Also in this letter:
■ Talk of SoftBank going private resurfaces after record loss
■ Clevertap raises $105 million in funding led by CDPQ
■ Seven in 10 startup founders bullish on near-term business growth: survey
RBI tightens scrutiny over digital lending apps with new guidelines
The Reserve Bank of India on Wednesday issued detailed guidelines that will increase scrutiny over digital lending apps and lenders who engage with them.
Catch up quick: In January 2021, the central bank had set up a committee to formulate norms on digital lending after receiving several complaints of malpractice against such apps.
In November, the committee proposed stricter rules for digital lenders and a self-regulatory body for participants in the digital lending ecosystem.
The RBI has now accepted some of these proposals and said others, while accepted in principle, need further examination.
Details: Only regulated entities such as banks and shadow banks will be allowed to disburse and collect repayments on loans, and this will not be left to third parties, the central bank said.
- The fee paid to apps will now have to be borne by the lenders and not the borrowers, it added.
- The central bank also addressed concerns over data collection. “Data collected by DLAs (digital lending apps) should be need-based, should have clear audit trails and should be only done with prior explicit consent of the borrower,” the RBI said.
- It also banned automatic increases in credit limits without the explicit consent of the borrower, and said interest rates and other charges must be clearly communicated to the borrower.
- Lenders will also have to provide a cooling-off period during which borrowers can exit digital loans by paying the principal and the proportionate costs without any penalty.
- Entities regulated by the RBI will also have to ensure that all loan service providers they engage have a nodal grievance redressal officer to deal with complaints
Impact: While it is too soon to tell how the new rules will affect India’s fintech companies, what’s certain is there will be some back-and-forth as firms seek clarity on the guidelines.
In June, the RBI barred non-banks from loading prepaid wallets and cards with credit lines, throwing the fintech industry into turmoil. Some companies have since updated their terms, while others such as Slice have changed their business models altogether.
Talk of SoftBank going private resurfaces after record $23 billion loss
Talk that SoftBank would be better off as a private company has resurfaced after the Japanese investment powerhouse posted a record $23 billion loss, Bloomberg reported.
SoftBank has evolved rapidly over the past decade from a telecom company and strategic investor to the world’s biggest pool of tech capital. It’ll look even more like a pure investment house as it continues to buy back its own stock and sell or pare assets, including its stake in Alibaba.
“There is little reason to be listed on the stock market,” SMBC Nikko analyst Satoru Kikuchi wrote. “We think changes in the very form of the company, for example an MBO, could be coming in the not-too-distant future.”
Ongoing debate: SoftBank founder Masayoshi Son – the company’s top shareholder with a near-28% stake as of end-March — has debated the idea of going private with his inner circle for at least five years.
When SoftBank’s shares tumbled in 2020, Son began conversations with advisers and lenders including Elliott Management and Abu Dhabi sovereign wealth fund Mubadala Investment Co.
That speculation evaporated after Son unveiled plans to sell about $43 billion in assets to pay down debt and buy back stock.
Buybacks: The company has committed to a series of big buybacks in recent years to bolster its stock price. This week, it said it would buy up to 400 billion yen ($3 billion) of its own shares, on top of a programme to buy back up to 1 trillion yen worth of its stock through September.
Clevertap raises $105 million in funding led by CDPQ
Customer engagement and user retention software platform Clevertap has raised $105 million in a Series D funding round led by global investment group CDPQ.
We had reported on August 9 that the company was looking to raise $75 million from CDPQ and IIFL, at a valuation of $750-775 million — double its last round when it picked up $35 million from Tiger Global and Sequoia.
IIFL AMC’s tech fund and existing investors Tiger Global and Sequoia India also participated in the round.
The funding comes at a time when VCs have turned cautious due to worsening macroeconomic conditions despite raising a record amount of money. Indian startups have witnessed a 37% dip in funding in Q2 this year as rising inflation and escalating geopolitical tensions continue to weigh on the global economy.
Tweet of the day
Seven in 10 startup founders bullish on near-term business growth: survey
A recent survey titled ‘India Sentiment Outlook Survey’ by venture capital firm 100X VC has found that 76% of founders remain bullish on near-term business growth despite a gloomy economic environment, while 52% plan to raise funds in the next three months.
Details: The founders surveyed identified angel investors, angel networks and venture capital funds as the preferred direct funding sources, with 49% of founders saying fundraising has improved significantly in the post-pandemic world.
Quote: “The survey result indicates a mixed reaction from founders and investors to the current market landscape. However, we are optimistic that there is still room for early-stage funding with credible and large investment deal flow,” said Ninad Karpe, partner at 100X.VC.
Investors echoed founders’ sentiments, with about 45% expecting India to have 100-200 more unicorns by 2025.
Former Twitter worker convicted of spying for Saudi Arabia
Ahmad Abouammo, an ex-media partnership manager for Twitter in the Middle East, has been convicted of spying for Saudi Arabia by accessing users’ private data, along with six other charges.
Tell me more: The FBI first charged Abouammo in 2019 for acting as an agent of Saudi Arabia without registering with the US government. According to the FBI’s complaint, Abouammo had allegedly accessed the user data of over 6,000 Twitter accounts, including at least 33 usernames for which Saudi law enforcement had submitted emergency disclosure requests to Twitter.
The case marks the first time the Saudi kingdom has been accused of spying in the US, after countless rumours over the last few years.
Musk sells more Tesla shares: Meanwhile, Elon Musk sold $6.9 billion worth of Tesla shares, the first such sale since backing out of his deal to buy Twitter. Musk has sold about $32 billion of Tesla stock in the past 10 months.
Today’s ETtech Top 5 newsletter was curated by Zaheer Merchant in Mumbai and Ruchir Vyas in New Delhi. Graphics and illustrations by Rahul Awasthi.
