IDBI Bank launches ‘Project Nishchay’ for turnaround (BL, BS 27.09.17)
IDBI Bank said it has launched ‘Project Nishchay’ in partnership with The Boston Consulting Group (BCG) to accelerate its turnaround programme and improve financial performance. The project will be led by senior management at IDBI Bank along with BCG, the public sector bank said in a statement. IDBI Bank MD and CEO Mahesh Kumar Jain said “BCG will assist us to identify areas for cost containment and revenue maximization leading to sustainable growth and profitability of the Bank. “With the support from our consulting partner, we hope to identify and address existing gaps, capitalize on core strengths and improve existing products and processes.” Coordinating across multitude of initiatives, the Bank will focus on four key areas - revenue enhancement, cost control and reduction, asset productivity and overall program management in consultation with BCG.
Karnataka Bank’s Aadhaar centre (BL 27.09.17)
Karnataka Bank opened its first Aadhaar enrolment and updation centre at the Sanjaynagar branch in Bengaluru. A press release said here that the bank will come out with 80 such centres across India in a phased manner. Citizens can make use of these centres for getting their Aadhaar number and making modifications, if any, in Aadhaar records, it added.
Ujjivan Small Finance Bank collects deposits of Rs. 1000 cr in seven months (BL 27.09.17)
The 8% interest rates offered on deposits has enabled Ujjivan Small Finance Bank to collect Rs 1000 Cr in seven months of its operations. Ittira Davis, Chief Operating Officer said that there has been an encouraging response for the interest rate offered on savings with a half per cent higher rates for senior citizens vis-a-vis 6.5-7% in other banks. With this growth momentum, the bank hopes to garner Rs1500-2000 Cr in the first year of operations, he said. The bank, according to him, is offering SB account with no charges for minimum balance and also providing host of other benefits such as doorstep banking, mobile internet, phone banking etc. The hand held device for biometric authentication for instant account opening can also be used for cash deposits, withdrawals and fund transfers at the customers doorstep. Asked whether the bank will review the interest rates, he said it all depends on the market conditions. “We will hold the rates for time being”. Davis said that the bank has established its presence across all four regions in the country in the seven months of its launch and is also looking at offering remittances services to transfer money within Ujjivan and other bank accounts in a very reasonable and affordable manner. With 87 branches, the bank has presence across Kerala, Tamil Nadu, Karnataka, Pondicherry, Gujarat, Maharashtra, New Delhi, West Bengal, Himachl Pradesh, Uttar Pradesh, Punjab and Haryana.
Reducing indents for clerical recruitment in PSBs worrisome, say unions (BL, FE 27.09.17)
There is growing concern that public sector banks are ‘progressively reducing indents’ for recruitment year after year. The headcount number is sought to be reduced even as banks find it difficult to serve customers thanks to an expanding bouquet of services and schemes, according to the unions. This is unacceptable, said C.H. Venkatachalam, General Secretary, All India Bank Employees' Association, in a letter to peer unions in the industry. The reducing indents would result in short supply of clerical staff, even for filling up vacancies arising on account of retirements and promotion, leave alone extra staff required as part of business expansion. Venkatachalam said that there appeared to be a design in the reduced intake of clerical staff, in particular. He requested peer unions to take up this matter seriously with the respective banks. He cited statistics to drive home the point that available manpower in banks has failed increasingly to sync with the increased business volumes during the past three years. At the end of 2013-14, the banks had deposits worth Rs. 65.9 lakh Cr, Rs. 51 lakh Cr in advances and Rs. 116 lakh Cr in total business. The number of workmen in public sector banks was 4.99 lakh. In the next year (2014-15), the deposits had grown to Rs. 71.95 lakh Cr, advances to Rs. 54.76 lakh Cr and total business to Rs. 126 lakh Cr. But the number of workmen had reduced to 4.84 lakh. The number of workmen employed reduced further to 4.79 lakh in 2015-16 even as deposits grew to Rs. 74. 86 lakh Cr, advances to Rs. 55.94 lakh Cr and total business of public sector banks rose to Rs. 130 lakh Cr. This is a worrisome trend, and had to be reversed even if it warranted industrial level strike action, Venkatachalam told fellow unions. According to statistics put out by the Institute of Banking Personnel Selection (IBPS), the reduced level for recruitment is evident in the indents for 2017-18 and proposed for 2018-19.
Empowering postmen to become door-step bankers (BL 27.09.17)
In a bid to empower about three lakh postmen in the country, IndiaPost, which also has the licence to run a payments bank in the country, will be educating and training them to act as banking correspondents. The postmen, with smartphone-cum-biometric reader, printer and card reader, will go door-to-door to educate people about cashless transactions. This move by IndiaPost, a government entity, also resonates with the Modi government’s initiative to make India a less-cash economy. Ashok Pal Singh, CEO of IndiaPost Payments Bank said the government is trying to encourage people to do more and more cash-less transactions in the country and India Post’s initiative to employ postmen will not only help the people in smaller towns transact from the comfort of their homes with a click, but would also help the humble postmen stay relevant in this dynamic world and contribute to the fintech revolution. “We have around three lakh postmen in the country and they will be carrying a micro-ATM sort of device, with the help of which our customers will be able to transact digitally at their door-steps,” Singh said, adding that the IndiaPost Payments Bank will soon be launching a mobile app for the same. With the help of the device, customers will be able to not only deposit their money in their accounts but also pay all kinds of utility bills, book tickets for train and buses, book gas cylinders, pay for services at public hospitals, fees at government schools and buy financial products such as mutual funds, insurance and ETFs, among others. According to experts, the initiative will not only empower people in smaller towns and villages who have to travel long distances to a physical branch but will also result in financial inclusion faster that expected.
Allahabad Bank to introduce 2-tier savings bank interest rate from October 1 (FE 27.09.17)
Close on the heels of some public and private sector banks slashing their interest rates on savings bank accounts, Allahabad Bank is going to introduce 2-tier savings bank interest rate with effect from October 1 this year. For balance less than Rs 40 lakh, interest rate has been set at 3.5% per annum, while for balances of Rs 40 lakh and above, interest rate remains unchanged at 4% per annum. It may be recalled that a host of banks, including SBI and Bank of Baroda, had recently slashed their interest rates on savings bank accounts. For instance, State Bank of India, India’s largest commercial bank, had on July 31 slashed interest rate on savings account deposits by 50 basis points to 3.5% on balance of Rs 1 Cr and below. However, it continues to offer 4% interest on savings account balance of Rs 1 Cr and above. “The decline in the rate of inflation and high real interest rates are the primary considerations for warranting a revision in the rate of interest of savings bank deposits,” it had said. That was followed by Bank of Baroda slashing its interest rate on savings bank accounts by 50 bps to 3.5% on deposits of up to Rs 50 lakh. “We wish to inform you that it has been decided to introduce a 2-tier savings bank interest rate (from) August 5…,” the bank had said in a regulatory filing. It had reduced the interest rate on savings bank balance of up to Rs 50 lakh to 3.5% from the earlier 4%. However, for balance above of Rs 50 lakh, the bank had retained the rate at 4%.
Bank of India defers perpetual bond issue due to high yield demand (FE 27.09.17)
Bank of India (BoI) deferred its plans to issue additional tier-1 bonds or perpetual bonds as yields demanded by investors were higher than expectations, sources aware of the matter confirmed. Additional tier-1 bonds or perpetual bonds do not have a fixed maturity period. For the same reason, yields on these instruments tend to be a bit higher than that of a conventional non-convertible debentures. These bonds qualify as tier-I capital and boost the capital adequacy ratio of banks “The lowest bid received by BoI stood at 11.5%. The bank then decided not to go ahead with its perpetual issue. We believe that the bank might have expected a yield close to 10.5-10.75%,” said a bond dealer. Bond market participants pointed out that the recent bout of volatility in the market has hardened yields. “G-sec yields are rising and the appetite for perpetual bonds seems to be a bit subdued. Banks are also not in a hurry to issue bonds under current market conditions,” said a bond arranger. The benchmark yield rose five basis points on Tuesday to end at 6.67%. Bank of India could not be immediately contacted to confirm the story. This is not the first time that a perpetual bond issue has been deferred. Recently, Oriental Bank of Commerce had cancelled its perpetual bond issue due to higher pricing demand from investors.
NBFCs, new lenders attracting bank talent with fat packages (FE 27.09.17)
At a time when banks are saddled with growing NPAs and managing regulations, non-banking finance companies (NBFCs) and newer, nimbler banks seem to be gnawing at traditional banking talent. Over the last 3-4 years, NBFCs have done better than banks as they had lesser issues of bad loans and profitability and fewer controls enabling them to expand, contribute more to credit growth and tap into growth segments, such as mortgages, home loans and gold loans. “NBFCs are looking to hire similar talent to banks — analytics, control functions and digital skills are becoming important,” says Roopank Chaudhary, associate partner, McLagan Aon Hewitt. Sample these. A year back, a very senior retail banker of a top multinational bank signed up with a much smaller new bank, an erstwhile microfinance institution. Again, over the last two years, about four-five people in senior management have quit a top public sector bank to join a new bank, which on average has more than doubled their pay packages. Or, for that matter, a vice-president of a private bank joining an NBFC at two times his pay a couple of years ago. Annual salary increases for NBFCs have also outstripped that of banking in last two years. Such stories are gathering steam with every passing day as NBFCs and smaller banks carry on expanding in Tier-3 and 4 towns with fewer restrictions. “NBFCs are paying almost three-four times of what people make in banks,” says Joydeep Dutta Roy, head – HRM & capability building, Bank of Baroda. Erstwhile microfinance institutions that have turned into small banks and NBFCs are well penetrated in Tier-3 and 4 towns where there is seemingly a strong demand for capital. Unlike larger banks, reach is not a hindrance for them as they have the franchise. “What they are struggling with is getting the right skill set to be able to scale up, expand and diversify, so they are hiring traditional bankers,” says Chaudhary.
Standard Chartered, Citibank become shareholders in Swift India (FE 27.09.17)
Standard Chartered and Citibank have picked up stake in global financial messaging service Swift’s local arm, becoming the first foreign lenders to invest in the platform. Swift India was formed in 2012 as a joint venture between the global cooperative Swift Scril and nine leading domestic banks. This is its second round of capital raising, an official statement said. Details on the stake picked up by the two lenders or the valuations were not shared. Other lender shareholders in the company include Axis Bank, Bank of Baroda, Bank of India, Canara Bank, HDFC Bank, ICICI Bank, Punjab National Bank, State Bank of India and Union Bank of India. Both Standard Chartered Bank as well as Citi linked the investment to their respective efforts to promote digitisation. “Given our long association with SWIFT across markets, Swift India’s corporate to bank connectivity was a logical extension of our endeavour to help clients automate and digitise flows, whilst gaining efficiency through standardisation and process automation,” Stan Chartered’s head of transaction banking Sanjay Gurjar said. “This association will help enable efficiencies in managing corporate-to-bank digital flows in India on a secure and robust platform,” Citi’s South Asia head for treasury and trade solutions, Debopama Sen, said.
Capital-starved PSBs Line Up QIPs (ET 27.09.17)
Indian Bank, Dena Bank, Union Bank of India (UBI), Syndicate Bank and Bank of India (BoI) are among a clutch of public sector lenders considering a share sale to institutional investors through a qualified institutional placement (QIP) following similar sales by the SBI and Vijaya Bank earlier this year. Chennai-based Indian Bank is leading the race to launch the QIP and has hired four investment banks, IDBI Capital, ICICI Securities, Citibank and B&K Securities to manage the sale. Dena Bank will have IDBI Capital and Motilal Oswal to manage the sale. “Indian Bank is among the best placed among public sector lenders in terms of asset quality and is looking to raise up to 1,500 Cr. Syndicate too has low NPAs. Then there are the large lenders like UBI and BoI, which have gross NPAs in double digits but a good franchise. All of them are contemplating tapping the markets,“ said an investment banker working on at least two of these issues. Indian Bank, with 7.21% gross NPA in the quarter ended June, has the lowest percentage of bad loans to total advances among PSU lenders. Vijaya Bank with 7.31% gross NPAs raised 700 Cr through QIP last month. SBI had raised 15,000 Cr in the biggest such sale in June. Public sector banks need to raise 1.10 lakh Cr from the market as per the government's Indradhanush plan which will kick in from March 2019.
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GST collections slowdown in August to Rs 90,669 Cr (BL, BS 27.09.17)
The government collected Rs 90,669 Cr goods and services tax (GST) for August, a little lower than the Rs 94,063 Cr collected in July. This is also lower than the Rs 91,000 Cr which should have come to the Centre and states in a month, given the Budget Estimates and assumed growth rates in receipts for 2017-18. Only 55% of assessees paid taxes for August, compared to 64% for July. But, the figures should be compared cautiously. About Rs 92,283 Cr GST was collected for July till August 29, while Rs 90,669 Cr was garnered till September 25. Hence, growth in collections was flat in August, compared to July. As much as Rs 94,063 Cr was paid till August 31. About Rs 14,402 Cr came from the Central GST (CGST) in August, against Rs 14,894 Cr in July (paid till August 29); Rs 21,067 from State GST (SGST), against Rs 22,722 Cr in the previous month; and Rs 47,377 Cr from Integrated GST (IGST), compared to Rs 47,469 Cr in July. Of the IGST, Rs 23,180 Cr came from tax on imports, against Rs 20,964 Cr in July, according to figures released by the finance ministry. The cess over the peak rate of 28% garnered Rs 7,823 Cr in August, from Rs 7,198 Cr in July. Of the August amount, Rs 547 Cr came from cess on imports. The cess will be used to pay states that suffer losses because of the GST. Taking a broad look at the numbers, it is clear that two figures — the IGST on imports and cess collections were higher in August. This means imports in the month were higher than in July, and items that draw cess, such as aerated drinks, cigarettes, cars, and coal, were sold more, at least in value terms.
ADB lowers India growth forecast for FY18 (BL, BS 27.09.17)
Asian Development Bank has downgraded India's growth projection to 7% for the current fiscal year, while lowering its forecast for the next financial year as well. "India's gross domestic product (GDP) growth is downgraded to 7% in financial year 2017-18, a 0.4 percentage point drop from the April forecast. In financial year 2018-19, the forecast is adjusted down to 7.4%, from 7.6%," ADB said in its Asian Development Outlook 2017 update. However, the multilateral lender said India continues its strong showing although demonetisation and implementation of the new goods and services tax regime have dented consumer spending and business investment. These short-term disruptions are expected to dissipate allowing these initiatives to generate growth dividends over the medium term, it added. The latest report remains sanguine for much of the developing Asia in growth metrics as a result of the broad-based recovery in global trade, robust expansion in major industrial economies and improved prospects of China.
Indirect tax share in GDP at all-time high of 10.5% (BS 27.09.17)
There has been a steady rise in indirect taxes (net of subsidies) in recent years, pushing up retail prices of commonly used goods and services. The combined share of Customs and excise duties, service tax, and value-added tax (VAT) in India’s gross domestic product (GDP) reached an all-time high of 10.5% during the financial year 2016-17, up from 7.7% three year ago. The previous high was 10.1% during the Rajiv Gandhi government in 1987-88. Experts say this could be one of the reasons for a demand slowdown in the economy, as higher indirect taxes raise retail prices, hurting demand as well as production. “Indirect taxes, such Customs, excise, VAT, and service tax, are part of the retail price for goods and services. As such, any increase in taxes raises consumer prices, adversely impacting their demand,” says G Chokkalingam, founder and managing director, Equinomics Research & Advisory.
Scope for RBI rate cut; fiscal stimulus ‘less likely’: ADB (BS, FE 27.09.17)
Asian Development Bank (ADB) expects the RBI to go for another round of rate cut in the latter part of 2017-18 in view of sluggish economic activities but does not see possibility of any major fiscal stimulus. The Monetary Policy Committee of the Reserve Bank reduced the key interest rate (repo) by 25 basis points to 6% in August. The committee is scheduled to come out with next bi-monthly monetary policy decision on October 4. “With inflation within the central bank target range of 2–6% and economic activity weakening in January–June 2017, the latter part of the fiscal year offers some scope for additional monetary easing,” ADB said in a report. In its ‘Asian Development Outlook 2017 Update’, the Manila-based multilateral lending agency had reduced India’s GDP growth forecast for the current fiscal to 7% from 7.4% owing to weakness in private consumption, manufacturing output and business investment.
RBI nod for banks to invest in PE, venture debt funds (BL 27.09.17)
The Reserve Bank of India has allowed banks to invest Category II Alternative Investment Funds (AIFs), which includes private equity and venture debt funds. It had earlier allowed banks to invest in the paid-up or unit capital of Category I AIFs, which include venture capital (VC) funds and social venture funds. In a circular issued on Monday, the RBI announced the amendment of its May 2016 order, permitting this investment and maintaining the cap at 10% of the capital of VC, PE and venture debt funds. It has, however, continued with the bar on banks investing in Category III AIFs, which include hedge funds. The latest RBI circular is part of a series of measures being taken by various regulators, including SEBI and IRDA, and the CBDT to ensure uniformity of regulations in the VC and PE industry and making them contemporary. The circular follows a series of discussions the industry has had with the central bank, through the Indian Venture Capital Association. Gopal Srinivasan, CMD, TVS Capital Funds, and Chairman, Indian Venture Capital Association, welcomed the open attitude of and interaction and coordination among various regulators, especially SEBI and RBI, which were also willing to listen to industry voices and make the regulations uniform and contemporary.
Centre to set up regulatory review committee to push industrial growth (BL 27.09.17)
The Centre will soon set up a regulatory review committee to look at issues inhibiting industrial growth and propose ways to get the growth momentum back. Commerce and Industry Minister Suresh Prabhu, in a meeting with top industry associations including CII, FICCI, Assocham and PHD Chamber, also decided to put in place a monitoring mechanism to track domestic and foreign investment proposals in collaboration with States. “We had a useful, productive and forward looking meeting with various industry chambers to find out what we can do together to push growth to a higher trajectory,” Prabhu said after the meeting. The meeting was also attended by Chief Economic Advisor Arvind Subramanian. “The meeting looked at how to get the growth momentum back and boost confidence of industry in India. Once confidence builds up, investments will increase,” said RV Kanoria, Past President, FICCI, who attended the meeting. The regulatory review committee will be headed by Department of Industrial Policy and Promotion Secretary Ramesh Abhishek and also include members from the industry. “The effort will be to look at regulatory issues affecting industry and take steps to increase ease of doing business,” a government official said. The Minister will also hold a separate meeting with the Micro Small and Medium Enterprises (MSME) sector to address their specific problems including access to credit. The industry has also been asked to suggest ways to utilise the excess capacity in the industry which is currently estimated at an average 26%.
Valuation loss in forex reserves amounted to $11.8 bn for FY17 (FE 27.09.17)
The RBI stated in its half yearly report on management of forex exchange reserves that the valuation loss in its foreign exchange reserves, mainly due to the appreciation of the US dollar against other currencies, amounted to $11.8 billion during fiscal year 2017. Compared to this, there was a gain of $0.6 billion in the preceding fiscal, the central bank pointed out. The RBI said that at the end of March 2017, the import cover decreased to 11.3 months from 12 months at end-September 2016. “The ratio of short-term debt to foreign exchange reserves, which was 21.8% at end-September 2016, increased to 23.8% at end-March 2017. The ratio of volatile capital flows (defined to include cumulative portfolio inflows and outstanding short-term debt) to reserves increased from 85.8% at end-September 2016 to 88.1% at end-March 2017,” the report stated. As at end-March 2017, out of the total foreign currency assets of $346.32 billion, $212.9 billion was invested in securities, $107.22 billion was deposited with other central banks, the BIS and the International Monetary Fund (IMF) and remaining $26.2 billion comprised deposits with overseas branches of commercial banks.
Model code clamps down on market investments by PSU staff (BL 27.09.17)
The government is compiling a fresh set of norms to govern the conduct of employees of Central public sector enterprises that bars them from political activities and restricts their investments in shares and mutual funds. The draft consolidated model conduct, discipline and appeal (CDA) Rules for CPSEs, compiled by the Department of Public Enterprises, would impact over 12.34 lakh employees working in 327 state-owned firms. “The original rules were framed in 1974. In the intervening four decades, the government has issued various additions to the code of conduct as and when required. This has now been compiled into a fresh set of norms,” said a senior official. Apart from norms for punctuality, courteous behaviour and prohibiting sexual harassment, the draft model code also bars CPSE employees from holding the office of any political party or organisation and contesting elections to the legislature or local authority. Further, full-time Directors and employees engaged in fixing the price of an initial or follow-on public offer of a CPSE and their family members have been barred from apply in these public offers. Similarly, trading in shares of the CPSE by its employees, who possess unpublished price sensitive information, is also barred. The draft code also prohibits PSU employees from speculating in shares and stock of other companies. Executives would have to report transactions over Rs. 50,000 annually in shares, securities, debentures or mutual funds scheme. For non-executive workers, the limit for such transactions is proposed at Rs. 25,000.
Reliance Capital setting up standalone health insurance firm (BL 27.09.17)
Reliance Capital’s standalone health insurance company is expected to become operational early next year, said Anmol Ambani, Executive Director. “Traditionally, health insurance was part of our general insurance set-up. But to create retail focus we are setting up a standalone health insurance company. We have already received Round 1 approval from the IRDAI (Insurance Regulatory and Development Authority of India),” said Anmol in his maiden speech at Reliance Capital’s 31st AGM on Tuesday. He alluded to three factors — changing demographics (a younger India with higher income, higher assets, and more financially aware), rising cost of healthcare, and an increase in lifestyle-related ailments, which indicate significant growth potential in retail health insurance. The health insurance company will use technology to connect with customers and distributors to leapfrog competition, he added.
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GST, Demonetisation Continue to Haunt Rural Markets: HUL (ET 27.09.17)
Rural markets in the country are yet to recover from the challenges posed by demonetisation, implementation of GST and volatile commodity prices, said fast-moving consumer goods major Hindustan Unilever (HUL). “From double-digit growth in FMCG across urban and rural markets in 2012, the overall segment has fallen to single-digit growth, with rural lagging urban market,“ said HUL MD Sanjiv Mehta, quoting research agency Nielsen. The company, however, showed resilience in performance, reporting 8% and 6% growth in the past two quarters, from no volume growth in the December quarter, he said. “The early part of the second quarter was affected by various myths in trade. But trade situation is improving gradually with the wholesale channel now stabilising,“ he said. The maker of Rin detergent also maintained it had increased its margins to 18%, a 300 basis points rise from 15% in 2010.“Demonetisation was a big challenge to implement, but from a strategic, long-term point of view, it is the right thing to do in India,“ Unilever global CEO Paul Polman said. “In terms of GST, we had been working in a planned way for long for this smooth transition. We have certainly seen that translate into share increases amongst a big part of the business,“ he added.
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