Month: September 2021

Quality of banks’ retail loans dips, India Ratings projects total gross NPA at 8.6% for FY22, BFSI News, ET BFSI

Banking & Finance

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India Ratings & Research has estimated banks’ gross non-performing assets to rise to 8.6% by March 2022 while maintaining a stable outlook on the overall banking sector for the rest of FY22.

The rating company’s NPA estimate is much more benign than 9.8% projected by Reserve Bank of India’s Financial Stability Report even as it expressed concerns over significant stress on banks’ retail and MSME loan books. It projected overall stressed assets at 10.3% for FY22 expecting provisioning cost to rise to 1.9% from its earlier estimate of 1.5%.

The banking sector gross NPA was at 7.7% at the end of March 2022.

Retail loans, which have been considered as a safe bastion for lenders, are showing cracks as the pandemic drives higher delinquencies due to salary cuts and job losses. The rating firm estimated that the asset quality impact in the retail segment has been significantly higher for private banks, forcing them to restructure loans helping to defer immediate rise in slippages. Overall stressed assets in the segment are expected to increase to 5.8% by end-FY22 from 2.9% earlier.

The micro, small and medium enterprises sector has been under pressure with demonetisation, introduction of Goods & Services Tax and Real Estate Regulatory Authority (RERA), slowing down of large corporates and now COVID-19, India Ratings said.

Although the government support in form of liquidity under the Emergency Credit Line Guarantee Scheme (ECLGS) and permission to restructure loans comes as an immediate relief for the sector immediately, a part of this credit support could turn bad when moratorium ends beginning the third quarter this fiscal. The rating firm projected gross NPA from MSME to rise to 13.1% by FY22 from 9.9% in FY21. Stressed assets similarly would increase to 15.6% from 11.7%.

The stable outlook on large private banks indicated their continued market share gains both in assets and liabilities, while competing intensely with public sector banks. “Most have strengthened their capital buffers and proactively managed their portfolio. As growth revives, large private banks are likely to benefit from credit migration due to their superior product and service proposition,” the rating company said.

The stable outlook on public sector banks took into account the continued government support through large capital infusions leading to a significant boost in capital buffers over the minimum regulatory requirements, significant improvement in provision coverage. The government injected Rs 2.8 trillion over FY18-FY21 and has budgeted another Rs 20000 crore for this fiscal.

The outlook on non-banking finance companies is however mixed depending on the category of their businesses. The outlook on NBFCs engaged in commercial vehicle loans and loans against property is negative while the rating company maintained stable outlook for NBFCs engaged in housing finance as well as gold loans.



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Dish TV gains 13% after Yes Bank move to sack board, BFSI News, ET BFSI

Banking & Finance

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Mumbai: Shares of Dish TV were up nearly 13% on Tuesday after Yes Bank moved a shareholder proposal to overthrow the board, including the managing director and CEO Jawahar Lal Goel. The private lender, which acquired just below 26% in the company following debt resolution, served notice to remove five directors and proposed seven directors to be appointed in their place.

In June, the company’s board had approved the raising of funds through a rights issue of Rs 1,000 crore. The promoters of Dish TV had pledged their holding for credit facilities used by the Essel Group.

With lenders revoking the pledge, the promoter stake in the firm had fallen to below 6%. Yes Bank’s notice comes ahead of the company’s annual general meeting on September 27. Shares of the company rose to a high of Rs 16 during intraday trade on Tuesday before closing at Rs 15.5, up 12.7% from the previous close of Rs 13.8.

Explaining the grounds for removal of the board, the bank said the directors approved a rights issue process despite pending objections raised with them time and again, solely to dilute the shareholding of the bank, which is the largest shareholder, and to prejudice its interest.

According to a Yes Bank notice to the exchange, banks and financial institutions hold around 45% stake in the company, but the board is acting at the behest of minority shareholders holding merely 6% of the shares. The bank also said that the board had completely sidelined its multiple requests to reconstitute the board.

The notice has been sent to the board under Section 169 of the Companies Act, which empowers shareholders to remove a director. The company secretary has informed the exchange that it is taking steps to get the candidatures of the proposed new directors cleared from the information & broadcasting ministry, as prior approval of the authority is required.

The other four directors sought to be removed are Rashmi Aggarwal, who is currently associated with IMT-Ghaziabad and is on the board of other Essel Group companies, B D Narang, former chairman of Oriental Bank of Commerce, Shankar Aggarwal, an IAS officer, and Ashok Mathai Kurien, an entrepreneur.

Yes Bank has informed the exchanges that it has made repeated requests to the board to induct Akash Suri and Sanjay Nambiar who are part of the company’s top management and experts in their respective field. The bank has again proposed their names with five other directors. These are Vijay Bhatt, Haripriya Padmanabhan, Girish Paranjpe, N V Prabhutendulkar and Arvind Nachaya.



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India Ratings maintains stable outlook on banking sector in FY22, BFSI News, ET BFSI

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Domestic rating agency India Ratings on Tuesday maintained a stable outlook on the banking sector for 2021-22 while it expects an increase in stressed assets in retail and MSME segments by end-March. It estimates gross non-performing assets (GNPA) of the banking sector to be at 8.6 per cent and stressed assets at 10.3 per cent for fiscal 2021-22.

“We have maintained a stable outlook on the overall banking sector for the rest of FY22, supported by the continuing systemic support that has helped manage the system-wide COVID-19 linked stress,” the rating agency said in its mid-year banks outlook released on Tuesday.

Banks will continue to strengthen their financials by raising capital and adding to provision buffers which have already seen a sharp increase in the last three to four years, it said.

The agency said its stable outlook on large private banks indicates their continued market share gains both in assets and liabilities, while competing intensely with public sector banks (PSBs). Most have strengthened their capital buffers and proactively managed their portfolio.

Outlook on PSBs takes into account continued government support through large capital infusions (Rs 2.8 lakh crore over FY18-FY21 and further Rs 0.2 lakh crore provisioned for FY22), it said.

The agency has a negative outlook on five banks (about 6.5 per cent of system deposits), driven primarily by weak capital buffers and continued pressure on franchise.

It estimates that the asset quality impact in the retail segment has been higher for private banks with a median rise of over 100 per cent in gross NPAs over Q1 FY21 to Q1 FY22 (about 45 per cent for PSBs).

“Banks have also undertaken restructuring in retail assets (including home loans), which could have postponed an immediate increase in slippages. Overall stressed assets (GNPA + restructured) in the segment is expected to increase to 5.8 per cent by end-FY22,” the report said.

It said the MSME sector has been under pressure with demonetisation, introduction of GST and RERA, slowing down of large corporates and now COVID-19.

However, the government has supported the segment by offering liquidity under the Emergency Credit Line Guarantee Scheme (ECLGS) and restructuring, it said adding that it expects that beginning Q3 FY22, a portion of such advances would start exiting moratoriums a part of which could slip.

GNPAs of MSMEs is expected to increase to 13.1 per cent by end-FY22 from 9.9 per cent in FY21. Stressed assets similarly would increase to 15.6 per cent from 11.7 per cent.

For corporate segment, the agency estimates GNPAs to increase to 10.2 per cent and stressed asset to increase to 11.3 per cent.

The rating agency has kept its FY22 credit growth estimates unchanged at 8.9 per cent for FY22, supported by a pick-up in economic activity post Q1 FY22, higher government spending especially on infrastructure and a revival in demand for retail loans.

Last week, the agency had changed the outlook to improving from stable for retail non-banking finance companies (NBFCs) and housing finance companies (HFCs) for the second half of FY22.

It said non-banks have adequate system liquidity (because of regulatory measures), sufficient capital buffers, stable margins due to low funding cost and on-balance sheet provisioning buffers.

These factors provide ‘enough cushion to navigate the challenges that may emanate from a subdued operating environment leading to an increase in asset quality challenges due to the second covid wave impacting disbursements and collections for non-banks’, it had said.



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HDFC Bank signs pact with NSIC to provide credit support to MSMEs, BFSI News, ET BFSI

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New Delhi, Sep 7 (PTI) HDFC Bank on Tuesday said it has signed a pact with the National Small Industries Corporation (NSIC) for providing credit support to the micro, small and medium enterprise (MSME) sector. Under this, the country’s largest private sector bank will also provide MSMEs with a set of specially-tailored schemes to enhance their competitiveness.

“HDFC Bank has signed a memorandum of understanding with National Small Industries Corporation to offer credit support to MSMEs across the country,” the bank said in a statement.

The bank branches will extend support to the MSME projects in the areas they are located and to other important industrial sectors across the country.

Rahul Shukla, group head (commercial and rural banking) of HDFC Bank, said the partnership will help reboot the economy and give it a required fillip.

“We believe this partnership with NSIC will help expedite the MSME sector growth, which is the backbone of the country both in terms of economic development and job creation,” he said.

The bank said it would accept loan applications forwarded by NSIC and consider sanctioning loans on a merit basis and as per its lending policy.



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Surplus liquidity, firm demand of MF drive down yields on CPs

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Demand from fund houses also increased because the investment made by them in CPs have matured in the past few days.

By Manish M. Suvarna

The yields on commercial papers (CP) maturing in three months have eased nearly 10 basis points in the last few weeks owing to huge surplus liquidity in the banking system and improved demand from mutual funds. Similarly, yields on the 91-day T-bill also moderated 10 basis points in August.

As of September 7, yields on CPs issued by non-banking finance companies (NBFC) maturing in three months were hovering between 3.50% and 3.65%, and those on papers issued by manufacturing companies were trading between 3.35% and 3.50%. This is lower than 3.65-70% and 3.40-55% yields traded on papers issued by NBFC and manufacturing companies, respectively, in mid-August. The 91-day T-bill cut-off was at 3.3892% on August 11 and 3.2856% on September 1.

“RBI’s bond and foreign exchange purchases continue to add to the unprecedented level of liquidity surplus, which has increased from about Rs 7 trillion at start of the fiscal to over Rs 11 trillion now. This is exerting downward pressure on the money market and short-end bond yields,” said Pankaj Pathak, fund manager for fixed income at Quantum Asset Management.

The liquidity in the banking system has remained in surplus in the past few weeks despite the central bank conducting variable rate reverse repo (VRRR) auctions. This is because the inflows from G-SAP auctions, government spending, redemption, coupons and CIC paybacks have offset the outflows from GST and VRRR auctions.

Currently, the liquidity in the banking system is estimated to be in a surplus of around Rs 8.79 lakh crore.
In August, the Reserve Bank of India (RBI) injected liquidity worth Rs 50,000 crore through the purchase of government securities under the Government Securities Acquisition Programme, however, Rs 5.50 lakh crore has been withdrawn via VRRR.

Market participants expect that the liquidity in the system is expected to remain range-bound this week due to almost the same amount of inflows and outflows. Kotak Mahindra Bank report showed that the inflows of `99,840 crore is expected this week and Rs 1.06 lakh crore outflows can be seen.

Additionally, the demand from fund houses has improved substantially since June due to inflows into shorter end funds such as duration fund, ultra-short-term fund, liquid fund, etc. Mutual funds are larger buyers of short-term debt papers such as commercial papers and certificates of deposit.

Demand from fund houses also increased because the investment made by them in CPs have matured in the past few days.

Dealers with brokerage firm said that if such high liquidity persists in the system then yields on CPs are expected to moderate further. “It would be extremely difficult for the RBI to suck out this excess liquidity on a durable basis without hurting the bond market sentiment. T-Bill and money market rates may remain suppressed in the near term,” Pathak said.

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Surplus liquidity, firm demand of MF drive down yields on CPs

Banking & Finance

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Demand from fund houses also increased because the investment made by them in CPs have matured in the past few days.Demand from fund houses also increased because the investment made by them in CPs have matured in the past few days.

By Manish M. Suvarna

The yields on commercial papers (CP) maturing in three months have eased nearly 10 basis points in the last few weeks owing to huge surplus liquidity in the banking system and improved demand from mutual funds. Similarly, yields on the 91-day T-bill also moderated 10 basis points in August.

As of September 7, yields on CPs issued by non-banking finance companies (NBFC) maturing in three months were hovering between 3.50% and 3.65%, and those on papers issued by manufacturing companies were trading between 3.35% and 3.50%. This is lower than 3.65-70% and 3.40-55% yields traded on papers issued by NBFC and manufacturing companies, respectively, in mid-August. The 91-day T-bill cut-off was at 3.3892% on August 11 and 3.2856% on September 1.

“RBI’s bond and foreign exchange purchases continue to add to the unprecedented level of liquidity surplus, which has increased from about Rs 7 trillion at start of the fiscal to over Rs 11 trillion now. This is exerting downward pressure on the money market and short-end bond yields,” said Pankaj Pathak, fund manager for fixed income at Quantum Asset Management.

The liquidity in the banking system has remained in surplus in the past few weeks despite the central bank conducting variable rate reverse repo (VRRR) auctions. This is because the inflows from G-SAP auctions, government spending, redemption, coupons and CIC paybacks have offset the outflows from GST and VRRR auctions.

Currently, the liquidity in the banking system is estimated to be in a surplus of around Rs 8.79 lakh crore.
In August, the Reserve Bank of India (RBI) injected liquidity worth Rs 50,000 crore through the purchase of government securities under the Government Securities Acquisition Programme, however, Rs 5.50 lakh crore has been withdrawn via VRRR.

Market participants expect that the liquidity in the system is expected to remain range-bound this week due to almost the same amount of inflows and outflows. Kotak Mahindra Bank report showed that the inflows of `99,840 crore is expected this week and Rs 1.06 lakh crore outflows can be seen.

Additionally, the demand from fund houses has improved substantially since June due to inflows into shorter end funds such as duration fund, ultra-short-term fund, liquid fund, etc. Mutual funds are larger buyers of short-term debt papers such as commercial papers and certificates of deposit.

Demand from fund houses also increased because the investment made by them in CPs have matured in the past few days.

Dealers with brokerage firm said that if such high liquidity persists in the system then yields on CPs are expected to moderate further. “It would be extremely difficult for the RBI to suck out this excess liquidity on a durable basis without hurting the bond market sentiment. T-Bill and money market rates may remain suppressed in the near term,” Pathak said.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

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Reserve Bank of India – Tenders

Tenders

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Reserve Bank Staff College (hereinafter referred to as “the Employer”) invites e-tenders from the empaneled vendors of Reserve Bank of India, Chennai for the work of ‘Renovation of 30 Rooms in Old Hostel Block at Reserve Bank Staff College, Chennai – 600018’, as per the schedule of tender given below. The work is estimated to cost ₹43.69 lakh and is to be completed within 04 months from the 10th day of issue of written order to commence the work. Vendors who are empaneled with RBI, Chennai under the category of “Civil, Interior, Fabrication, Painting works – ₹25-50 lakh” are only eligible to participate in this tender.

The tenderers should electronically submit their proposal, as per the instructions regarding e-Tender, along with all supporting documents complete in all respects on or before September 28, 2021, 02.00 p.m. Tenderers shall submit tender proposal along with refundable EMD of ₹87,380/-, as prescribed in the tender. The technical bids (Part I) and financial bid (Part II) will be opened electronically on September 28, 2021 at 03:00 p.m. In the event of any date indicated above being declared a Holiday, the next working day shall become operative for the respective purpose mentioned herein. Financial Bid (Part II) of only those bidders who are found to be eligible on evaluation of their Part I documents will be opened.

Tender document can be downloaded from RBI website – www.rbi.org.in and www.mstcecommerce.com. Any amendment(s) / corrigendum / clarifications with respect to this tender shall be uploaded on the website / e-portal only. The tenderer should check the above website / e-portal for any Amendment / Corrigendum / Clarification before submitting the bid. The Employer reserves the right to reject any or all the tenders without assigning any reason thereof.

The Chief General Manager/ Principal
Reserve Bank Staff College
359, Anna Salai, Teynampet
Chennai – 600 018

Schedule of Tender

a. E-tender No. RBI/RBSC//140/21-22/ET/140
b. Name of work Renovation of 30 rooms in the Old Hostel Block at Reserve Bank Staff College, Chennai- 600018
c. Mode of Tender e-Procurement System (Online Part I – Techno- Commercial Bid and Part II – Price Bid through www.mstcecommerce.com/eprochome/rbi) Guidelines for e-tender have been provided in Annexure – I.
d. Date of NIT available to parties to download 02:00 p.m. on September 7, 2021.
e. Earnest Money Deposit ₹ 87,380/- from each bidder.
f. Last date of submission of EMD. 01:00 p.m. on September 28, 2021.
g. Pre-bid Meeting 11:30 a.m. on September 14, 2021 at Seminar Hall, Reserve Bank Staff College, 359, Anna Salai, Teynampet, Chennai – 600018.
h. Date of starting of e-Tender for submission of on-line Techno-Commercial Bid and price Bid at www.mstcecommerce.com/eprochome/rbi 02:00 p.m. on September 17, 2021.
i. Date of closing of online e-tender for submission of Techno-Commercial Bid & Price Bid. 02:00 p.m. on September 28, 2021.
j. Date & time of opening of Tender 03:00 p.m. on September 28, 2021.
k. Transaction Fee Transaction fee is 0.05% of estimated cost subject to a maximum of ₹15,000/- Payment of Transaction fee is as mentioned in the MSTC portal through MSTC payment gateway or through NEFT/RTGS in favor of MSTC LIMITED.

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Reserve Bank of India – Press Releases

Press Releases

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The Reserve Bank of India (RBI) has today announced the following enhancements to the extant framework on card tokenisation services:

  1. the device-based tokenisation framework advised vide circulars of January 2019 and August 2021 has been extended to Card-on-File Tokenisation (CoFT) services as well, and

  2. card issuers have been permitted to offer card tokenisation services as Token Service Providers (TSPs). The tokenisation of card data shall be done with explicit customer consent requiring Additional Factor of Authentication (AFA).

The above enhancements are expected to reinforce the safety and security of card data while continuing the convenience in card transactions.

Citing the convenience and comfort factor for users while undertaking card transactions online, many entities involved in the card payment transaction chain store actual card details [also known as Card-on-File (CoF)]. In fact, some merchants force their customers to store card details. Availability of such details with a large number of merchants substantially increases the risk of card data being stolen. In the recent past, there were incidents where card data stored by some merchants have been compromised / leaked. Any leakage of CoF data can have serious repercussions because many jurisdictions do not require an AFA for card transactions. Stolen card data can also be used to perpetrate frauds within India through social engineering techniques.

Reserve Bank had, therefore, stipulated in March 2020 that authorised payment aggregators and the merchants onboarded by them should not store actual card data. This would minimise vulnerable points in the system. On a request from the industry, the deadline was extended to end-December 2021 (RBI circular CO.DPSS.POLC.No.S33/02-14-008/2020-2021 dated March 31, 2021), as a one-time measure. RBI has been in regular consultation with the industry to facilitate the transition.

It may be noted that introduction of CoFT, while improving customer data security, will offer customers the same degree of convenience as now. Contrary to some concerns expressed in certain sections of the media, there would be no requirement to input card details for every transaction under the tokenisation arrangement. The efforts of Reserve Bank to deepen digital payments in India and make such payments safe and efficient shall continue.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/823

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Reserve Bank of India – Tenders

Tenders

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The captioned Meeting was held at 11.00 am on Monday, September 06, 2021 in the VC Room on the third floor of the Bank’s Main Office Building at Bakery Junction, Thiruvananthapuram.

(a) List of Bank’s Officials who attended the meeting

1 Shri V Jayaraj Assistant General Manager
2 Shri Suresh Kumar R Nair Assistant Manager (Tech-Electrical)
3 Smt. T Gowthami Assistant Manager
4 Shri Jomin Joseph Assistant

(b) List of Contractors’ representatives who attended the meeting

  Name of the Representative Name of the Contractor
1 Shri Vishnu K S M/s Cochin Fire Tech India Pvt Ltd
2 Shri Sarjad Salim M/s Cochin Fire Tech India Pvt Ltd
3 Shri Najam M/s A V Fire Fighting Systems

2. Shri V Jayaraj, Assistant General Manager welcomed the participants to the meeting and invited queries, if any, from the prospective bidders regarding the captioned tender. Shri Suresh Kumar R Nair, AM (Tech) explained various aspects of the tender which need to be taken care of in their bids. Queries put forth by the representatives and clarifications given by the Bank are tabulated below:

Queries/Suggestions Clarification/Comments
Whether there is exemption from paying EMD for MSME vendors? Bank is providing EMD exemption for MSMEs for works with estimate up to Rs 10 lakh. Since the estimate for the captioned work is Rs 27 lakh, such exemption is not applicable.
Validity and Value of Performance Bank Guarantee. Para 5 of Section II of tender may be referred to. After virtual date of completion the system shall be under initial warranty period of three years. A performance Bank Guarantee of 10% of the contract value has to be submitted to cover the three years. Thereafter, the system shall be under Comprehensive Annual Maintenance Contract (CAMC) with the contractor for five years. For due fulfilment of obligations towards CAMC, Bank Guarantee of 5% of the contract value valid for five years shall be submitted.
During the Warranty period and Comprehensive Annual Maintenance Contract Period, whether the contractor has to bear costs for repair/replacement of defective components? Para 11 of Section II of tender may be referred to. The contractor has to bear all costs for repair/replacement of defective components of the fire alarm system except for the existing cabling.
Whether rates to be quoted are inclusive of taxes? The rates quoted must be inclusive of all taxes.
Payment release against supply of materials at site. As mentioned in clause 16 of Section II of the tender, 60% of the quoted rates on pro-rata basis shall be paid against delivery of materials after checking at site and submission of test certificates from Original Equipment Manufacturer and submission of Bank Guarantee for 20% of contract value (Quoted amount), valid till scheduled date of completion of the work.
Whether AMC timings mentioned in the tender are relaxable? Considering the operational requirements of the Bank, the Comprehensive AMC timings as per clause 11 of Section II of the tender shall be strictly adhered to.
Is one client certificate sufficient? Client certificates for all qualifying works have to be submitted.

3. Shri V Jayaraj, Assistant General Manager thanked all participants for attending the meeting. He also added that further queries, if any, about the tender can also be clarified from the section and advised the bidders to complete the exercise early and avoid last minute references. The meeting came to an end at 11.45 am.

Regional Director for Kerala and Lakshadweep

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Reserve Bank of India – Press Releases

Press Releases

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The Reserve Bank of India (RBI) has, by an order dated September 07, 2021, imposed a monetary penalty of ₹3.00 lakh (Rupees three lakh only) on The Sutex Co-operative Bank Ltd., Surat (Gujarat) (the bank) for contravention of directions issued by RBI on ‘Loans and advances to directors, relatives and firms /concerns in which they are interested’ and ‘Loans and advances to directors etc. – directors as surety/guarantors – Clarification’. This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to the aforesaid directions issued by RBI.

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

Background

The statutory inspection of the bank conducted by the RBI with reference to the bank’s financial position as on March 31, 2018, the Inspection Report pertaining thereto and examination of all related correspondence revealed, inter alia, non-compliance with aforesaid directions issued by the RBI. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with the aforesaid directions issued by the RBI. After considering the bank’s reply to the notice and oral submissions made during the personal hearing, the RBI came to the conclusion that the aforesaid charge was substantiated and warranted imposition of monetary penalty.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/822

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