February 2021 – Page 62

Muthoot Finance Q3 net rises 17% yoy on robust gold loan portfolio growth

February 9, 2021 root Banking & Finance

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Muthoot Finance on Tuesday reported a consolidated net profit of Rs 1,006.6 crore in the third quarter.

NBFC Muthoot Finance on Tuesday reported a 17% year-on-year increase in its third quarter consolidated net profits to Rs 1006.6 crore with its gold loan portfolio growing robustly.

The Kerala-based lender said its consolidated loan assets under management (AUM) increased 28 % year on year to touch Rs55,800 crore during the quarter.

The finance company, which also operates home loan, microfinance and insurance broking subsidiaries, said net profit of the gold loan division, Muthoot Finance (MFIN), increased 22 % YoY to touch Rs 991 crore.

Managing director George Alexander Muthoot said, “We had a remarkable third quarter with several achievements. Our standalone loan assets of Muthoot Finance have crossed the landmark of Rs 50,000 crore. Our active customers presently having a loan account also crossed the landmark of 50 lakh. We have achieved 22% growth in gold loan portfolio during the nine months of the current year and likely to end the year with at least 25% growth as against previous year growth of 22%.”

“During the quarter, gold loan portfolio of Muthoot Finance increased by Rs 3,389 crore to Rs 49,622 crore, quarter-to- quarter growth of 7%. Our disbursements for the quarter were focused on new customer additions, fresh loans to active and inactive customers and top-up loans to existing customers. We disbursed fresh loans to 3.88 lakh new customers amounting to Rs 2,976 crore and to 4.38 lakh inactive customers amounting to Rs 2,960 crore,” he added.

Subsidiaries followed a cautious approach towards lending. Share of the subsidiaries constitutes 10% of the consolidated loan portfolio.

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IOB nets Rs 213 crore profit; says it’s matter of time it comes out of PCA

February 9, 2021 root Banking & Finance

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IOB, which was under Prompt Corrective Action (PCA), said it has been posting profits for four consecutive quarters and almost fulfilled all the requirements to come out of the PCA.

Chennai-based public sector lender Indian Overseas Bank (IOB) on Tuesday reported a net profit of Rs 212.87 crore for the third quarter of FY21 as compared to a net loss of Rs 6,075 crore in the corresponding quarter of the previous financial year.

The bank has recorded an increase of 11.3% in its total income to Rs 5,786.54 crore as against Rs 5,197.94 crore. IOB, which was under Prompt Corrective Action (PCA), said it has been posting profits for four consecutive quarters and almost fulfilled all the requirements to come out of the PCA.

Speaking to media persons after releasing the earning performance, through virtual mode, Partha Pratim Sengupta, MD & CEO, IOB, said the bank plans to come out of PCA by focusing on recovery, low-cost deposits and less capital consuming advances.

“For the last four quarters, we have been making profit consistently. When compared with Q3 performance of FY20, there was a marked improvement in all key parameters. It is a matter of time for us to exit PCA and is up to the regulator to decide,” he said.

IOB had received a capital infusion of over Rs 8,000 crore in two tranches during the last two quarters of the last financial year, which helped the loss-making bank restart the business with a clean slate. Coupled with recovery and asset-light advances, the bank could achieve profits during the last four quarters.

The MD said there has been perceptible change in NPA levels achieved through recovery measures.

“Currently, the bank has a carry forward loss of Rs 17,500 crore. Our aim is to recover at least Rs 1,000 crore per quarter. In the first quarter of FY21, we recovered about Rs 200 crore due to lockdown, followed by Rs.760 crore and Rs 1,055 crore, respectively. Going forward, the focus will be on recovery in excess of Rs 1,000 crore and it will add to our bottom line,” he said.

According to him, IOB has evolved a policy of not taking fresh exposures in stressed sectors while the bank had exited from accounts in the stressed sectors, wherever feasible.

During the quarter, gross non-performing assets (GNPAs) reduced to Rs 16,753 crore from Rs 23734 crore and stood at 12.19% as against 17.12% and net NPA was contained at Rs 3,905 crore, as compared to 7,087 crore, which was 3.13% as against 5.81%. The provision coverage ratio improved to 91.91% from 86.20%.

While interest income contracted to Rs 4,244 crore from Rs 4,352 crore, other income rose 82.36 % to Rs 1,542.82 crore. Net interest margin stood at 2.45%.

He said around Rs 18,000 crore worth NPAs are awaiting NCLT’s resolution, while Rs 3,000 crore assets was expected to be restructured.

IOB had board’s approval to raise up to Rs 5,500 crore capital. He said the bank needed only Rs3,000 crore and the timing of the issue will be decided at a later date.

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Quarterly Results: Dhanlaxmi Bank Q3 net plunges 44.5% on higher wage bill

February 9, 2021 root Personal Finance

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Dhanlaxmi Bank had reported a net profit of Rs21.28 crore in the third quarter of last fiscal and Rs14.01 crore in the second quarter of FY21.

Dhanlaxmi Bank on Tuesday reported a 44.5% year-on-year decline in its third-quarter net profits to Rs11.8 crore mostly on higher wage bill and lower interest income.

Provisions for wages and pensions of the Thrissur-based lender has increased by 40% YoY to touch Rs70.27 crore as against Rs50.13 crore reported in the year-ago period. The lender had reported a net profit of Rs21.28 crore in the third quarter of last fiscal and Rs14.01 crore in the second quarter of FY21.

JK Shivan, MD & CEO of the bank told FE that provisions for higher wage bill and slippages led to a decline in the profits. Total advances of the bank are seen marginally lower at Rs7099 crore, while corporate advances have come down by 13.92 % YoY.

Gold loan portfolio has increased by 48.64 % YoY and now stands at 26.06 % of the total loan book. Shivan added that the bank will increase its corporate advances in the current quarter. Total income stands flat at Rs286.21 crore as against Rs285.85 crore in the year-ago period.

Interest income has declined by Rs13.52 crore year-on-year to Rs237.36 crore, while other incomes have increased to Rs48.85 crore from Rs34.97 crore reported in the year-ago period.

On the asset side, the lender reported an improvement with gross non-performing assets (NPA) as a percentage of gross advances at 5.78 % from 6.36 % in the preceding quarter.While net NPA declined to 1.11 % in the December quarter from 1.66 % in the September quarter.

Provision Coverage Ratio of the bank as on December 31, 2020, was 92.68%.

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CEA to bankers: If you want books in order then let your ‘karma’ be driven by your ‘dharma’

February 9, 2021 root Banking & Finance

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His comments in relation to governance in banks also add weight given that Subramanian has also previously served as a member of the P J Nayak Committee on governance of banks for RBI and the Uday Kotak Corporate Governance Committee of SEBI.

It was a memorial lecture in honour of a legendary banker remembered for his practices guided by ethical behaviour and Krishnamurthy V Subramanian, the chief economic adviser, government of India, left no stone unturned to drive home the importance of abiding by core values of staying highly principled. He was delivering the 11th R K Talwar memorial lecture organised by the Indian Institute of Banking and Finance. Raj Kumar Talwar headed the State Bank of India (SBI) between 1969 and 1976 and continues to be regarded as a highly principled banker.

Responding to a question on what bankers need to learn of governance given the current challenges in the banking sector with reports of bank failures and banks constrained by rising non-performing assets, he urged bankers to be guided by their dharma. Pointing to the latest economic survey, he said, it has a chapter of regulatory forebearance. As a result of the forebearance, he said, not only did the zombie lending happen in the banking sector but also there was the labelling of non-performing assets as restructured assets adding to the problems.

Referring to R K Talwar and his principles and stature, he said, were Talwar to be heading any of the banks today, it would have done none of this and stuck to right conduct and would have had the moral courage to lend right and paint a true picture of the balance sheet and be very transparent when it came to making disclosures on bank performance.“Such people (like Talwar) don’t need incentives and just do the right thing because that is what their dharma demands and their karma is driven by their dharma,” he said.

His comments in relation to governance in banks also add weight given that Subramanian has also previously served as a member of the P J Nayak Committee on governance of banks for the Reserve Bank of India and the Uday Kotak Corporate Governance Committee of Securities and Exchange Board of India. The latest Economic Survey that he referred to talks in detail about the P. J. Nayak Committee (2014), constituted by RBI, and says it “highlighted in its report submitted in May 2014 the twin concerns stemming from the forbearance regime: ever-greening of loans by classifying NPAs as restructured assets and the resultant undercapitalization of banks.” It also goes on to say that “once the forbearance policy was discontinued in 2015, RBI conducted an Asset Quality Review to know the exact amount of bad loans present in the banking system. As a result, banks’ disclosed NPAs increased significantly from 2014-15 to 2015-16. In the absence of forbearance, banks preferred disclosing NPAs to the restructuring of loans.”

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Pro forma gross NPAs of 17 banks estimated to be Rs 7 lakh crore

February 9, 2021 root Banking & Finance

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Similarly, among the PSBs, State Bank of India reported highest pro forma NPAs of over Rs 16,000 crore.

By Ankur Mishra

Seventeen banks are likely to have ratcheted up bad loans to the tune of Rs 7 lakh crore on a pro forma basis during the December quarter (Q3FY21). These 17 lenders had disclosed pro forma gross non-performing assets (GNPAs) this quarter due to the Supreme Court’s (SC’s) interim direction for standstill on fresh NPAs. Of Rs 7 lakh crore, these lenders have reported GNPAs of Rs 5.95 lakh crore in the current quarter without counting any fresh slippages. This implies Rs 1.04 lakh crore of bad loans in the system, which is yet to be recognised by the banks. The apex court had earlier directed lenders not to classify fresh non-performing loans from August 31, 2020, till further orders.

While the top six public sector lenders have reported the majority of pro forma NPAs at Rs 5.12 lakh crore, the 11 private lenders have reported pro forma bad loans at Rs 1.88 lakh crore, with Yes Bank reporting the highest among private sector lenders at over Rs 8,000 crore. Similarly, among the PSBs, State Bank of India reported highest pro forma NPAs of over Rs 16,000 crore.

Anil Gupta- sector head, Financial Sector Ratings, Icra, said the asset quality pressures for banks were likely to continue over the next few quarters as the impact of various measures such as emergency credit line guarantee scheme (ECLGS) and the six-month moratorium wanes. “The performance of loans where disbursements have been done under ECLGS will be monitorable apart from the exposures towards working capital borrowings where the funded interest is required to be repaid by March 31, 2021,” he said. The Reserve Bank of India had earlier granted moratorium of six months to borrowers from March 1, 2020. The banking regulator had also permitted lending institutions to convert the accumulated interest on working capital facilities over the total deferment period of six months into a funded interest term loan, which can be fully repaid during the course of the financial year 2021 (FY21).

Care Ratings senior director Sanjay Agarwal said, “We may see some increase in the gross NPA figures of banks in the next quarter, but overall it is likely to be lower than our estimate of 11-11.5% by the end of FY21.” It also depends on the path economy is going to take now, he added.

Last week, RBI had projected India’s gross domestic product (GDP) to contract by 7.7% in the current fiscal (FY21), but expects it to rebound at 10.5% in FY22. Veena Sivaramakrishnan, partner, Shardul Amarchand Mangaldas, said, “The worst in terms of Covid-19 impact is hopefully behind all of us. But the asset quality problem is not the one of pandemic alone.” For the asset quality to improve, there needs to be discipline among the corporates and tightening of lending practices, both of which are changing the ‘set in stone practices’ to a great extent, she added.

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Yield on 10-year G-Sec hardens 2 bps

February 9, 2021 root Banking & Finance

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Yield on the benchmark 10-year Government Security (G-Sec) hardened about 2 basis points on Tuesday as the government announced that it will mobilise resources via a special auction a day ahead of the scheduled auction on Friday.

The government’s announcement to raise resources via two back-to-back auctions on Thursday and Friday seems to have nullified the Reserve Bank of India’s (RBI) move to purchase of G-Secs via open market operation to check the rising yields in the secondary G-Sec market.

The government plans to raise up to ₹26,000 crore (notified amount: ₹22,000 crore plus additional subscription option: ₹4,000 crore) by selling two G-Secs (re-issue) via a special auction on Thursday. On Friday, it will mobiliise ₹26,000 crore via the scheduled auction of via four securities.

Yield on the 10-year benchmark G-Sec, carrying a coupon rate of 5.77 per centhardened about 2 basis points to close at 6.1105 per cent against the previous close of 6.0870 per cent. The price of this security declined about 17 paise to close to ₹97.5750.

Bond yields and price are inversely related, with the two moving opposite directions

In a report ‘Bond Fatigue, Dwindling Options’, Crisil observed that as economic recovery is gaining momentum, there will be a pick-up in credit growth and banks will now have more options than the government to lend to. This could put some pressure on G-sec yields.

The Centre has budgeted to borrow ₹12.1-lakh crore next fiscal, only a shade less than the ₹12.8-lakh crore in fiscal 2021 (revised estimate) and much higher than the ₹7.1-lakh crore in fiscal 2020. Stressed state finances means supply of state development loans could be copious as well, the credit rating agency said.

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HDFC Bank invites start-ups to apply for SmartUp grants

February 9, 2021 root Banking & Finance

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Private sector lender HDFC Bank is inviting applications from start-ups and individual entrepreneurs for its SmartUp grants.

“This year, the bank will focus on start-ups creating social impact at scale in sectors such as education – technology (ed-tech) and skill development, among others,” the lender said in a statement on Tuesday.

SmartUp grants are a part of the bank’s umbrella CSR brand, and are aimed at finding and deploying long-term, sustainable solutions at scale, to address social issues, and contribute to the economic and social development of the country.

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Non-life premium up 6.6% in January

February 9, 2021 root Banking & Finance

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The gross direct premium underwritten by general insurers increased 6.6 per cent at ₹18,488 crore in January 2021 against ₹17,334 crore in the same month last year.

According to flash figures released by the Insurance Regulatory and Development Authority of India (IRDAI), the total premium up to January in the current financial year grew by 2.76 per cent at ₹1,63,670 crore against ₹1,59,275 crore in the year-ago period.

The premium collected by general insurers registered 1.91 per cent growth at ₹1.40,999 with a market share of 86.15 per cent, while standalone healthy insurers showed a growth of 8 per cent. Specialised PSU insurers recorded a growth of 8.77 per cent, as per the data.

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Reserve Bank of India – Tenders

February 9, 2021 root Tenders

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The captioned meeting was held at 11:30 a.m. on February 01, 2021 at the Seminar Hall, RBSC, Chennai. The meeting was chaired by Shri P. N. Raghunath, General Manager & Vice Principal, and the undernoted Officer/ Staff attended the meeting:

1) Shri Sunil M. R, Manager (Estate Cell)

2) Shri Rajeev S. J., Junior Engineer

Representatives from M/s Sri Venkateswara Electrical Service and M/s Aadhi Electrical & Construction attended the meeting. Clarifications for the queries raised by vendor in the meeting are furnished below:

Sl. No.	Queries raised by the Contractors	Clarifications by RBSC
1.	Whether LAN cabling is part of the tender?	LAN cabling is not part of the tender. But providing conduit and RJ45 will be part of the tender.

Chief General Manager/ Principal
Reserve Bank Staff College
359, Anna Salai
Teynampet
Chennai – 600 018

February 09, 2021

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Central Bank of India Q3 profit rises 6% to ₹165 crore

February 9, 2021 root Banking & Finance

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Central Bank of India (CBoI) reported a 6 per cent year-on-year (y-o-y) increase in third quarter net profit at ₹165 crore against ₹155 crore in the year-ago quarter.

The public sector bank’s bottomline was supported by a 10 per cent y-o-y increase in net interest income (NII) and 48 per cent y-o-y decline in loan-loss provisions.

NII (difference between interest earned and interest expended) stood at ₹2,228 crore (₹2,022 crore in the year-ago quarter).

Non-interest income, comprising commission, exchange and brokerage, trading profit on investments, recovery in written off accounts, among others, was down 38 per cent y-o-y at ₹774 crore (₹1,249 crore).

Loan loss provisions were lower at ₹565 crore (₹1,089 crore).

Gross Non-Performing Assets (NPAs) declined to 16.30 per cent of gross advances as of December-end 2020 against 17.36 per cent as of September-end 2020.

Net NPAs declined to 4.73 per cent of net advances as of December-end 2020 against 5.60 per cent as of September-end 2020.

With proforma slippages (adjusted for the Supreme Court’s interim order on asset classification standstill), Gross and Net NPA ratio would have been 18.19 per cent and 6.58 per cent, respectively.

Net interest margin edged up to 2.97 per cent from 2.92 per cent a year ago. Credit cost has come down to 1.28 per cent from 2.66 per cent a year ago.

Gross advances were up 9 per cent y-o-y to ₹1,80,856 crore as of December-end 2020, mainly on the back of growth in MSME advances (12 per cent growth), retail (11 per cent) and corporate (9 per cent).

Total deposits increased by 5 per cent y-o-y to ₹3,23,872 crore as of December-end 2020. The proportion of low-cost current account, savings account (CASA) in total deposits improved to 48.11 per cent from 45.82 per cent a year ago.

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