Month: June 2021

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 ₹13,100 Cr. (Face Value).

Sr. No. State Amount to be raised (₹ Cr) Additional Borrowing (Greenshoe) Option (₹ Cr) Tenure (Yrs) Type of Auction
1. Goa 100 – 10 Yield
2. Gujarat 1000 – 10 Yield
3. Haryana 1000 – 15 Yield
4. Kerala 1000 – 10 Yield
5. Maharashtra 1000 500 10 Yield
1000 – 11 Yield
6. Punjab 1500 – Re-issue of 6.81% Punjab SDL 2031 issued on June 09, 2021 Price
7. Rajasthan 750 – 5 Yield
750 – 10 Yield
8. Tamil Nadu 1000 – 4 Yield
1000 – Re-issue of 6.96% Tamil Nadu SDL 2056 issued on May 19, 2021 Price
9. Telangana 3000 – 30 Yield
  Total 13100      

The auction will be conducted on the Reserve Bank of India Core Banking Solution (E-Kuber) system on June 15, 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 15, 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 15, 2021 (Tuesday) and payment by successful bidders will be made during banking hours on June 16, 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 16 and June 16 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: 2021-2022/348

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Covid second wave: Auto debit payments bounce rate rises for 2nd month in May

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Hit by the second wave of the Covid-19 pandemic and lockdowns, stress amongst borrowers seems to be on the rise, though it is lower than what was seen in the first surge of the pandemic. Data captured by the National Payments Corporation of India from its National Automated Clearing House (NACH) platform reveals that the number of unsuccessful auto debit requests increased for a second straight month in May.

Of the total auto debit transactions of 8.57 crore in May this year, 5.49 crore transactions were successful while 3.08 crore were returned. This reflects a return or bounce rate of 35.91 per cent in May compared to 34.05 per cent in April this year.

Also read: Bounce rates of auto debit transactions rise in April

NACH bounce rates have been spiking since last month after localised lockdowns hampered economic activity. It had hit a low of 32.7 per cent in March this year while the peak was in June 2020 when the bounce rate rose to 45.3 per cent.

To help small borrowers tide over the impact of the second wave of the pandemic, the Reserve Bank of India had announced the Resolution Framework 2.0 on May 5. The RBI on June 4 expanded the coverage of the scheme and announced the doubling of the maximum aggregate exposure to ₹50 crore.

Stress among small borrowers

Many companies have begun to indicate that there is rising stress amidst small borrowers.

In a mid quarter update, Bajaj Finance said the second wave has caused a marginal increase in EMI bounce rates in the first quarter of 2021-22 versus the fourth quarter of last fiscal. “Average EMI bounce rates in the first quarter of this fiscal were approximately 1.08X of the fourth quarter last fiscal,” it said.

Equitas Small Finance Bank reported a collection efficiency of 77.84 per cent in May this year as against 105.16 per cent in April. “We will be studying the impact of stress created by the second wave on our customers and any possible restructuring they may require to help revive their livelihood,” it said in a recent statement.

Post September 2020, the bank had seen a strong pick up in collection efficiency and ended the year with March 2021 at pre-Covid level collection efficiency.

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BoB pares MCLR by 5 bps in three tenors

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Bank of Baroda has decided to pare its three-month, six-month and one-year marginal cost of funds-based lending rate (MCLR) by 5 basis points each with effect from June 12.

Floating rate rupee loans priced with reference to MCLR will become cheaper to that extent.

MCLR for the three-month tenure will be 7.10 per cent (existing: 7.15 per cent); six-month: 7.20 per cent (7.25 per cent); and one-year: 7.35 per cent (7.40 per cent).

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ATM usage to cost more

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The Reserve Bank of India (RBI) has accepted the long-standing demand of banks and White Label ATM operators (WLAO) for a hike in interchange fee in view of increasing cost of ATM deployment and maintenance.

This could encourage deployment of ATMs, which has hit the slow lane in the last one year amid the Covid-19 pandemic.

The interchange fee (which is recovered by banks owning ATMs from card issuing banks for providing) has been upped from ₹15 to ₹17 per financial transaction and from ₹5 to ₹6 per non-financial transaction in all centres. The new fee will be effective from August 1.

Customer charges

Simultaneously, to compensate Banks for the higher interchange fee and given the general escalation in costs, they have been allowed to increase the customer charges for transactions beyond the stipulated free monthly ATM transactions to ₹21 per transaction from ₹20. This increase will be effective from January 1, 2022.

Customers are eligible for five free transactions (inclusive of financial and non-financial transactions) every month from their own bank ATMs. In other bank ATMs they are allowed three transactions in metro centres and five in non-metro centres.

RBI, in a circular, said applicable taxes, if any, will be additionally payable on the interchange fee and customer charges. The central bank added that its instructions also apply, mutatis mutandis (with the necessary changes having been made), to transactions done at Cash Recycler Machines (other than for cash deposit transactions).

ATM additions declined to 2,815 in FY21 against 8,564 in the previous year. The number of ATMs across the country is 2.13 lakh (2.10 lakh.)

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Reserve Bank of India – Press Releases

Press Releases

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As announced in the Governor’s statement of June 04, 2021, the Reserve Bank will conduct the third tranche of open market purchase of government securities of ₹40,000 crore under the G-sec Acquisition Programme (G-SAP 1.0) on June 17, 2021. Of this, state development loans (SDLs) would be purchased up to ₹10,000 crore.

2. Accordingly, the Reserve Bank will purchase government securities and state development loans (SDLs) through a multi-security auction using the multiple price method. The details of the securities are given in Annex.

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 June 17, 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 June 18, 2021.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/347

Annex

1. Purchase of Government securities

The Reserve Bank will purchase the following government securities. There is no security-wise notified amount.

Sr. No ISIN Security Date of Maturity
1 IN0020160035 6.97% GS 2026 06-Sep-2026
2 IN0020170026 6.79% GS 2027 15-May-2027
3 IN0020170174 7.17% GS 2028 08-Jan-2028
4 IN0020150069 7.59% GS 2029 20-Mar-2029
5 IN0020200294 5.85% GS 2030 01-Dec-2030
6 IN0020210020 6.64% GS 2035 16-Jun-2035

2. Purchase of State Development Loans

The Reserve Bank will purchase the following state development loans (SDLs). Aggregate amount of purchase would be up to ₹10,000 crore. There is no security-wise notified amount. Any shortfall in purchase of state development loans would be utilized towards purchase of government securities.

Sr. No. State ISIN Security Date of Maturity
1 ANDHRA PRADESH IN1020160082 7.42% ANDHRA SDL 2031 14-Sep-2031
2 BIHAR IN1320190193 7.17% BIHAR SDL 2030 29-Jan-2030
3 GUJARAT IN1520150112 8.26% GUJARAT SDL 2031 13-Jan-2031
4 GUJARAT IN1520190183 7.17% GUJARAT SDL 2030 08-Jan-2030
5 HARYANA IN1620200122 6.59% HARYANA SDL 2030 11-Nov-2030
6 KARNATAKA IN1920190148 7.16% KARNATAKA SDL 2030 08-Jan-2030
7 KARNATAKA IN1920180156 8.22% KARNATAKA SDL 2031 30-Jan-2031
8 MADHYA PRADESH IN2120200240 7.03% MADHYAPRADESH SDL 2031 17-Feb-2031
9 MAHARASHTRA IN2220190010 8.15% MAHARASHTRA SDL 2030 16-Apr-2030
10 MAHARASHTRA IN2220200033 6.54% MAHARASHTRA SDL 2030 27-May-2030
11 PUNJAB IN2820180148 8.45% PUNJAB SDL 2031 06-Mar-2031
12 PUNJAB IN2820180098 8.56% PUNJAB SDL 2030 29-Aug-2030
13 RAJASTHAN IN2920200796 7.15% RAJASTHAN SDL 2031 17-Mar-2031
14 RAJASTHAN IN2920200689 7.05% RAJASTHAN SDL 2031 17-Feb-2031
15 TAMILNADU IN3120200222 6.33% TAMILNADU SDL 2030 22-Jul-2030
16 TAMILNADU IN3120200339 6.53% TAMILNADU SDL 2031 06-Jan-2031
17 UTTAR PRADESH IN3320200329 7.17% UTTARPRADESH SDL 2031 10-Mar-2031
18 UTTAR PRADESH IN3320200337 7.16% UTTARPRADESH SDL 2031 17-Mar-2031
19 WEST BENGAL IN3420190198 7.10% WESTBENGAL SDL 2030 12-Feb-2030
20 WEST BENGAL IN3420190172 7.23% WESTBENGAL SDL 2030 15-Jan-2030

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Max Life eyes VNB growth of 26 per cent in FY21-22

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After clocking a robust 39 per cent growth in ‘Value of new business’ (VNB) in 2020-21, Max Life Insurance, a private life insurer, is now eyeing a VNB growth of at least 26 per cent this fiscal, its Managing Director & CEO Prashant Tripathy has said.

Seen globally as the true measure of a life insurer’s profits, the VNB as a concept is the profit the company (insurer) hopes to make on policies written during the year after accounting for all the costs incurred and assuming future persistence and mortality.

For 2020-21, Max Life Insurance’s VNB came in at ₹ 1,249 crore, up 39 per cent over previous fiscal and almost doubled in last 3 years. The average VNB growth for the company over the last five years stood at 26 per cent.

“Maintaining VNB growth at 39 per cent will be difficult. However, our aspiration this fiscal is to achieve VNB growth of atleast 26 per cent, which has been our last five years average,” Tripathy told BusinessLine in an interaction post the announcement of financial results for 2020-21.

Asked as to how Max Life achieved strong growth in VNB in a pandemic year, Tripathy said that the company sold more protection policies and changed product mix and sold more non participating products. There was also some base effect that aided such growth, he noted.

Tripathy highlighted that VNB —and not statutory profits —is true reflection of an insurer’s profitability.

Statutory profits dip

As regards statutory profits, Max Life on Tuesday reported that it has recorded net profit of ₹523 crore in FY’20-21. This reflected a decline of 3 per cent over the net profit of ₹ 539 crore recorded in the previous fiscal.

In 2020–21, total new business premium (individual and group) of Max life increased 22 per cent to ₹ 6,826 crore. In terms of individual adjusted premium equivalents (APE), the company recorded 19 per cent growth to ₹ 4,907 crore. Further, the renewal premium income (including group) grew 15 per cent to ₹ 12,192 crore taking gross written premium to ₹19,018 crore, an increase of 18 per cent over the previous financial year.

For the fourth quarter ended March 31, 2021, Max life recorded a gross premium of ₹ 7,106 crore, an increase of 21 per cent from ₹ 5,873 crore in the same quarter last year. Individual APE grew 35 per cent in the quarter to ₹ 1,893 crore from ₹ 1,398 crore in the year ago period.

Second wave

Tripathy said that despite the second wave, situation in April-May 2021 is not that bad as last year when it came to industry. In 2020-21, the company received 1,762 Covid death claims and out of which 1,746 claims were settled with an amount close to ₹ 200 crore. For the current fiscal, the company has made ₹ 500 crore provisioning towards likely Covid claims.

“Despite Covid claims, our claims payment ratio has improved. We have kept ₹ 500 crore extra provision. We will not have P&L impact if extra claims is less than ₹ 500 crore in 2021-22. Of course, claims are going to go higher and our financials are protected. Covid has impacted balance sheet marginally, but we have enough resources to take care of that,” Tripathy said.

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Reserve Bank of India – Notifications

Notifications

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RBI/2021-22/52
DPSS.CO.OD.No.S-182/06.07.011/2021-22

June 10, 2021

The Chairman and Managing Director / Chief Executive Officer
All Scheduled Commercial Banks including RRBs /
Urban Co-operative Banks / State Co-operative Banks /
District Central Co-operative Banks / Authorised ATM Network Operators /
Card Payment Network Operators / White Label ATM Operators

Madam / Dear Sir,

Usage of Automated Teller Machines / Cash Recycler Machines
– Review of Interchange Fee and Customer Charges

The Reserve Bank of India had constituted a Committee in June 2019 under the Chairmanship of the Chief Executive, Indian Banks’ Association to review the entire gamut of Automated Teller Machine (ATM) charges and fees with particular focus on interchange structure for ATM transactions.

2. The recommendations of the Committee have been comprehensively examined. It is also observed that the last change in interchange fee structure for ATM transactions was in August 2012, while the charges payable by customers were last revised in August 2014. A substantial time has thus elapsed since these fees were last changed. Accordingly, given the increasing cost of ATM deployment and expenses towards ATM maintenance incurred by banks / white label ATM operators, as also considering the need to balance expectations of stakeholder entities and customer convenience, it has been decided as under :

  1. Allow increase in interchange fee per transaction from ₹15 to ₹17 for financial transactions and from ₹5 to ₹6 for non-financial transactions in all centres. This shall be effective from August 1, 2021.

  2. Customers are eligible for five free transactions (inclusive of financial and non-financial transactions) every month from their own bank ATMs. They are also eligible for free transactions (inclusive of financial and non-financial transactions) from other bank ATMs viz. three transactions in metro centres and five transactions in non-metro centres. Beyond the free transactions, the ceiling / cap on customer charges is ₹20 per transaction, as prescribed vide circular DPSS.CO.PD.No.316/02.10.002/2014-2015 dated August 14, 2014. To compensate the banks for the higher interchange fee and given the general escalation in costs, they are allowed to increase the customer charges to ₹21 per transaction. This increase shall be effective from January 1, 2022.

  3. Applicable taxes, if any, shall be additionally payable.

  4. These instructions shall also apply, mutatis mutandis, to transactions done at Cash Recycler Machines (other than for cash deposit transactions).

3. This directive is issued under Section 10(2) read with Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007).

Yours faithfully,

(P Vasudevan)
Chief General Manager

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YES Bank receives board approval to raise ₹10,000 crore through debt securities

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Private sector lender Yes Bank has received approval from its board of directors to raise ₹10,000 crore through debt securities.

“The board of directors of the bank, in its meeting held on June 10, 2021, have considered and approved seeking shareholders’ approval for borrowing or raising funds in Indian or foreign currency up to an amount of ₹10,000 crore by issue of debt securities including but not limited to non-convertible debentures, bonds, Medium Term Note (MTN),” it said in a regulatory filing on Thursday.

The bank’s capital adequacy ratio was 17.5 per cent as on March 31, 2021, while its CET1 ratio was 17.5 per cent.

Prashant Kumar, Managing Director and CEO, Yes Bank had told BusinessLine that the lender may consider fund raising if there is a lot of improvement in the economy, and credit growth takes place.

“All approvals are in place. Depending on the situation, we will take a call. We had taken an overarching approval of ₹10,000 crore but the requirement will not be so much,” he had said after the fourth quarter results of the bank.

Shifting its registered office

Meanwhile, the board also approved a proposal to move the bank’s registered office to Santacruz (East), Mumbai from ONE International Centre, Elphinstone (W), Mumbai. “This is with effect from June 14,” it said in a separate filing.

Significantly, its new office is the old headquarters of Reliance Anil Dhirubhai Ambani Group. The erstwhile Reliance Centre is spread over a 21,432.28 square metre plot.

Reliance Infrastructure Limited had sold off the property to Yes Bank for ₹1,200 crore in April this year. “Entire proceeds from sale of Reliance Centre, Santacruz is utilised only to repay the debt of YES Bank,” Reliance Infra had said in a statement.

Last year, Yes Bank had said that it was taking possession of the properties under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, and comes for non-payment of loans amounting to ₹2,892 crore.

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Reserve Bank of India – Press Releases

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The Government of India has announced the sale (re-issue) of Government Stock detailed below through auctions to be held on June 11 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 11, 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: 2021-2022/346

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RBI may give banks/NBFCs more time to appoint auditors

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The Reserve Bank of India may give more time to regulated entities, including banks, to implement the new guidelines on the appointment of statutory auditors.

Regulated entities are of the view that a year’s time should have been given for implementing the guidelines as some of them have already re-appointed auditors for FY22. The RBI’s new norms were unveiled on April 27. The guidelines allow regulated entities to appoint auditors for three years. What this means is that audit firms that have already completed the three-year period will have to discontinue their assignment.

Financial services industry veteran TT Srinivasaraghavan observed that some of the regulated entities have already had their AGMs in which appointment of Statutory Auditors is usually on the agenda. So, industry bodies want some more time (say, from April 1, 2022) for implementation of the guidelines.

“In the meantime, an advisory/ consultative group of key stakeholders — the RBI, the regulated entities, and the CA Institute — can be asked to assess the guidelines and give recommendations within two months… there will be a 360-degree view on the issues and the potential solutions,” Srinivasaraghavan suggested.

Applicable to banks

The guidelines are applicable to commercial banks (excluding Regional Rural Banks), urban co-operative banks and non-banking finance companies (NBFCs), including housing finance companies, from financial year 2021-22. However, non-deposit taking NBFCs with asset size below ₹1,000 crore can continue with their extant procedure.

Chartered Accountant Sethuratham Ravi said regulated entities can ask for a dispensation, seeking continuation of the current auditor for one more quarter. “A regulated entity can write to the RBI that it is in the process of appointing a new auditor and that the same needs to be ratified at the AGM… The RBI could have given one more year for implementation,” Ravi said.

P Sitaram, ED & CFO, IDBI Bank, said the guidelines came at a time when some banks would have proceeded with the appointment/re-appointment of auditors. “So, they should have done it (issued the guidelines) either in January or having issued it, they could have said the guidelines will be applicable from next year,” he said.

Banking expert V Viswanathan underscored that even if an audit firm has completed its three-year term, the status quo of March quarter will continue for the April-June quarter. The bank will apply for RBI approval, and it is given.

“Sometimes, public sector banks get the list (of eligible audit firms from RBI) after September also. In which case, the status quo continues for the second quarter also,” he said.

 

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