ICRA Lowers Corp Bank's Bond Rating (ET 14.10.17)
ICRA has downgraded Corporation Bank's 700 Cr tier-II bonds rating by a notch to “AA-“ from “AA “, following a sharp deterioration of its asset quality to 15.5%. The outlook on the long-term rating is negative, reflecting the expected pressure on the bank's overall credit profile as the asset quality is likely to remain weak in the medium term, the rating firm said. The state-run bank's gross non-performing assets ratio rose to 15.5% as on June 30 from 11.7% a quarter back while the provision coverage remained low at 31.5%. “So, given the current low provision coverage ratio, ICRA expects the bank's credit costs to remains high in the near to medium-term on account of both incremental slippages and ageing of current NPAs; thus, profitability and internal generation going forward would remain subdued,“ the rating company said in a release. The bank's fresh NPA generation rate increased steeply from 5.9% in FY2017 to 16.4% (annualised) in the quarter to June on account of higher fresh slippages from large corporate accounts. However, ICRA has reaffirmed the bank's short-term rating on 30,000 Cr of certificate of deposits.
Karnataka Bank Q2 net plunges 24.5% to Rs. 93 Cr (BL 16.10.17)
Karnataka Bank’s net profit declined 24.58% to Rs. 93.38 Cr in the second quarter of 2017-18 compared with a net profit of Rs. 123.82 Cr in the corresponding period of the previous fiscal. Mahabaleshwara MS, MD and CEO, attributed the fall in net profit to the frontloading of future risks of the bank. Explaining this, he said the bank has treated one account belonging to infrastructure sector with an exposure of Rs. 230 Cr as a NPA even though it is under debt realignment. In that account, the bank has made a provision of 25%. “That hit we have frontloaded during this quarter. This is a conscious decision taken by the management to frontload the future risk,” he said. Provisions and contingencies (other than tax) stood at Rs. 225.98 Cr (Rs. 130.55 Cr). Stating that other business parameters are on strong footing, Mahabaleshwara said operating profit went up 57.35%, and advances registered a growth of 12.34%. The credit-deposit ratio increased to 72.22% (68.95%) during the quarter. Net interest income (NII) of the bank stood at Rs. 440.23 Cr (Rs. 397.25 Cr) and other income at Rs. 247.82 Cr (Rs. 189.71 Cr) during the quarter. The net interest margin increased to 3.09% (3.03%). The gross and net NPAs of the bank stood at 4.13% (3.4%) and 3.04% (2.63%), respectively. On the future outlook, Mahabaleshwara said there may not be much pressure on the asset quality, going forward. But the provision requirement on account of resolution of some of the accounts either under the National Company Law Tribunal or any other debt restructuring activities will have to be keenly watched. “Otherwise, it is just the beginning of the strong and sustainable growth of Karnataka Bank,” he said.
IndusInd Bank announces takeover of micro finance lender Bharat Financial (BL, BS, FE, ET 15.10.17)
IndusInd Bank announced the takeover of micro finance lender Bharat Financial Inclusion Ltd in Mumbai on Saturday. Chairman of the bank, R. Seshasayee, said the two boards met independently this morning and decided to go ahead. It would help develop reach and would be a strong partnership. The two institutions had worked together for many years and were, therefore, comfortable with each other's people and culture, he said. P.H. Ravikumar, Chairman of Bharat Financial, said they believed margins were available only in two segments -- the lower middle-class and the poverty line segments. He drew attention to the irony that today was the 7th anniversary of the infamous Andhra Pradesh MFI Act, which created mayhem among MFIs. Ramesh Sobti, MD, IndusInd Bank, said Bharat Financial Inclusion would remain a wholly-owned subsidiary after the takeover. He assured that there would be no loss of jobs. There would be plenty of synergies. The cost of funds would come down by 3 to 4 percentage points immediately. Asked if they would pass on the benefit to customers, Sobti replied in the affirmative. While not saying how much, he said we could soon see cuts and they wanted to lead the industry there. He recalled that Bharat Financial had breached the 20% floor in interest rates and had brought down rates below that. Sobti said an additional reason for retaining the wholly-owned subsidiary model was that the model had regulatory approval and precedent. Secondly, they did not want to disturb the cost structure and ethos of the existing organisation. Sobti mentioned that the swap ratio had been decided at 639 shares of IndusInd Bank for every 1,000 shares of Bharat Financial. This worked out to a 15% premium over the current market price of Bharat Financial.
ATM additions slow down as banks focus on e-money (BL 16.10.17)
With banks going all out to promote digital transactions, ATM addition has hit the slow lane. The number of ATMs added by banks collectively nudged up by a mere 93 in the April-August 2017 period compared with 4,936 additions in the year-ago period, as per RBI data. In sharp contrast, banks’ ramped up point-of-sale (PoS) terminals during the April-August 2017 period, with their number soaring by 3,53,281 compared with 1,11,101 in the corresponding year-ago period. PoS terminals are payment processing devices that enable transactions at merchant outlets. As at August-end 2017, the number of ATMs and PoS terminals stood at 2,22,568 and 28,82,422, respectively. Given that almost 87% of the value of total notes in circulation were demonetised during the November 9-December 30, 2016 period, triggering a crunch in currency for transacting, banks seem to have shifted their attention away from ATMs to building up the PoS network in a big way. Moreover, with re-monetisation happening only gradually, bankers may not have felt the need to expand their ATM network. As per latest RBI data, the value of currency in circulation was 8.9% less year-on-year at Rs. 16,00,190 Cr as on October 6, 2017. That there has been a substantial increase in digital transactions is underscored by the fact that in August 2017, the volume of credit card transactions at PoS rose to 11.533 Cr (amounting to Rs. 36,299 Cr) against 8.395 Cr transactions (amounting to Rs. 25,746 Cr in August 2016). Similarly, the volume of debit card transactions at PoS jumped to 26.545 Cr (amounting to Rs. 35,413 Cr) against 13.054 Cr transactions (amounting to Rs. 18,369 Cr in August 2016). “In fact, during the demonetisation period, the government had announced a package of incentives and measures for the promotion of digital and cashless economy. So, all the banks were given a target. Hence, there was a substantial increase in the PoS infrastructure. That is the reason why it (PoS expansion) is still increasing. “Given that digital transactions are being promoted, over a period, demand (for PoS) will only go up. Merchants have also realised that this is one of the better ways of doing transactions,” said a senior public sector bank official. The slowdown in ATM addition, according to the official, is also a consequence of banks’ digital push.
A testimony to rural banking’s potential (BL 16.10.17)
IndusInd Bank’s takeover of Bharat Financial Inclusion Ltd (BFIL) is indicative of the potential in rural banking and of microfinance, which now appears to have become a viable model for financial inclusion. The merged entity will have over 3,600 branches and outlets and a customer base of 16.3 million. IndusInd Bank will have an increased outreach of 1,400 MFI outlets and 6.8 million borrowers, as per available data. The net worth of the merged entity will be Rs. 23,921 Cr while total assets will stand at Rs. 2 lakh Cr. IndusInd Bank (IBL) has a comfortable Capital to Risk Weighted Assets Ratio (CRAR) of 16.18%, and the corresponding figure for BIFL is 31.8%. IBL is now likely to focus on rural banking as it transfers BFIL’s employees and operations into a wholly-owned captive Business Correspondent subsidiary. For BFIL, which, in its earlier avatar as SKS Microfinance Ltd, lost out on a chance to become a small finance bank — the RBI had denied it a licence in 2015 — the merger with IBL has proved a ‘short-cut’. BFIL’s clients will now have access to all the benefits of a ‘universal bank’, said MR Rao, its MD and CEO. The cost of funds has been coming down for BFIL in the recent past, allowing the micro lender to charge the lowest interest rates among NBFC-MFIs. As part of IndusInd Bank, it can now look forward to lower cost of funds.
Conversational banking gains currency as chatbots become popular (BL 16.10.17)
If you are vexed with call drops and delays when you dial a call centre of your bank with a query or service request, then here is some relief. Chatbots, conversational banking tools on artificial intelligence platforms that help answer customer queries, are fast becoming popular with banks as well as insurers. According to data released by HDFC Bank on its OnChat recently, the number of users of its OnChat has grown 160% month-on-month up to September 2017 since its launch in December 2016, with over 2.4 million messages. The number of repeat users at close to 34% further bolsters confidence in conversational banking. The Messenger chatbot has also opened up yet another channel for customer acquisition, with nearly 25% of OnChat users being non-HDFC Bank customers. The reasons for increasing patronage are varied. “Chatbots are very transformative in conversation experience vis-a-vis the traditional call centre,” Beerud Seth, Co-Founder Gupshup, a messaging platform said. Gupshup is partnering with banks and insurers including YES Bank, HDFC Bank, ICICI Bank and brokerage firm Motilal Oswal. The popularity of bots is mainly driven by the option to escape the limited options and delays of the traditional phone banking, according M Puspha Raj, a software professional working for Infosys. “It is true because to get an answer to a query like a loan, one can just send a message on WhatsApp and Facebook which will be answered instantly,” Seth said, adding that the scalability of the software and the range of answers given may equal the branch banking experience in many transactions. What works behind the scene is a scalable software that can address 95% of expected queries. While phone banking executives may take two-three minutes to look at the customer history and then answer questions, the bot can answer in a split-second as it has all relevant information. It can also handle a plethora of information required in financial transactions.
PNB to hire insolvency resolution professionals (BL 15.10.17)
Punjab National Bank (PNB) seeks to hire insolvency resolution professionals for 2017-18, according to a notification by the bank. The bank has invited applications for empanelment of insolvency resolution professionals (IRP) for 2017-18, the notification said. PNB said IRPs should be registered with the Insolvency & Bankruptcy Board of India (IBBI) and applicants are desired to submit applications on or before November 3. Insolvency resolution professionals work in the area of reorganisation and insolvency resolution of corporate, partnership firms and individuals in a time bound manner. “Besides having registration with IBBI, preference shall be given to the IRPs having five years of relevant experience in handling matters relating to rehabilitation of companies, which may include corporate debt restructuring/strategic debt restructuring scheme or arrangement under Companies Act,” the notification said. On fee structure for the IRPs, who are also appointed as resolution professionals by the committee of creditors, PNB said for an outstanding of ₹1 Cr on the books of the bank, the maximum fee is ₹2 lakh per borrower (not per account and that will include bank’s share only. For over ₹1 Cr and up to ₹50 Cr, the maximum fee is capped at ₹3 lakh; above ₹50 Cr and up to ₹100 Cr, the maximum fee payable is fixed at ₹5 lakh and for outstanding above ₹100 Cr, the IRPs can claim a maximum fee of ₹10 lakh per borrower (bank’s share only). For the IRPs not appointed as resolution professionals by the committee of creditors, the maximum fee is ₹1 lakh for up to ₹50 Cr outstanding and ₹2 lakh for loan dues over ₹50 Cr.
Union Bank launches bilingual Android app (BL 14.10.17)
Union Bank of India has launched an Android app, Union Sahyog, as part of its drive to digitise customer-facing banking services. The Union Sahyog app is bilingual — offering both English and Hindi language — and packs in all mobile-based banking applications, missed call/SMS-based services, Internet banking login and self-user creation, deposit and loan product information, online account opening, online loan application, online complaints and even RTI. It also offers extras such as branch locator, EMI calculator, social media links and digital banking information. Union Sahyog is currently available for download on the Google Play Store. An iOS version is in the works. The app was launched by RajKiran Rai G, MD & CEO, Union Bank of India. Speaking on the occasion, Raai said, “The launch of Union Sahyog will now put copious amounts of convenience in a customer’s hands and is in consonance with digital initiatives envisaged by the government of India’s vision of Digital India.”
Dena Bank raises over ₹401 cr via QIP (BL 14.10.17)
Dena Bank said it has raised ₹401.26 Cr by issuing equity shares through the qualified institutional placement (QIP) route. The Issue Committee of the board of directors of the bank at the meeting held during the day approved the closure of the QIP. The Issue Committee approved the “issue price of ₹29.30 an equity share, with a discount of 5% or ₹1.54 an equity share ... for an aggregate value of ₹401.26 Cr, to be allotted to eligible qualified institutional buyers (QIBs) in the QIP,” the bank said in a regulatory filing. Earlier this week, the bank had informed about price fixation for the QIP. This is part of the bank’s June annual general meeting, in which it had decided to raise a sum of up to ₹1,800 Cr within a period of one year in tranches.
Kotak Bank completes buyout of life insurance subsidiary (BL 14.10.17)
Kotak Mahindra Bank completed the acquisition of 26% equity stake in its subsidiary Kotak Mahindra Old Mutual Life Insurance from Old Mutual Plc for Rs. 1,293 Cr, the bank informed the exchanges. In April this year, Kotak Mahindra Bank had inked an agreement to purchase the entire 26% equity stake held by Old Mutual Plc, UK (OM), in Kotak Mahindra Old Mutual Life Insurance. Following the acquisition, Kotak Mahindra Bank now holds 100% stake in the subsidiary. Kotak Mahindra Bank in March raised over Rs 5,000 Cr by issuing up to 6.2 Cr equity shares to pursue consolidation opportunities in the Indian financial services space. Kotak Mahindra Bank and its affiliates held 74% stake in Kotak Life before the deal. The net worth of Kotak Life stands at Rs. 1,825 Cr as on March 31, 2017.
NCLT route cannot be used effectively in all NPA cases, says SBI MD (BS 14.10.17)
SBI MD P K Gupta said banks should use the best available mechanism to recover bad loans and the NCLT (National Company Law Tribunal) route cannot be used effectively in all non-performing assets (NPA) cases. Indicating that one size fits all approach may not work in all cases, he said that basically, the NCLT is one of the resolution mechanisms. "A lot of resolution mechanisms already are there -- the RBI scheme, an oversight committee," Gupta said. "The banks have to use what is the best mechanism in each particular case. The NCLT cannot be the solution for all cases." The banks that find it tough to recover loans from borrowers can refer such cases to the NCLT as part of insolvency proceedings. A number of banks, including SBI, PNB, Bank of Baroda and IDBI Bank, have initiated proceedings against defaulters by moving the NCLT to recover their dues. The banking sector is saddled with NPAs of over Rs 8 lakh Cr, of which Rs 6 lakh Cr is with public sector banks (PSBs). The RBI has identified 12 large NPA accounts constituting 25% or about Rs 2 lakh Cr of the total pie. Essar Steel, Bhushan Steel, Bhushan Steel and Power, Electrosteel Steel, Lanco Infratech, Alok Industries, Jyoti Structures and Jaypee Infratech are among the big names that are facing NCLT cases.
Cooperative banks hit by farm loan waivers, brace for high NPAs (BS 14.10.17)
The cooperative banking sector, already under stress due to high NPAs, is bracing for a significant addition in bad loans due to the spate of debt waiver schemes by states. These schemes have adversely impacted the repayments on the crop loans, as farmers anticipate more waivers in the coming days. Already the sector is reeling under stress for high NPAs and poor infrastructure. Data from the National Federation of State Cooperative Banks (NAFSCOB) showed, absolute NPAs of district central cooperative banks (DCCBs) at the end of March 31, 2016, stood at Rs 22,406 Cr, while that of state cooperative banks stood at 5,147 Cr. Data for the primary agricultural credit societies (PACS) was not available. PACS are the smaller cooperative credit institutions and work at the grassroot level. In June this year, Maharashtra government announced a debt waiver of Rs 34,000 Cr for nearly 8.9 million farmers. The Uttar Pradesh government had also waived loans worth Rs 36,359 Cr for about 21 million farmers. Andhra Pradesh, Punjab, and Telangana waived loans of about Rs 20,000 Cr, Rs 10,000 Cr and Rs 15,000 Cr, respectively, while Karnataka announced a Rs 8,000-Cr waiver. “This year we will see an increase in NPAs in the sector, and this would be mainly due to the waivers announced by the governments. Debt waivers have been destroying the repayment culture among farmers,” said B Subramaniam, MD, NAFSCOB.
Bank of America profit rises on higher rates, lower costs (BS 14.10.17)
Bank of America (BofA) beat expectations with a 15% rise in third-quarter profit as the second-largest US lender kept a tight leash on costs and benefited from higher interest rates. Chief Executive Brian Moynihan’s years-long effort to streamline the bank’s sprawling operations and keep its costs in check are finally bearing fruit as the Federal Reserve raises borrowing costs. The lender’s large stock of deposits and rate-sensitive mortgage securities make it especially well placed to benefit from rate rises. Its third-quarter earnings performance beat rivals JPMorgan Chase & Co and Citigroup, which reported gains of 7.1% and 7.6%, respectively on Wednesday. “On balance, Bank of America’s results stack up better than those of peers,” Instinet analyst Steven Chubak said. The Federal Reserve’s three rate increases since December boosted Bank of America’s net interest income 9.4% to $11.16 billion and the central bank is widely expected to raise rates again in December. The improved fortunes at BofA, which spent years in the doghouse dealing with fines and settlements arising from the financial crisis, contrasts with the 19% profit decline Wells Fargo & Co reported due to mortgage issues stemming from 2007-09. Provisions for credit losses rose 15% from the second quarter, driven by credit cards and loan growth and analysts pressed the bank’s executives about possible signs of problems with consumer credit. Citigroup and JPMorgan said they expect to charge-off more for bad card loans in the future.
IDBI Bank employees to go on 2-day strike (FE 14.10.17)
IDBI Bank employees along with the members of various bank unions would hold a two day strike later this month demanding wage revision. The wage revision for employees and officers of IDBI Bank is due from November 1, 2012 to October 31, 2017 on the lines of settlement in all other banks, AIBEA General Secretary, CH Venkatachalam said in a statement. Noting that the wage revision was already settled in other banks, he said, the negotiation talks were underway for next wage revision due from November 1, 2017. The all India strike in IDBI Banks will be conducted on October 24 and 25 by employees and officers demanding “overdue wage revision”, he said. He said the Association along with other unions would extend “all out support” and will give a call for strike in all banks in support of the IDBI Bank. “It is most regrettable and deplorable that the management of IDBI Bank has been delaying the issue unwarrantedly. “, he said. “In view of the adamant attitude of the management (of IDBI), our units in IDBI Bank — All India IDBI Officers Association and All India IDBI Employees Association have once again decided to resort to agitation and have given call for two day strike“, he said. Venkatachalam said the Association had already taken up the issue with Finance Minister Arun Jaitley last month and would take up the issue again with him “very soon”. As part of the protest, he said the Unions would stage protest on October 23 in front of IDBI Bank branches. Senior representatives of the associations would take part in a demonstration in front of IDBI Bank head office in Mumbai on October 24, he added.
Debt hit DB Realty referred to NCLT by LIC Housing Finance (FE 14.10.17)
DB Realty has said that its lender LIC Housing Finance has referred the company to the Mumbai bench of the National Company Law Tribunal (NCLT). The Mumbai-based realtor said in a recent regulatory filing that the case is listed under the caption ‘for settlement’ on October 16. DB Realty said it had availed a loan of Rs 200 Cr from LIC Housing Finance in January 2010 and Rs 88 Cr was disbursed. Of the disbursed loan, Rs 157.37 Cr was repaid and the rest—30.63 Cr—is outstanding. “LIC has filed an application by financial creditor to initiate corporate insolvency resolution process under the code at the NCLT Mumbai against DB Realty for recovery of this outstanding money,” the company said. It added the matter is pending admission before the NCLT. “Settlement talks are in progress between LIC and DB Realty,” it said. Bankers to the company include Oriental Bank of Commerce, ICICI Bank and HDFC Bank. According to DB Realty’s FY17 annual report, the company has defaulted in repaying interest of Rs 13.4 Cr to Reliance Capital, Rs 3 Cr to ICICI Bank (principal and interest) and Rs 32 lakh in interest to Indiabulls Housing Finance. The company’s gross debt stood Rs 1,374 Cr in FY17, down from Rs 1,405 Cr in the previous year. It reported a net profit of Rs 1.43 Cr on Rs 13.78 Cr in revenues in FY17.
Vijaya Bank Cuts MCLR Rates (ET 14.10.17)
Vijaya Bank has reduced its marginal cost of funds-based lending rate by up to 20 basis points. From October 7, the revised MCLRs for the following tenors are as following: Overnight (7.9%), one month (7.9%) and three months (8.15%). The MCLRs for the rest of the tenors remain unchanged.
Exports rise 25.67% in Sept; all major commodities record growth (BL, BS, FE, ET 14.10.17)
Ringing in festive cheer for exporters and policy-makers, goods exports moved to a higher growth trajectory in September, posting a year-on-year increase of 25.67% to $28.61 billion. All the top 10 commodity groups, ranging from engineering items to textiles, registered an increase in growth. This is the 13th consecutive month of growth for exports, but the rate of increase, so far, was mostly low. The trade deficit, too, narrowed in September by 0.95% to $8.98 billion, as the import growth rate was slightly lower than export growth, with gold imports declining by 5%. Imports increased 18.09% in September 2017 to $37.59 billion, according to an official release from the Commerce and Industry Ministry. “Overall, it has been a fabulous performance and once the GST hurdles are behind us, exports would surely lead the India growth story again,” said Engineering Export Promotion Council India Chairman TS Bhasin. The acceleration in goods exports is good news for the government which is carrying out a sectoral study to come up with a plan to boost exports sharply and on a sustained basis. Apart from engineering goods exports, which posted a sharp increase of 44% during the month to $7.32 billion, other sectors that registered growth included gems and jewellery, petro products, organic and inorganic chemicals, readymade garments, drugs and pharmaceuticals, cotton yarn/fabs/made-ups, handloom products, marine products, rice and electronic goods. Oil imports, at $8.18 billion were 18.4% higher than in September 2016. Non-oil imports, at $29.40 billion, were 17.9% higher. Gold imports came in at $ 1.71 billion. The trade deficit in the first six months of this fiscal year increased to $72.12 billion compared with $43.35 billion in the first half of 2016-17.
Fiscal consolidation, reforms will drive job growth in India: Lagarde (BL 16.10.17)
The combination of fiscal consolidation, lower inflation and structural reforms will deliver more employment and jobs that cater to the aspirations of the Indian workforce, said Christine Lagarde, MD, International Monetary Fund (IMF). Her comments come at a time when employment continues to be a key challenge for the government. Though the IMF has scaled down India’s GDP forecast to 6.7% for 2017, Lagarde said the country was on a much more “solid growth track”. “India is on a growth track which is much more solid in the medium and long-term due to structural reforms undertaken by the government,” she said. The impact of demonetisation and the rollout of the Goods and Services Tax, which has led to a slump in the Indian economy, is “hardly surprising”, she said, while maintaining confidence in India’s growth prospects. She, however, stressed that countries, such as India, must look at more measures to address economic concerns as the upswing in the global economy gives some respite. “When the sun is shining, it is better to fix the roof. All 189 members of the IMF should go home and look at what part of the roof needs fixing,” she said as the annual meetings of the IMF and World Bank concluded. The IMFC has also reiterated its commitment to further quota reforms in the IMF that would give more say to developing and emerging economies.
Forex reserves fall by $862.2 mn to $398.794 bn (BL, BS 14.10.17)
The country’s foreign exchange reserves declined by USD 862.2 million to USD 398.794 billion in the week to October 6 due to fall in foreign currency assets, RBI data showed. In the previous week, the reserves had fallen by USD 2.590 billion to USD 399.656 billion. It had touched a lifetime high of USD 402.509 billion in the week to September 15. The foreign currency assets (FCAs), a major component of the overall reserves, decreased by USD 1.391 billion to USD 373.795 billion, the data showed. Expressed in US dollar terms, FCAs include effect of appreciation or depreciation of non-US currencies such as the euro, the pound and the yen held in the reserves. After remaining unchanged for past few weeks, gold reserves rose by USD 548.6 million to USD 21.240 billion. The special drawing rights with the International Monetary Fund (IMF) declined by USD 7.9 million to USD 1.494 billion. The country’s reserve position with the IMF declined by USD 11.9 million to USD 2.264 billion, the apex bank said.
Slowdown bottomed out, GDP likely to grow 7% in FY18: NITI Aayog (BL, BS 15.10.17)
Niti Aayog Vice Chairman Rajiv Kumar has said the economic slowdown that began in 2013–14 has bottomed out and the GDP is likely to grow 6.9 to 7% this fiscal and 7.5% in 2018–19. The economic growth slowed to 7.1% in 2016–17, the year in which 87% of the currency was demonetised, despite a very good show by the agricultural sector. On a quarterly basis also, the growth in the first quarter of the current fiscal has slipped to 5.7%. “I think by the time you come to the first quarter of 2018, you will see a stronger recovery and fiscal 2018–19 will be the much better year than fiscal 2017–18. And that will then continue because it will on much more sustained basis,” he said adding that growth will be about 6.9–7% in the current fiscal year. “In the next fiscal year, the growth would be about 7.5%,” Kumar said in an interview to PTI. The Niti Aayog vice chairman said the country did very well from 2007–13 and the downward cycle started in 2013–14, mainly because of spurge in lending to undeserving projects since 2007. “The high economic growth between 2007–13 was on the basis of huge increase in loans and spurge in private debt for which there was zero control. That was given by the banking sector to the most undeserving cases (projects) and on completely false assumptions,” he observed. Noting that growth stalled after 2013 because of policy stance, Kumar said, “As soon as that happened, all the debt began to becoming bad and therefore downward spiral started.” “My considered view and gut feeling is that, this downward cycle has now bottomed out in July,” he asserted.
‘Agri Growth to be Above 3% in FY18’ (ET 14.10.17)
Agricultural growth rate will be more than 3% in 2017-18, according to Ramesh Chand, a member of the government's premier think-tank Niti Aayog. He said that the agricultural growth rate in 2016-17 might be revised upwards to 5% from earlier 4.1%. “Agriculture growth rate this year will be more than 3% looking at the performance of the kharif season. If rabi season is very favourable it can increase but we can't presume both season will be good,“ said Chand. The long term (50 years) growth rate in agriculture sector is 2.8%, so any growth rate over it is good, said Chand. He added that with growth rate at 3%, it adds 0.5% point to overall growth of the country's economy. Two years of back-to-back droughts in 2014-2015 and 2015-16 had ravaged the agriculture sector and posed a big challenge to the present central government when it took over. In 2016-17, the growth has been projected at 4.1%. “This year growth has to be over the growth rate of previous year. So I definitely can say, it can't be as good as last year,“ said Chand who added that the last year growth rate figure might be revised. “The growth rate (for 201617) might go up and be close to 5% with the Agriculture ministry revising its production estimates,“ he said. The agriculture ministry's fourth advance estimates released in August of major crops pegged food grain production at 275.68 million tonnes, 0.84% higher than the third advance estimate.
Atal Pension Yojana: Centre, PFRDA target 1 Cr accounts by March (BL 16.10.17)
The Centre and the pension regulator PFRDA are hopeful of bringing at least one Cr subscribers by March 2018 under the Atal Pension Yojana (APY) platform, which is one of the flagship schemes of the Central government. APY is an extremely important tool for giving pension benefit at the age of 60 years and beyond. It was launched to encourage individuals from the weaker section to opt for pension, which would immensely benefit them during their old age. In the last two years since launch, APY has been able to mobilise 69 lakh accounts. Addressing a national APY conference 2017, organised by PFRDA, Rajiv Kumar, Secretary, Department of Financial Services, said India was a huge country and a lot had to be done on the pension front. The pension coverage in the country is still low at 10-12%, he added. “We have fixed a target of 1 Cr for APY to be achieved by March 2018. When we can achieve huge success in Pradhan Mantri Suraksha Bhima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti Bhima Yojana (PMJJBY), there is no reason why we can’t achieve the target in APY,” Kumar said. Kumar said that the Department of Financial Services has been closely monitoring the progress made on the APY enrolment. BS Bhandari, Wholetime Member, Pension Fund Regulatory and Development Authority, later said that the pension regulator is hopeful of achieving the 1 Cr target. In April-September this year, a whopping 20 lakh APY accounts were opened, he noted.
‘Higher provisioning will make banks’ balance sheet more resilient’ (BL, BS 16.10.17)
Stressing on the need for higher provisioning, the RBI Deputy Governor NS Vishwanathan said the required provisioning for the NPA (non-performing asset) accounts referred for insolvency resolution is “nothing unusually large”. According to him, higher provisioning will make banks’ balancesheet more resilient; it will also boost credit growth. “Provisioning by banks needs to be higher to make their balancesheet more resilient and boost credit growth,” he said. The central bank has directed banks to set aside 50% of the loan amount as likely losses for all NPA accounts it has referred to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC). The provisioning should be 100% in cases that fail to get resolved under insolvency proceedings and are forced into liquidation. While the common perception is that the provisioning norms stipulated by the central bank for cases referred to the IBC is steeper than required, Vishwanathan was of the view that the higher provisioning is for “expected loss”. Stressed asset, in general, and the public sector banks, in particular, is a matter of serious concern, he said and added that NPA as a percentage of total exposure is higher in large accounts. “Globally, there is a move to contain large exposure, and RBI has also aligned its policy in this regard,” he said. A strong insolvency code will improve the long-term credit quality of banks, placing them on a firm footing. Strong balance sheet will enable banks to deal better with the stressed assets.
FinMin may finalise capital infusion plan for NPA-ridden PSU banks (BS 15.10.17)
The Finance Ministry is working on capital infusion strategy for the public sector banks (PSBs) and it is expected to be finalised by December, according to official sources. The Department of Financial Services is assessing the capital needs of various banks based demands made by them, sources said. There are various parameters which are being looked at for capital infusion exercise, including NPA ratio, credit growth, insolvency proceeding etc, sources said, adding that the second quarter result would also give clarity on the capital requirements for the current fiscal. Various factors are being considered before arriving at the exact number and the final output is likely by next month or December, they said. Besides providing capital for meeting regulatory requirements, the ministry is looking at providing capital to performing state-run banks to boost credit disbursement. One of the options on the table is the issuance of capitalisation bond for meeting their capital needs but no final decision has been taken yet. The government followed a similar strategy in 2008 when it sold bonds worth about Rs 10,000 Cr to subscribe to nearly 60% of State Bank of India's rights issue. Last week, Finance Minister Arun Jaitley said the government, faced with a 'catch-22 situation' over the issue of non-performing assets, is working on a plan to rebuild the capacity of India's banking sector so as to support growth. Banks are facing mounting non-performing assets (NPAs) or bad loans to the tune of Rs 8 lakh Cr of which PSBs alone account for Rs 6 lakh Cr. The bank NPAs are skirting the double-digit mark at present and expected to grow further.
Dec rate cut likely after Sept's soft CPI inflation: BofAML (BS 15.10.17)
The RBI is likely to go for a 25 bps rate cut at its next policy review meet on December 6 after September Consumer Price Index (CPI) inflation came in at a soft 3.3%, says a report. "We grow more confident in our call of a 25 bps RBI rate cut on December 6 after September CPI inflation came in at a soft 3.3%, the same as August's downwardly revised 3.3%," Bank of America Merrill Lynch (BofAML) said in a research note. The RBI at its policy review meeting earlier this month kept the key interest rate unchanged at 6%, citing upward trend in inflation. As per CPI data, retail inflation came in at 3.28% in September, unchanged from August, despite softening of vegetable and cereal prices. According to the global financial services major, the October CPI inflation is expected to be around 3% following the drop in tomato and onion prices and government cutting the excise duty on petrol and diesel. "Against this backdrop, we expect the RBI's Monetary Policy Committee (MPC) to cut in December to signal a bank lending-rate cut before the 'busy' October-March industrial season intensifies," the report noted. India's economic growth slipped to a three-year low of 5.7% in the first quarter of the current fiscal, leading to calls by the industry for a rate cut.
RBI Working on a Framework for Cryptocurrencies (ET 15.10.17)
The central bank seems to be preparing a policy on cryptocurrency, which is virtual money used as a medium of exchange in many countries including India, but is yet to be legalised here. Cryptocurrencies, like bitcoin, use cryptography to secure transactions. RBI Deputy Governor NS Vishwanathan said that the policy is in the making. “I can't comment on a policy which is still in the making,“ he said, responding to a query on whether RBI would encourage use of cryptocurrency. The central bank is, in fact, exploring the possibility of issuing its own fiat cryptocurrency, while it is not comfortable with non-fiat or private cryptocurrency like bitcoin. Last month, RBI executive director Sudrashan Sen had said that an internal group was exploring the possibility of issuing it while China has banned bitcoin exchanges leading to a sharp drop in cryptocurrency flows worldwide. The regulator has repeatedly expressed concerns over proliferation of the use of virtual currencies saying these carry potential financial, legal and security related risks. Vishwanathan also said RBI was mapping the shadow banking entities exist in the country as the regulator looks to protect customers from financial risks.
Gruh Finance Q2 net up 23% (BL 15.10.17)
Housing finance player Gruh Finance Ltd announced 23% rise in the net profit for the quarter ended September 2017, at Rs. 150 Cr as against Rs. 122 Cr in the corresponding quarter a year ago. The company's loan portfolio increased by 18% to Rs. 14,304 Cr for the quarter as against Rs. 12,089 Cr a year ago period. Gross NPAs stood at Rs. 95.55 Cr or 0.67% as on September 30. Loan disbursements during the quarter stood at Rs. 2,483 Cr as against Rs. 1,945 Cr in the previous year indicating a growth of 28%, the company informed in a statement.
New KYC norms may leave wallets of digital money players lighter (BS 15.10.17)
The roller coaster ride continues for digital money players. From an initial high of more than 450 million new customers soon after demonetisation, many are staring at a massive loss of user base, thanks to the new RBI guidelines prepaid payment instruments (PPIs). The RBI issued a series of guidelines, setting a road map for full operability between all Know Your Customer (KYC)-compliant wallets. However, if existing PPI customers did not share KYC details by the year-end, they would be converted to the minimum-slab PPI holders by January next year. Digital transaction players are now hurriedly drawing up a memorandum to be taken to the central bank in hope of having a few of the guidelines — such as full Know Your Customer (KYC) compliance in 12 months — overturned. Many industry insiders believe the new guidelines would take away transactional convenience of PPIs. “The biggest USP of digital wallets was the convenience and ease attached to using them. With the new guidelines in place, that confidence is gone. Also the December 31 deadline for companies to secure the full KYC of existing customers is too short,” said Praveen Dhabhai, chief operating officer, Payworld. The biggest concern of digital payment players, however, is having mandatory KYC norms would cost them customer base. “We think that the guidelines are overkill. We still do not understand why the RBI comes out with norms that are same as those for banks. We are digital e-commerce players, who are serving a set of customers who want convenience as well as faster action. When payments bank norms came out, we had the same problems. A customer making small transactions would not be interested in following the same procedures they would have to follow to open a bank account. It defeats the purpose,” said a senior executive with a digital payments firm.
Mudra Yojana: 9 cr people given loans of Rs 4 lakh Cr under scheme, says Rajyavardhan Singh Rathore (FE 14.10.17)
Terming Mudra scheme as the world’s largest financial inclusion campaign, Union Minister Rajyavardhan Singh Rathore said so far 9 Cr people have been given loans of Rs 4 lakh Cr under the initiative. The number of beneficiaries under the scheme is more than the population of several countries, the Minister of State for Information and Broadcasting said after participating in the Mudra Yojana promotion campaign. He said that of the total nine Cr beneficiaries under the scheme, 80% are women and 55% from OBC, SC and ST categories. The Union minister said that in the current financial year, government targets to give loans worth Rs 2.04 lakh Cr. He said that banks have been directed to give loans to SC, ST and women and give reason if the loan application is refused. The Pradhan Mantri Mudra Yojana (PMMY) provides access to institutional finance to the under-funded sections of the society.
Paytm Plans to Hire 10,000 more Agents to Complete KYC Norms (ET 16.10.17)
Mobile wallet provider Paytm plans to double its team of agents and is preparing to open 1,00,000 branches across the country that, among other things, will make it easier for its users to complete the know-your-customer (KYC) norms. The payments company has set an ambitious target of reaching 500 million full-KYC customers in three years. Paytm, which is converting itself into a payments bank, said the RBI's recent guidelines for prepaid payment instruments or mobile wallets put standalone mobile wallets at a disadvantage with its strict KYC norms and additional regulatory requirements. “We already have 10,000 people on the street doing KYC of our customers, now we are planning to hire 10,000 more within the next two months to expand our capacity to do physical KYC,“ said Renu Satti, CEO of Paytm Payments Bank. “Also, we will open 1,00,000 banking outlets where customers can come in for biometric authentication and other basic banking facilities as well.“ Paytm transferred its mobile wallet or PPI licence to the payments bank earlier this year. Satti said each banking outlet would be a combination of a mini branch with two or three people and a network of business correspondents who will undertake basic banking activities and complete KYC formalities for the company's customers.
Expect NBFCs to Report 15-32% Growth in Quarterly Earnings (ET 16.10.17)
Non-banking finance companies are expected to report 15-32% growth in earnings for the last quarter, as affordable housing and consumer lending rolled on amid lower borrowing costs and product launches, according to analysts. They saw a revival in demand in the segment, after a brief halt during the implementation of goods and services tax. Housing finance companies are expected to report strong growth in disbursements, while tractor financing is estimated to have seen an improvement in the past quarter. However, microfinance companies and small finance banks are expected to post weak earnings due to elevated provisioning despite an improvement in collection efficiency. NBFCs have likely sustained their earnings momentum in the July-September quarter due to credit growth that was faster than that of banks and better asset quality, Edelweiss said in a quarterly result preview. Bajaj Finserv is expected to post 25% profit growth for the quarter, with strong momentum in financing business coming from consumer durable and lending to SMEs. Lower funding cost is expected to have boosted margins. Strong growth in new business in come could weigh on life insurance arm's profitability, but the general insurance business is expected to report better growth in most parameters compared with the industry.
Insurers' Individual New Business Income Jumps 25% in Ist Half (ET 14.10.17)
Riding on the growth of unit-linked insurance plans (ULIPs) and bullish market conditions, the insurance industry reported a growth of 25.2% in individual annualised premium equivalent, while the private sector insurers grew 36.6% in the first half of the financial year. State-run Life Insurance Corporation (LIC) saw a growth of 13.3% in the segment, according to the data released by the Insurance Regulatory and Development Authority. The newly listed SBI Life reported a 48% increase in income on the annualised basis, while the other large listed company, ICICI Prudential Life, saw a growth of 38.8% in the first half of the financial year. HDFC Life, which is looking to list in this calendar year, saw a 38.5% increase in income on the annualised basis. Other large players like Max Life saw 18.8% and Bajaj Allianz Life reported a 65.6% increase in premium income during the first half of the fiscal. “For ICICI Prudential Life, growth normalised to about 18% from 100% YoY in May 2017, as base normalisation played out,“ said Edelweiss in its report. “The tilt towards financial savings and higher inflows post demonetisation helped the industry register impressive growth. We expect growth to sustain through balanced contribution from distribution channels and strong ULIP traction, but H2FY18 may see some moderation due to the base effect.“
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RBI policy is anti-growth, must cut rates to balance inflation: Ficci chief (BS 15.10.17)
Ficci President Pankaj Patel slammed the RBI over its reluctance to cut interest rate, saying its policies were "not industry- friendly" and posed a hurdle in the country's economic growth. In its latest monetary policy review on October 4, the RBI had kept the policy rate unchanged at 6% even as it cut the growth forecast to 6.7% for the current financial year. Patel said such a move was "anti-growth". "RBI is not behaving properly. It (RBI policy) is anti-growth," Patel said. Indian industry, Patel said, wishes that there be a drop in interest rates, on which, he said, the RBI has adopted a rigid approach. "We want a drop in interest rate. This (interest rate) is a huge problem now for us. The real interest rate in India today is touching 6%," he said, arguing that there should be a balance between growth, inflation, and interest rates. "Inflation is necessary irrespective of growth. There has been no growth without inflation," a visibly upset Patel said, adding that his views were known to the RBI and the government.
JSPL on recovery path amid insolvency turmoil in sector (BS 16.10.17)
Naveen Jindal-promoted Jindal Steel and Power Ltd (JSPL) is looking at a recovery after paying back more than Rs 10,000 Cr in interest and Rs 6,000 Cr in principal to its lenders since 2014. This is at a time when steel firms, barring three majors, are in a troubled phase. Since the beginning of 2016, JSPL sold a series of assets and increased its production capacity. “While other companies are with the National Company Law Tribunal for insolvency proceedings, we are looking forward to be out of the joint lenders’ forum (that oversees stressed banking assets),” Jindal said. Lenders to Bhushan Steel, Monnet Ispat and Essar Steel have commenced insolvency proceedings against the companies after a RBI directive identified 12 accounts that together accounted for about 25% of the gross NPAs of the banking system. Jindal said the company would now focus on sweating assets without major investment in new projects. Large-scale expansion to increase steel and power generation capacities by three times and 2.5 times, respectively, had seen the company debt increase manifold at a time when the business cycle for steel turned unfavourable and the company saw de-allocation of its captive coal blocks.
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