Month: January 2021

The Reserve Bank of India has decided to withdraw with immediate effect three circulars issued by its Department of Government and Bank Accounts (DGBA) relating to recovery of excess pension paid by agency banks.

“It may please be noted that though the…circulars issued (two in 1991 and one in 2016) under the signature of RBI stand withdrawn, agency banks are requested to seek guidance from respective pension sanctioning authorities regarding the process to be followed for recovery of excess pension paid to the pensioners, if any,” the central bank said in a notification.

Agency banks are banks authorised to conduct government business in various States.

Not keeping with norms

In its notification, the RBI said it has been brought to its notice that the recovery of excess / wrong pension payments from the pensioners are being made in a manner that is not in keeping with the extant guidelines /court orders.

Excess pension

“Agency banks are again advised that, where excess pension payment has arisen on account of mistakes committed by the bank, the amount paid in excess should be refunded to the Government in lumpsum immediately after detection of the same and without waiting for recovery of any amount from the pensioners,” the RBI said.

SBI Card, the country’s largest pure-play credit card issuer, on Thursday reported a 52 per cent decline in net profit for the third quarter ended December 31, 2020, at ₹ 210 crore (₹ 435 crore in same quarter last fiscal)

Total income for the quarter under review declined 1 per cent to ₹2,540 crore (₹2,563 crore). It maybe recalled that SBI Card had, in the previous quarter ended September 30, 2020, recorded a net profit of ₹ 206 crore.

For the nine months period ended December 31, 2020, the company has now reported a 30 per cent decline in net profit at ₹809 crore (₹ 1161 crore). Total income remained flat at ₹7,245 crore (₹7,242 crore).

A statement issued by the company said that SBI Card business has reached pre-Covid levels.

The gross non-performing assets were at 1.61 per cent of gross advances as on December 31, 2020, against 2.47 per cent as on December 31, 2019. Net non-performing assets were at 0.56 per cent against 0.83 per cent as on December 31, 2019. Proforma Gross NPA as on December 31, 2020, stood at 4.51 per cent, and Net NPA at 1.58 per cent.

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹2 crore on Standard Chartered Bank–India for delays in reporting of frauds.

The central bank said the penalty has been imposed on the bank for non-compliance with certain directions issued by it contained in the ‘Reserve Bank of India (Frauds – Classification and Reporting by commercial banks and select FIs) Directions 2016’.

“The penalty has been imposed in exercise of powers vested in the RBI under the provisions of…the Banking Regulation Act 1949, for delays in reporting of frauds to RBI, revealed during the statutory inspection of the bank with reference to its financial position as on March 31, 2018, and March 31, 2019,” the RBI said in a statement.

The central bank said a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for such non-compliance with the directions.

After considering the bank’s reply to the notice and oral submissions made in the personal hearing, the RBI concluded that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty, it added.

The central bank said this action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

Higher credit cost has made a dent on South Indian Bank’s profitability in the third quarter of FY21. The Thrissur-based lender has registered a net loss of ₹91.62 crore against a net profit of ₹90.54 crore in the corresponding period of the previous year.

Murali Ramakrishnan, Managing Director and CEO, said that the quarterly loss was mainly on account of credit cost on the higher proforma slippages during the third quarter, as a result of additional stress in the economy due to Covid pandemic. Further, there was a one-time additional employee provision requirement on account of the wage settlement which was finalised during the quarter.

The interest reversal of ₹73 crore, conservative provisioning of ₹55 crore from a fraud account, and the provision of security receipts, are also contributing factors that led to the reduction in net profit, he said.

Despite the Covid pandemic, he said the bank could register a moderate growth in desired segments. As part of the business strategy to reduce the exposure in the corporate advances, the bank has brought down the share of corporate advances from 30 per cent as on December 31, 2019, to 24 per cent as on December 31, 2020. The growth in the desired portfolios and the reduction in the corporate exposure have further strengthened the balance sheet, he added.

The bank has also been able to meet the targeted levels of recovery/ upgrades, which has helped in containing the GNPA level. The provision coverage ratio has improved markedly to 72 per cent from 50 per cent, he said.

The capital aadequacy ratio stands comfortable at 14.47 per cent as on December 31, 2020. According to him, technology initiatives will be leveraged to improve the CASA and technology income in the coming quarters. As per the strategy, the Return on Assets and NIM will cross 1 per cent and 3.5 per cent, respectively, by the financial year 2024.

Bandhan Bank has registered a 13 per cent decline in net profit at ₹633 crore for the quarter ended December 31, 2020, against ₹731 crore in the same period last year on the back of higher provisioning.

During the quarter, the bank made further provisioning of ₹1,000 crore on standard advances against the potential impact of Covid-19. With this provisioning and additional standard assets provisioning that bank is carrying in the micro banking portfolio, total additional provisioning in books stands at ₹3,119 crore.

Net Interest Income (NII) for the quarter grew by around 35 per cent to ₹2,072 crore against ₹1,540 crore in the corresponding quarter of the previous year.

Non-interest income grew by 55 per cent to ₹553 crore compared to ₹358 crore in the corresponding quarter last year year. Operating profit increased by 51 per cent to ₹1,914 crore against ₹1,264 crore.

Net interest margin (annualised) for the quarter ending December 31, 2020, stood at 8.3 per cent against 7.9 per cent in December 31, 2019.

“This quarter showed robust performance operationally backed by higher growth, lower cost of funds and aided non-interest income and strong retail deposits and CASA. During the quarter, we further strengthened the balance sheet by taking accelerated additional provision on standard advances amounting to ₹1,000 crore taken for Covid-19. With Q4 historically been the best for us every financial year, we now look forward to similar performance in the last quarter for this financial year as well,” said Chandra Shekhar Ghosh, Managing Director and CEO of Bandhan Bank.

Gross non-performing asset as a percentage of advances stood at 1.11 per cent (1.93 per cent) and net NPAs stood at 0.26 per cent (0.81 per cent). The Supreme Court had, in its order in September, directed banks that the accounts that were not declared NPA till August 31, 2020, would not be declared non performing until further orders.

The bank’s proforma gross NPA would have been 7.12 per cent if it had classified borrower accounts as NPA after August 31, 2020, it said in notes to accounts to BSE.

According to Sunil Samdani, CFO, Bandhan Bank, while a lot of customers are making repayments, however, many are making part-payment of dues. So, it may not be right to consider these accounts as non-performing, as these are expected to regularise soon. The bank is focussing on improving recovery and enhancing collections.

Collection efficiency hit

The collection efficiency of the bank, which stood at around 89 per cent during the quarter ended September 2020, improved to around 92 per cent during the quarter ended December 2020. However, collections have been impacted, particularly in Assam, following the passing of the Assam Micro Finance Institutions (Regulation of Money Lending) Bill 2020, by the Assam Assembly and talks of a possible waiver ahead of the State elections.

Collection efficiency in Assam, which was at around 88 per cent in December-end, has come down to around 78 per cent during the first 16 days of January. Overall collection efficiency during the first fortnight of January has also inched down to around 90 per cent (against 92 per cent in end December).

The bank’s total exposure in Assam stood at ₹6,917 crore, which is about eight per cent of its total loan portfolio. The collection efficiency should improve moving forward, said Ghosh.

The bank’s scrip closed at ₹341.05, down by 5.22 per cent on the BSE on Thursday.