Dou­ble Cheer for Slow­ing Econ­omy Nifty Closes Above 10,000; RIL Leads Stocks Rally

In­dus­trial growth hits 9-month high in Aug; con­sumer in­fla­tion stays steady in Sept

The Economic Times - - Front Page - Our Bureau

New Delhi: The gov­ern­ment had twin cause for cheer with in­dus­trial growth pick­ing up pace to a nine-month high in Au­gust and con­sumer in­fla­tion re­mai- ning steady in Septem­ber, ex­ceed­ing ex­pec­ta­tions and rais­ing hope the econ­omy is set for a re­vival after slump­ing to a three-year low in the June quar­ter.

The in­dex of in­dus­trial pro­duc­tion (IIP) rose 4.3% in Au­gust, re­vers­ing a con­trac­tion in June and faster than a 0.9% rise in July, ac­cord­ing to data re­leased by Cen­tral Statis­tics Of­fice on Thurs­day. In­fla­tion based on the con­sumer price in­dex (CPI) was at 3.28% in Septem­ber, un­changed from Au­gust, the statis­tics of­fice said. Bench­mark indices ended up 1.1% on Thurs­day with the Nifty clos­ing a lit­tle over the 10,000-mark, led by Re­liance In­dus­tries surg­ing nearly 4% to a record high ahead of its sec­ond quar­ter re­sults. Sen­sex ended up 348.23 points at 32182.22.

In­dus­try play­ers con­tend the process of com­plet­ing a full KYC can be even more oner­ous for cap­tive wal­let play­ers such as Ola Money, PhonePe and Ama­zon Pay, where the scope of use by a cus­tomer is limited, re­duc­ing the in­cen­tive to park money in such wal­lets. “One of our con­cerns is that even lowusage wal­lets are re­quired to do a KYC be­yond 12 months. This adds fric­tion to cus­tomers,” said Sriram Ja­gan­nathan, vi­cepres­i­dent (pay­ments), Ama­zon In­dia. “We urge the reg­u­la­tor to re-ex­am­ine this in line with in­ter­na­tional guide­lines, and adopt a frame­work of pro­por­tional KYC,” he said.

Ex­perts are of the view that the cen­tral bank’s move will lead to a re­order­ing of the busi­ness land­scape in a mar­ket where both large, well-funded com­pa­nies like Alibababacked Paytm and small niche play­ers jos­tle for space.

“The wal­lets space is a three-to-four large play­ers mar­ket and may open up scope for 1012 niche play­ers … more con­sol­i­da­tion is ex­pected in this sec­tor,” said Vivek Bel­gavi, part­ner, fin­tech leader at PwC.

While the dom­i­nant play­ers are ad­e­quately cap­i­talised and can meet reg­u­la­tory re­quire­ments, in­dus­try watch­ers fear the new norms will sound the death knell for small PPI (pre­paid pay­ment in­stru­ment) li­cence hold­ers, typ­i­cally those which of­fer ser­vices such as do­mes­tic re­mit­tance or niche pay­ments. An ex­am­ple would be Alibaba and Soft­Bank-backed Paytm, which has said it will in- vest $500 mil­lion by 2020 to en­sure its tar­geted 500 mil­lion cus­tomers are KYC-com­pli­ant.

“With in­ter-op­er­abil­ity, there is a need for wal­let com­pa­nies to have enough money to be able to han­dle a large amount of in­com­ing pay­ments from other wal­lets,” said Vi­jay Shekhar Sharma, founder of Paytm. “Also, it will re­quire only se­ri­ous play­ers to en­ter this space with a strong busi­ness model.”

With wal­lets be­com­ing full-KYC prod­ucts and lim­its on bal­ance be­ing en­hanced to .₹ 1 lakh, in­dus­try in­sid­ers ques­tioned the need for a sep­a­rate pay­ments bank li­cence, which works on a sim­i­lar prin­ci­ple.

“We will be­come fully in­ter-op­er­a­ble, have higher net worth, even­tu­ally will have ful­lKYC users and will have bal­ance lim­its same as pay­ments banks — all this kills the sep­a­rate pay­ments bank propo­si­tion,” said Mo­biK­wik’s Singh.

Some play­ers also see the change in reg­u­la­tions as an op­por­tu­nity to catch up with mar­ket lead­ers like Paytm. Flip­kart-owned PhonePe, for in­stance, feels that since it started off as a UPI-based app, its ticket sizes are higher than that of wal­lets, which makes cus­tomers more pli­able to do KYC. PhonePe CEO Sameer Nigam feels the ex­ist­ing in­fra­struc­ture of Flip­kart’s on­line re­tail busi­ness can be lever­aged. “If it is pa­per KYC, since we have a sis­ter com­pany like eKart (Flip­kart’s lo­gis­tics arm), our abil­ity to get it done will be much bet­ter. Flip­kart is al­ready go­ing to 10 mil­lion house­holds any­way,” said Nigam. (With ad­di­tional re­port­ing by

Mugdha Vari­yar)

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