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SpiceJet to Send 80 Pilots on Leave Without Pay – Top Indian Market Updates

Here are some of the major updates that could move the markets tomorrow:

SpiceJet to send 80 pilots on leave without pay

SpiceJet Ltd will send around 80 pilots on Leave Without Pay (LWP) as the airline finds itself with excess pilots. Around 40 pilots from the Boeing 737 fleet and 40 from the Q400 fleet have been asked to go on LWP for three months. The airline will call them back gradually as it deploys new aircraft into its fleet. SpiceJet plans to add seven new Boeing 737 Max starting from December 2022.

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Hero MotoCorp, HPCL to set up charging infrastructure for EVs

Hero MotoCorp Ltd has partnered with Hindustan Petroleum Corporation Ltd (HPCL) to set up charging infrastructure for electric vehicles across India. The companies will first set up charging stations in select cities and expand to other key markets to establish a high-density of EV charging station network. They will initially establish charging infrastructure at HPCL’s existing network of energy stations.

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Piramal Enterprises to raise ₹750 crores via NCDs

Piramal Enterprises Ltd’s board has approved a proposal to raise ₹750 crore through the issuance of non-convertible debentures (NCDs). It will raise market-linked NCDs on a private placement basis up to ₹100 crore along with an option to retain oversubscription of up to ₹650 crore. The debentures will be listed on the debt segment and capital market segment of NSE and BSE, respectively.

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C E Info Systems acquires 26% stake in KOGO

C E Info Systems Ltd (CEISL) has completed the acquisition of a 26.37% stake in Kogo Tech Labs Pvt. Ltd for ₹10 crore. This acquisition would help automotive OEMs deliver a premium and engaging user-first approach to travel experiences for their vehicle owners. Kogo is a gamified social travel commerce platform. Users earn KOGOCOIN as they step out and can spend it on hotels, experiences, and stores on the KOGO Marketplace.

Zydus Lifesciences launches cancer drug in the US

Zydus Lifesciences Ltd has announced the launch of Lenalidomide capsules in the US. The drug is used to treat various types of cancer. It works by slowing or stopping the growth of cancer cells. Lenalidomide can also treat anemia in patients with certain blood/bone marrow disorders. Zydus will maufacture the drug at its manufacturing facility at the Special Economic Zone (SEZ) in Ahmedabad.

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Adani pledges stake worth $13 billion in newly acquired Holcim cement units

The Adani Group has pledged shares valued at around $13 billion (~₹1.03 lakh crore) in two cement firms days after it completed the acquisition from Holcim Ltd. Stakes in two companies (57% of ACC and 63% in Ambuja Cements Ltd.) have been pledged for “the benefit of certain lenders and other finance parties”. The buyouts from Holcim earlier this year marked the group’s entry into the cement business.

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Adani Transmission to invest over ₹5,000 crore in FY24-25

Adani Transmission Ltd. is planning to invest over ₹5,000 crore to add more capacity in each of the next two financial years. The company aims to increase the share of its renewable energy capacity to 60% by FY26-27. Currently, Adani Trans holds a portfolio of 18,795 circuit kilometers (ckm) of transmission lines and 40,001 megavolt-amperes (MVA) of power transformation capacity across 13 states.

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Mindtree secures multi-year engagement with UK-based Currys

UK’s leading retailer of technology products and services, Currys, has selected Mindtree Ltd. to deliver a highly personalised shopping experience to its customers across multiple markets. Mindtree will design and implement an omnichannel solution that provides a unified customer experience across online, mobile, and in-store shopping while driving cross-channel fulfillment and inventory optimisation for Currys. 

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NPCI in talks with govt as Zomato, Swiggy plans entry into UPI space

The National Payments Corporation of India (NPCI) is worried over the delay in implementing its mandate requiring payment apps to hold no more than 30% market share in the UPI ecosystem. NPCI is in talks with the govt. and industry stakeholders over the effect of late implementation. The recent action comes at a time when Zomato and Swiggy are reportedly planning an entry into the UPI payments platform as third-party payments apps.

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Wipro, Finastra to power digital transformation for corporate banks

Wipro Ltd has partnered with UK-based Finastra to help corporate banks accelerate digital transformation. This partnership combines Wipro’s expertise in consulting and digital infrastructure with Finastra’s cutting-edge solutions to deliver modern API-enabled platforms for banks. The solution will help banks streamline and digitize core trade finance processes and reduce cost overheads.

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India to grow at over 7% in FY23: CEA

Chief Economic Advisor V Anantha Nageswaran said the Indian economy will grow at 7% in FY23, down from the 8-8.5% growth rate projected in January. The aftereffects of the COVID-19 pandemic and Russia’s invasion of Ukraine are hurting economic growth. India can sustain the 7% growth rate for the rest of the decade, he added.

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Editorial

What is e-RUPI: The Future Of Payments in India?

e-RUPI has been in the news for a while now. PM Narendra Modi officially announced the launch of e-RUPI on August 2, 2021. It is an initiative by the National Payments Corporation of India (NPCI) in association with the Department of Financial Services (DFS), National Health Authority (NHA), and the Ministry of Health and Family Welfare (MoHFW). NPCI is the very same organization that looks after UPI or Unified Payment Interface. 

Let us dig deeper into e-RUPI and analyze its possible impacts on the way Indians pay for goods and services. 

The Concept

The basis of e-RUPI is similar to that of gift vouchers or coupons that you redeem at restaurants, e-commerce websites, or fashion stores. e-RUPI is a one-time contactless payment mechanism where a person can redeem a payment voucher without a card, app, or internet banking access at the merchants accepting e-RUPI. The merchants can be hospitals, seed banks, hospitals, stores, retailers, wholesalers, etc. Customers would be able to redeem e-RUPI vouchers of a certain value to buy goods or avail of a service.

A question arises here: who would issue these e-RUPI vouchers? NPCI has tied up with 11 banks that would facilitate the transaction. These banks would issue the vouchers on behalf of the government, a company, or a person. 

Case Study: How can E-RUPI Benefit Farmers?

Before E-RUPI

Farmers have been on the receiving end of a lot of government schemes and benefits. Indian farmers haven’t been the most financially literate or technologically savvy. Let us take the example of fertilizer subsidies. Before the early 2010s, many farmers didn’t even own a bank account. Before that, the only way to avail subsidies or benefits was to stand at a government office for hours, bribe a few officials, or buy cheap-quality subsidized fertilizer or seeds.

Things changed a little after the PM-Jan Dhan Yojna (PMJDY). The scheme aimed at facilitating financial inclusion, where anyone could open a savings bank account without any limits, conditions, or bottlenecks. Government agencies started directly transferring subsidy money into the bank accounts of farmers. This is called Direct Benefit Transfer (DBT). 

The problem with the current DBT system was information asymmetry. There were administrative issues, glitches, privacy issues, fraud, etc. Moreover, not all farmers were able to open bank accounts. e-RUPI could change things completely for farmers. 

After e-RUPI

Through e-RUPI, after registering for a particular subsidy, the farmer would get a text message that would contain a QR code or other encrypted details. The farmer can now go to the merchant and show the QR code to get the fertilizer at a subsidized price. On the other hand, the merchant would get the payment in full and there will not be any impact on their business. Thus, e-RUPI will benefit the farmer as well as the merchant.  

Advantages of e-RUPI

  • There would be a two-step contactless transaction. 
  • No app, card, or bank account is required to facilitate the transaction.
  • More payments can be facilitated since even those individuals without a bank account can transact using e-RUPI.
  • Safe and Secure – No personal details are shared throughout the transaction. Hence, privacy is maintained.

Application of e-RUPI

e-RUPI can be used to facilitate direct benefit transfers and subsidies, such as mother-child welfare schemes, electricity and water subsidy, healthcare subsidy, fertilizer subsidy, and many more

A private sector company can also avail of e-RUPI solutions for employee welfare and Corporate Social Responsibility (CSR) programs. Currently, there are more than 10 partnering banks (both public and private banks) that facilitate the use of e-RUPI.

Is it a new digital currency?

There has been some buzz in the market where people are calling e-RUPI a cryptocurrency. e-RUPI is NOT a cryptocurrency. Even its working principle does not come close to that of a cryptocurrency. While cryptocurrencies are decentralised, e-RUPI will be regulated by the Indian government and derives its value from the Indian Rupee.

Another misconception is of e-RPUI being a Central Bank Digital Currency (CBDC). This is not the case since e-RUPI isn’t a currency at all. Not to forget that the RBI doesn’t control the function or flow of e-RUPI.

Yet, the e-RUPI system is a big step in paving the way for alternate sources of payment like CBDC or cryptocurrency. Do you think this is a first step in the way for cryptocurrencies in India? Do you think that e-RUPI has some inherent flaws? You can let us know in the comment section of the marketfeed app.

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Editorial

What are New Umbrella Entities? Why are Tata to Reliance Interested in it?

As India moves towards building an extensive digital society, there is a requirement for multiple players to be involved. The RBI has run many experiments in the digital payments space in India, including licensing exclusive payments banks and setting up white-label ATMs. They have now come up with a new concept— New Umbrella Entities, which is set to revolutionise the payments industry. A large number of companies have reportedly applied for New Umbrella Entity licenses for payment systems. Let us have an understanding of what NUEs are.

The Current Scenario

You may be familiar with payment or settlement systems such as the Unified Payments Interface (UPI), Aadhaar Enabled Payment System (AEPS), RuPay, FASTag, etc. These are all managed and operated by an umbrella entity known as the National Payments Corporation of India or NPCI. It is a non-profit entity that is promoted by the Reserve Bank of India (RBI). The NPCI is owned and managed by a consortium of major banks, including State Bank of India, Punjab National Bank, Canara Bank, ICICI Bank, HDFC Bank, and many more. 

Recently, many prominent players in the payments space have indicated the various disadvantages or challenges faced by NPCI. It is now the only entity that manages all of the retail payment systems in our country. As more citizens are using online payment platforms, the volume of transactions conducted every day has risen exponentially. In February 2021, the NPCI admitted that they were facing structural and technical issues. According to reports, investors could not get mutual fund (MF) units they purchased on time due to a problem in the settlement system operated by the NPCI.

The RBI has now envisioned a plan to allow more private players to set up umbrella entities for payments systems. This would promote competition and lead to further development of the payments landscape and network in India.

What are New Umbrella Entities?

New Umbrella Entities (NUEs) will be a non-profit entity that will set-up, manage, and operate new payment systems such as ATMs and white-label Point-of-Sale (POS) systems. It also includes Aadhaar-based payments and remittance services. NUEs will develop the standards and technologies for these payment systems. They will operate clearing and settlement systems, identify and preserve the integrity of the system. These entities will also manage relevant risks such as settlement, credit, liquidity, and operational risks. 

NUEs will monitor retail payment system developments and related issues in India and internationally. This is to avoid shocks, fraudulent activities, and cyber threats that may adversely affect the financial systems and our economy as a whole.

Framework Related to NUEs

  • As per RBI guidelines, only those entities that are owned and controlled by Indian citizens (residents) can become promoters of NUEs. They should have at least 3 years of experience in the payments ecosystem. 
  • The umbrella entity should have a minimum paid-up capital of Rs 500 crore. 
  • The shareholding pattern should be diversified. Any entity holding more than 25% of the paid-up capital of an NUE will be deemed as a promoter.
  • No single promoter or promoter group should have more than 40% investment in the capital of the NUE.
  • A minimum net worth of Rs 300 crore should be maintained at all times.
  • An NUE should conform to the norms or regulations of corporate governance. The RBI retains the right to approve the appointment of directors and members of the board of an NUE. 
  • Foreign investment is allowed in NUEs as long as they comply with the existing government guidelines.

Recent Developments

The RBI had set a deadline of March 31, 2021, for firms to submit their applications for setting up New Umbrella Entities. As per reports, several Indian companies have tied up with major banks and tech companies to apply for NUEs. Reliance Industries, which has partnered with tech giants Facebook and Google, were planning to apply as a consortium. Other reports suggest that the Tata Group has partnered with HDFC Bank, Kotak Mahindra Bank, MasterCard, and Bharti Airtel. E-commerce platform Amazon.com, Inc. has tied up with Visa, ICICI Bank, Axis Bank, as well as fin-tech startups Bill Desk and PineLabs to obtain the NUE license. Also, Paytm and Ola have also reportedly joined hands to apply for the NUE. 

The primary aim of players that are planning to establish NUEs is to obtain a bigger share in India’s digital payments sector. According to RedSeer Consulting, the digital payments industry in India is expected to grow over three-fold to Rs 7,092 lakh crore by 2025. There is no doubt that more companies would want to obtain a piece of this highly promising market. Let us look forward to seeing which of these firms gets selected by RBI to launch NUEs, and how they disrupt or revolutionise the payments space.

Categories
Editorial

The UPI Transaction Cap – All You Need To Know

On 5th November, an official notification from the National Payment Corporation of India (NPCI) came as a bitter surprise for digital payment companies. The notice stated that the amount of UPI transactions on third-party applications would be capped at 30%. This would impact firms such as Google Pay and PhonePe, and also consumers like you and me. Let us understand more about why this limit is introduced and what its effects could be.

Why was this Rule Introduced?

Since 2016, India has been seeing a rapid growth of online payment systems. We know that there are many third-party Unified Payments Interface (UPI) apps such as Google Pay, PhonePe, Paytm, and Amazon Pay. These apps dominate the payment services industry. With these apps, we can send or receive money through our bank accounts with great ease. These companies do not charge us for transferring funds, and even provide us with cashback offers as well. Since these apps have a large number of active users, they can be found as a payment option on almost all online platforms.

Source: BloombergQuint

As lockdown restrictions were introduced this year, these UPI apps have reported a sharp increase in its active user base. India’s digital payments ecosystem had registered almost 200 crore monthly transactions through the UPI network in October 2020. At the same time, Google Pay and PhonePe together hold more than 80% of the market share in this industry. In fact, on November 9, the Competition Commission of India (CCI) had ordered a detailed probe against Google Pay. It has been alleged that the company is using unfair anti-competitive practices.

To ensure that these big companies do not control the payments market, NPCI believed that it was time to introduce a strict limit on the number of UPI transactions for each payment app. They have stated that the new rule would create a more competitive market. It would also protect the UPI ecosystem, as it is scaling up at a rapid pace. NPCI has also stated that this limit would bring down transaction risks and failures.

Hence, a 30% cap on the total volume of UPI transactions through third-party app providers (TPAPs) would be imposed from January 2021. The 30% cap will be calculated based on the total volume of transactions processed in UPI during the preceding three months. These companies would get two years to ensure that the new rules are imposed in a phased manner. It would also apply to the new member of the industry- WhatsApp Pay. 

Interestingly, the new limit would not apply to PayTM and Reliance’s Jio Payments Bank. This is because they have payments banking licenses and do not fall under the category of third party apps. If you have noticed, a UPI ID on Google Pay would end with @okicici or @okaxis while it ends with @paytm on PayTM.

How Would it Affect Third-Party Apps?

It is believed that this rule could cause a major effect on the user experience of third-party UPI apps. The main cause of rapid innovations in the UPI platform was only because of the user experience created by Google Pay and PhonePe. If you have noticed, there are options ranging from paying your monthly expenses to even splitting a bill amongst your friends. These are the main features that popularised digital payments in India.

With this new limit, the third-party apps would have to remove small online merchants from their platforms. They would also have to cut back on incentives such as coupons and cashback. These were important features that allowed payment apps to attract more individuals to join the digital movement. More importantly, the number of UPI transactions that an individual can conduct per day would be cut down from these apps. Once the daily limit has been reached, people would have to use less-popular UPI apps to make essential payments. 

“This announcement has come as a surprise and has implications for hundreds of millions of users who use UPI for their daily payments and could impact the further adoption of UPI and the end goal of financial inclusion,”- Sajith Sivanandan, the Business Head at Google Pay India.

The Entry of WhatsApp Pay

Facebook-owned WhatsApp has finally received approval from RBI and NPCI to launch its digital payment platform in India. According to the company’s records, the messaging app has an active user base of almost 40 crore members in our country. This would be a great advantage for the company as it makes its entry into the UPI market. Similar to the existing UPI payment apps, WhatsApp will not be charging a transaction fee. A report from the Times of India suggests that WhatsApp could end up achieving a market share of about 30%. This would automatically lead to a decline in the share of both Google Pay and PhonePe in the UPI industry.

However, they are faced with some major hurdles. Even with such a large user base, the regulators have ensured that WhatsApp Pay will only be launched in a phased manner. What this means is that only 2 crore users will be able to use the platform to conduct transactions in the initial stages. Also, the introduction of the 30% cap would harm the user experience of the app. It seems like the entry of WhatsApp Pay has come at a rather difficult time in this highly competitive industry. 

The Future of UPI in India

The future of payments is digital. India has successfully launched multiple methods (such as NEFT, IMPS, UPI) to support this transformation. According to a report from Crisil in 2019, digital payments in India seem to grow at a CAGR of 12.7%. It may jump to Rs 4,055 lakh crore in FY24 with a five-year CAGR of 20%. Also, the prediction shows that all UPI payments will dominate the payments space with 59% payment transactions. For the first time in India, UPI payments had exceeded ATM cash withdrawals due to lockdown restrictions this year. These are very promising figures that would ultimately help our country to establish a much easier flow of funds.

What we are witnessing now is a complete restructuring of UPI payments. This method was completely free of charge and a much-loved mode of online transactions. Now, banks which offer UPI service in our country have started to charge a specific transaction fee on all UPI transfers. Several banks such as Axis Bank and Kotak Mahindra Bank are already charging Rs 2.5 for amounts of up to Rs 1,000. These charges are levied after a free transaction limit is crossed. So, it would be applicable to all the payment apps we had mentioned earlier.

Even if these small charges are imposed, we could say that the usage of UPI transactions across our country would not decline. It would remain to be one of the most convenient and user-friendly modes of payment for all our needs. Let us look forward to how these payment companies would implement the new rule. Only time will tell if users would react positively to these changes.