Highlights of the Financial Services sector in Q3 FY2024

Highlights of the Financial Services sector in Q3 FY2024

Gross bank credit increased to ~INR 158T in Dec’23 as compared to ~INR 132T in Dec’22 at a y-o-y growth rate of ~21%, while deposits increased to ~INR 198T in Dec’23 as compared to ~INR 173T in Dec’22 at a y-o-y growth rate of ~14% Credit growth to the services sector accelerated to 25.4% in Nov’23 from 21.3% in Nov’22, primarily due to higher loans to aviation, professional services, and transport operators Growth in personal loans accelerated to 30.1% in Nov’23 as compared to 19.9% in Nov’22, primarily due to housing, credit cards, and education loans Net AUM for Mutual funds increased to INR 51T at the end of Dec’23 from INR 48T at the end of Sep’23; direct plans accounted for 45% of the AUM Number of trades increased to 682M (turnover ~INR 20.8T) in Dec’23 as compared to 545M (turnover ~INR 16.7T) in Sep’23 in the capital market; In the F&O segment, turnover increased to INR 46T in Dec’23 as compared to INR 38T in Sep’23 UPI transaction volumes saw an increase to 12B transactions (~INR 18T in value) in Dec’23 as compared to 10.6B in Sep’23 (~INR 16T in value) Debit card transaction volume (excluding cash withdrawal) decreased to 177M (~INR 0.5T value) in Nov’23 from 208M (~INR 0.5T value) in Aug’23.  Credit card transaction volume increased to 297M (~INR 1.60T value) in Nov’23 as compared to 291.3M (~INR 1.48T value) in Aug’23.  Sale of life insurance policies decreased 5% y-o-y to ~2.04M (with LIC having ~68% market share) in Nov’23; the policies covered ~19M lives under group scheme.. For non-life insurance policies, gross underwritten premium increased 7.4% y-o-y to INR 206B in Nov’23 (against INR 192B in Nov’22). SEBI extended the suspension of trading in commodity derivatives, including Paddy, Wheat, Chana, Mustard seeds, Soya bean, Crude Palm Oil, and Moong, for an additional year, lasting until December 20, 2024 SEBI Board introduced flexibility for the Social Stock Exchange to give a boost to fundraising by Not-for-Profit Organisations (NPOs) on the SSE SEBI reduced the minimum issue size from INR 10M to INR 5M for public issuance of Zero Coupon Zero Principal (ZCZP) instruments SEBI approved reducing the minimum application size from INR 200K to INR 10K for public issuance of ZCZP by NPO on the social stock exchange to help expand the participation of subscribers including retail SEBI plans to introduce same day (T + 0) settlement by March 2024 and Instantaneous settlement by 2025 RBI increased capital requirements for personal loans and credit cards, raising risk weights for retail loans and credit card exposures by 25 percentage points, and mandated additional capital for loans to NBFCs with risk weights below 100% Fintech firms that use technology platforms to generate leads and provide unsecured personal loans, consumer durable loans, credit cards, and gold loans will be required to increase their risk weightages against such loans to 125% from 100% currently, thus, impacting the fintech lending sector RBI clamped down on lender’s evergreening loans through the use of AIFs by barring regulated entities (REs) such as banks and NBFCs, from investing in any scheme of AIFs that has downstream investments either directly or indirectly in the debtor company of the RE The Monetary Policy Committee of RBI decided to maintain the key repo rate at 6.5 percent, aligning with economists' expectations and marking the fifth instance of unchanged interest rates by the 6-member MPC Kotak Mahindra received approval from the Reserve Bank of India to acquire Sonata Finance for INR 5.37B HDFC Bank executed an agreement to sell its entire 9.95 per cent equity stake in Softcell Technologies Global Private Limited for INR 99.4M Alternative lending fintech InCred raised about USD 60M in Series D funding round CCI approved IDFC Ltd's merger with IDFC FIRST Bank, subject to conditions including the merger of IDFC Holding into IDFC Ltd, followed by the amalgamation of IDFCL with IDFC FIRST Bank, under the green channel route RBI granted its approval for SBI Mutual Fund to acquire a 9.99% stake in the private lender, IndusInd Bank Yes Bank acquired additional shares in J.C. Flowers Asset Reconstruction (JC Flowers ARC) to reinstate the bank’s stake to 9.9% in the company NPCI directed compliance with RBI's UPI transaction limit increase to INR 0.5M for hospitals and educational services by January 10 NPCI announced ‘UPI for Secondary Market’ which entered its Beta phase. The app enables limited pilot customers to block funds post-trade confirmation, settling payments on a T1 basis via Clearing Corporations RBI proposed a four-hour time limit for users initiating first payments over INR 2K on UPI for added security, enabling transaction reversals or modifications within that window NPCI directed banks and online payment apps like Google Pay, Paytm and PhonePe to deactivate all UPI IDs that have been lying dormant for over a year NPCI's CEO Dilip Asbe mentioned that a reasonable charge for UPI-based payments on larger merchants may be implemented in the long term, without specifying the exact timeline, during an event organized by BCAS NACH introduced a 30-year maximum validity period for SIP mandates from October 1, 2023, requiring investors to specify an end date, impacting new mandates but not affecting existing or pre-September 30, 2023