Month: May 2021

NARCL to further Govt’s agenda of disinvestment of IDBI Bank, privatisation of PSBs

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The National Asset Reconstruction Company Ltd (NARCL), currently being put together by banks and other lenders, may structurally alter the balance-sheets of banks in such a way that it will further the Government’s agenda of divesting its stake in IDBI Bank and privatising two public sector banks (PSBs).

Once chunky stressed assets are out of the books, the valuation of these banks will improve, making them more saleable, opine market experts.

This can help the government realise more value from the proposed sale of its 45.48 per cent stake in IDBI Bank to a strategic buyer as well as privatisation of two PSBs.

Ramnath Krishnan, President-Ratings & Chief Rating Officer, ICRA, observed that NARCL might structurally help with disinvestment in state-owned banks should the Government consider this in the future. “It might structurally alter the balance-sheets of certain banks, which could make them more saleable should disinvestment be an opportunity seriously considered by the Government,” Krishnan said.

Referring to IDBI Bank’s healthy provision coverage ratio (PCR), Mangesh Kulkarni, Research Analyst, Almondz Global Securities, assessed that with most of its legacy assets being provided for 100 per cent, it can straight away transfer them to NARCL. So, the path to divestment of Government’s stake in IDBI Bank and privatisation of two PSBs will be streamlined once NARCL starts operations, he added.

IBA sets the ball rolling

The Indian Banks’ Association (IBA) has set the ball rolling on NARCL with the appointment of State Bank of India’s Padmakumar M Nair as its new Chief. Nair is currently Chief General Manager with SBI’s Stressed Assets Resolution Group.

NARCL is being set up following Finance Minister Nirmala Sitharaman’s FY2022 Budget announcement that the high level of provisioning by public sector banks on their stressed assets calls for measures to clean up the bank books.

Stressed assets with principal outstanding of ₹500 crore and above, aggregating about ₹1.50- lakh crore, are expected to be transferred to NARCL.

At a recent press meet, Rakesh Sharma, MD & CEO, IDBI Bank, said large public sector and private sector banks will be investing in NARCL, with each bank taking less than 10 per cent stake. IDBI Bank will also consider investing in the company.

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Reserve Bank of India – Press Releases

Press Releases

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As announced in Governor’s statement of May 05, 2021, the Reserve Bank will conduct the second tranche of open market purchase of government securities of ₹35,000 crore under the G-sec Acquisition Programme (G-SAP 1.0) on May 20, 2021.

2. Accordingly, the Reserve Bank will purchase the following Government securities through a multi-security auction using the multiple price method:

Sr. No ISIN Security Date of Maturity Aggregate Amount
1 IN0020190396 6.18% GS 2024 04-Nov-2024 ₹35,000 crore
(There is no security-wise notified amount)
2 IN0020150093 7.59% GS 2026 11-Jan-2026
3 IN0020170026 6.79% GS 2027 15-May-2027
4 IN0020170174 7.17% GS 2028 08-Jan-2028
5 IN0020200294 5.85% GS 2030 01-Dec-2030
6 IN0020020106 7.95% GS 2032 28-Aug-2032
7 IN0020200245 6.22% GS 2035 16-Mar-2035

3. The Reserve Bank reserves the right to:

  • decide on the quantum of purchase of individual securities.

  • accept bids for less than the aggregate amount.

  • purchase marginally higher/lower than the aggregate amount due to rounding-off.

  • accept or reject any or all the bids either wholly or partially without assigning any reasons.

4. Eligible participants should submit their bids in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system between 10:00 am and 11:00 am on May 20, 2021. Only in the event of system failure, physical bids would be accepted. Such physical bid should be submitted to Financial Markets Operations Department (email; Phone no: 022-22630982) in the prescribed form obtainable from RBI website (https://www.rbi.org.in/Scripts/BS_ViewForms.aspx) before 11:00 am.

5. The result of the auctions will be announced on the same day and successful participants should ensure availability of securities in their SGL account by 12 noon on May 21, 2021.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/199

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Akshaya Tritiya 2021: Must Know Jeweller Offers On Online Gold Purchase

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1. Malabar Gold and Diamonds:

Kerala-based jewellery company as part of its Akshaya Tritiya is offering up to 20% off on making charges on gold and Gemstone Jewellery. Simultaneously, it is also providing up to 20% off on diamond value in case of diamond jewellery. Note the offer is available exclusively on the company’s website malabargoldanddiamonds.com online till May 16. The Akshaya Tritiya offer at the company was launched from May 3.

SBI credit card customers can avail 5% extra cashback on transaction valued over Rs. 15000, with maximum cash back of Rs.1250/-.

2. Tanishq:

2. Tanishq:

Tanishq this Akshaya Tritiya presents ‘Akshayam’, taking forward the tradition of belief. As part of the offer, the Titan company is giving up to 25% off on making charges of gold and on diamond jewellery value. In such unprecedented times, the company has taken to new ways of servicing customers and now offers Live video calling facility to enable virtual shopping over a video call.

PC Jeweller

PC Jeweller

In its festive offer, the company is extending a discount of flat 25% on diamond jewellery and making charges of gold jewellery. Additonally it is giving 10% off on making charges of gold coins. The scheme will run until May 16.

– ICICI Bank Credit and debit card holder can get 7.5% cashback on minimum spend of Rs. 45000. Maximum cashback however is ,capped at Rs. 7500. This offer is valid on all PC Jeweller store and online and will run from May 7th to May 15th.

Kalyan Jewellers

Kalyan Jewellers

The company is offering Gold Ownership Certificate which will give an opportunity to gold buyers to avail rate benefits. Buyers can book their gold purchase now and redeem the same at their chosen showroom as gold coin or jewellery. The scheme guarantees gold rate protection and is on offer till May 31, 2021.

Note this scheme is not marked as Akshaya Tritiya offer by the company

Joyallukas:

Joyallukas:

– In the scheme that is running until May 16, on purchase of gold jewellery worth Rs. 50000 Joyallukas is giving out free 200 mg 22K gold coin.

– On purchase of diamond, uncut and precious jewellery worth Rs. 50000, the company is giving free 1 gm 22K gold coin.

– On purchase of diamond, uncut and gemstone jewellery worth Rs. 20000, free 10 gm silver coin is being given.

– In an exclusive offer, SBI credit card customers can get 5% extra cashback.

GoodReturns.in



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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 May 14 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
New GS 2023 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 May 14, 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: 2021-2022/198

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PSU banks keep vigil over Cairn Energy raid on its overseas accounts, BFSI News, ET BFSI

Banking & Finance

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With UK’s Cairn Energy Plc looking to seize Indian assets to recover USD 1.2 billion it was awarded by an international arbitration tribunal, the Indian government has dug in heels and put banks on vigil for any such action.

Cairn Energy has said it taking necessary actions to access the USD 1.7 billion it was awarded by an international arbitration tribunal after overturning a retroactive tax demand slapped by the Indian government.

The Department of Financial Services has asked public sector banks to appoint a nodal officer amid increasing concerns that overseas assets or deposits of these lenders could be attached.

The department wrote a letter to public sector bank chiefs suggesting they immediately inform Sanjay Kumar, director – banking operations, if they receive ‘any intimation/notice/letter’ from Cairn Energy Plc and its subsidiary Cairn UK Holdings.

“Banks are advised to appoint a nodal officer in the case for any future correspondence, and share the name, designation and contact details of the official with us,” Jnanatosh Roy, under secretary, department of nancial services, nance ministry, wrote in the letter.

Cairn Energy and the government are locked in a legal battle over an arbitration order that requires India to pay $1.2 billion.

Withdraw funds

Last week, the central government has asked public sector banks to withdraw funds from their foreign currency accounts abroad, as New Delhi fears Cairn Energy may try to seize the cash after an arbitration ruling in a tax dispute.

A guidance was sent to state-run banks to withdraw funds from their nostro accounts.

A nostro account refers to an account a bank holds overseas at another bank in the currency of that jurisdiction. Such accounts are used for international trade and to settle other foreign exchange transactions.

While the Indian government has filed an appeal, the London-listed firm has started identifying Indian assets overseas, including bank accounts, that could be seized in the absence of a settlement, which Cairn says it is still pursuing.

The company has registered its claim against India in courts in the United States, Britain, France, the Netherlands, Singapore and Quebec, moves that could make it easier to seize assets and enforce the arbitration award.

The government was concerned courts abroad could order funds in their jurisdiction be remitted to Cairn.

Cairn said in February it was discussing several proposals with the government to find a solution.

India’s stand

Finance Minister Nirmala Sitharaman has earlier said that an international arbitration ruling on India’s sovereign right to taxation sets the wrong precedent, but said the government is looking at how best it can sort out the issue arising out of New Delhi being ordered to return $1.2 billion plus interest and cost to UK’s Cairn Energy Plc.

The government, which participated in an international arbitration brought by the Scottish firm against being taxed retrospectively, has appealed against The Hague based tribunal’s ruling asking the government to return the value of shares expropriated and liquidated, tax refunds withheld and dividend seized to recover a wrongly levied retroactive tax demand.

“We don’t believe in retrospective taxation,” she had said. “However, when issues are taken at arbitration… which question India’s sovereign right to taxation, we are worried that it sets a wrong precedent.” The Indian government argues that tax levied by a sovereign power should not be subject to private arbitration. Cairn had previously said the award is binding and it can enforce it by seizing overseas Indian assets.

Sitharaman, however, added that the government is looking to sort out the issue.

“I want to see how we can best sort this out,” she said, without elaborating.

The award

Cairn was awarded damages of more than $1.2 billion-plus interest and costs in December in a long-drawn-out tussle with the Indian government over its retrospective tax claims.

The Scottish firm invested in the oil and gas sector in India in 1994 and a decade later it made a huge oil discovery in Rajasthan. In 2006, it listed its Indian assets on the BSE.

Five years after that, the government passed retroactive tax law and billed Cairn Rs 10,247 crore plus interest and penalty for the reorganisation tied to the flotation.

The state then expropriated and liquidated Cairn’s remaining shares in the Indian entity, seized dividends and withheld tax refunds to recover a part of the demand.

Cairn challenged the move before an arbitration tribunal in The Hague, which in December awarded it $1.2 billion (over Rs 8,800 crore) plus costs and interest, which totals USD 1.725 billion (Rs 12,600 crore) as of December 2020.

The company has since then been in talks with the finance ministry to get the government to pay the award.



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PNB report higher stress levels a year after merging two banks, BFSI News, ET BFSI

Banking & Finance

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Ahead of its plan to raise funds via qualified institutional placement, Punjab National Bank (PNB) has revealed a pile of stressed loans.

As of December, the lender had 13.2% of loans with repayment overdue for more than one month.

It had a gross bad loan ratio of over 14% for the December quarter with most stressed segments being corporate loans and small businesses. MSME dominated loans those where repayments are overdue for more than thirty days or SMA loans.

PNB’s ratio of loans that were in default for anywhere between one and 90 days stood at 20% of the overall book at the end of 2020, according to the offer document issued by the bank. It witnessed a sharp increase in its stressed loans during the moratorium period last year.

SMA accounts

The special mention account (SMA)-2 loans, where repayments are overdue for 61-90 days, rose to 8.8% as on December 31, 2020, from 2.74% as on September 30, 2020.

The SMA loans as of December 31, 2020, also include loans that were not being classified as non-performing assets (NPAs) in line with the Supreme Court’s interim stay on recognition of fresh bad loans after August 31, 2020.

With the stay vacated on March 23, these loans are likely to slip into NPAs as of the March quarter of FY21.

About 2.89% of MSME advances were classified as SMA 2 while 2.72% loans in the corporate sector were unpaid between 61 and 90 days.

In Bank of Baroda‘s offer document too, the bank’s SMA ratio surged to 21.57% as on December 31, 2020, from 8% on March 31, 2020.

These are likely to slip into the NPA bucket in the March quarter of FY21 as the stay was vacated on March 23.

while both banks had around 20% of their loans under SMA, PNB carried a much higher ratio of SMA 1 and 2 loans — 13% — compared to 9% for BoB. Segment-wise, SMA2 for PNB is nearly double that of BOB in the retail and corporate sector.

The QIP

PNB board has approved raising equity capital from qualified institutional investors to enhance its capital base. For the Qualified Institutional Placement (QIP) purposes, the bank has fixed the floor price at Rs 35.51 per equity share. The ”Relevant Date” for the purpose of the QIP is May 10, 2021 and accordingly the floor price in respect of the aforesaid QIP, based on the pricing formula as prescribed under SEBI ICDR Regulations is Rs 35.51 per equity share, PNB said in a regulatory filing.

The merger

Last year, Oriental Bank of Commerce (OBC) and United Bank of India (UBI) were merged into Punjab National Bank (PNB), making PNB India’s second-biggest public sector bank after State Bank of India (SBI).

In a first three-way amalgamation, Vijaya Bank and Dena Bank were merged with Bank of Baroda from April 1, 2019.



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PayPal introduces digital Foreign Inward Remittance Advice

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PayPal, a global digital payments company, has introduced an automated process for receiving Foreign Inward Remittance Advice (FIRA) — a key document for Indian MSME exporters and freelancers that establishes proof of receipt of export proceeds in foreign currency from outside the country.

At zero-cost, merchants will now be able to download their monthly digital FIRA issued by the bank, by simply logging into their PayPal account. This FIRA was otherwise coming at a cost close to ₹2,000 for every 20 international transactions. This initiative is aimed at empowering Indian MSME exporters to seamlessly grow their business internationally.

New exporters

“When we help the exporters, we help ourselves. Through this FIRA automation, our merchants get a better experience. We are hoping this will be one of things that will help us attract new exporters. It helps our existing base and in acquiring new exporters as well,” Nath Parameshwaran, Director, Corporate Affairs, PayPal India told BusinessLine.

He highlighted that the pandemic has significantly accelerated digital adoption especially amongst small sellers and freelancers. At zero-cost, digital FIRA process not only reduces time, saves money and removes friction but also eliminates the need to visit branches and thereby reducing the chances of the Covid-19 infection, he added.

This has eliminated a huge number of steps for the MSME exporter and freelancers who are using PayPal. In 2020, despite the pandemic headwinds, PayPal enabled exports worth ₹10,000 crore for 3.6 lakh small exporters with a majority driven by tribal, artisan and women led enterprises, according to Parameswaran.

What is FIRA?

Foreign Inward Remittance Advice (FIRA) is a document that acts as a proof for all inward remittances and payments received from abroad. This is issued by banks in India and is required by exporters of all sizes individual or a business, such as a limited company, partnership firm, sole proprietorship firm etc.

Previously, Indian sellers and freelancers had to send a manual request to PayPal’s partner bank and also pay a fee for the service. The bank would then issue FIRA as a physical statement which could take up to 10 days and required the seller to visit the bank to collect the same.

This latest PayPal initiative comes on the heels of its partnership last month with FlexiLoans.com, a digital lending platform, to provide freelancers, women entrepreneurs, sole proprietors in MSMEs with collateral free business loans.

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Reserve Bank of India – Press Releases

Press Releases

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Auction Results 91 days 182 days 364 days
I. Notified Amount ₹15000 Crore ₹15000 Crore ₹6000 Crore
II. Competitive Bids Received
(i) Number
(ii) Amount		 85
₹44905 Crore		 153
₹46678.655 Crore		 106
₹26887 Crore
III. Cut-off price / Yield 99.1670
(YTM: 3.3692%)		 98.2510
(YTM: 3.5701%)		 96.4229
(YTM: 3.7200%)
IV. Competitive Bids Accepted
(i) Number
(ii) Amount		 28
₹14992.196 Crore		 61
₹14991.604 Crore		 21
₹5997.68 Crore
V. Partial Allotment Percentage of Competitive Bids 13.72%
(1 Bid)		 24.11%
(10 Bids)		 12.13%
(1 Bid)
VI. Weighted Average Price/Yield ₹99.1697
(WAY: 3.3582%)		 ₹98.2569
(WAY: 3.5578%)		 ₹96.4324
(WAY: 3.7098%)
VII. Non-Competitive Bids Received
(i) Number
(ii) Amount		 4
₹3307.804 Crore		 2
₹8.396 Crore		 2
₹2.32 Crore
VIII. Non-Competitive Bids Accepted
(i) Number
(ii) Amount
(iii) Partial Allotment Percentage		 4
₹3307.804 Crore
100% (0 Bids)		 2
₹8.396 Crore
100% (0 Bids)		 2
₹2.32 Crore
100% (0 Bids)

Rupambara
Director    

Press Release: 2021-2022/197

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2 Stocks From The Banking Sector That Could Generate Good Returns

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Investment

oi-Sunil Fernandes

|

The advent of the second COVID wave has muddied sentiment and impaired the FY22E earnings visibility. “With multiple states entering into extended lockdowns and restrictions, we see downside risks to our FY22 earnings estimates,” Motilal Oswal has said in a report. Here are two stocks from the banking sector that could generate good returns as per a Motilal Oswal Research Report.

ICICI Bank

According to the Motilal Oswal report the bank reported a strong quarter, led by healthy business performance across all business segments. Strong operating performance was aided by healthy NII growth (17bp NIM expansion), though weak other income affected net earnings.

“Asset quality remains under control with controlled slippages and total restructuring at 0.5% of loans. Provision coverage remains best in the industry. The bank holds a COVID related provision buffer of INR74.75b (1% of loans), providing comfort on anticipated normalization in credit cost. Liability franchise continues to improve with healthy CASA growth. Concerns. Rising COVID-19 cases and regional lockdown would be a key to watch out for in the near term. Any increase in BB and below pool could keep slippages elevated,” Motilal Oswal report has said.

2 Stocks From The Banking Sector That Could Generate Good Returns

According to it, the bank has delivered double-digit RoE (~12.6%) for the first time post FY17 and the firm expects RoA/RoE to improve to 1.7%/15.2% in FY23E.

Shares of ICICI Bank were last seen trading at Rs 600 on the NSE.

State Bank of India

According to Motilal Oswal, loan growth at SBI is showing healthy recovery in retail portfolio, with disbursements in many business segments surpassing pre-COVID levels, while deposit growth stood strong

“State Bank of India strengthened its Balance Sheet by creating higher provisions toward stressed accounts. The bank increased its PCR (including TWO) to ~90% in 3QFY21 (86% on a pro forma basis) from ~65% in 1QFY18. It holds a higher provision coverage of ~89% on corporate NPAs. Controlled pro forma slippages (INR20.7b) and low restructuring request (0.8% of loans) underscores an encouraging asset quality outlook,” the firm has noted

The bank is well on track to keep credit cost under control, while recoveries from resolution of large accounts can further support earnings.

Concerns

A) Slower resolution of large accounts. B) Covid 2nd wave could impact collection efficiency once again.

“We believe the earnings normalization cycle for SBIN has begun as the uncertainty ushered by COVID-19 has receded significantly. We maintain our FY22E/FY23E estimates and project RoA/RoE of 0.8%/14.5% by FY 2023,” the broking firm has stated.

Shares of State Bank of India were last seen trading at Rs 366 on the NSE.



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Yes Bank enables reward point redemption to refill oxygen cylinders for Covid-19 patients

Banking & Finance

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Private sector lender Yes Bank has enabled its customers to use their banking and credit card reward points to contribute towards medical oxygen for Covid-19 patients, in partnership with GiveIndia.

“Customers can now redeem their existing reward points to refill oxygen cylinders of 1,500 litre and 6,000 litre, respectively. The reward points redeemed towards oxygen refill will be channelled through GiveIndia and used to replenish medical oxygen at charitable hospitals in Mumbai, Bengaluru and Delhi,” Yes Bank said in a statement on Wednesday.

All donations made either through reward points or using debit or credit card are 50 per cent tax exempted under Section 80G, it further said.

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