Month: July 2021

NABARD wants state to speed up implementation of bank’s scheme, BFSI News, ET BFSI

Banking & Finance

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BHOPAL: National bank for agriculture and rural development (NABARD) wants the state government to speed up implementation of the schemes funded by the bank in MP.

Chairman of the bank GR Chitala said that almost half of the state’s cooperative bodies also need improvement. Talking to media here on Thursday, Chitala sighted the examples of the states of Andhra Pradesh and Tamil Nadu for implementing the NABARD schemes.

He has been on a six days’ visit to the state where he would Dewas and Indore also where the bank has funded many schemes. Talking about the state of affairs of the cooperative banks in the state, he hinted that 50 % of them need improvement in functioning.

He said that of 4800 cooperative banks in the state, almost half of them need technical upgradation for better and efficient functioning of the cooperative sector . He said that about 38 % of farmers did not have Kisan credit cards in the state and there are a variety of reasons.

“ Which is why a large number of farmers have not been able to get benefits of the government’s scheme”, he said Replying to a query on the NABARS’s help to the state , Chitala said it has disbursed Rs 55759 crore towards crop Loan covering more than 71 lakh farmers during the last few years in MP.

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RBI raises loan limit to Directors on bank boards to Rs 5 cr, BFSI News, ET BFSI

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Mumbai, The Reserve Bank of India (RBI) has raised the limit of loan that can be given by banks to a Director on the board of a bank to Rs 5 crore from the previous cap of Rs 25 lakh.

In a circular issued on Friday, the central bank said that unless sanctioned by the Board of Directors or the Management Committee, banks should not grant loans and advances aggregating Rs 5 crore and above to any relative other than spouse and minor or dependent children of their own Chairmen and Managing Directors or other Directors. Same would be the rule in terms of relatives of Chairman or Managing Director or other directors of other banks.

Further, any credit facility given to the Directors and relatives of Directors have to be sanctioned by the appropriate authority in the financing bank, and the matter has to be reported to the board, it said.

Board approval would be required for loans given to major shareholders of the bank, or his relatives, where the shareholder holds more than 10 per cent in the bank.

There have been instances in the past wherein existing Directors allegedly misused their position to grant loans to favour their family members, as in the case of the former ICICI bank MD & CEO Chanda Kochhar who is alleged to have misused her official post to grant a massive Rs 3,250 crore loan to Videocon.

Allegedly, the loan was part of a quid pro quo arrangement under which Venugopal Dhoot invested Rs 64 crore in Chanda Kochhar’s husband’s NuPower Renewables.



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No lumpy slippage gives us confidence: Shyam Srinivasan, MD & CEO, Federal Bank

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Our provisioning policy continues to be very conservative so that the balance sheet remains strong.

Federal Bank reported an 8.3% year-on-year decline in its net profit for the first quarter. Following are excerpts from a post-result virtual press meet by Shyam Srinivasan, MD & CEO.

Provisioning is seen higher for the quarter. Are the slippages higher than the run-rate?

Our provisioning policy continues to be very conservative so that the balance sheet remains strong. It is a choice. For Rs 640-crore of fresh slippages in the quarter, we have provisioned Rs 460 crore as a choice. Even in gold loans, which is 100% secure, we have provisioned 65%. Our unsecured book is very marginal. There is no lumpy slippages and it gives us the confidence.

Other income has grown sharply in the quarter.

We had a strong quarter in treasury and we had a one-off recovery in a large account which was written off in the past.

Your deposits and advances have de-grown sequentially.

We reduced our certificate of deposits by Rs 2,000 crore in Q1, while customer deposits went up. The credit growth is dependent on the environment and we believe that it will pick up from September onward and we will have a higher share.

What is the reason for higher provisioning in the gold loan portfolio? It is considered a secure asset?

Our NPA% in gold is 0.3%. Our loan-to-value (LTV) is 75-80% and it is manageable if prices fall is in that range. In case it becomes NPA, we can easily auction and collect our dues.

Any update on the credit card launch? How will you take it forward with the Mastercard issue?

We launched the credit card in June. Initial proposition was for existing customers and we saw good traction in July. We were a single Mastercard issuer and due to a recent direction from the RBI, we have stopped issuing cards to customers from July 22. There are two other franchisees in the country — Visa and Rupay, and in the next two months, we hope to be back in action.

Can you tell us about the stake sale to IFC? And is there any more stake dilution plans?

The process is complete as our board has approved the allotment of shares to IFC. They have taken up 4.9% share of the bank. As far as incremental equity issuance, we are very prudent about capital allocation and use, and in the last 10-12 years, we have done only one QIP and IFC is the only other transaction. Our capital adequacy is strong and we are not looking anything right now. However, we have an enabling resolution passed.

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3 Best Mutual Fund SIP Schemes That Are Rated 5-Star By Value Research

Personal Finance

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Axis Small Cap Fund

This fund is not for investors unwilling to take the risk. Small cap funds are highly volatile in terms of returns and hence investors should be careful. Axis Small Cap Fund has generated a returns of 91% in the last 1-year, which is phenomenal. The 3-year returns is 29% on an annualized basis, which again is amongst the best in its class.

The fund has exposure to small cap stocks like Galaxy Surfactants, Tata Elxi, JK Lakshmi Cement, CCL Products etc. This fund has also been rated as 5-star by Morningstar, another top rating agency.

You can commence an SIP in the stock with a sum of Rs 500 only. Investors looking for long-term returns invest. A sum of Rs 10,000 invested in SIPs in he last three years would be worth Rs 6.5 lakhs today. This means, if you had to invest every month Rs 10,000 for 36 months the sum invested would be Rs 3.6 lakhs, but, your portfolio value would be a solid Rs 6.5 lakhs.

ICICI Prudential Short Term Fund

ICICI Prudential Short Term Fund

We have chosen this fund for those looking to invest in debt funds by way of SIPs. ICICI Prudential Short Term Fund is a debt fund that generates income through investments in a range of debt and money market instruments. For those looking at steady returns and protection of capital, this is a good fund to be in. ICICI Prudential Short Term Fund has been rated as 5-star by Value Research.

As is the nature of the scheme, most of the money is parked in government owned securities, which are likely to provide safety, but, low returns. Investors can start an SIP by investing a sum of Rs 1,000 every month. This is a rather large fund with assets under management of nearly Rs 21,000 crores.

Canara Robeco Emerging Equities Fund

Canara Robeco Emerging Equities Fund

Again, this is a SIP to invest, where the ratings are 5-star from Value Research. The fund invests in a combination of large- and medium-sized companies, which gives flexibility to the fund manager to move from larger companies to slightly smaller or vice versa.

The assets under management of the fund is Rs 9,633 crores and investors can look to invest small sums of Rs 1,000 every month. While Canara Robeco Emerging Equities Fund is a kind of flexi cap fund, most of the investments are tilted towards the large cap stocks with holdings in stocks like HDFC Bank, Infosys, ICICI Bank, Axis Bank and Bajaj Finance.

At the moment, with the markets at record highs, the best way to invest would be the SIP route. it’s difficult to predict movement of markets in the longer term and hence this is the best route to take. If you are unable to analyse the funds it is better go for SIPs of well rated funds.

Disclaimer

Disclaimer

Investing in Mutual funds, particularly equity mutual funds are subject to stock market risk. Please do your own analysis and research. Neither the author, nor Greynium Information Technologies would be responsible for losses incurred based on this article.



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Yes Bank June quarter net jumps 360% on lower provisions, higher other income

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Provisioning declined 41% year on year (YoY) and 88% sequentially to Rs 644 crore. The net interest income (NII) fell 26% YoY to Rs 1,908 crore, but rose 42% sequentially.

Yes Bank on Friday reported a 360% year-on-year jump in its net profit to Rs 207 crore for the June quarter, on the back of lower provisions and higher other income. This is the the lender’s highest profit since December 2018.

Provisioning declined 41% year on year (YoY) and 88% sequentially to Rs 644 crore. The net interest income (NII) fell 26% YoY to Rs 1,908 crore, but rose 42% sequentially.

However, other income increased 70% YoY and 29% quarter on quarter to Rs 1,056 crore. The other income included retail banking fees of Rs 342 crore and recovery from written-off accounts worth Rs 249 crore.

On the second wave of Covid-19, the lender said extent to which the pandemic would continue to impact the bank’s results would depend on ongoing as well as future developments, which are highly uncertain. Highlighting the impact of Covid-19, Prashant Kumar, managing director and chief executive officer, said, “The new business generation continued for the quarter with retail disbursements of Rs 5,006 crore, SME disbursements of Rs 3,242 crore and wholesale banking disbursements of Rs 3,625 crore.”

The bank’s net interest margin (NIM) declined 90 basis points (bps) YoY to 2,1%, compared to 3% in the same quarter last year. However, NIMs improved 50 bps sequentially.

The asset quality remained a mixed bag during the June quarter. Gross non-performing assets (NPAs) ratio increased 19 basis points (bps) to 15.6%, compared to gross NPAs of 15.41% in the previous quarter. However, net NPAs ratio improved 10 bps to 5.78% from 5.88% in the March quarter.

“The corporate recoveries and resolutions during the quarter at Rs 1,643 crore outpaced the slippages of Rs 1,258 crore,” Kumar said. The bank aims to make cash recoveries of Rs 5,000 crore during the financial year (FY22).

Total advances remained flat YoY to Rs 1.63 lakh crore. The lender mentioned that retail advances have crossed Rs 50,000-crore mark during the quarter. Total deposits grew 39% YoY to Rs 1.64 lakh crore. Current account/savings account (CASA) deposits grew 48% YoY to Rs 44,790 crore.

CASA ratio improved to 27.4%, compared to 25.8% in Q1FY21. The lender aims to reach CASA ratio of 30% by the end of FY22. The bank’s capital adequacy ratio (CAR) as per Basel III guidelines was at 17.9% as on June 30, 2021.

On the impact of RBI’s direction on Mastercard, the lender said it is tying up with Rupay and Visa for issuing new cards. “We have already signed up with Rupay and tie-up with Visa will be done in a week or so,” Kumar said. The banking regulator had barred Mastercard from adding new customers after it found that the company was non-compliant of RBI’s storage norms.

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Federal Bank Q1 net falls 8.3% on higher provisioning

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Provisions and contingencies stood higher at Rs 641.83 crore, against Rs 394.62 crore in the year-ago period. The provision coverage ratio (including technical write-offs) was strengthened substantially and stood at 78.66%.

Federal Bank on Friday reported an 8.3 % year-on-year (y-o-y) decline in its net profit to Rs 367.29 crore for the first quarter of the current fiscal, mostly due to higher provisioning for bad loans. The lender had reported a net profit of Rs 400.77 crore in the year-ago period and Rs 477.81 crore in Q4FY21.

The asset quality deteriorated, with gross NPA as a percentage of gross advances increasing to 3.50% from 3.41% in Q4FY21 and 2.96% in the year-ago period. Net NPA ratio too increased to 1.23% from 1.19% in the preceding quarter and 1.22% in the comparable quarter of the last fiscal.

Provisions and contingencies stood higher at Rs 641.83 crore, against Rs 394.62 crore in the year-ago period. The provision coverage ratio (including technical write-offs) was strengthened substantially and stood at 78.66%.

Shyam Srinivasan, MD & CEO, said the provisioning policy continues to be very conservative so that the balance sheet remains strong. “For Rs 640-crore of fresh slippages in the quarter, we have provisioned Rs 460 crore as a choice. Even in gold loans, which is 100% secure, we have provisioned 65%. Our unsecured book is very marginal. There is no lumpy slippages,” he said.

The bank recorded the highest-ever operating profit of Rs 1,135.18 crore in the quarter, 22% higher y-o-y. Net interest income grew 9.41% to Rs 1,418.43 crore while other income grew 33.13% to reach Rs 650.15 crore.

The total business of the bank reached Rs 299,158.36 crore, registering a y-o-y growth of 8.30%. Total deposits reached Rs 169,393.30 crore, registering a growth of 9.33%. Net advances grew by 6.98% to reach Rs 129,765 crore. On the assets side, gold loans registered a growth of 53.90% to reach Rs 15,764 crore.

“The external environment continues to be challenging. However, we have managed to keep our operating momentum intact by delivering our highest-ever operating profit for the quarter. Our CASA ratio is at an all-time high and we continue to build a granular liability franchise with more than 90% of our deposits being retail in nature,” he said.

The bank raised Rs 916 crore in equity capital by issuing shares to International Finance Corporation and its affiliates .

The capital adequacy ratio computed as per Basel III guidelines stood at 14.64% at the end of the quarter.

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Centre plans BRICS Bank’s regional office at GIFT SEZ

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The Centre is all set to give a nod to the setting up of the BRICS’ New Development Bank’s Indian regional office at the GIFT SEZ IFSC (International Financial Services Centre), in Gandhinagar, with the proposal scheduled to be taken up by the Board of Approval (BoA) for SEZs in a meeting later this month.

The Department of Economic Affairs (DEA), which has made the proposal, has also sought certain relaxation of SEZ rules for the smooth functioning of the Indian Regional Office (IRO) that will promote “effective and extensive’’ investment operations by NDB in India, as per the agenda of the BoA meeting scheduled on July 29. “Operationalisation of the IRO is one of the important agenda items of BRICS, 2021 under India’s chairship and the announcement of operationalisation of IRO is expected to be made in the BRICS Lenders Summit to be held on September 9,” per the agenda of the meeting scheduled on July 29.

NDB, a multilateral development bank established by Brazil, Russia, India, China and South Africa in 2014, aims at mobilising resources for infrastructure and sustainable development projects in BRICS and other emerging market economies and developing countries.The bank supports its members in infrastructure development through loans, guarantees, equity participation and other financial instruments. “Since India is one of the largest recipients of finances from the NDB, it is important that all measures are taken to ensure smooth functioning of the development bank’s regional office in the country. That is why the DEA and the Development Commissioner (DC) of the GIFT SEZ have also sought certain relaxation of SEZ rules for the functioning of the office,” an official tracking the matter told BusinessLine.

$4.7 billion loan assistance

As many as 15 sovereign projects amounting $4.7 billion of loan assistance have been posed to NDB for financing in different States in India, the agenda note pointed out. Owing to the importance of the project, the DC of the GIFT City SEZ has recommended to the BoA, so that the IRO may be exempted from certain provisions of SEZ rules. These include exemption from providing details on net foreign exchange earning, items of manufacture/service activity, employment, annual report, marketing collaboration and industrial licence, information of bank accounts, PAN, IEC numbers and exemption from application fee.

In July 2020, the Union Cabinet had approved the signing of an agreement between the Gol and NDB on hosting the NDB’s IRO at GIFT SEZ. Consequently, in September 2020, the Board of Directors of NDB accorded approval for signing the Host Country Agreement (HCA) with India. The Host Country Agreement (HCA) on the IRO was signed in December 2020.

In June this year, the Department of Commerce inserted a new rule in the SEZ Rules, 2006 allowing a multilateral agency to set up their local or regional office in the IFSC as a unit.

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Federal Bank, Yes Bank in talks with Visa and RuPay for onboarding new credit card users

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With the Reserve Bank of India barring Mastercard from onboarding new users, Federal Bank and Yes Bank are in discussions with Visa and RuPay to restart issuances of credit cards over the next two to three months.

Both the private sector lenders had exclusive tie-ups with Mastercard. They have stopped onboarding of new credit card customers following the embargo by the Reserve Bank of India (RBI) on Mastercard from acquiring new customers.

Shalini Warrier, Executive Director at Federal Bank said the lender is likely to restart issuance of credit cards within two months.

“There are two other franchises – Visa and RuPay. We have started the process with both of them and we will be back in action within the next two months. We will continue with existing to bank customers and at some point move to new to bank customers,” she said.

The bank had launched credit cards for existing to bank customers in a digital format in June this year and had onboarded 20,000 cards to date.

Yes Bank’s credit card ambitions

Yes Bank Managing Director and CEO Prashant Kumar also said the process to onboard RuPay and Visa for initiating issuance has started.

“The bank has already signed an agreement with RuPay and will sign an agreement with Visa within next week,” he said, adding that they expect issuance to restart in 90 to 120 days.

Yes Bank in recent months has been fairly ambitious in its credit card business. Kumar said over the next three months, the bank would not be in a position to issue 75,000 to 1 lakh cards

“There will be no impact due to the bar on Mastercard on existing 9,87,000 credit cards in force. It will not impact profitability of the bank in the short term and we will make up on the lost acquisition momentum in the current fiscal year,” he said, adding that the news of the embargo on Mastercard came as a surprise to the bank.

Earlier, RBL Bank, which too had an exclusive tie up with Mastercard, entered into an agreement with Visa on July 14 to issue credit cards enabled on the Visa payment network.

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SBI Card Q1 net profit jumps 74% sequentially despite 2nd Covid wave

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SBI Card, the country’s largest pure play credit card issuer, on Friday reported a 74 per cent sequential increase in net profit for the first quarter-ended June 30 at ₹305 crore against net profit of ₹175 crore recorded in the previous quarter.

This is a clear pointer that the performance of SBI Cards had not been unduly impacted by the second wave of Covid-19 that struck India since April this year, said corporate observers.

However, on a year-on-year basis, net profit in the first quarter declined 23 per cent when compared to net profit of ₹393 crore in the first quarter last year.

Total income for the quarter under review declined 1 per cent sequentially to ₹2,451 crore from ₹2,468 crore in the previous quarter. However, on a year-on-year basis, total income in Q1FY22 was up 12 per cent against ₹2,196 crore in same quarter last fiscal, a company release said.

Higher retail spends

Retail spends for the quarter under review were up 63 per cent year-on-year at ₹27,000 crore despite lockdown 2.0. In the same quarter last fiscal, retail spends stood at ₹16,608 crore.

Nearly 55 per cent of the retail spends in the first quarter this fiscal were online spends. This was higher than 52 per cent for the first quarter last year.

Corporate spends for the quarter under review stood at ₹6,000 crore, up 149 per cent on a year-on-year basis over ₹2,477 crore.

The cards in force stood at 1.2 crore as of end-June 2021, reflecting 14 per cent increase over same quarter last year. However, the CIF growth sequentially was a modest 2 per cent.

Gross NPA stood at 3.99 per cent in Q1, higher than 1.35 per cent in same quarter last fiscal. It was, however, lower than 4.99 per cent recorded in previous quarter this year.

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RBI devolves 10-year G-Sec auction

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The Reserve Bank of India (RBI) devolved the recently issued 10-year government security (G-Sec) on primary dealers (PDs) to the tune of 80 per cent of the notified amount at the weekly auction held on Friday as bidders wanted to the buy the paper at a lower price vis-a-vis the prevailing market price.

By devolving the paper on the PDs, the central bank is trying to keep the G-Sec yields in check. Bond price and yields are inversely related and move in opposite directions.

At the auction, PDs had to pick up the GS 2031 aggregating ₹11,144.145 crore against the notified amount of ₹14,000 crore.

The cut-off price for the paper came in at ₹99.63 (versus the previous close of ₹99.7225). Cut-off yield was at 6.1498 per cent (6.1373 per cent).

In the secondary market, price of the aforementioned G-Sec closed about 20 paise lower at ₹99.52 vis-a-vis the previous close. Its yield rose about 3 basis points to close at 6.1648 per cent.

The auction of the other two papers — 4.26 per cent GS 2023 (notified amount: ₹3,000 crore, with greenshoe amount of ₹750 crore being accepted) and 6.76 per cent GS 2061 (₹9,000 crore, with greenshoe amount of ₹2,250 crore being accepted).

PDs play vital role

Madan Sabnavis, Chief Economist, CARE Ratings, observed that the G-Sec auctions on Friday followed the familiar path of PDs playing an important role in subscribing to the offerings.

“We can see that the 10-year yield has been crawling up over the weeks and while the RBI did manage the yield curve and keep the rate at around 6 per cent, the market has been demanding a higher return. The average cost for these three papers is 6.28 per cent,” he said.

Sabnavis noted that there will be one more auction next week before the Monetary Policy Committee meets and the market is awaiting the tone of the discourse.

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