RBI proposes cutting of merchant discount rate

Mumbai The Reserve Bank of India (RBI) has proposed to rationalise the merchant discount rate (MDR), or the fee a merchant has to pay a bank to access its payment infrastructure.

While the central bank did not provide any solution, it has asked public opinion in a concept paper on card acceptance infrastructure.

In the concept paper, RBI noted that MDR "often acts as a disincentive," as the cap prescribed by the regulators were treated as a floor and the benefit of lower MDR "not really accruing to smaller merchants."

Larger merchants, with economies of scale, can absorb MDR relatively easily.

In September 2012, RBI capped MDR for debit card transaction at 0.75 per cent for transaction values up to Rs 2,000 and at 1 per cent for transaction values above Rs 2,000.

The concept paper also raised questions whether MDR for credit cards should also be rationalised as the cap prescribed was only for debit cards but can be extended to credit cards as well. However, if MDR was lowered, the merchant acquisition would be unattractive for banks, thereby defeating the purpose of promoting card payment.

The concept paper proposed a few options that can be explored to make MDR viable and at the same time cheap.

The proposals included ad-valorem MDR across all merchant categories and locations, differentiated MDR across various tiers of cities and merchant sizes, and also fixing the MDR at a flat fee rate beyond certain value.

Banks are also going slow on acquiring merchants, the paper noted.

Between October 2013 and October 2015, ATMs increased by around 43 per cent while POS machines increased by around 28 per cent. As of end-December 2015, the number of ATMs has increased to 193,580 while POS machines had increased to 1,245,447 in the country.

"The issuance gap in POS terminals is glaringly high. For more than 25 million retail outlets currently, we have about 1.2 million POS terminals in India. Going forward, the POS gap will only increase leading to major acceptance problems," said Kumar Karpe, CEO of TechProcess Payment Services Ltd.


"India needs to leapfrog the gap by leveraging the existing infrastructure of more than 200 million smart phones and work towards a virtual mPOS solution that converts a merchant's smartphone into a virtual point-of-sale device."

Sun Capital

Deutsche Bank chief scotches India unit sale speculation

MUMBAI: Deutsche Bank quelled speculation about its future in India as well as Asia and said it aims to build on one of the most profitable franchises amid global reorganisation that is leading to some businesses shrinking for it to remain profitable.

"Deutsche Bank India sale was never ever on the table,''Gunit Chadha, chief executive officer of Deutsche Bank in Asia Pacific, told ET in an interview. "We have significant businesses in Japan, China, India, Australia, Hong Kong,ASEAN & Singapore.

Deutsche Bank

The global banking industry must reinvent its business models. We ourselves have some challenges which we are proactively addressing, but our commitment to Asia Pacific is strong and stays fully intact."

The German bank which was cleared by the regulators in a rate rigging probe is reorganising itself by cutting staff and exiting markets which are unviable.In this context, some speculated that Deutsche may sell its India unit as the region itself could become a non-core area. In fact, the bank had to face some toughmarket conditions recently after analysts questioned its ability to pay interest on some bonds. But the bank has since reassured investors with a bond buyback plan. Its CEO John Cryan said that bank is 'absolutely rock solid.'

"Asia Pacific is our strong growth region," said Chadha. "This is no surprise as Deutsche Bank Asia Pacific PBT has doubled between 2012 to 2015 with very attractive financial metrics and the region now has five of the top 10 countries for Deutsche Bank globally." About 12% of its revenues (4 billion) came from the Asia-Pacific region. It mostly does corporate and investment banking in the region with India alone having a retail business. Deutsche Bank has 17 branches in India currently with around.`5,000 crore mortgage book and.`15,000 crore in wealth management.

Last year it sold its mutual fund business to Pramerica Mutual Fund.

In October 2015, the bank announced that it will shut operations in 10 countries globally, cutting 15,000 full and part time jobs as part of the bank's 'Strategy 2020' which aims to reduce costs, lower risks and improve Deutsche Bank's capital position after being weighed down by fines linked to the LIBOR fixing scandal.

Chadha said the bank recently sold its mutual fund business in India because it was "sub scale and largely domestic". It was less than 2-3% of the DB India profits. While being consistently profitable and well managed, it needed to scale up.

But the same need not be true of its retail business in India even though it does not contribute significantly to overall profits.

"I don't believe that our Indian retail business will be shrunk to glory," said Chadha. "Either you are in the retail business or not. If one is in the business it needs to scale up. Deutsche Bank's retail business is not about becoming leaner. It's a well-managed profitable business for us. Yet as India is the only market in Asia where we have a retail business , the strategic forward naturally comes up."

Investment Banking

RBI Cancels Registration Certificate of BNP Paribas, 3 Others

Mumbai: The Reserve Bank of India on Wednesday said it has cancelled registration certificates of four non-banking financial companies (NBFCs) including BNP Paribas India Holding Pvt Ltd.

The three other firms are Mumbai-based Financial Services Private Limited Bhageriya Financial, Capital Services Limited of Hyderabad and Kenny Commercial & Investment Pvt Ltd belonging to Jammu.

Following the cancellation of registration certificates, these companies cannot transact the business of a non-banking financial institution, the RBI said.

Commenting on the RBI's move, BNP Paribas said, "In view of BNP Paribas India Holding Company (BNPP IHC) being classified as an exempt Core Investment Company which will not access public funds, RBI has, on BNPP IHC's own request, cancelled its registration as an NBFC."

Over last few years, the RBI has carved out some specialized NBFCs like Core Investment Companies (CICs), NBFC-Infrastructure Finance Companies (IFCs), Infrastructure Debt Fund- NBFCs, NBFC-MFIs and NBFC-Factors.

Sun Capital

Reforms in India will be slow, tedious: Morgan Stanley

Experts said domestic woes, including ballooning NPAs reported by banks and weak quarterly numbers in various other sectors, also added to the market weakness recently.

Big bang reforms will not be the operating template for India and the process will be a 'slow and tedious one', says a Morgan Stanley report.

The global financial services major said that the recently announced Budget for 2016-17 has proved once again that major reform initiatives will not be the operating template for the country.

"Reforms in India will be a slow and tedious process, requiring the buy-in of the opposition and the bureaucracy," it said. Since the beginning of this year, Indian markets have seen heavy volatility largely owing to high fluctuations in global markets led by the Shanghai Composite and domestic events such as the Union Budget, it said.

The Indian equity markets have seen extreme weakness due to various negative factors, including global economic slowdown fears, falling crude prices, worries related to Chinese economy and muted quarterly earnings.

Experts said domestic woes, including ballooning NPAs reported by banks and weak quarterly numbers in various other sectors, also added to the market weakness recently. Meanwhile, the index slumped to its lowest level in 21 months, when the Sensex crashed 807 points to drop below the 23,000-mark on February 11, this year.

"Moreover, what was evident once again this year, is that while India may be in a relatively better position based on external macro indicators compared to 2013, the correlations with global markets always rise disproportionately during periods of heightened uncertainty in other parts of the world," the report added.

Sun Capital

PE inflows from foreign funds in real estate up 33%

Total private equity investments from foreign funds in Indian real estate increased 33%, from $1,676 million (around R11,306 crore) in 2014 to $2,220 million (around R14,974 crore) in 2015, according to latest findings of global real estate consultancy Cushman & Wakefield.

Total private equity investments from foreign funds in Indian real estate increased 33%, from $1,676 million (around R11,306 crore) in 2014 to $2,220 million (around R14,974 crore) in 2015, according to latest findings of global real estate consultancy Cushman & Wakefield.

Owing to high property prices and high investment potential, Mumbai was accounted for about 35% of the total foreign investments in 2015, followed by Delhi NCR accounting for about 25% of the investments.

Sanjay Dutt, managing director, Cushman & Wakefield India said, “The three large cities; Mumbai, Bengaluru and Delhi-NCR continue to attract the highest investments in India and account for about 75% of these investments.

However, with government initiatives to de-stress these cities, relaxed FDI norms and focus to improve infrastructure across the country, other cities in India are likely to witness rise in PE investments going forward.”

The structured debt deals accounted for almost half (49% in value terms) of the total PE investments in 2015.

The structured deals strategy, though moderated due to increased competition, offers returns in the range of 15% – 17% to its investors.

Sun Capital

Crompton Greaves to sell overseas power unit to First Reserve for $126M

Crompton Greaves sells global power biz 

Parent Avantha Group has been selling non-core assets to cut debt. 

Crompton Greaves has inked a deal with US private equity fund First Reserve International to sell its global power business for an enterprise value of €115 million (about Rs. 846 crore). The sale will enable the company to reduce debt and focus on its faster-growing Indian businesses.

The company’s consolidated debt stood at Rs. 2,744 crore in FY15. Earlier, Crompton Greaves had announced the de-merger of its consumer products business into a wholly owned subsidiary Crompton Greaves Consumer Electricals.

Paring debt

In October 2015, the company sold its Canadian Power Transformer business to PTI Holdings Corp. These deals will help Crompton Greaves bring down its debt and expand its consumer products business.

On Wednesday, the Avantha Group company’s shares rose 8.81 per cent to Rs. 151.85 on a steady BSE, which closed 0.55 per cent higher.

On May 28, 2015, the company informed the stock exchanges that it had got non-binding proposals from “interested parties” from across Europe, North America and Indonesia. Later, on February 4, it said that discussions with a potential buyer were on.

Sun Capital

Paragon Partners launches $200-m India-focused mid-market PE fund

PE firm Paragon Partners has raised $50 million, marking the close of its $200 million growth fund, PPGF-I to invest in mid-size companies.

PPGF was established in 2015 by Siddharth Parekh and Sumeet Nindrajog. It is an AIF-Category II Private Equity fund, investing in high growth mid-market private companies in India.

The fund will focus on five key sectors — consumer discretionary, financial services, infrastructure services, industrials and healthcare services. The fund has an advanced pipeline of investment opportunities across these sectors.

Paragon Partners advisory board includes Deepak Parekh (Chairman, HDFC Ltd), Harsh Mariwala (Chairman, Marico Ltd & Founder Member), Sunil Mehta (Chairman, SPM Capital Advisors Pvt Ltd) and Jeff Serota (ex Sr. Partner at Ares Private Equity).

Siddharth Parekh, co-founder, Paragon Partners said: “We believe the next decade in India will see a strong resurgence of growth in key sectors such as manufacturing, financial services and infrastructure.”

The company said with its first close, PPGF-I has completed the funding of its first investment in Capacite Infraprojects Ltd, a leading EPC player based in Mumbai. Capacite is engaged in the construction of buildings (including super high rise structures) and factories, for large real estate developers, corporates and institutions.

The company currently has a footprint across Mumbai, NCR and Bengaluru regions and will look to grow this on a selective basis. Capacite is promoted by Rahul Katyal, Rohit Katyal and Subir Malhotra.

PPGF-I has seen significant interest from onshore and offshore institutions, family offices and HNIs. Domestic investors include India Infoline, Edelweiss Group and Infina Finance Private Ltd (an associate of Kotak Mahindra Bank Ltd).

Sun Capital