Month: June 2021

Reserve Bank of India – Press Releases

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The following State Governments have offered to sell securities by way of an auction, for an aggregate amount of ₹ 20,400 Cr. (Face Value).

Sr. No. State/ UT Amount to be raised
(₹ Cr)		 Additional Borrowing (Greenshoe) Option
(₹ Cr)		 Tenure
(Yrs)		 Type of Auction
1 Goa 100 – 10 Yield
2 Gujarat 1500 500 10 Yield
3 Jammu and Kashmir 900 – 12 Yield
4 Kerala 2000 – 25 Yield
1000 – 35 Yield
5 Maharashtra 1000 500 10 Yield
1000 – 11 Yield
6 Manipur 200 – 10 Yield
7 Punjab 1000 – 10 Yield
1000 – 20 Yield
8 Rajasthan 500 – 5 Yield
500 – 10 Yield
1000 – 20 Yield
9 Tamil Nadu 1000 – Re-issue of 6.96% Tamil Nadu SDL 2051 issued on May 19, 2021 Price
1000 – Re-issue of 6.96% Tamil Nadu SDL 2056 issued on May 19, 2021 Price
10 Telangana 1000 – 30 Yield
11 Uttarakhand 700 – 10 Yield
12 Uttar Pradesh 2500 – 10 Yield
13 West Bengal 2500 – 7 Yield
  TOTAL 20,400      

The auction will be conducted on the Reserve Bank of India Core Banking Solution (E-Kuber) system on June 29, 2021 (Tuesday). 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 June 29, 2021 (Tuesday). 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 June 29, 2021 (Tuesday) and payment by successful bidders will be made during banking hours on June 30, 2021 (Wednesday) 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 December 30 and June 30 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: 2021-2022/423

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Reserve Bank of India – 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 June 25 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:

(₹ crore)
Security Notified Amount Minimum Underwriting Commitment (MUC) amount per PD Minimum bidding commitment per PD under ACU auction
4.26% 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 June 25, 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.

Ajit Prasad
Director   

Press Release: 2021-2022/422

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Reserve Bank of India – Press Releases

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The Reserve Bank of India vide directive DCBS.CO.BSD-I/D-16/12.22.474/2018-19 dated June 21, 2019 had placed the Shri Anand Co-operative Bank Limited, Chinchwad, Pune, Maharashtra under Directions from the close of business on June 25, 2019 for a period of six months. The validity of the directions was extended from time-to-time, the last being up to June 24, 2021.

2. It is hereby notified for the information of the public that, the Reserve Bank of India, in exercise of powers vested in it under sub-section (1) of Section 35 A read with Section 56 of the Banking Regulation Act, 1949, hereby directs that the aforesaid Directions shall continue to apply to the bank till September 24, 2021 as per the directive DOR.MON.D-18/12.22.474/2021-22 dated June 22, 2021, subject to review.

3. All other terms and conditions of the Directives under reference shall remain unchanged. A copy of the directive dated June 22, 2021 notifying the above extension is displayed at the bank’s premises for the perusal of public

4. The aforesaid extension and /or modification by the Reserve Bank of India should not per-se be construed to imply that Reserve Bank of India is satisfied with the financial position of the bank.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/421

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Reserve Bank of India – Press Releases

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The Reserve Bank has launched the 2020-21 round of its annual Survey on Computer Software and Information Technology Enabled Services (ITES) Exports.

The annual survey being conducted since 2002-03, collects data on various aspects of computer services exports as well as exports of information technology enabled services (ITES) and business process outsourcing (BPO). The survey results are released in the public domain besides being used for compilation of balance of payments (BoP) statistics and other uses.

The survey schedule for the 2020-21 round is required to be filled in by all software and ITES/BPO exporting companies. The soft form of this survey schedule (both in Hindi and English) is available on the RBI’s website under the head ‘Forms’ (available under ‘More Links’ at the bottom of the home page) and sub-head ‘Survey’, which can be duly filled and submitted by email July 31, 2021. The instructions are provided in FAQs and, in case of any query or clarification, kindly contact:

The Director,
International Investment Position Division,
Department of Statistics and Information Management (DSIM),
Reserve Bank of India,
C-9, 5th floor, Bandra-Kurla Complex, Bandra (E),
Mumbai – 400 051.
Please click here to send email.
Phone: 022-2657 8510

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/419

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RBI links NBFC dividend payout to capital, NPA norms

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The Reserve Bank of India has linked declaration of dividend by non-banking finance companies (NBFCs) to their meeting minimum prudential norms on capital and bad loans.

The RBI also set the maximum payout ratio as part of its guidelines on distribution of dividend by NBFCs. The RBI said the guidelines, aimed at infusing greater transparency and uniformity in the payout practice, will be effective for declaration of dividend from the financial year ending March 31, 2022.

Board oversight

While considering a dividend proposal, the board has to take into account supervisory findings of the RBI (National Housing Bank for housing finance companies) on divergence in classification and provisioning for non-performing assets (NPAs).

The board must also consider any qualification in the auditor’s report to the financial statements, as also the long-term growth plans of the NBFC.

NBFCs (other than standalone primary dealers or SPDs) need to meet the mandated capital requirement for each of the three previous financial years, including the financial year for which the dividend is proposed.

For example, every deposit-taking NBFC is required to maintain a minimum capital ratio (of Tier I and Tier II capital) of not be less than 15 per cent of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off-balance sheet items.

Net NPA and other criteria

The net NPA ratio shall be less than 6 per cent in each of the last three years, including as at the close of the financial year for which the dividend is proposed.

NBFCs and HFCs have to transfer to the reserve fund not less than 20 per cent of their net profit every year as disclosed in the profit and loss account and before any dividend is declared.

Banking expert V Viswanathan said that since NPAs could go up in view of the Covid pandemic effect on borrowers, the RBI is tryingto ensure that NBFCs and HFCs with net NPAs above 6 per cent do not declare dividend but increase their internal accruals.

Dividend payout ceilings

In case the net profit for the relevant period includes any exceptional and/or extraordinary profits/income or the financial statements are qualified (including ‘emphasis of matter’) by the statutory auditor that indicates an overstatement of profit, the same has to be reduced from the net profits while determining the dividend payout ratio (DPR).

There is no ceiling DPR for NBFCs that do not accept public funds and do not have any customer interface. The maximum DPR for core investment companies and SPDs is 60 per cent, that for NBFCs is 50 per cent.

The RBI said an NBFC (other than an SPD) that does not meet the prudential requirement for each of the last three financial years, may be eligible to declare dividend, subject to a cap of 10 per cent, and certain conditions.

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Insurers settle Covid claims worth over ₹15,000 cr

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After the second wave of Covid-19 swept India in April-May, insurance companies settled about 80 per cent, or more than 15.39 lakh health claims exceeding ₹15,000 crore as on June 22, said a top IRDAI official.

“Over 19.11 lakh Covid health claims have been reported as on June 22 as far as medical insurance or hospitalisation is concerned.

“While in terms of death claims, which is handled by life insurers, about 55,276 claims have been intimated and, nearly 88 per cent, or 48,484 claims amounting to ₹3,593 crore, have already been settled,” said TL Alamelu, Member (Non-Life), IRDAI, while inaugurating 13th Global Insurance E-Summit organised by industry chamber Assocham.

She added that the repudiated claims for health is 4 per cent and in life it is just 0.66 per cent.

Not under cover

Alamelu, however, said that these figures showcase the opportunity available for insurers; although Ayushman Bharat covers health for many people, there are other schemes, including specialised State schemes, but many people are not covered by insurance in any form.

“Now, we are grappling with the problem that most of these people have spent good amount of their savings, it has even taken down many below the poverty line, they have gone into debts, sold up their assets, pledged their jewellery and have been pushed back to worst times,” she said.

“The industry has tremendous responsibility, especially for a nation like India, to offer protection and just not assume that people will not take insurance. There has to be aggressive probably, more sort of forcefully sell insurance because it is no longer an option,” Alamelu added.

She noted that both the insurance industry and regulator have worked together to design new policies to cater to the demands of new and unprecedented situation.

“We have also eased some processes and procedures to make it easier for servicing the policyholders.”

Talking about the micro, small and medium enterprises (MSMEs), she said: “There is a lot of focus on MSMEs, with the spate of recent initiatives by the government, and insurance has a very important role to play here. The safety net offered by insurance keeps various industries thriving in a healthy manner. This spells greater employment, demand and consequent greater supply and the cycle goes on.”

“The regulator has created standard products for MSMEs with policies such as Bharat Laghu Udyam Suraksha, Bharat Sookshma Udyam Suraksha and others such as Bharat Griha Raksha for householders; all these specifically cater to the middle class and lower middle class, and the industry should take this opportunity to ensure that everybody has this sort of insurance in their pocket,” she added.

Good performance

On the insurance industry’s performance, she said that it grew extremely well to end the last financial year with combined life and non-life at 9 per cent growth, while this year, starting in April-May, a growth of 17 per cent has been registered.

On the growth prospects of insurance industry in next five years, she said that it can easily grow well at 40-50 per cent to be extremely optimistic if things are settled down and, otherwise, it should grow at 25-30 per cent as the world is there for them to take advantage.

Saurabh Mishra, Joint Secretary, Ministry of Finance, said that digitalisation is one factor that has contributed to the resilience of non-life and to a great extent in life businesses in every sphere of activity – from distribution and sales to post-sales.

This has proved to be a game-changer that has helped avoid a standstill in the new business due to mobility restrictions implemented to contain the pandemic.

“In the new normal of technology, it is not just an important element for us to drive it out, but is going to play a pivotal role in transforming the insurance businesses to make them more digital and customer-centric, cutting across every sphere of the customer experience – claims efficiency, fraud proofing,” said Mishra.

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Kapol Co-op bank takes first step towards amalgamation with Pune-based Cosmos Bank

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Action is hotting up in the urban co-operative banking (UCB) space, with Mumbai-based Kapol Co-operative Bank taking its first step towards an amalgamation with Pune-based Cosmos Co-operative Bank.

The special general body meeting of the Kapol Co-operative Bank unanimously voted on the resolution “to consider and approve merger of the Bank with The Cosmos Co-operative Bank Ltd” on June 9, 2021.

The aforementioned development came about nine days before the Reserve Bank of India (RBI) accorded its “in-principle” approval to Centrum Financial Services to set up a small finance bank (SFB), which in turn is expected to takeover the scam-hit Punjab & Maharashtra Co-operative (PMC) Bank.

Jyotindra Mehta, President, The National Federation of Urban Cooperative Banks and Credit Societies, observed that resolution of weak UCBs has brightened after the September 2020 amendment to the Banking Regulation (BR) Act, 1949, as an UCB can be merged with any bank, be it a SFB, universal bank or another UCB.

“Now a clear path to resolution via amalgamation is available,” Mehta said

The Kapol Co-operative Bank was placed under Directions by the RBI with effect from the close of business on March 30, 2017.

Once an UCB is placed under Directions, deposit withdrawal is capped. This brings lot of misery to the depositors as they are unable to withdraw money beyond the cap.

An UCB under Directions also cannot grant or renew any loans and advances, make any investment, incur any liability, among others. While stressed UCBs are placed under Directions by RBI to nurse them back to health, many stay under Directions for years.

Amalgamation among UCBs

Like Saraswat Co-operative Bank, which is India’s largest UCB, Cosmos Co-operative Bank too has been game for growth through amalgamation.

In the last 15 years, Cosmos Co-operative Bank, has acquired about five UCBs, including Amravati Peoples Co-op Bank (Amravati, Maharashtra), Unnati Co-op. Bank (Baroda, Gujarat), Sushil Kumar Nahata Co-op. Bank (Bhusawal, Maharashtra), and Co-op. Bank of Ahmedabad (Gujarat).

Saraswat Bank had acquired seven stressed UCBs (Maratha Mandir Co-operative Bank, Mandvi Co-operative Bank, Annasaheb Karale Janata Sahakari Bank, Murgha Rajendra Sahakari Bank, Kolhapur Maratha Co-operative Bank, South Indian Co-operative Bank and Nashik People’s Co-operative Bank) during the 2006-2009 period.

As per Kapol Co-operative Bank’s latest balance sheet, as at March-end 2020, it had deposits and advances aggregating ₹392 crore and ₹150 crore, respectively.

In FY20, the Bank’s net loss widened to ₹36 crore (₹30 crore in FY19). The multi-state scheduled bank had gross non-performing assets of ₹138 crore as at March-end 2020 against ₹141 crore as at March-end 2019. The Bank has 14 branches – 13 in Mumbai and one in Surat.

Cosmos Co-operative Bank had deposits and advances aggregating ₹15,195 crore and ₹11,503 crore, respectively, as at March-end 2020.

The Bank, which was set up in 1906, has 140 branches spread across Maharashtra, Madhya Pradesh, Karnataka, Gujarat, Tamil Nadu, Andhra Pradesh and Telangana. It reported a net loss of ₹54 crore in FY2020 against a net profit of ₹22 crore in FY2019.

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IIFCL bets big on ‘takeout financing’ to drive growth this year

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India Infrastructure Finance Company Ltd (IIFCL), a government owned infrastructure lender, has decided to revise its strategy and place more emphasis on government sponsored projects and takeout financing this year, PR Jaishankar, Managing Director has said.

Aided by the Hybrid Annuity Model (HAM) projects – largely seen in roads sector, this State-owned infrastructure lender is looking to ramp up its takeout financing book to about ₹11,000 crore by end of this fiscal from the current level of ₹6,400 crore, Jaishankar told BusinessLine.

HAM projects

“We expect HAM projects to help us in a big way in achieving growth in takeout financing. 35-40 per cent of HAM projects are getting completed this year. We are already a leader in the HAM segment with 65 HAM projects financed by us. The projects that are already with me, I just have to take additional exposure of 10 per cent. In addition, I will compete for other projects too,” he said.

Under Takeout financing, loans made by banks to infrastructure firms are sold to IIFCL so that banks recover their much needed funds ahead of the payment schedule under the loan agreement. The Takeout Finance scheme offers infrastructure developers the benefit of lower interest rates than that under direct lending, freeing up their exposure limits with banks.

So far, IIFCL has been largely focused on institutional and refinancing solutions to drive growth. After recording strong financial performance in 2020-21, IIFCL is now looking to this fiscal expand its balance sheet in a big way and acquire more assets.

For the current fiscal, IIFCL is eyeing sanctions in excess of ₹20,892 crore, which was the sanctions level achieved in 2020-21 and the highest ever sanctions recorded by the company. IIFCL would aim to achieve disbursement level of over ₹12,000 crore, much higher than the disbursement level of ₹9,460 crore in 2020-21, according to Jaishankar.

Infrastructure investment trusts

Meanwhile, Jaishankar said that IIFCL is awaiting Reserve Bank of India (RBI) approval for it to invest in several Infrastructure Investment Trusts (InVITs) that have taken off in the country. “If RBI clarifies and allow us to invest in InVITs, then this will be another big revenue stream for us and add another ₹4,000 crore in the days to come. Like any other bank, we also want to offer financial assistance to InVITs. How we have to do it, whether we have to invest in the form of security or we have to lend directly at the SPV level, that is something we will look into. I am very hopeful that RBI will consider us favourably”, Jaishankar said.

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Reserve Bank of India – Press Releases

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The Reserve Bank has launched the 2020-21 round of its annual survey on ‘Foreign Liabilities and Assets of Mutual Funds and Asset Management Companies’. The survey collects information from Mutual Fund companies and Asset Management Companies on their external financial liabilities and assets as at end-March of the latest financial year. Consolidated results of the survey are released in the public domain besides being used for compilation of India’s external sector statistics.

Asset Management companies (AMCs) are required to submit the annual return on Foreign Liabilities and Assets (FLA) online through the web-based portal (https://flair.rbi.org.in) by July 31, 2021.

In addition, Mutual Fund companies are required to fill the survey schedule (Schedule-4), which is available on the RBI website (www.rbi.org.in → Forms → Survey) and send via e-mail by July 31, 2021.

Both Hindi and English formats are available for Schedule-4 and reporting entities may use either of them. Please refer to the instructions with FAQs and in case of any query or clarification, kindly contact:

The Director,
International Investment Position Division (IIPD),
Department of Statistics and Information Management (DSIM),
Reserve Bank of India,
C9-5th floor, Bandra-Kurla Complex, Bandra (East),
Mumbai-400051.
Please click here to send email.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/420

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Focus is to strengthen internal checks and balances: HDFC Bank MD & CEO

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Taking cognizance of the recent issue of mis-selling of GPS products along with car loans, HDFC Bank is working on more controls to ensure such problems do not recur.

“I am personally determined to fix this. At an organisational level there is a greater focus on the role of Credit, Risk, Compliance, Audit and other enabling functions so that our checks and balances get strengthened,” said Sashidhar Jagdishan, Managing Director and CEO, HDFC Bank.

In his message to shareholders in the bank’s Annual Report 2020-21, Jagdishan said the lender has over the last year put in place a systemic way of measuring customer experience by adopting the Net Promoter System. This would enable it to get customer feedback post transactions.

The Reserve Bank of India had on May 28 imposed a monetary penalty of ₹10 crore on the private sector lender.

HDFC Bank has also said it will be refunding the GPS device commission to auto loan customers who availed of the devices as a part of the auto loan funding during fiscal years 2013-14 to fiscal year 2019-20.

Jagdishan said that for many years the bank had been bundling the financing of GPS systems and cars. “The teams believed this was a routine lending activity. Also, a particular vendor had entered into an arrangement with us directly,” he said.

After the whistleblower complaint, the bank conducted an enquiry and basis the findings took necessary actions against the involved employees including termination of their services and also terminated the arrangement with the vendor.

“Reinforcing the three Cs: Culture, Conscience and Customers across the organisation is a clear focus area for both me and the Bank,” Jagdishan stressed.

Highlighting his other focus areas, he said HDFC Bank is working to augment its digital capacities post outages in its mobile and net banking services.

“The regulator also appointed a third party audit of our IT systems. This audit is now over and the report has been submitted to the regulator. We now await the decision from the RBI,” he said.

Strategy

In terms of the expansion strategy, Jagdishan said the bank has created a new business segment of Commercial (MSME) and Rural Banking to capture the next wave of growth.

“We will continue to strengthen our leadership position in the payments business and retail assets business and have added Wealth Management and Private Banking as a core focus area for us,” he said, adding that it will also focus on the Corporate Cluster and Government Business to increase penetration.

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