Month: May 2021

‘We have a lot of experience from the last fiscal’

Banking & Finance

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Nitin Chugh, MD & CEO, Ujjivan Small Finance Bank

The impact of the second wave of Covid is far widespread than that of the first wave, when there was not much impact in rural areas and not much loss of livelihoods and radical reduction in collection efficiency, observes Ujjivan Small Finance Bank MD & CEO Nitin Chugh. In an interviw with Mithun Dasgupta, Chugh says the bank will have to estimate how much loan restructuring would be needed for microfinance portfolio, going forward. Excerpts:

Ujjivan Small Finance Bank’s net profit for the fourth quarter last fiscal jumped 86.5% year-on-year. However, its total income and net interest income (NII) fell during this quarter. What are the reasons behind these decreases?
There is only one reason. We had recognised the pro forma GNPAs as GNPAs after the Supreme Court vacated the stay (on banks for classifying loans which were standard as on August 31, 2020, as non-performing assets). That led to the reversal of interest income on GNPAs or de-recognising of the income to the extent of around `75 crore. And, that led to reduction in income as well as reduction in net interest margin (NIM).

Going forward, how do you expect the interest income growing?
I think as long as the loan book continues to grow. Last fiscal we grew by 7%, but that was largely because of we started to push the businesses only from the December onwards. We are now confident that since we were able to grow the book by nearly 11% quarter-on-quarter in the fourth quarter, as and when things get normalised, which we are hoping will happen hopefully by the end of the current quarter, then we should go back to rebuilding the businesses and growing. So, the income will, therefore, continue to grow as the book grows.

How much provisions did you set aside towards Covid-related risks?
In Q3, we had taken the accelerated Covid provision of Rs 547 crore making the aggregate provision to Rs 1,029 crore at the balance sheet level. From Rs 1,029 crore, we had written off Rs 74 crore in Q4 which is also the total write-off during the year, that brings down the provisions level to Rs 955 crore. That is what we are holding even now. We have free provisions of Rs 172 crore, and the balance is provided on account level, which makes our provision coverage ratio (PCR) of 60%. We had made provision of Rs 25 crore on interest accrued on proforma GNPA in Q3, which got reversed post the Supreme Court order.

Amid the second wave of Covid, how do you see the asset quality for the bank’s microfinance portfolio in the future?
The bank had made the upfront provisions due to the deterioration of the asset quality that we saw in the last financial year. Obviously, there is continuing stress. A lot of our customers had not even recovered from the first wave. This time around the infections keep spreading in rural areas as much as in the cities. So, the impact is far widespread than ever before. Last time, we did not see much impact in rural areas, we did not see loss of livelihood and radical reduction in collection efficiency. But, it does look like that the second wave will probably get resolved in the next 30-45 days the way the cases are coming down now. The RBI has very timely announced a lot of measures, especially for the small finance banks. So, we have those framework available to us to operate efficiently and responsibly, in terms of restructuring, etc. We have a lot of experience from the last financial year. We do know that what kind of things will work for collections and disbursal. At the end of March 2021, 96% of our microfinance customers were paying, fully or partly. In April collection efficiency dropped to 88%. At the moment, everywhere across the country, collections are lower than April.

How much bad loans did you write off for microfinance portfolio last fiscal? And, what is the outlook for restructuring, going forward?
For the whole year, we wrote off Rs 74 crore, and of that microfinance was around Rs 60 crore. All these accounts were NPAs as of February. We did not do any restructuring in microfinance loans. We did minor restructuring in housing and SME loans, which were less than Rs 30 crore. This time around we will have to estimate how much restructuring will be needed for the microfinance loan and we are working on the available policy frameworks.

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Reserve Bank of India – Press Releases

Press Releases

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The Reserve Bank of India (RBI) has, by an order dated May 19, 2021, imposed a monetary penalty of ₹10 Lakh (Rupees Ten Lakh only) on Daimler Financial Services India Private Limited, Pune (the company), Maharashtra for non-compliance with certain provisions of the directions issued by RBI contained in ‘Reserve Bank Commercial Paper Directions 2017’ and ‘Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016’. This penalty has been imposed in exercise of powers vested in RBI under the provisions of clause (b) of sub-section (1) of section 58 G read with clause (aa) of sub-section (5) of section 58B of the Reserve Bank of India Act, 1934, taking into account the failure of the company to adhere to the aforesaid directions issued by RBI.

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

Background

The statutory inspection of Daimler Financial Services India Private Limited with reference to its financial position as on March 31, 2019, revealed, inter alia, non-compliance with above mentioned directions issued by RBI. In furtherance to the same, a notice was issued to the company advising it to show cause as to why penalty should not be imposed for failure to comply with the directions issued by RBI. After considering the company’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI came to the conclusion that the charge of non-compliance with aforesaid RBI directions was substantiated and warranted imposition of monetary penalty.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/248

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Reserve Bank of India – Press Releases

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The Reserve Bank of India (RBI) has, by an order dated May 20, 2021 imposed a monetary penalty of ₹1.00 crore (Rupees One crore only) on Tamilnad Mercantile Bank Ltd. (the bank) for non-compliance with certain provisions of directions issued by RBI on “Cyber Security Framework in Banks” dated June 2, 2016.

The penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949. 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.

Background

The bank had reported a few cyber incidents to RBI in October 2019. Examination of the incident reports revealed, inter alia, non-compliance by the bank with RBI directions on “Cyber Security Framework in Banks” dated June 2, 2016. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for non-compliance with the said directions. After considering the bank’s reply to the notice, oral submissions made in the personal hearing and examination of additional submissions, RBI came to the conclusion that the charges of non-compliance with RBI directions on “Cyber Security Framework in Banks” were substantiated and warranted imposition of monetary penalty.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/247

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Reserve Bank of India – Press Releases

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The Reserve Bank of India (RBI) has imposed, by an order dated May 19, 2021, a monetary penalty of ₹1 Crore (Rupees one Crore only) on City Union Bank Limited (the bank) for contravention of/non-compliance with certain provisions of the directions contained in the Reserve Bank of India (Lending to Micro, Small & Medium Enterprises (MSME) Sector) Directions, 2017 and the circulars on Educational Loan Scheme and Credit Flow to Agriculture – Agricultural Loans – Waiver of Margin/Security Requirements. The penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) of the Banking Regulation Act, 1949 (the Act).

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.

Background

The statutory inspection of the bank with reference to its financial position as on March 31, 2019 and the Risk Assessment Report (RAR) pertaining thereto revealed, inter alia, non-compliance with the afore-said directions issued by RBI. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for failure to comply with the directions issued by RBI. After considering the bank’s replies to the notices, oral submissions made in the personal hearing and examination of additional submissions made by it, RBI came to the conclusion that the charges of non-compliance with the aforesaid RBI directions were substantiated and warranted imposition of monetary penalty.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/245

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Reserve Bank of India – Press Releases

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The Reserve Bank of India (RBI) has, by an order dated May 20, 2021, imposed a monetary penalty of ₹90 lakh (Rupees ninety lakh only) on Nutan Nagarik Sahakari Bank Ltd., Ahmedabad (the bank) for non-compliance with directions issued by RBI contained in Master Directions on ‘Interest Rate on Deposits’, ‘Know Your Customer (KYC)’ and Circular on ‘Frauds Monitoring and Reporting Mechanism’. This penalty has been imposed in exercise of powers vested in RBI under section 47 A (1) (c) read with sections 46 (4) (i) and 56 of the Banking Regulation Act, 1949.

This action is based on 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.

Background

The statutory inspection of the bank conducted by the RBI with reference to the bank’s financial position as on March 31, 2019 and the Inspection Report (IR) pertaining thereto, and examination of all related correspondence revealed, inter alia, non-compliance with aforesaid directions issued by RBI. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of the provisions of the Act/ directions issued by RBI. After considering the bank’s reply to the notice and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charges were substantiated and warranted imposition of monetary penalty.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/246

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Reserve Bank of India – Press Releases

Press Releases

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The following State Governments have offered to sell securities by way of auction, for an aggregate amount of ₹11,000 Cr. (Face Value).

Sr. No. State Amount to be raised
(₹ Cr)		 Additional Borrowing (Greenshoe) Option
(₹ Cr)		 Tenure
(Yrs)		 Type of Auction
1. Bihar 2000 – 6 Yield
2. Kerala 1000 – 10 Yield
500 – 12 Yield
3. Maharashtra 1500 500 10 Yield
1000 – 11 Yield
4. Rajasthan 500 – 5 Yield
1000 – 10 Yield
5. Sikkim 500 – 10 Yield
6. Tamil Nadu 1500 – 20 Yield
1500 – 25 Yield
  Total 11000      

The auction will be conducted on the Reserve Bank of India Core Banking Solution (E-Kuber) system on May 24, 2021 (Monday). The Government Stock up to 10% of the notified amount of the sale of each stock will be allotted to eligible individuals and institutions subject to a maximum limit of 1% of its notified amount for a single bid per stock as per the Scheme for Non-competitive Bidding Facility.

Both competitive and non-competitive bids for the auction should be submitted in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system on May 24, 2021 (Monday). The non-competitive bids should be submitted between 10.30 A.M. and 11.00 A.M. and the competitive bids should be submitted between 10.30 A.M. and 11.30 A.M.

In case of technical difficulties, Core Banking Operations Team (email; Phone no: 022-27595666, 022-27595415, 022-27523516) may be contacted.

For other auction related difficulties, IDMD auction team can be contacted (email; Phone no: 022-22702431, 022-22705125).

Only in the event of system failure, physical bids would be accepted. Such physical bids should be submitted to the Public Debt Office (email; Phone no: 022-22632527, 022-22701299) in the prescribed form obtainable from RBI website (https://www.rbi.org.in/Scripts/BS_ViewForms.aspx) before the auction timing ends.

The yield percent per annum expected by the bidder should be expressed up to two decimal points. An investor can submit more than one competitive bid at same/different rates of yield or prices in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system. However, the aggregate amount of bids submitted by a bidder should not exceed the notified amount for each State.

The Reserve Bank of India will determine the maximum yield /minimum price at which bids will be accepted. Securities will be issued for a minimum nominal amount of ₹10,000.00 and multiples of ₹10,000.00 thereafter.

The results of the auction will be announced on May 24, 2021 (Monday) and payment by successful bidders will be made during banking hours on May 25, 2021 (Tuesday) at Mumbai and at respective Regional Offices of RBI.

The State Government Stocks will bear interest at the rates determined by RBI at the auctions. For the new securities, interest will be paid half yearly on November 25 and May 25 of each year till maturity. The Stocks will be governed by the provisions of the Government Securities Act, 2006 and Government Securities Regulations, 2007.

The investment in State Government Stocks will be reckoned as an eligible investment in Government Securities by banks for the purpose of Statutory Liquidity Ratio (SLR) under Section 24 of the Banking Regulation Act, 1949. The stocks will qualify for the ready forward facility.

Ajit Prasad
Director   

Press Release: 2021-2022/244

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Reserve Bank of India – Press Releases

Press Releases

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A. I. SUMMARY – PURCHASE RESULTS

Aggregate Amount (Face value) notified by RBI : ₹35,000 crore
Total amount offered (Face value) by participants : ₹1,21,696 crore
Total amount accepted (Face value) by RBI : ₹35,000 crore

A. II. DETAILS OF PURCHASE ISSUE

Security 6.18% GS 2024 7.59% GS 2026 6.79% GS 2027 7.17% GS 2028 5.85% GS 2030 7.95% GS 2032 6.22% GS 2035
No. of offers received 105 104 135 133 165 35 124
Total amount (face value) offered (₹ in crore) 21,497 17,621 19,933 25,526 12,490 2,604 22,025
No. of offers accepted 31 36 18 24 122 Nil 60
Total offer amount (face value) accepted by RBI (₹ in crore) 2,980 6,593 5,143 6,697 8,345 NA 5,242
Cut off yield (%) 5.0145 5.7022 6.0140 6.1906 5.9526 NA 6.5827
Cut off price (₹) 103.65 107.59 103.85 105.25 99.26 NA 96.73
Weighted average yield (%) 5.0270 5.7331 6.0238 6.2033 5.9651 NA 6.5929
Weighted average price (₹) 103.61 107.46 103.80 105.18 99.17 NA 96.64
Partial allotment % of competitive offers at cut off price NA NA 33.77 NA NA NA NA

Ajit Prasad
Director   

Press Release: 2021-2022/243

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Sundaram Home Finance Q4 net dips 55% to ₹36.6 cr

Banking & Finance

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Sundaram Home Finance’s net profit for the fourth quarter of FY21 was down 55 per cent to ₹36.6 crore. The company reported a net profit of ₹82 crore in the same period last year.

However, the company, a wholly owned subsidiary of Sundaram Finance, said that the results of the two periods are not comparable as net profit in the year-ago quarter had an exceptional item of ₹60 crore on account of write back of deferred tax liability.

The company said that on a comparable basis, profit from continuing operations for Q4FY21 went up 68 per cent to ₹36.60 crore (₹21.68 crore), excluding the one-time exceptional item of ₹60 crore during Q4FY20.

Disbursements during the fourth quarter went up 18 per cent to ₹459.38 crore (₹389.60 crore) while deposits saw a net addition of ₹204 crore to ₹1,810 crore as on March 31.

“The real estate sector showed remarkable tenacity in 2020 against unprecedented odds. Over the five-month period between Nov’20 and March’21, we saw demand getting back to pre-Covid levels and a nice momentum was starting to build,” Lakshminarayanan Duraiswamy, MD, Sundaram Home Finance, was quoted in a press release.

In FY21, the company registered a net profit of ₹191 crore compared to ₹218 crore in FY20.

The company also said that it is looking to raise ₹2, 500 crore this year through a mix of debt instruments and bank funding to augment its growth plans.

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Reserve Bank of India – Press Releases

Press Releases

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The Reserve Bank of India today released the data showing daily merchant and inter-bank transactions in foreign exchange for the period March 22 – March 26, 2021.

All Figures are in USD Millions
Position Date MERCHANT INTER BANK
FCY / INR FCY / FCY FCY / INR FCY / FCY
Spot Forward Forward Cancel Spot Forward Forward Cancel Spot Swap Forward Spot Swap Forward
Purchase
3/22/2021 5,391 2,203 1,274 314 119 104 13,123 14,260 354 3,566 2,052 476
3/23/2021 4,653 2,684 898 306 172 140 11,761 16,424 1,042 4,036 2,482 1,105
3/24/2021 3,683 1,448 2,077 190 369 515 10,309 13,436 572 4,887 2,714 151
3/25/2021 4,367 1,523 1,469 309 407 219 10,099 16,411 843 4,012 3,564 272
3/26/2021 5,928 2,659 3,003 365 524 607 12,819 14,567 1,049 5,585 5,853 587
Sales
3/22/2021 4,686 1,906 595 320 120 100 13,533 15,885 1,627 3,564 1,674 476
3/23/2021 4,417 1,901 721 314 188 124 13,334 15,512 1,219 3,994 2,201 1,105
3/24/2021 4,856 2,231 673 187 395 498 10,247 11,533 1,253 4,864 2,695 151
3/25/2021 4,127 2,026 898 309 336 308 9,843 14,720 1,347 3,887 3,667 272
3/26/2021 5,101 4,499 2,131 391 483 670 13,713 13,524 1,557 5,195 5,776 578
(Provisional Data)

Ajit Prasad
Director   

Press Release: 2021-2022/242

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