Month: April 2021

HDFC Bank, ICICI, Axis retail loan recast thrice corporate ones, BFSI News, ET BFSI

Banking & Finance

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It was not corporates but retail borrowers who rushed to avail the debt recast scheme announced by the Reserve Bank of India to alleviate pandemic stress last year.

Retail loan restructuring by top three private banks, HDFC Bank, ICICI Bank and Axis Bank, at Rs 6,600 crore, was three times the Rs 2,100 crore restructured loans by corporates, according to a report.

However, while the retail loan restructuring ended by March 31, corporate loan recasts are allowed till June end.

Fresh concerns

With a fresh surge in Covid infections and subsequent lockdowns, lenders are staring at renewed stress in loan accounts.

Sameer Narang, Chief Economist of Bank of Baroda, recently told ETBFSI that the salaried segment is still alright but the informal sector will be impacted. “Banks may not be that impacted as banks do not cater the informal sector in a big way as NBFCs does. There will be an impact on NBFCs, and they would require some degree of support. It also depends upon the pace of the second wave. We should wait and see how things pan out. If it is a phenomenon for 6-8 weeks then most of the segments will ride it over. If it lasts longer then this might be an issue for segments. It is very difficult to create a policy in an uncertain environment.”

Asset quality

HDFC Bank, ICICI, Axis retail loan recast thrice corporate ones

Ratings agency Icra too had raised concerns over the asset quality of retail loans.

The rising Covid cases have again raised concerns on the asset quality of retail loans from non-banking financial companies (NBFCs) and housing finance companies (HFCs), according to investment information agency ICRA.

The restrictions on movement will have a bearing on the collection efforts of NBFCs especially for microfinance loans where cash collections still remain dominant, it said in a report.

Commercial vehicle loans can also face stress if the inter-state restrictions are re-imposed, though even the current restrictions put in place in key geographies like Maharashtra and Delhi where non-essential services are closed will lead to lower fleet utilisation for operators.

However, said ICRA, housing loans are expected to remain most resilient as was seen even last year given the secured nature of asset class and priority given by borrowers to repay them.

No relief measures

Banks, which got protection and support by a swift moratorium on loans when the pandemic first struck, have no such cover this time.

As the second wave intensifies, most of the relief measures and schemes announced by the government and Reserve Bank of India have expired. On top of it, the central bank is non-committal on moratoriums.
“In today’s conditions, there is no need for a moratorium,” RBI governor Shaktikanta Das had said after the central bank’s monetary policy review.

Also, a spike in overdue loans after the lifting of the moratorium has been worrying analysts.

“The level of loans in overdue categories has increased after the moratorium has been lifted and the impact on asset quality will be spread over FY2021 and FY2022 as various interventions and relief measures have prevented a large one-time hit on profitability and capital of banks,” Icra said in a report.

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Reserve Bank of India – Press Releases

Press Releases

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Government of India has announced the sale (re-issue) of Government Stock detailed below through auctions to be held on April 30 2021.

As per the extant scheme of underwriting notified on November 14, 2007, the amounts of Minimum Underwriting Commitment (MUC) and the minimum bidding commitment under Additional Competitive Underwriting (ACU) for the underwriting auction, applicable to each Primary Dealer (PD), are as under:

(₹ in crore)
Security Notified Amount Minimum Underwriting Commitment (MUC) amount per PD Minimum bidding commitment per PD under ACU auction
3.96% GS 2022 3,000 72 72
5.85% GS 2030 14,000 334 334
6.76% GS 2061 9,000 215 215

The underwriting auction will be conducted through multiple price-based method on April 30, 2021 (Friday). PDs may submit their bids for ACU auction electronically through Core Banking Solution (E- Kuber) System between 09:00 A.M. and 09:30 A.M. on the date of underwriting auction.

The underwriting commission will be credited to the current account of the respective PDs with RBI on the date of issue of securities.

Rupambara
Director   

Press Release: 2021-2022/129

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ICICI Bank launches Merchant Stack, offering curated digital banking services to retail merchants, BFSI News, ET BFSI

Banking & Finance

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ICICI Bank announced the launch of its ‘Merchant Stack’, a set of digital banking services specially curated for retail merchants. Merchants —- grocers, supermarkets, large retail store chains, online businesses and large e-commerce firms can meet their banking requirements seamlessly so that they can continue to serve their consumers during the pandemic’s difficult times. This initiative is in line with the Bank’s ‘Business with Care’ principle. Retail merchants can avail these contactless services without visiting the Bank’s branches. They can use these services right away via InstaBIZ, the Bank’s mobile banking application for businesses.

Merchant Stack offers a variety of banking solutions and value-added services at one single place curated for the retailer eco-system. The stack’s key pillars are 1) a new account called “Super Merchant Current Account”; and 2) two instant credit facilities called “Merchant Overdraft” and “Express Credit,” both of which are focused on POS transactions and are industry firsts.) ‘Digital Store Management’ facility to help merchants take their business online; 4) exclusive loyalty rewards programme, an industry first feature; 5) value added services like alliances with major e-commerce and digital marketing platforms for expansion of online presence.

Anup Bagchi, ICICI Bank, on the launch, said, “There are over 2 crore merchants in the country with approximately USD 780 billion in value of transactions in 2020. They are expected to grow rapidly in the coming years. During these difficult times of the pandemic, it is our endeavour to enable the merchants banking platform that will help them to continue serve their customers. We have thus launched the ‘Merchant Stack’, which most importantly offers a range of ‘contactless’ banking services, providing safety to the merchants and their customers alike. It is also a continuation of ICICI Stack, which we introduced a year ago to provide all digital banking services to retail customers on a single platform.”

Furthermore, the Bank offers ‘Express Credit,’ which allows for immediate settlement of POS transactions. It provides greater convenience because retailers can immediately access funds, as compared to the industry practice of waiting a few days for credit for transactions made at POS machines.



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Axis Bank board approves re-appointment of Amitabh Chaudhry as MD & CEO, BFSI News, ET BFSI

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Private sector lender Axis Bank on Thursday said its board has approved the re-appointment of Amitabh Chaudhry as its Managing Director and CEO for three years with effect from January 1, 2022.

“The board of directors of the bank.. considered and approved the proposal relating to re-appointment of Amitabh Chaudhry as the Managing Director and CEO of the bank, for a further period of 3 years, with effect from January 1, 2022 up to December 31, 2024,” Axis Bank said in a regulatory filing.

The appointment will be subject to the approval of the Reserve Bank of India (RBI) and shareholders of the bank, the filing added.

Chaudhry was appointed as Managing Director (MD) and CEO of Axis Bank for a period of three years, with effect from January 1, 2019 up to December 31, 2021.

Prior to joining Axis Bank, Chaudhry was MD and CEO of HDFC Standard Life Insurance Company.



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Lenders to approve the transfer of 30-40 loans by next week, BFSI News, ET BFSI

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The Indian Banks’ Association (IBA) has identified 102 corporate bad loans, totalling to Rs 2 lakh crore, where the amount outstanding in each is over Rs 500 crore that can be transferred to the proposed National Asset Reconstruction company (NARC) or bad bank.

It has asked its member banks asked members to identify large loans where they are lead bankers and get approval from co-lenders so that these loans can be sold to a National Asset Reconstruction company.

The loans identified by IBA include NPAs in a variety of industries — including oil, steel, cement and roads, with many admitted under the insolvency process. These loans are almost fully provided for over the years and they exclude the ones where there is fraud involved or those currently under liquidation. About 75% of the lenders by value need to approve to transfer the loans to an ARC.

The process

In the first phase, lenders are expected to approve the transfer of 30-40 loans by next week for transferring the loans from the books of banks is already in place.

Once the lenders decide on selling the loan, the NARC will make them an offer based on the scope of recovery. With the NARC’s offer on hand, the lenders will hold a ‘Swiss Challenge’, where rivals are allowed to better the offer made by a chosen bidder.

While rival in the private sector will be given an option to bid, it is unlikely they will succeed. This is because the security receipts issued by the NARC for 85% of the value of the loans would be guaranteed by the government. Since private companies do not have a government guarantee, they can only hope to win if they can provide cash. The Swiss Challenge will enable the public sector banks to comply with RBI’s norms that require banks to sell loans through a price-discovery process rather than doing a one-to-one deal.

The NARC will pay up to 15% of the agreed value for the loans in cash. The bad bank is also expected to do a good job in recovery as it will create a trust that will assign the task to an asset management company (AMC) in the private sector.

Each corporate nonperforming asset (NPA) will be converted into a special purpose vehicle, which will be sold by the AMC.

The bad bank

Nine banks and two non-bank lenders, including the State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB), are coming together to jointly invest Rs 7,000 crore of initial capital in a proposed bad bank that aims to help extract funds stuck in bad loans. Two other state-run financiers of power projects will also own stock in the bad bank.

Canara Bank, Union Bank of India and Bank of India will join their larger state-run peers as investors in the bad bank. ICICI Bank, Axis Bank and Life Insurance Corp of India-owned IDBI Bank are also among the shareholders. State-owned Power Finance Corp and Rural Electrification Corp will also be equal shareholders in the new company.

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RBI launches latest round of surveys to get inputs for monetary policy, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank on Wednesday announced the launch of the latest round of households’ surveys to capture inflation expectations and consumer confidence, which provides useful inputs for its monetary policy.

The central bank has been regularly conducting these surveys.

Announcing the launch of the May 2021 round of Inflation Expectations Survey of Households (IESH), the RBI said it aims at capturing subjective assessments on price movements and inflation of approximately 6,000 households, based on their individual consumption baskets, across 18 cities.

“The survey seeks qualitative responses from households on price changes (general prices as well as prices of specific product groups) in the three months ahead as well as in the one year ahead period and quantitative responses on current, three months ahead and one year ahead inflation rates,” it said.

The cities include Ahmedabad, Bengaluru, Bhopal, Bhubaneswar, Chandigarh, Delhi, and Guwahati.

The May 2021 round of Consumer Confidence Survey (CCS) will cover approximately 5,400 respondents across 13 cities, including Ahmedabad, Bengaluru, Bhopal, Chennai, Kolkata, Lucknow, Mumbai and Thiruvananthapuram.

The CCS seeks qualitative responses from households, regarding their sentiments on general economic situation, employment scenario, price level, households’ income and spending.

The agency engaged by the RBI will conduct the surveys over telephone (instead of regular personal interview mode) in view of the COVID-19 pandemic.

The next meeting of the rate-setting Monetary Policy Committee (MPC) is scheduled during June 2 to 4, 2021.



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HDFC Bank in talks with FinTechs to upgrade credit card biz, BFSI News, ET BFSI

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HDFC Bank Ltd, India’s biggest private sector lender, is looking to replace its legacy credit card system with a modern technology platform, according to a report.

The bank wants to make the processes more efficient and cost-effective and give customers a better experience and more security.

It is in talks with FinTech firms such as Zeta and Sprinklr for the upgrade.

Zeta, a software service provider for Sodexo’s employee benefits and rewards programme, helps banks to launch modern retail and FinTech products.

HDFC Bank, which has been hit by several digital glitches since the past year, has embarked on a scale changing technology adoption and transformation agenda to help drive its ambitious future growth plans.

RBI ban on credit card issue

The RBI had temporarily barred HDFC Bank in December 2020, from launching new digital banking initiatives and issuing new credit cards after taking a serious note of service outages at the lender over the last two years.

The bank was penalised by the RBI for two major outages, one in November 2018, and the other in December 2019.

Taking a stern view of the repeated outages, RBI Governor Shaktikanta Das had said in December that the regulator had some concerns about certain deficiencies and it was necessary that HDFC Bank strengthens its IT system before expanding further.

Technology transformation

Following this, the bank embarked on a scale changing technology adoption and transformation agenda to help drive future growth plans.

Giving details of the Technology Transformation Agenda, Jagdishan said that the bank has invested heavily in the infrastructure to handle any potential load that it might encounter in the next 3 to 5 years.

“We are also in the process of accelerating our cloud strategy to be on the cutting edge leveraging best in class cloud service providers,” he added.

As part of the agenda, he said, the bank has strengthened the process of monitoring the Data Centre (DC) and has shifted key applications to new DC.

“We have strengthened our firewalls further. We have to be scanning the horizon for potential security issues and be ever prepared to face them. We haven”t had any security issues in the past. But this is always an important area of focus and action plans are underway for further robustness,” the letter said.



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Sebi deepens fund managers’ skin in the game, BFSI News, ET BFSI

Personal Finance

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Mumbai: Mutual funds will have to pay a part of the salary to its top employees in the form of units of the schemes they oversee. The Securities and Exchange Board of India (Sebi) said on Wednesday at least 20% of the salary, perks, bonus or non- cash compensation of these executives will have to be paid in the form of units of mutual fund schemes.

The regulator said the move is aimed to align the interest of the key employees with the unit holders of the mutual fund schemes. Key officials include a fund house’s chief executive officer, chief investment officer, fund manager, research analysts, chief operation officer among others.

“Having skin in the game is looked at positively by all investors, and the basic intent seems good,” said Kaustubh Belapurkar, Director (Fund Research), Morningstar India.

The new rule comes in the wake of a forensic report commissioned by Sebi which alleged that some of the top officials of Franklin Templeton and their family members withdrew a portion of their investments from some of six stressed schemes of the fund house just before they were shut for redemptions on April 23,2020.

The Sebi circular on Wednesday said units allotted to key employees would be clawed back in the event of “fraud, gross negligence or violation of code of conduct.” The rules become effective on July 1.

The regulator has excluded exchange traded funds, index funds, overnight funds and existing close ended schemes from the new rule.

Sebi said the compensation paid in the form of units should also be proportionate to the assets under management of the schemes in which the key employee has an oversight.

In case of compensation paid in the form of employee stock options, the date of exercising such option should be considered as the date of such payment, Sebi said. The compensation should be locked- in for a minimum period of three years or tenure of the scheme whichever is less.

Mutual fund industry officials are miffed with the new regulations. While some said the move could result in a flight of talent to independent fund management, others said it was unfair on the chief executive officers of mutual funds.

“The CEO will end up putting 20% of his post tax money across a large number of schemes irrespective of his needs, and that too locked in for three years,” said the CEO at a domestic fund house.

The regulator said fund houses should not allow any redemptions of the said units during the lock- in period. Besides, redemptions of such units should also not be allowed within the lock-in period in case of resignation or retirement before attaining the age of superannuation.

“In case of retirement on attaining the superannuation age, such units shall be released from the lock-in and the key employee shall be free to redeem the units, except for the units in close ended schemes where the units shall remain locked in till the tenure of the scheme is over.”

In the case of fund managers managing only a single scheme, 50% of the compensation can be by way of units of the scheme managed by the fund manager and the remaining can could be by way of units of those schemes whose risk value is equivalent or higher than the scheme managed by the fund manager, the circular said.



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No more kebabs for bitcoins as Turkey’s crypto-payment ban looms, BFSI News, ET BFSI

Personal Finance

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ISTANBUL: Kebab chef Kadir Oner hoped to boost his new business by accepting payment in cryptocurrencies, but a ban by Turkish authorities will force him next month to fall back on payment methods as traditional as his spit-roasted meat.

Interest in cryptocurrencies has boomed in Turkey, where double digit inflation and a tumbling lira make them an attractive alternative investment, and Oner says that customers used them to settle between 5% and 10% of their bills.

“The world is adapting to the digital era and we have to get on board with it,” Oner said adding that crytopayments were easier than bank transactions and would have accounted for a growing slice of his doner kebab sales if allowed to continue.

But Turkey’s Central Bank sees dangers in the new practice, and on April 16 banned the use of cryptocurrencies and crypto assets for purchases from April 30, citing “irreparable” damage and transaction risks.

Authorities last week also launched investigations into possible fraud at two cryptocurrency exchanges, and the Central Bank Governor Sahap Kavcioglu said the Finance Ministry is working on wider regulations regarding cryptocurrencies.

Cryptocurrencies remain little-used for global commerce even as they become increasingly mainstream assets, although companies including Tesla Inc and travel site Expedia Group Inc do accept such payments.

In Turkey, businesses like hairdressers and small grocery shops started accepting payments out of convenience as they also held crypto coins, Altug Isler, the founder of the Kripto Teknik news website said.

If the sector were well regulated, there would be potential for more cryptocurrency transactions, he said, but the central bank had taken the “easiest option” by closing it all down.

“The ban has became a serious issue for the fintech firms working in this area and they have started taking the crypto payment ban to court,” Isler said. “I think the government will make an effort to bring regulations into the cryptocurrency market and loosen this ban.”

Trading volumes in Turkish crypto exchanges doubled on the weekend following the central bank ban on crypto asset payments compared to the previous weekend, according to data from U.S. researcher Chainalysis and trading data firm Kaiko shared with Reuters.

Cryptocurrency trading volumes often spike during periods of volatility, with short-term traders seeking to profit from swings in price. Many market players say this is a key attraction of the emerging asset.

PLANS SHELVED
In the covered halls of Istanbul’s 15th century Grand Bazaar, cryptocurrency exchange shop Cointral can no longer sell gold for cryptocurrencies, its founder Ugur Hakan Cakan said.

He also had to put on hold a new initiative for e-commerce websites offering crypto asset payments.

“We have been selling gold, real estate and we were preparing to launch a new service… but the project is shelved now with the new regulation,” Cakan said.

“I hope that this ban is a transition until the necessary regulations are put into implementation,” he said, adding that gold for cryptocurrency sales had been popular.

Chef Oner says he will survive the ban on cryptopayments, which had been used to purchase more than 1,500 of his kebabs since he opened in March, but he also hoped the move would be temporary.

“I am sure when the necessary legal regulations are made we will win back the customers we’ve lost due to this ban.”



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SC rejects banks’ pleas for recall of 2015 verdict asking RBI to disclose info about them under RTI, BFSI News, ET BFSI

Banking & Finance

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In a major blow to banks, the Supreme Court on Wednesday refused to recall its 2015 judgment, which had held that the RBI will have to provide information about the banks and financial institutions (FIs) regulated by it under transparency law.

Several FIs and banks, including the Canara Bank, the Bank of Baroda, the UCO Bank and the Kotak Mahindra Bank had filed applications in the top court seeking a recall of the 2015 judgment in the Jayantilal N Mistry case, saying the verdict had far-reaching consequences and moreover, they were directly and substantially affected by it.

The banks had contended that the pleas for a recall of the judgment, instead of a review, is “maintainable” as there was a violation of the principles of natural justice in view of the fact that they were neither parties to the matter nor heard.

“A close scrutiny of the applications for a recall makes it clear that in substance, the applicants are seeking a review of the judgment in Jayantilal N Mistry. Therefore, we are of the considered opinion that these applications are not maintainable,” a bench of justices L Nageswara Rao and Vineet Saran said.

The order, written by Justice Rao, said in the instant case, the dispute relates to information to be provided by the Reserve Bank of India (RBI) under the Right to Information Act (RTI) and though the information pertained to banks, it was the decision of the RBI that was in challenge and decided by this court.

“No effort was made by any of the applicants (banks) in the miscellaneous applications to get themselves impleaded when the transferred cases were being heard by this court. The applications styled as recall are essentially applications for review. The nomenclature given to an application is of absolutely no consequence, what is of importance is the substance of the application…,” the top court said.

While dismissing the pleas, the bench, however, made it clear that it was not dealing with any of the submissions made by the banks on the correctness of the 2015 judgment in the Jayantilal N Mistry case.

“The dismissal of these applications shall not prevent the applicants (banks) to pursue other remedies available to them in law,” it said.

Earlier, the apex court had heard several matters pertaining to the orders of the Central Information Commission asking the RBI to provide information about banks to RTI applicants.

Several pleas were transferred to the top court at the request of the RBI and the judgment came to be pronounced in 2015.

In the judgment, the apex court had refused to accept the RBI’s contention that the information sought under the RTI Act could not be disclosed in view of its fiduciary relationship with the banks.

The court had observed that the RBI is not in any fiduciary relationship with the banks and that it has a statutory duty to uphold the interest of the public at large, the depositors, the country’s economy and the banking sector.

The top court was of the opinion that the RBI has to act with transparency and not hide information that might embarrass the banks and that it is duty-bound to comply with the provisions of the RTI Act and disclose the information sought.

Several banks sought a recall of the judgment by filing miscellaneous applications in the main petition filed by the State Bank of India (SBI) and the HDFC bank.

The top court de-tagged the main pleas of the SBI and the HDFC bank and dismissed the miscellaneous applications of the banks.



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