India Post Payments Bank gets private-sector stamp (BL, BS 24.10.17)
India Post Payments Bank (IPPB) appointed Suresh Sethi as its Managing Director and Chief Executive Officer on Monday. Sethi had been selected by the Banks Board Bureau from top contenders for the post, including public and private sector banking and fintech professionals, the company said in a statement. He was the former Managing Director of Vodafone M-Pesa and has broad international experience of over 27 years in the banking and financial services industry with Citigroup and YES Bank, across India, Kenya, the UK, Argentina and the US. He has also worked in the financial inclusion space, where he leveraged digital-led innovation. Sethi takes over from AP Singh, who has been the interim Managing Director and CEO of IPPB since January. IPPB has been incorporated as a public limited company under the Department of Posts with 100% Government of India equity. The company plans to leverage the reach of the India Post network to achieve a pan-India rollout of 650 branches by early next year.
SBI to step up lending to self-help groups (BL 24.10.17)
State Bank of India will be focussing on extending micro-finance to self-help groups (SHGs) through the Pradhan Mantri Mudra Yojana (PMMY). Speaking at the inauguration of the national conference on micro-finance organised by State Bank Institute of Rural Development (SBIRD) here on Monday, Dibakar Mohanty, Chief General Manager (Financial Inclusion and Micro-finance), SBI, said the stress in the SHG portfolio was relatively lower and asked branch officials to extend micro-finance to the eligible on priority basis. SBI branches must finance candidates trained by rural self-employment institutes to enable them start their own small enterprises for livelihood, Mohanty added. About 11,000 branches of SBI had already financed SHGs. According to M Jayashree Reddy, General Manager & Principal, SBIRD, the two-day conference will draw out strategies for improving the bank’s market share in SHG finance. “Being a big player in banking in the country, SBI will be at the forefront to extend micro-finance to small borrowers for their livelihood,” she added. WR Reddy, Director-General, National Institute of Rural Development & Panchyat Raj, said in the context of dwindling employment opportunities and stagnating growth, there should be more focus on productive employment through micro entrepreneurship. The business heads and 80 branch managers handling SHG portfolio for SBI from of all over the country are participating in the conference.
Maharashtra: Banks to use own funds for loan waiver, says government (ET 24.10.17)
The Maharashtra government, which is implementing an ambitious Rs 34,000 Cr farm loan waiver scheme, has asked the banks to use their own funds to settle farmers' loans, and promised them a reimbursement later. As it has not specified a timeline for reimbursement, the state cooperation department has received queries from banks, seeking clarity on the issue, a senior government official said. The cooperation department, in a letter on October 13, asked the banks to use their own capital for settling the loans of eligible farmers and close their loan accounts. Banks should then submit a consolidated report to the government and the government will reimburse them as soon as possible, said the letter. The government will provide the banks a list of loan accounts of farmers who have been found eligible for waiver. A senior official of the cooperation department confirmed to that he has received several calls from bankers, seeking clarification about the letter. "As long as the government doesn't reimburse the banks, a huge amount of funds will be stuck and the banks are not going to earn any interest over delayed payment by the government...banks are highly suspicious about this mode of implementation," said the government official, speaking on the condition of anonymity. "We cannot use our entire capital for the implementation of loan waiver scheme which is being executed in phases. Once we get reimbursed for the first phase, we will go for the next one," said a senior official from the banking sector.
Karnataka Bank to focus on credit quality (BL 24.10.17)
Quality credit growth will be one of the focus areas of Karnataka Bank during the current financial year, according to Mahabaleshwara MS, Managing Director and Chief Executive Officer of the bank. Speaking at the quarterly review conference of the regional heads of the bank in Mangaluru on Monday, he said that the bank has been able to show satisfactory growth in the second quarter of 2017-18 in spite of subdued market conditions. The credit-deposit ratio stood at 72.72% during the quarter. Stating that the bank will continue to focus on five important areas — credit, non-performing assets (NPAs) management, current account, savings account (CASA), fee-based income and digital innovations — for consistent growth, he said: “It is the need of the hour to concentrate on credit growth, especially in retail and mid-corporate sectors, without losing focus on the quality of assets.” The bank, which has been successful in strengthening the fundamentals, will endeavour to take it further forward, he said.
IndusInd Bank’s rural bet (FE 24.10.17)
IndusInd Bank (IIB) and Bharat Financial (BhaFin) are finally set to merge (subject to RBI, CCI, SEBI and NCLT approvals). IIB board has agreed on swap ratio of 0.639:1 (639 shares of IIB for 1,000 BhaFin shares). This values BhaFin at Rs 1,118 (11.5% premium over CMP), implying FY19E BV of 3.6x, entailing dilution of 14.9% for IIB. The deal is an aggressive and determined bet in line with the bank’s Planning Cycle-IV objective of inclusive banking financing the livelihood. It also specifically chose BhaFin given its dominant leadership & domain expertise in the rural segment and BhaFin’s fully validated business model (BhaFin acted as its Business Correspondent for close to 5 years). Financially, this merger will be synergistic, capital accretive, boost return profile and provide cross-selling opportunities over the long term. However, this segment, which will constitute 10% of combined portfolio, is volatile in nature (validated by historical anecdotes) and synergies will take some time to accrue. This may cap the near term upside. Having said that, IIB has proven track record of successful execution (organic & inorganic, reflected in vehicle financing & gems/jewellery portfolios). Maintain Buy.
Catholic Syrian Bank expects to raise funds by December (BS 24.10.17)
Kerala-based Catholic Syrian Bank (CSB) hopes to conclude its fundraising exercise by December. T S Anantharaman, chairman, said the second half of the exercise would be concluded by then. CSB needs Rs 400-600 Cr. Sources say SSG Capital Management, InCred Finance, Aion Capital, JM Financial and Everstone-backed IndoStar Capital are among the investors which have shown interest. R Rajendran, managing director of CSB, say that 25-30 investors had shown interest and three-odd rounds of discussion were over. He said: “We have told the Reserve Bank that CSB will be listed in the next one and a half years.” CSB had a net loss of Rs 149 Cr in 2015-16 and then turned around in 2016-17, with net profit of Rs 1.6 Cr, on the back of treasury gains. Anatharaman said the challenge was to have growth in operating profit this year without the benefit of treasury gain. The operating profit was Rs 9 Cr in the first, June, quarter and Rs 34 Cr in the September one. Net loss was Rs 14 Cr in the first quarter; the next one saw a profit of nearly Rs 1 Cr. The aim in the financial year’s second half was to make up for the June quarter’s loss and register a decent profit overall, said Anatharaman. Rajendran said they were targeting a credit to deposit ratio of 75% by year-end, from 52% now. The cost to income ratio would be brought down to 50% from the current 75%; it was 103% last year. It has set a target to grow three% more than the sector average in both advances and deposits in 2018-19.
Repco Bank suspends branch manager on charges of loan-sanction fraud (BL 24.10.17)
Repco Bank has suspended its Dharmapuri branch manager over alleged fraud and irregularities relating to loan sanctions. The bank suspended P Kamalakannan, who worked as Chief Manager in the Dharmapuri branch, and has initiated departmental action. “The bank has also lodged a criminal complaint for further investigation and action,” according to a statement of the bank. It said loans were provided without any documents, such as promissory note, loan agreement and mortgage deed, from the borrowers. In some loan disbursements, only partial loan amounts were given to the borrowers. Also, during the period of demonetisation, it is alleged that Kamalakannan accepted demonetised notes on the pretext of remitting these to the loan accounts and issued fake receipts for closure of loans, whereas the said loan accounts are still outstanding. The bank found that there was total flouting of norms, guidelines, procedures and systems in many of the loan sanctions and disbursements leading to sizeable financial loss to the bank. The bank’s action followed complaints from various quarters and alarmingly quick default of loans in the Dharmapuri branch. A special inspection was conducted during June and irregularities in loan sanctions, documentation and disbursements came to light, said the bank.
Jayant Rikhye to take over as HSBC India CEO (ET, FE 24.10.17)
London based Hongkong and Shanghai Banking Corp (HSBC) has appointed Jayant Rikhye as India CEO effective from December 1, subject to regulatory approvals. Indian born Rikhye has spent his entire career at HSBC since starting at the bank in 1989. He is currently group general manager, head of strategy and planning and regional head for the bank in 11 markets in Asia Pacific, based out of Hong Kong. Rikhye's elevation means that HSBC gets an Indian CEO after a gap of eight years since Naina Lal Kidwai completed her term in 2009. Kidwai was also chairman of the bank in India until 2015. "Rikhye will lead HSBC’s next phase of growth in the country, where he first joined the group in 1989," HSBC said in a press release. In his 28 years at HSBC, Rikhye has worked in different regions including Taiwan, Hong Kong, Middle East and North Africa. Stuart Milne who took over as India CEO in June 2012 will leave after a five-and-a-half year stint in December. He will take a three month sabbatical from January 2018 and his next role at HSBC will be announced in due course, the bank said.
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Govt may have to cut capex by Rs 70,000 cr: SBI Research (BS 24.10.17)
While corporate India wants a fiscal stimulus for the economy, the government might have to cut its capital expenditure by Rs 70,000 Cr to ensure the financial year's fiscal deficit doesn't cross the targeted 3.2% of gross domestic product (GDP), says SBI Research. To make up, it might rely on the investible surplus of public sector units, it says. As an alternative, the target might be postponed, by expanding it the deficit this year to 3.5% of GDP. In this case, it might not resort to extra market borrowing, said Soumya Kanti Ghosh, chief economist with the SBI group. “To manage the fiscal deficit, the government needs to cut expenditure substantially. We estimate Rs 70,000 Cr from the capital expenditure,” he said, as there could be a shortfall of Rs 1.1 lakh Cr in revenue receipts. Within revenue receipts, non-tax revenue might be Rs 38,000 Cr less because of lower telecom spectrum proceeds, among others. The note says there is still a way to compensate, with the investible surplus of public sector units. If one considers 10% of aggregate investments of Rs 2,03,937 Cr, along with Rs 1,08,063 Cr cash with these units, the aggregate investible surplus in FY17 was Rs 1,28,457 Cr. In FY17, however, cash balances declined 31%, from Rs 1,55,835 Cr in FY16, indicating much of the idle balances might have gone into investments in associates, subsidiaries and treasury assets. “There are doomsday predictions currently that the government is going to have a big revenue slippage in 2017-18, which might impact the headline fiscal deficit numbers. However, such projections flunk the test of logical reasoning and are grossly misconstrued,” the report says.
Inter-state supply may come under GST composition (BS 24.10.17)
The composition scheme for small taxpayers that offers easier compliance and a flat rate of tax looks set to be made more attractive as its ambit may be expanded to include inter-state supplies of goods. Besides, the facility of input tax credit may be made available under this scheme. A ministerial panel, led by Assam Finance Minister Himanta Biswa Sarma, is expected to finalise the contours of the revised structure in its next meeting on Sunday. The five-member group of ministers (GoM) would meet representatives of small- and medium-scale industry on Sunday to seek feedback on improving the composition scheme. It would be the second meeting of the GoM, which decided to reduce rates for restaurants to 12% from 18% while withdrawing the input tax credit facility. The GoM’s decision would be put up to the GST Council at its next meeting in Guwahati on November 10 for approval. “There was broad consensus in the meeting that the compliance burden needs to be reduced for small and medium enterprises in the GST. Taking the discussion forward, we will deliberate on extending the composition scheme to those undertaking inter-state supply of goods. This is a key demand from the sector,” said a state minister who is part of the panel. He added the input tax credit facility may also be made available under the composition scheme in order to make it easier for smaller players to opt for it. “Many small and medium players are hesitant about opting for the composition scheme as they worry that large players will stop buying from them. This needs rectification,” he said.
Reserve Bank sets up task force on public credit registry (BL, BS 24.10.17)
The Reserve Bank Monday said it has set up a high-level task force on a Public Credit Registry for India with an aim to improve ease of doing business and control delinquencies. The 10-member panel headed by Y M Deosthalee, former CMD of L&T Finance Holdings, will review the current availability of information on credit in India. In a statement, the RBI said it has been under its active consideration to set up a transparent and comprehensive public credit registry (PCR), an extensive database of credit information that is accessible to all stakeholders. The PCR would "help in enhancing efficiency of the credit market, increase financial inclusion, improve ease of doing business and help control delinquencies," the release said. The panel has been also asked to assess gaps in availability of information, determine the scope of the PCR, decide the structure of the new information system and suggest road map for developing a "transparent, comprehensive and near near real time PCR for India". The panel has been asked to submit its report by April next year.
Fiscal, monetary discipline important, says RBI chief Urjit Patel (BS 24.10.17)
Reserve Bank of India (RBI) governor Urjit Patel has said it is important for a country to maintain monetary and fiscal discipline if it is to attract investors from abroad. And, justified the central bank's stance on high provisioning toward stressed assets. Patel was speaking at an international banking seminar of G-30 nations at Washington on October 15, where he used the phrase 'virtual apartheid' for global banks' reluctance to share their currency swap lines with emerging market economies' central banks. The full copy of the speech was made available on the RBI website on Monday. "International capital tends to punish monetary and fiscal indiscipline severely," Patel said in his speech. "Even as some shocks tend to be impervious to fundamentals, economies with sound, prudent, transparent and accountable macro policy frameworks have demonstrated success in containing negative externalities, as well as in restoring normalcy faster," he said, adding that prudent policy frameworks tie down policy actions to final goals. The governor also suggested that banks adhere to the strict standard imposed by global accounting and regulatory bodies, so that investors have reference to higher quality information in making decisions. While there are challenges in implementing the strict norms under International Financial Reporting Standards (IFRS), India welcomes those norms. As for stressed assets, "banks generally tend to delay provisioning for bad loans until cyclical downturns have already set in and it is too late, possibly magnifying the impact of the economic cycle on banks' income and capital," Patel said. Adding: "In such circumstances, providing for and recognising actual and potential loan losses at an earlier stage in the credit cycle could reduce pro-cyclicality and foster financial stability."
Indiabulls Housing Finance Q2 profit up by 26% (BL 24.10.17)
Indiabulls Housing Finance saw a rise in net profit in the September quarter helped by expansion in loan book and rise in the net interest income (NII). The non-banking finance company (NBFC) reported a profit of Rs 861.1 Cr for the quarter against Rs 684.3 Cr in year-ago quarter, a rise of 26%. Disbursals grew by 41.8% to Rs 9,504.2 Cr and NII was up by 27.1% to Rs 1,389.5 Cr in the first quarter. Asset quality improved with gross non-performing loans at 0.78% and net non-performing assets at 0.31% as on June 2017, against 0.83% and 0.34%, respectively, for the previous-year quarter. Total loan assets crossed Rs 1 lakh Cr and balance sheet size grew by 26.7% to Rs 1.15 lakh Cr on September 2017. The spread on stock of loans expanded to 325 bps by 5 bps from the year-ago quarter. Gagan Banga, MD, Indiabulls, said that the NBFC plans to increase its loan book by 30%, about Rs 28,000 Cr by the full year. It has raised Rs 16,000 Cr during the first half of the year and plans to raise Rs 20,000 Cr in the second half.
Rupee struggles to gain momentum (BL 24.10.17)
The recovery in the rupee witnessed in the first two weeks of this month, came to a halt last week. The currency traded on a weak note all through the truncated week and fell, breaking below 65 to a low of 65.16 on Wednesday. The currency managed to recover from this low and closed at 65.02 on Monday, down 0.5% for the week. With no major domestic data release scheduled this week, the movement in the US dollar would largely impact the rupee’s move. The dollar index has been stuck in a narrow range between 93 and 94 over the past three weeks. The index is currently hovering below the upper end of this range at 93.90. The bias is bullish as the price action on the daily chart reflects a bullish inverted head and shoulder reversal pattern. The neckline resistance is at 94.30, which is likely to be tested if the index breaks above 94. A strong break and a decisive close above 94.30 will confirm this pattern. Such a break will increase the likelihood of the dollar index targeting 95 or even higher in the coming weeks. Such a rally in the dollar index can keep the rupee under pressure for a fall to 66 levels. The European Central Bank (ECB) meeting on Thursday and the US GDP data release on Friday are the key events to watch for this week, which might create volatility in the dollar index.
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Infosys likely to name next CEO today (BS 24.10.17)
Infosys is likely to name its next chief executive officer on Tuesday. Finding a CEO was among the key tasks taken up by co-founder and Chairman Nandan Nilekani when he took charge in August. Among the probable candidates for the post are B G Srinivas and Ashok Vemuri, two former executives who had quit before co-founder N R Narayana Murthy hired Vishal Sikka in 2014. Two people familiar with the development said there was a strong case for Srinivas, group managing director, PCCW Group of Hong Kong, who left Infosys as president, global markets, in 2014. U B Pravin Rao, interim MD and CEO, may be moved to his earlier role as chief operating officer. A company spokesperson dismissed it as speculative. While Infosys had tasked executive search firm Egon Zehnder to shortlist CEO candidates, Nilekani had clearly outlined that the firm would also invite former executives for the candidature. With a CEO in place, Nilekani would be able to focus on the strategy and build the governance structure that would look at its implementation.
Insolvency: Tatas, Ruias submit bids for debt-laden Essar Steel (BS 24.10.17)
Tata Steel and the Ruias themselves have put in bids for debt-laden Essar Steel after the company was put up for sale under the Insolvency and Bankruptcy Code (IBC). Sajjan Jindal-led JSW Steel, aggressive in bidding for Monnet Ispat’s and Bhushan Steel’s businesses, is said to have skipped submitting a resolution plan for Essar Steel. “The IBC allows promoters to bid for their company. In a number of other cases as well, promoters have been showing an interest in their own companies,” said a person aware of the proceedings. The promoter is not obligated to pay all the money upfront and can pay a portion of the total. “The Essar promoters plan to raise funds from other investors and pay the lenders. This is a classic case where the promoter wants to get the company back,” said the person quoted above. “Tata Steel is a very aggressive bidder for Essar Steel. But apart from them, interest is very thin though the asset is coast-based,” said another person close to the development.
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