Month: January 2021

A greater push to health insurance, reduction in Goods and Services Tax (GST), and a separate deduction for home insurance top the wish list of the general insurers in the upcoming Budget 2021-22.

There are also expectations of broader healthcare reforms that can augur well for the health insurance segment, which has been in the limelight, thanks to increased awareness driven by Covid.

According to Mayank Bathwal, CEO, Aditya Birla Health Insurance, health insurance was growing even before the pandemic. However, the pandemic has reinforced the essential nature of having a safety net for healthcare costs. In this situation, it is necessary to have health insurance as every family today faces questions on their preparedness coping with unforeseen and emergency healthcare costs, he said.

To give a further push, the industry is expecting some positive action by the government in the upcoming Budget. “Given the global focus on health, we anticipate that this year’s Budget will have a larger thrust on health reforms,” said Bathwal.

As family health insurance premiums versus the tax benefits are skewed, it becomes important to increase the limits defined for mediclaim premium tax deduction under section 80D of the Income Tax Act to ₹1,00,000 ( ₹50,000for self and spouse, in addition to ₹50,000 for parents).

“Further, allowed dependent relationships should be re-looked. It is also crucial to reintroduce the medical reimbursement with a higher limit of ₹50,000 tax deduction, which got merged in standard deduction during the finance budget 2018,” said the Aditya Birla Health Insurance chief.

Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance, expect more traction on the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (PMJAY).

“Looking at the way PMJAY scheme is evolving (case in point is PMJAY-SEHAT in J&K UT), I feel that the scheme should further enhance its coverage by not limiting it to specific strata of people, but should be provided for all citizens of our country,” he said.

This, coupled with reducing the GST on insurance premiums and increasing the tax exemption cap limit under 80D, will encourage more people to opt for health insurance.

“These measures will not only help people access quality medical treatment but also better their lifestyle, thereby increasing the life expectancy of people in our country even further,” Singhel added.

Given India’s low insurance penetration and that insurance is intended to provide financial support against sudden human or economic loss, the government should lower the applicable GST rate on insurance premiums.

The non-life companies are mandatorily participating in pooling arrangements such as Terrorism Pool, which should be exempted from GST. In the case of the insurance business, investments or transactions in securities are governed by the Insurance Act and Regulations framed thereunder to protect the policyholders’ interest over the long term.

Hence, the insurance industry feels that provisions of inclusion of transactions in securities in ‘exempted supply’ should not apply to insurance companies, said Ramandeep Sahni, Chief Financial Officer, Bajaj Allianz General Insurance.

A separate deduction for home insurance is also needed, feel industry experts. “Given that most individuals exhaust their 80C limits through investments/savings, the limit for deduction under section 80C should be increased to ₹175,000, with a separate deduction made available for home insurance up to ₹25,000,” Sahni added.

Having posted improvement in asset quality and profitability for four subsequent quarters starting March 2020, UCO Bank is hopeful of coming out of the Prompt Corrective Action (PCA) measure of the Reserve Bank of India.

According to Atul Kumar Goel, MD and CEO, UCO Bank, now that the bank has been able to adhere to all four parameters required to come out of PCA for four subsequent quarters, it has urged the RBI to consider taking it out of the framework.

Improvement in profitability

Riding on the back of a higher net interest income, UCO Bank registered a net profit of ₹35 crore for the quarter ended December 31, 2020, compared to a net loss of ₹960 crore during the same period last year.

On a sequential basis, net profit was up by nearly 17 per cent from ₹30 crore during the quarter ended September 30, 2020.

Net interest income grew by 14 per cent to ₹1,408 crore during the quarter under review compared with ₹1,237 crore in the same period last year. Operating profit was up by 10 per cent at ₹1,334 crore (₹1,210 crore).

Other income was up by 16 per cent at ₹864 crore (₹743 crore).

The percentage of gross non performing assets (NPA) to total advances declined to 9.8 per cent during the quarter under review against 19.45 per cent in the same period last year. Net NPA came down to 2.97 per cent (6.34 per cent).

Provision coverage ratio improved to 91.22 per cent during the quarter under review against 83.71 per cent in the same period last year.

Total deposits increased by seven per cent to ₹20,2421 crore, while advances grew by around three per cent to ₹11,6797 crore.

Despite a marginal decrease in yield on advances and a higher cost of funds, the bank has witnessed a growth in net interest margin to 2.86 per cent (2.62 per cent), said Goel.

The bank’s capital adequacy ratio stood at 12.08 per cent.

“We are comfortable on the capital front till March 2021. We have board approval to raise around ₹3,000 crore and we are looking for an opportune time to raise around ₹1,000 crore via QIP. We are in the process of appointing merchant bankers for the same,” he said.

On Monday, the bank’s scrip closed at ₹13.08, up by 1.55 per cent on the BSE.

Private sector lender Kotak Mahindra Bank reported a 16.1 per cent increase in its standalone net profit at ₹1,853.54 crore for the third quarter of this fiscal against ₹1,595.90 crore in the same period last fiscal.

Net interest income for the quarter ended December 31, 2020, rose by 17 per cent to ₹4,007 crore, from ₹3,430 crore a year ago. Net interest margin for the quarter under review was at 4.51 per cent.

Other income was almost flat at ₹1,334.38 crore in the third quarter of this fiscal versus ₹1,341.43 crore a year ago.

Provisions rose by 34.9 per cent to ₹599.03 crore in the third quarter of this fiscal against ₹444 crore a year ago.

“Covid-related provisions as of December 31, 2020, stood at ₹1,279 crore,” the bank said in a statement on Monday.

One-time restructuring

In accordance with the Resolution Framework for Covid-19 announced by the RBI on August 6, 2020, as of December 31, 2020, the bank has approved, for certain eligible borrowers, one-time restructuring of 0.28 per cent of net advances, it further said. This is roughly ₹600 crore.

As of December 31, 2020, gross non-performing assets was 2.26 per cent and net NPA was 0.50 per cent.

Had the bank classified the borrowers more than 90 days overdue on December 31, 2020, as NPA, gross NPA would be 3.27 per cent (September 30, 2020: 2.70 per cent); net NPA would be 1.24 per cent (September 30, 2020: 0.74 per cent), it further said, adding that it has made provision for such advances, including towards interest accrued but not collected for the entire period, with moratorium.

The bank remained cautious in lending. Advances declined marginally to ₹2,14,103 crore as at December 31, 2020, from ₹2,16,774 crore as of December 31, 2019. Average savings deposits grew by 29 per cent to ₹1,07,363 crore for the nine months of 2020-21 compared to ₹83,049 crore in the corresponding period a year ago.

Jaimin Bhatt, Group President and Group Chief Financial Officer, Kotak Mahindra Bank, said there has been growth in segments such as home loan, consumer secured businesses and tractors. It is going slow in unsecured consumer loans, he told reporters.