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Industry roundup: 28 December

Nepal co-operatives get financial lifeline

Nepal’s National Cooperative Bank Limited (NCBL) has set up a Nepalese rupee (Rs) 2 billion (£6.2bn, US$8.3bn) liquidity management fund, aimed at helping many of the South Asian country’s cooperatives that have recently experienced a liquidity crunch. Nepal is reported to have around 30,000 co-operatives that collectively cater to 45 million members.

KB Upreti, chairman of the NCBL, said a working guideline had been agreed for distributing money from the fund to avoid potential shortages of funds for loans by the cooperatives. “By utilising the fund, we will be providing collateral free loans up to Rs 10 million to the cooperatives that are in need of money to lend in production businesses,” said Upreti.

Nepal’s banks and financial institutions (BFIs) have recently faced a liquidity crunch due to a mismatch between their lending and relatively low deposit collections. Most Nepalese banks have crossed the limit of 90% of the credit-deposit (CD) ratio.

Over the past few weeks,cooperatives have also begun to feel the squeeze, with insufficient cash to provide loans. According to Minraj Kandel, president of the National Cooperative Federation of Nepal, the demand for loans from cooperatives increased massively as BFIs were increasingly unable to offer loans to their clients.

Reports suggest that Nepal’s cooperatives have been mobilising as much as Rs 500 billion in deposits of their members. However, there is no strict mandatory framework to track the deposits lending of the co-operative businesses as those being imposed for the BFIs. 

Milestone for China’s digital RMB tax payment system

China’s digital Renminbi (RMB) project has passed a further milestone according to Ecns.cn, the official English website of China News Service (CNS). It reports that Changsha, capital city of Central China's Hunan province, successfully pioneered its digital RMB application to the whole process of tax payment on 25 December to became the first city in China to achieve that goal.

Taxpayers in Changsha who open a “digital renminbi” wallet can choose one of four methods—via Hunan Provincial Electronic Taxation Bureau; mobile banking app or online banking; taxation hall, and bank counter—to pay taxes in RMB. The entire process of payment to the national treasury and reconciliation is carried out through digital RMB.

Bai Wenxi, chief economist at IPG China, told Securities Daily that Changsha took the lead in opening the digital RMB tax payment system, which broadened the application scenarios of digital RMB and also made the process more convenient and efficient.

Using digital RMB for tax payment can save transaction costs while ensuring authenticity and security, to improve the efficiency of the payment process, said Su Xiaorui, an analyst from Beijing-based consultancy Analysys, as quoted by Securities Daily. Su added that features such as controllable anonymity lay a solid foundation for using digital RMB to detect tax evasion.

In addition to Changsha, Shenzhen, Beijing, Xiong'an New Area, Hainan and Shanghai have also piloted partial tax payment services in digital RMB.

In October, a Hong Kong resident who set up a business in Shenzhen used digital RMB to pay his personal income tax in the city and last month the Beijing Municipal Taxation Bureau pioneered the city’s first commissioned tax collection through digital RMB payment. This month has seen Xiong'an New Area successfully implement a tax payment service via digital RMB at a bank branch.

Zheng Lei, chief economist at Glory Sun Financial Group, told Securities Daily that tax payment is becoming a popular application for digital RMB, which will circulate like paper money in the future.

Zheng added that unlike other electronic payment methods, digital RMB will circulate in the same currency payment and circulation environment, which can leave traces and enable supervision throughout the whole process. As digital renminbi is an electronic form of cash, if all paper currency is phased out, the transparency and traceability of currency circulation will be improved.

Reduce use of new banknotes, urges MAS

The Monetary Authority of Singapore (MAS) has urged the city state’s citizens to reduce the use of new banknotes in red envelopes and red packets – known as hongbao – for the upcoming Chinese New Year to “support the environment and reduce queues at bank branches”. Hongbaoare traditionally handed out by married couples to children during New Year festivities as a token of good luck.

In a press release the authority recommended substituting e-hongbao or used notes, to reduce the environmental impact of issuing new notes. The MAS added that it issues about 100 million new notes annually for Chinese New Year and other festive periods. Hongbao are also used by some business owners and supervisors from their own funds and given to employees as a token of good fortune for the year ahead.

A “large proportion” of the notes, particularly the S$2 bills, are returned after Chinese New Year and subsequently destroyed as it “far exceeds normal circulation demand”, the authority added. “The carbon emissions from the production, transportation, and destruction of such new notes each year is highly wasteful, unnecessary, and impacts the environment negatively.”

The authority added that it has been working with the Association of Banks in Singapore (ABS) and financial technology firms to develop e-gifting alternatives to physical hongbao.

“E-hongbao are a safe, simple, and speedy way to convey blessings to family and friends and also enable family and friends who may be unable to meet during the pandemic to continue with the tradition of festive gifting,” it said.

“Those who prefer to give physical hongbao while doing their part for the environment are urged to reuse notes or give QR gift cards instead of using new notes. Most of the notes in circulation in Singapore are clean and of good quality, and suitable for use in festive gifting.”

Japanese payment firms unite to combat fraud

Six of Japan’s payment companies, including NTT Docomo and Line Pay, are reported to be launching an information-sharing initiative to prevent fraud on smartphone-based payment services.

According to Nikkei Asia, the move is in response to the country’s surge in phishing attacks, which fraudsters use to steal IDs, passwords and account numbers by directing users to fake websites. Data from the Council of Anti-Phishing Japan shows that the number of reported cases jumped to over 224,000 in 2020, a fourfold increase from the previous year, and reached 460,000 in the 11 months January to November 2021

A framework for information sharing will be created next spring 2022 by the Payments Japan Association, whose members are banks, credit card companies and smartphone payment providers.

The smartphone payment subsidiaries of telecommunication companies NTT Docomo and KDDI, Fukuoka-based electronic ticketing company Commoney, the smartphone payment subsidiaries of convenience store chain FamilyMart, and Line and Rakuten Group are the initial council members.

Tokyo-based security company Caulis will develop the database in which companies register phone numbers and addresses that have been used illegally. By linking the database with their own systems, companies will have more measures available, such as quick identification when an account is being created using a registered phone number. The specifics of the information that can be shared will be worked out in consultation with relevant ministries.

In autumn 2020, there were 127 cases of fraudulent withdrawals from NTT Docomo's smartphone payment service involving a total of 28.5 million yen (JPY). Large-scale fraud was also found with SoftBank-backed PayPay in 2018 and Seven-Eleven's smartphone payment service in 2019.

Companies are individually responsible for preventing criminals from using fraudulently obtained bank account and credit card information to withdraw cash and points from the services.

It is planned for more participating companies to join the initial six founding members. The group will invite banks, e-commerce operators and other financial service providers on the Internet to participate in the system to increase fraud detection efficiency. The Nikkei Asia report observes that this system contrasts with the US, where anti-money laundering measures are strictly enforced and information about fraud is compiled by law enforcement.

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