirements driven by high crude oil prices and currency depreciation, followed by the chemical and chemical products which rose 22.5 per cent y-o-y versus marginal growth of 1.9 per cent in the year-ago period. The infrastructure subindustry (share of 37.5% within the industry) registered a growth of 10.9 per cent from 3.4 per cent in the year-ago period. Within infrastructure, telecommunication and other infrastructure grew at a robust rate of 16.3 per cent and 19.0 per cent y-oy. Within the infrastructure, roads and airports reported growth of 13.4 per cent y-o-y each in the month. 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