AIBDA’s concerns over interest waiver for borrowers.

It is usually the case that someone’s gain is else’s pain. That’s the reason while making a decision, both sides of the coin have to be considered. Although, it’s also true that taking care of everyone’s interest is almost impossible. But then, there’s this condition known as being better off. This means, deciding something which causes the least damage because many a time there are situations when nobody is wrong and yet, a decision has to be made in someone’s favor.

This situation fits perfectly to the hearing over interest waiver during the period of lockdown that has been sought through a PIL in Supreme Court. All India Bank Depositors Association (AIBDA) is of the opinion that depositors would be the biggest losers if the interest waiver is approved. Just to give you a background, a PIL has been admitted by the Supreme Court of India seeking an interest waiver in context of the lockdown for the period of moratorium. The reasons for AIBDA’s worry are also valid. Read on to find out.

What’s the Matter?

First of all, this comes at a time when already the banks are suffering from higher NPAs. Now, according to AIBDA, if the banks do not charge an interest for the moratorium period from the borrowers, it would become extremely difficult for them to honor their obligations towards the depositors. As per AIBDA, if this happens, it would also be a violation of a section of the Baking Regulation Act which protects the interest of depositors.

To prevent the dire consequences, AIBDA has requested the Reserve Bank of India to freeze the deposit rates at the level at which they were before the pandemic broke out. AIBDA believes that this is the only way with which depositors’ interest could be prevented. Let us also tell you that the deposit rates have already gone down during the lockdown. So, while banks are already paying only 2-3% interest to the depositors, if this goes down further, then definitely it won’t be good for the depositors.

However, the other side of the coin is that most the loans taken during the lockdown belong to the middle-class income group and if the interest is not charged they would get a sigh of relief. Middle class suffers the most as government schemes benefit the poor while the rich sustain such crises easily. Ultimately, it depends upon the Supreme Court on how it hears the case and decides. Will the depositors’ interests get protected or will the interest waiver be approved? We’ll have to wait and watch.

Vodafone Idea Limited (VIL)

A joint venture between Vodafone (44.39%) and Aditya Birla Group (27.18%) resulted in Vodafone Idea Limited. Vodafone Group, one of the world’s largest telecom companies having its presence in 67 nations in terms of mobile operations and 19 countries in terms of broadband operations.

This group has a consumer base of 625 million mobile customers, 27 million broadband customers, and 22 million TV customers. The other partner is an Indian origin conglomerate group who is on the league of fortune 500 companies in the world. Around half of the revenue of the Aditya Birla group comes from its overseas operation in 36 countries. It was named the AON best employer in India 3 times in the last 7 years.

VIL is committed to connect every Indian and provide world-class digital experiences to its customers. With this merger, VIL was able to optimize its capital expenditures through equipment reuse leading to lower costs. It prioritised its investments to focuses on providing better services to existing customers in key profitable districts.

It was able to drive up its Average Revenue Per User (ARPU) by simplifying its pricing plans, including low value recharges for non-unlimited customers, leverage its Big data and analytics for improving service delivery and digitalization of customer acquisition.

This focused investment helped in improved customer experience resulting in improving profitability. It is a leading telecom operator in the country with 1,849.6 MHz spectrum operated through more than 1,98,000 Unique GSM cell sites, more than 3,76,000 broadband sites, 1.4 million retail touchpoints, and 11,000 branded exclusive stores. Its broadband network is spread across 2,73,000 towns and villages covering 69% of the population whereas its 4G networks cover approx. 65% of India’s population.

The company is facing fierce competition since the launch of the new 4G mobile operator in 2016 which led to significant erosion of ARPU and gross revenue dropped by 16% in the last two years. As of December 2019, the market share of major telecom players Reliance Jio, Vodafone Idea, Bharti Airtel, BSNL, and MTNL stood at 32.14%, 28.89%, 28.43%, 10.26%, and 0.29% respectively.
 

The combined mobile market share of Vodafone and idea before the launch of Jio was 36.65% (19.46% + 17.19%) which was reduced to 28.89% by Dec 2019. Also, the firm’s future depends on the Supreme court verdict in ₹ 51,400 Crore adjusted gross revenue (AGR) case.

India is one of the world’s fastest-growing economy with the population increasing day by day. With the increasing penetration of smartphones and internet awareness, data usage is going to increase enormously in the near future which may be proved to be a huge potential market with great growth opportunity.
 

Road ahead:

During the recent lockdown, the firm has observed a huge surge in data usage and has provided services via digital modes. Earlier, around 35% of recharges of all telecom companies were processed digitally which have increased up to 65% during lockdown even after travel restrictions are removed. Now, in the post lockdown era of new normal where more people have adapted to online services (education, contactless payments, and telemedicine, etc), work from anywhere, and social distancing are becoming common, offering a significant business opportunity to telecom operators.

Also, the merger of Vodafone and Aditya Birla group is expected to complete by the end of June 2020. In response to that, the major telecom operator is changing the operating model by focusing investments in developing digital infrastructure and converting its circle based operating model of 22 circles into a cluster-based model with 10 clusters.

This is expected to be leaner, agile, and cost-efficient for addressing customer needs. This shows that the firm has clear intentions to stay in the market and fight against fierce competition in India.

This increase in digital capacity with help in providing real-time customer services, decreasing distribution costs, and reducing call-center operations which will help in reducing operational costs. With such an increase in demand for data, the firm may further lower network costs.

Given the emergence of online businesses and services, to scale up, the requirement for cutting edge tools and technologies such as analytics, big data, cloud computing, artificial intelligence, and machine learning will also increase. VIL is planning to create a strong cloud computing platform linked with its networks to address and tap the new business opportunity.