Month: January 2021

SBI raises $600 million at 1.80% coupon, BFSI News, ET BFSI

Banking & Finance

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Public lender, State Bank of India through its London branch raised $600 million of ‘Regulation S’ bonds at a coupon rate of 1.80%.

The bond has been benchmarked against the 5 year US treasury and priced at a spread of 140 bps over the benchmark. The bonds will be listed on SGX-ST and India INX.

SBI said, “The transaction was well received and saw strong interest from investors across geographies with a final order book in excess of USD 1.9 billion. On the back of strong demand, the price guidance was revised from T+175 bps area to T+140 bps, with a peak orderbook of USD 2.1 billion resulting in final pricing at the tight end of the range i.e. T+140 bps. The Notes are expected to carry a final rating of Baa3, BBB- and BBB- from Moody’s, Standard and Poor’s and Fitch respectively.”

Commenting on the successful transaction, C Venkat Nageswar, DMD – International Banking Group, said, “The successful issuance demonstrates the strong investor base SBI has created for itself in offshore capital markets allowing it to efficiently raise funds from the World’s leading fixed income investors, even during periods of heightened volatility. This is an indication of confidence global investors have in the Indian banking sector generally, and in SBI in particular and is also testament to the exceptional access that SBI enjoys in the global capital markets.”

BofA Securities, Citigroup, HSBC, J.P. Morgan, MUFG, SBICAP and Standard Chartered Bank were the Joint Bookrunners for this offering.



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Reserve Bank of India – Press Releases

Press Releases

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(Amount in ₹ crore, Rate in Per cent)
  Volume
(One Leg)		 Weighted
Average Rate 		Range
A. Overnight Segment (I+II+III+IV) 415,517.73 3.09 0.01-3.50
     I. Call Money 10,270.77 3.16 1.90-3.50
     II. Triparty Repo 314,676.90 3.10 2.92-3.39
     III. Market Repo 90,270.06 3.07 0.01-3.50
     IV. Repo in Corporate Bond 300.00 3.25 3.25-3.25
B. Term Segment      
     I. Notice Money** 679.10 3.22 2.55-3.42
     II. Term Money@@ 410.45 – 3.10-3.50
     III. Triparty Repo 0.00 – –
     IV. Market Repo 0.00 – –
     V. Repo in Corporate Bond 0.00 – –
  Auction Date Tenor (Days) Maturity Date Amount Current Rate /
Cut off Rate
C. Liquidity Adjustment Facility (LAF) & Marginal Standing Facility (MSF)
I. Today’s Operations
1. Fixed Rate          
     (i) Repo          
     (ii) Reverse Repo Wed, 06/01/2021 1 Thu, 07/01/2021 7,10,047.00 3.35
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo          
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo – – – – –
3. MSF Wed, 06/01/2021 1 Thu, 07/01/2021 55.00 4.25
4. Long-Term Repo Operations –   –   –
5. Targeted Long Term Repo Operations – – – – –
6. Targeted Long Term Repo Operations 2.0 – – – – –
7. Net liquidity injected from today’s operations
[injection (+)/absorption (-)]*		       -7,09,992.00  
II. Outstanding Operations
1. Fixed Rate          
     (i) Repo          
     (ii) Reverse Repo          
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo          
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo          
3. MSF          
4. Long-Term Repo Operations# Mon, 24/02/2020 365 Tue, 23/02/2021 15.00 5.15
  Mon, 17/02/2020 1095 Thu, 16/02/2023 499.00 5.15
  Mon, 02/03/2020 1094 Wed, 01/03/2023 253.00 5.15
  Mon, 09/03/2020 1093 Tue, 07/03/2023 484.00 5.15
  Wed, 18/03/2020 1094 Fri, 17/03/2023 294.00 5.15
5. Targeted Long Term Repo Operations^ Fri, 27/03/2020 1092 Fri, 24/03/2023 12,236.00 4.40
  Fri, 03/04/2020 1095 Mon, 03/04/2023 16,925.00 4.40
  Thu, 09/04/2020 1093 Fri, 07/04/2023 18,042.00 4.40
  Fri, 17/04/2020 1091 Thu, 13/04/2023 20,399.00 4.40
6. Targeted Long Term Repo Operations 2.0^ Thu, 23/04/2020 1093 Fri, 21/04/2023 7,950.00 4.40
D. Standing Liquidity Facility (SLF) Availed from RBI$       33,592.17  
E. Net liquidity injected from outstanding operations [injection (+)/absorption (-)]*     110,689.17  
F. Net liquidity injected (outstanding including today’s operations) [injection (+)/absorption (-)]*     -5,99,302.83  
G. Cash Reserves Position of Scheduled Commercial Banks
     (i) Cash balances with RBI as on 06/01/2021 4,32,538.26  
     (ii) Average daily cash reserve requirement for the fortnight ending 15/01/2021 441,636.00  
H. Government of India Surplus Cash Balance Reckoned for Auction as on¥ 06/01/2021 0.00  
I. Net durable liquidity [surplus (+)/deficit (-)] as on 18/12/2020 815,721.00  
@ Based on Reserve Bank of India (RBI) / Clearing Corporation of India Limited (CCIL).
– Not Applicable / No Transaction.
** Relates to uncollateralized transactions of 2 to 14 days tenor.
@@ Relates to uncollateralized transactions of 15 days to one year tenor.
$ Includes refinance facilities extended by RBI.
& As per the Press Release No. 2019-2020/1900 dated February 06, 2020.
* Net liquidity is calculated as Repo+MSF+SLF-Reverse Repo.
# As per the Press Release No. 2020-2021/287 dated September 04, 2020.
^ As per the Press Release No. 2020-2021/605 dated November 06, 2020.
¥ As per the Press Release No. 2014-2015/1971 dated March 19, 2015.
Ajit Prasad
Director   
Press Release : 2020-2021/898

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Worthiness Of Small Savings Schemes In The Fixed Income Space

Personal Finance

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Investment

oi-Vipul Das

|

Against the context of rising inflation, with the government agreeing to keep interest rates on small savings schemes stagnant, investors in these strategies have no alternative but to stick on it in order to reap good returns compared to fixed deposits of banks. On 31 December, a government circular confirmed that interest rates on small savings schemes will stay static until 31 March. This suggests that the Public Provident Fund (PPF) will continue to fetch 7.1 per cent, Senior Citizens Savings Scheme (SCSS) with 7.4 per cent, post office time deposits with 5.5-6.7 per cent, National Savings Certificate with 6.8 per cent and so on. These returns actually saw a drastic decline from what they were before April 2020, with until then PPF having 7.9 per cent interest.

Worthiness Of Small Savings Schemes In The Fixed Income Space

Should I Go For Other Long-Term Investment Options Amid Low FD Rates?

Lower savings rates, as well as stronger inflation, started in April. Inflation in price inflation has stayed above the higher end of the 6 per cent acceptable limit of the central bank during the fiscal year, hitting 6.93 per cent in November 2020. After that, interest rates have nearly stayed up with inflation on small savings schemes. In a few instances, strategies other than PPF have taxable benefit, indicating that the returns do not cover inflation until paying tax. In addition, higher prices as well as reduced interest income have pressured small investors. Yet, considering that fixed deposits at leading banks still yield just 4-6 per cent, small savings remain comparatively more appealing.

There was an assumption that, like FD rates, rates of small savings schemes would be reduced, but this has not occurred. In the fixed income sector, this tends to make them appealing. With an interest rate of 7.15% RBL Floating Rate Bonds have seen their rate kept stable, making it a strong choice for the investors as of now. With the exception of this, it is important to glance at an incremental change into hybrid funds that have some potential to overcome inflation by equity. Next year, inflation may decline, providing savers with a good return whereas investors still have some little hope.



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Top 4 Midcap Funds That Investors Should Invest In

Personal Finance

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1) PGIM India Midcap Opportunities Fund

This fund has a 5-star rating from Crisil and a 4-star rating from Value Research. The fund has done well in the last few years in terms of returns. In fact, the fund has generated whopping returns of 56 per cent in the last 1 year and the three year returns are 17 per cent on an annualized basis.

The fund has holdings in Coforge, ACC, Dixon Technologies, NATCO Pharma, Cholamandalam etc.

The minimum SIP investment needed to start an investment is Rs 500. The net asset value for PGIM India Midcap Opportunities Fund under the growth plan is Rs 28.16. Since the PGIM India Midcap Opportunities Fund has offered spectacular returns to investors, we suggest that investors invest small amounts and probably through SIP.

2) DSP Midacp fund

2) DSP Midacp fund

This fund has been rated 5-star by by Value Research and 4-star by Crisil. The fund largely invests in midcap stocks, which tend to generate volatile returns when compared to largecap stocks. The top 5 holdings of the fund include names like IPCA Labs, Cholamandalam, Infosys, Manappuram Finance and Balkrishna Industries.

The fund has given a 1-year return of 27 per cent, while the 5-year returns on an annualized basis is 14 per cent. DSP Midacp fund has now invested almost 91.7 per cent in equities, while the remaining is held in cash. One can invest in the fund through the SIP route as well, wherein the minimum investment is Rs 500 and the additional investment is Rs 500 every month. This fund in the longer term has the potential to generate good returns.

3) Invesco India Midcap Fund

3) Invesco India Midcap Fund

This fund has been rated as “5” star by Crisil. Even Value Research has given a very good rating of 4-star for the fund. The last 4 years has seen Invesco India Midcap Fund generate a returns of 13 per cent on an annualized basis. In fact, the seven year returns on an annualized basis is 19.53 per cent, which is stupendous.

The Invesco India Midcap Fund has invested almost 95.4 per cent in equities and the balance is held in cash. Invesco India Midcap Fund has holdings in quality midcap stocks including the likes of Coromandel International, Balkrishna Industries, Apollo Hospitals, Mphasis, ICICI Bank etc. If you are a long term investor this fund may be a good bet, though the NAV under the growth plan has risen substantially over the last few months in line with the markets.

4) Kotak Emerging Equity Fund

4) Kotak Emerging Equity Fund

This is another fund that has been rated 4-star by Value Research. Kotak Emerging Equity Fund has generated returns of 27 per cent in the last year, in line with the sharp upward movement in the markets.

The fund has assets under management to the tune of Rs 8,600 crores. Almost 99 per cent of the funds are invested in equities, which is not a big positive when the markets are at record levels.



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Private lenders report healthy loan growth in Q3

Banking & Finance

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The margin trajectory will remain moderately under pressure, given the continued monetary easing, low lending rates and relatively higher liquidity on bank balance sheets.

Private lenders have reported a sequential improvement in the net advances during the December quarter, according to provisional data released by the banks. While the largest private lender HDFC Bank has shown a 3% growth in the loan book, IndusInd Bank and IDFC First Bank reported over 3% quarter-on-quarter (q-o-q) growth in the advances. Similarly, Yes Bank has shown a 1.3% increase in the net advances during the quarter compared to the September quarter.

An analyst from Emkay Global Financial Services said that banks have reported q-o-q credit growth mainly due to festive pick-up as economic unlocking began. Many lenders reported improvement in the retail loan book during the quarter. IDFC First reported a 11.3% q-o-q increase in its retail loan book during the quarter. Similarly, showing a sign of improvement after its reconstruction, Yes Bank’s gross retail disbursements more than doubled in the December quarter at Rs 7,563 crore (q-o-q).

In a note to its clients, Kotak Institutional Equities has however, said that loan growth recovery of banks will be slower than expectations. “While credit demand is recovering from post-lockdown lows along with approval rates and share of NTC (new-to-credit) originations, we expect loan growth recovery to be slower than expectations of market participants, “ Kotak Institutional Equities said.

Private lenders have also reported strong deposit growth during the December quarter. While HDFC Bank has shown a 19% y-o-y growth in deposits during the December quarter, IndusInd Bank has registered 10.56% y-o-y growth in deposits. Similarly, Federal bank has registered a 12% y-o-y growth in the deposit numbers. Sequentially, While HDFC Bank has registered a 3% deposit growth, IDFC First Bank reported 11% increase in its deposits during the December quarter. Similarly, Yes Bank and IndusInd Bank reported a 7.7% and 5% deposit growth in the December quarter, as compared to September quarter.

Lalitabh Srivastava, assistant vice-president (AVP), research, Sharekhan, said that the low-cost deposit share of private banks is increasing as per provisional data. “So, maybe they are gaining market share, either from public sector banks or cooperative banks. Gaining deposit share was the next goal to achieve for private banks, because they were already doing better on the advances side, ” he added.

Shailendra Kumar, chief investment officer, Narnolia Financial Advisors said that although provisional numbers released by the private lenders were on expected lines, but it will be important to know what happens in the moratorium accounts and the final figures of restructuring.

Kotak Institutional Equities also said that headline asset quality is expected to worsen if the Supreme Court lifts its order that banned banks from marking defaulted loans as non-performing assets (NPAs). The slippages could be meaningfully high in our view, it said. The apex court had earlier directed banks not to recognise fresh NPAs, till further orders in the interest on interest case. A public interest litigation (PIL) was earlier filed in the Supreme Court to waive off interest on interest for borrowers during the moratorium period between March to August 2020.

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NBFC AUM growth would revive in FY22 to about 7-9%: Icra

Banking & Finance

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Smaller and mid-sized entities with an AUM of under Rs 20,000 crore expect higher growth rate compared to their larger peers.

Growth in non-banking financial companies’ (NBFC) assets under management (AUM) is likely to recover to about 7-9% in FY22 from a flattish performance in FY21, rating agency Icra said on Wednesday. In order to achieve this rate of growth, they will have to raise Rs 1.9-2.2 lakh crore, in addition to refinancing existing lines. The rating agency carried out a survey across non-banks, involving about 60 entities, together accounting for over 50% of the sectoral AUM and about 23 investors. The survey revealed that more housing finance companies (HFCs) expect growth of over 10% as compared to NBFCs. Also, smaller and mid-sized entities with an AUM of under Rs 20,000 crore expect higher growth rate compared to their larger peers. However, investors have a relatively muted growth outlook.

A M Karthik, vice president and sector head – financial sector ratings, Icra, said that growth in FY22 is likely to be driven by the improvement in demand from all the key target segments. Some of the key segments which would bolster growth include gold loans, home loans, personal credit, rural finance and microfinance. Growth in the vehicle finance and business loans segments, which are closely linked to economic activity, are expected to take longer to register a reasonable revival.

Non-bank exposures to commercial real estate and other large corporate or wholesale exposures are expected to register a decline even in FY22 after the decline of about 15% in FY20 and a 10% expected contraction in FY21. “As per the survey, majority (~70%) of issuers and investors do not expect co-lending to account for less than 10% of non-bank AUM over the next two-three years. Access to adequate funding, therefore, would remain critical for the sector to register a sustained improvement in growth,” Karthik said.

Growth would be contingent upon the access to adequate funding lines. Incremental bank loans to non-banks, considering their high sectoral exposure to the NBFC segment, remains to be seen and would, in turn, depend on overall bank credit growth. Mutual funds registered some improvement in their exposures to non-banks over the recent past, but their sustainability will be critical. An expected improvement in securitisation volumes in FY22 after the sharp contraction in FY21 and access to funding from other sources, including retail or overseas lenders or investors, would be key for sustainable growth.

Icra expects the slippages from the restructured book (estimated at 4-6% of AUM) to keep NBFC non-performing assets (NPAs) at elevated levels even in FY22 after an increase of up to 200 basis points (bps) in FY21. This is after considering that entities, especially those having retail exposures, would prefer to write off sticky overdues, in view of the provision build-up, adequate earning performance and their comfortable capital structures. Collection efficiency, notwithstanding the improvement since April 2020, remains about 5-15% lower than pre-Covid levels, thereby exerting pressure on their current asset quality.

“While part of the stress could get restructured, slippages would increase in H2FY21. As per the survey, ~90% of the investors expect the NPAs to increase by about 100-200 bps by March 2021 vis-a-vis 40% of the issuers. Further, another 40% of the issuers expect the NPAs to remain stable vis-a-vis March 2020 levels,” Icra said.

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Reserve Bank of India – Tenders

Tenders

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April 14, 2015





Dear All




Welcome to the refurbished site of the Reserve Bank of India.





The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved search – well, at least we think so but you be the judge.





With this makeover, we also take a small step into social media. We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy.




The site can be accessed through most browsers and devices; it also meets accessibility standards.



Please save the url of the refurbished site in your favourites as we will give up the existing site shortly and register or re-register yourselves for receiving RSS feeds for uninterrupted alerts from the Reserve Bank.



Do feel free to give us your feedback by clicking on the feedback button on the right hand corner of the refurbished site.



Thank you for your continued support.




Department of Communication

Reserve Bank of India


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Reserve Bank of India – Press Releases

Press Releases

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As part of the measures to further strengthen Supervision over regulated entities, Reserve Bank had set up a College of Supervisors (CoS) to augment and reinforce supervisory skills among its regulatory and supervisory staff both at entry level and on a continuous basis. This was done to facilitate the development of unified and focused supervision by providing training and other developmental inputs to the concerned staff.

While the CoS was functioning in a limited way in virtual mode since May 2020, it is now being fully operationalised. The CoS will have a full-time Director supported by an Academic Advisory Council (AAC). The AAC will identify areas where skill building/up-skilling are required, plan and develop curricula of all programmes, benchmark the programmes with international standards/best practices, develop appropriate teaching methods, etc.

The AAC has now been constituted with the following composition:

1 Shri N.S. Viswanathan,
Former Deputy Governor, RBI		 Chairperson
2 Shri Arijit Basu,
Former MD, SBI		 Member
3 Shri Paresh Sukthankar,
Former DMD, HDFC Bank		 Member
4 Prof. S. Raghunath,
IIM Bangalore		 Member
5 Prof. Tathagata Bandyopadhyay,
IIM, Ahmedabad		 Member
6 Prof. Subrata Sarkar,
IGIDR, Mumbai		 Member

Dr. Rabi Narayan Mishra, former Executive Director, RBI has been appointed as the Director of CoS.

The full-fledged operationalisation of the CoS will further contribute to effective oversight of the regulated entities by augmenting and ensuring a consistent quality of supervisory resources pool.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2020-2021/897

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Reserve Bank of India – Press Releases

Press Releases

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April 14, 2015





Dear All




Welcome to the refurbished site of the Reserve Bank of India.





The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved search – well, at least we think so but you be the judge.





With this makeover, we also take a small step into social media. We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy.




The site can be accessed through most browsers and devices; it also meets accessibility standards.



Please save the url of the refurbished site in your favourites as we will give up the existing site shortly and register or re-register yourselves for receiving RSS feeds for uninterrupted alerts from the Reserve Bank.



Do feel free to give us your feedback by clicking on the feedback button on the right hand corner of the refurbished site.



Thank you for your continued support.




Department of Communication

Reserve Bank of India


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Strong winds of change set to sweep health insurance sector

Banking & Finance

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Marked by innovation and digital push, 2021 will witness major winds of change in health cover, according to industry experts.

“The new trends seen last year will continue with new types of coverage such as the launch of more single disease products like ‘Covid-19 Benefit Policy’ or single disease critical illness etc,” Rakesh Jain, ED and CEO, Reliance General Insurance, told BusinessLine.

Apart from health due to the increasing number of catastrophic events, parametric cat policies (which pay at the occurrence of a triggering event rather than having to claim a specific insured property loss) may also find application for future viral outbreaks.

“The health insurance sector looks set for a full-scale makeover, which is a good sign, and one can be optimistic about the industry’s growth in the next few years due to these developments,” he added.

A game-changer

The Covid-19 outbreak and the requirements it generated can make the pandemic a game-changer for the industry, going forward. “Post Covid-19, I see excellent opportunities through service offerings such as e-pharmacy and telemedicine making way in 2021,” said Mayank Bathwal, CEO, Aditya Birla Health Insurance.

According to him, there will also be a paradigm shift in the functioning of the health insurance industry in the days to come. When it comes to servicing customers, one can expect more dependency on digital technologies such as Chatbots, AI-based voice assistants, and robust phone apps that provide essential information at the customers’ disposal.

More than anything, the entire industry is heading towards a more user-centric approach, and this is the approach that is likely to be the greatest strength of the industry in the years to come, feel experts.

In the last eight months, Covid had considerably changed lives globally; and in India, this not only includes the behaviour but also the business.

There has been an increase in the demand for health insurance by consumers as they have become more health-conscious. The increase in demand has been fuelled to a significant extent by the younger generation, say industry sources.

There has been a promising 30-40 per cent uptake in health insurance adoption across industry players.

However, there is still significant untapped potential. Citing a recent survey, Bathwal says insurance penetration in the country was 3.78 per cent in FY20, which is low compared to the global average of 7.23 per cent. Of this, the non-life segment only amounts to 0.97 per cent.

Standardisation

In this entire transformation, IRDAI has also played a pivotal role in standardising the exclusion of health insurance policy to eradicate the confusion among insured in different policies.

The basic standard health cover product, Aarogya Sanjeevani, has made a mark in 2020. The standard health cover policy has been offered by general and health insurers for a sum between ₹1 and ₹5 lakh from April 2020. Going forward, Arogya Sanjeevani can provide a further boost to the health insurance portfolio.

The regulator also rose to the occasion by introducing standard Covid-19 basic products, Corona Kavach and Karona Rakshak, to be offered by non-life and life insurers mandatorily for a period of nine-and-a-half months.

Digital push

The lockdown in 2020 also taught the insurance sector that still there is huge scope for insurers to invest in technology.

Digital claims settlement process has reduced the turnaround time for claims settlement. Digitalisation in the insurance sector is resulting in reduced costs, lower error rates and increased customer satisfaction.

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