Month: September 2021

Reserve Bank of India – Tenders

Tenders

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Please refer to the tender notice published on the Bank’s website www.rbi.org.in on August 13, 2021 inviting quotations from eligible vendors for the Application for Empanelment of Contractors for Civil, Electrical, Other Works, Architects and Structural Consultants etc. wherein last date of submission of applications was specified as 4:00 PM on September 13, 2021.

Extension of Time:

It is advised that the time for submission of applications has been extended to 04:00 PM on September 21, 2021. All other terms and conditions mentioned in the above tender Document remains unchanged.

Regional Director
Nagpur

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Union Bank of India inks first $1.50b sustainability-linked overseas loan

Banking & Finance

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Union Bank of India (UBI) on Tuesday said it has syndicated a “sustainability-linked loan” facility aggregating $1.50 billion for a Singapore-based global trading corporate.

The syndicated loan is of three years tenor and the coupon rate is LIBOR (London Inter-Bank Offered Rate) plus 155 basis points.

The public sector bank, in a statement, said the facility includes three Key Performance Indicators (KPIs) relating to a reduction in greenhouse gas emissions, responsible sourcing of metals and growing renewable power portfolio.

Key performance indicators

Under this structure, the interest rate paid by the borrower on the credit facilities will decrease or increase based on the group’s progress on the KPIs, it added.

The sustainability-linked KPIs will have to be tested annually and verified by a third-party expert.

UBI said sustainability-linked financing demonstrates its commitment towards environmental and responsible lending, reducing its carbon footprint, and diversifying its asset base towards renewable energy.

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IDFC losing investor confidence over delay in value unlocking

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Investors’ patience with IDFC’s drawn out restructuring exercise seems to be wearing thin, going by their feedback to its Board and management at a pre-annual general meeting conference call.

While one investor wanted IDFC to immediately divest its stake in its asset management company (AMC), failing which he said he will reach out to other investors’ to seek a change in management, another investor, referring to the performance of the stock, alleged value destruction for shareholders.

Vinod Rai, Non-Executive Chairman, IDFC, explained that it has taken the company the last three-four years to try and simplify the entire corporate structure and it has managed to remove all the other entities, except the Bank, AMC and the Foundation. “Now, what we are grappling with today is the IDFC Foundation. It has two joint ventures under it — one is with the Government of Delhi and another is with the Government of Karnataka.”

Also read: To remain on IDFC board, Vinod Rai gives up independent director’s post

In his statement to the shareholders in the latest annual report, Rai observed that in pursuit of creating maximum value for shareholders, over the last few years the Board has been focused on cleaning up the corporate structure of the IDFC Group while awaiting the expiry of the 5-year lock in period for the Group as promoter of IDFC FIRST Bank.

The Reserve Bank of India vide their letter dated July 20, 2021, has clarified that after expiry of the ‘lock in’ period of 5 years, IDFC can exit as promoter of IDFC FIRST Bank.

Rai, who was the Comptroller and Auditor General of India between 2008 and 2013, emphasised that IDFC has engaged a security advisor in October 2020 for disinvestment of non-core activities and for drawing up a strategy, roadmap ahead, etc. The single term of reference for the advisor was maximisation of shareholder value, he added.

In the report, IDFC Chairman noted that alienation of the investments by IDFC Foundation and detachment of Foundation are a prerequisite for the optimum restructuring of IDFC for creating maximum value for shareholders.

IDFC management has been making full efforts in this direction but progress on this front has been slow in view of challenging nature of specific conditions that exist in the joint venture agreements, he added.

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RBI, Singapore Monetary Authority link payment systems for fast funds transfer

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In a bid to make cross-border transactions easier and cheaper, the Reserve Bank of India and the Monetary Authority of Singapore (MAS) have announced a project to link their respective fast payment systems, UPI and PayNow, by July 2022.

The UPI-PayNow link will allow users to make instant, low-cost fund transfers on a reciprocal basis without the need to get onto any other payment system, the RBI said on Tuesday. Cross-border payments and remittance flows between India and Singapore exceed $1 billion each year currently.

PayNow is a fast payment system that enables peer-to-peer fund transfer by retail customers through participating banks and non-bank financial institutions (NFIs) in Singapore. UPI, on the other hand, has proved to be one of the most popular digital payment systems in India, clocking 355 crore transactions worth ₹6.39-lakh crore in August. It processes transactions valued at over ₹15,000 crore daily.

“The UPI-PayNow linkage builds upon the earlier efforts of NPCI International Private Limited (NIPL) and Network for Electronic Transfers (NETS) to foster cross-border interoperability of payments using cards and QR codes between India and Singapore and will further anchor trade, travel and remittance flows between the two countries,” the RBI said.

Fund transfers

According to a statement by MAS, when implemented, fund transfers can be made from India to Singapore using mobile phone numbers, and in the other direction by using the UPI virtual payment addresses (VPA).

“The experience of making a PayNow transfer to a UPI VPA will be similar to that of a domestic transfer to a PayNow VPA,” the RBI said.

Industry players say it will lead to convenience for users, both individuals and businesses, including in investments, trade and travel. “The reduced time and charges for cross-border payments will help grow the trade between India and Singapore,” said Asheesh Chanda, Founder and CEO of Kristal.AI.

Currently, inter-bank charges of up to ₹3,000 are levied over and above the LRS processing fees by banks. This discourages small investors from accessing global markets as it eats into their returns, he added. NIPL has been working to promote the use of UPI overseas. It has partnered with cross-border digital payments provider Liquid Group to enable UPI QR-based payments acceptance in 10 markets across North and South-East Asia.

NIPL has also tied up with the Royal Monetary Authority of Bhutan for enabling and implementing BHIM UPI QR-based payments and has partnered with Mashreq to get UPI accepted in the UAE.

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Weathering challenges of 2nd Covid wave, microfinance industry grows in Q1FY22

Banking & Finance

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The regional lockdowns across various parts of the country induced by the second wave of Covid notwithstanding, the microfinance industry witnessed a surge in disbursements in the April-June 2021 quarter.

Loan disbursals

Loan disbursals jumped to ₹25,503 crore during Q1FY-22 compared to ₹6,186 crore in the same period last year. The number of loans disbursed also increased to 71 lakh as against just around 21 lakh last year, MFIN (Microfinance Institutions Network) said in its latest issue of Micrometer report for April-June 2021.

As on June 30, 2021, the microfinance industry served 5.68 crore unique borrowers, through 10.30 crore loan accounts. The overall industry currently has a total gross loan portfolio (GLP) of ₹2,37,369 crore, an increase of over 4 per cent compared to ₹2,27,727 crores as on June 30, 2020.

Also read: Outlook for non-banks and housing financiers shifts to ‘improving’ from ‘stable’: Ind-Ra

According to Alok Misra, CEO and Director of MFIN, both loan portfolio and disbursements rose in Q1FY-22 on a Y-o-Y basis. The growth was however muted sequentially in comparison to Q4FY-21.

“This growth, despite difficult operating environment due to second wave of Covid-19, shows the ability of the industry to learn quickly and adapt to challenges. The Credit Guarantee Scheme for microfinance institutions with focus on small and medium-sized MFIs would ensure growth of MFIs in the short term as fresh loans need to be disbursed using the funds received under this scheme. In the medium to long-term, the asset-class based regulations proposed in the RBI’s consultative document, expected soon, would provide the much-needed impetus to industry to transform for a better future, leveraging on the past experience,” Misra said.

Share of loan portfolio

Banks (numbering around 13) hold the largest share of the portfolio in micro-credit with a total loan outstanding of ₹1,02,405 crore, accounting for a little over 43 per cent of the total micro-credit universe.

NBFC-MFIs are the second largest provider of micro-credit with a loan amount outstanding of ₹75,021 crore, accounting for 32 per cent. NBFC-MFIs witnessed close to 7 per cent increase in loan outstanding on a year-on-year basis against ₹71,301 crore as on June 30, 2020. The GLP includes owned portfolio of ₹65,206 crore and managed portfolio of ₹11,031 crore. Loan amount of ₹6,511 crore was disbursed by NBFC-MFIs in Q1FY-22 through 17.97-lakh accounts compared to ₹561 crore disbursed during the same period last year through 1.99-lakh accounts.

Average loan amount disbursed per account during the quarter under review was ₹36,243, which is an increase of around 29 per cent compared to the same quarter last financial year.

Small finance banks have a total loan amount outstanding of ₹38,624 crore with a total share of around 16 per cent. NBFCs account for another 8 per cent, and other MFIs for around one per cent of the total microcredit portfolio.

In terms of regional distribution of GLP, East, North-east and South continue to account for 66 per cent of the total portfolio.

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UCO Bank sees ‘improved investor appetite’

Banking & Finance

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UCO Bank, which recently came out of the purview of the Reserve Bank’s Prompt Corrective Action, is expecting an “improved investor appetite”, which is likely to help its proposed capital raising plan.

The bank had recently received the board approval to raise close to ₹3,000 crore capital in 2021-22. The fundraise can take place through various modes, such as follow-on public offer, qualified institutional placement and preferential issue, subject to necessary approvals, it had said in a regulatory notification to stock exchanges.

According to Atul Kumar Goel, MD and CEO, UCO Bank, it would go for capital raising plans at an “opportune time”. “Earlier when we were in PCA there was less appetite from investors but now it is better. We have the board approval to raise around ₹3,000 crore and we will go for it when the market is right. We may look at QIP or preferential issue for raising funds,” Goel told BusinessLine.

As on June 30, 2021, the bank’s capital adequacy ratio stood at 14.24 per cent and CET-I ratio at 11.32 per cent.

PCA is triggered when banks breach certain regulatory requirements such as minimum capital, return on asset and quantum of non-performing asset.

The bank has been witnessing an improvement in profitability as well as asset quality.

Its net NPA reduced to 3.85 per cent (4.95 per cent) as on June 30.

Credit growth

The bank is expecting 8-10 per cent growth in advances during the current fiscal primarily on the back of a good demand from retail, MSME and agriculture sectors. During Q1FY22, the bank witnessed five per cent growth in advances at ₹1,20,849 crore as against ₹1,15,236 crore same period last year.

It has achieved 75 per cent of a targetted ₹2,500 crore loans by end September.

“We have seen a better response and demand for credit for housing loan and gold loan as compared to last year. There is also a demand from NBFC and infrastructure sectors. We are expecting 8-10 per cent growth in credit this year,” he said.

Loan restructure

UCO Bank, Goel said, has restructured loans to the tune of ₹2,500 crore upto June this year under RBI’s resolution framework 2.0.

Under the framework, banks and non-banking financial companies (NBFCs) can restructure loans of up to ₹50 crore.

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Reserve Bank of India – Press Releases

Press Releases

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The Result of the auction of State Development Loans for 11 State Governments held on September 14, 2021.

Table
(Amount in ₹ crore)
  ANDHRA PRADESH 2036 ASSAM 2031 CHHATTISGARH 2028 GOA 2031
Notified Amount 1000 600 1000 100
Tenure 15 10 7 10
Competitive Bids Received        
(i) No. 104 54 75 22
(ii) Amount 3275 2820 7715 720
Cut-off Yield (%) 6.98 6.87 6.53 6.85
Competitive Bids Accepted        
(i) No. 10 14 11 3
(ii) Amount 954.853 559 940.995 94
Partial Allotment Percentage of Competitive Bids        
(i) Percentage 78.0444 37.381 48.9298 54
(ii) No. (8 bids) (6 bids) (3 bids) (1 bid)
Non – Competitive Bids Received        
(i) No. 6 8 10 5
(ii) Amount 45.147 41 59.005 6
Non-Competitive Price (₹) 100.05 100.05 100.05 100.05
Non-Competitive Bids Accepted        
(i) No. 6 8 10 5
(ii) Amount 45.147 41 59.005 6
Partial Allotment Percentage of Non-Competitive Bids        
(i) Percentage – – – –
(ii) No. – – – –
Weighted Average Yield (%) 6.9747 6.8636 6.5203 6.8436
Total Allotment Amount 1000 600 1000 100

  JHARKHAND 2031 MADHYA PRADESH 2031 MAHARASHTRA 2033 MAHARASHTRA 2034
Notified Amount 500 2000 2000 2000
Tenure 10 10 12 13
Competitive Bids Received        
(i) No. 51 152 173 157
(ii) Amount 2400 11695 8843 6967.5
Cut-off Yield (%) 6.87 6.85 6.91 6.91
Competitive Bids Accepted        
(i) No. 11 22 25 5
(ii) Amount 459.998 1800 1885.008 1867.948
Partial Allotment Percentage of Competitive Bids        
(i) Percentage 33.684 58.3333 37.2858 81.9382
(ii) No. (8 bids) (11 bids) (13 bids) (3 bids)
Non – Competitive Bids Received        
(i) No. 10 15 10 13
(ii) Amount 40.002 230.233 114.992 132.052
Non-Competitive Price (₹) 100.02 100.05 100.09 100.05
Non-Competitive Bids Accepted        
(i) No. 10 15 10 13
(ii) Amount 40.002 200 114.992 132.052
Partial Allotment Percentage of Non-Competitive Bids        
(i) Percentage – 86.8685 – –
(ii) No. – (15 bids) – –
Weighted Average Yield (%) 6.867 6.8425 6.899 6.9046
Total Allotment Amount 500 2000 2000 2000

  MANIPUR 2031 PUNJAB 2031 UTTAR PRADESH 2031 WEST BENGAL 2036
Notified Amount 147 1000 2500 1000
Tenure 10 Re-issue of 6.89% Punjab SDL 2031 Issued on September 08, 2021 10 15
Competitive Bids Received        
(i) No. 12 69 141 90
(ii) Amount 439 3580 14225 3932.7
Cut-off Yield (%) 6.87 6.8785 6.87 6.98
Competitive Bids Accepted        
(i) No. 3 10 31 9
(ii) Amount 141.126 945.49 2276.686 939.799
Partial Allotment Percentage of Competitive Bids        
(i) Percentage 68.4328 67.745 19.1226 52.2575
(ii) No. (2 bids) (1 bid) (15 bids) (8 bids)
Non – Competitive Bids Received        
(i) No. 6 8 16 7
(ii) Amount 5.874 54.51 223.314 60.201
Non-Competitive Price (₹) 100.01 100.13 100.09 100.02
Non-Competitive Bids Accepted        
(i) No. 6 8 16 7
(ii) Amount 5.874 54.51 223.314 60.201
Partial Allotment Percentage of Non-Competitive Bids        
(i) Percentage – – – –
(ii) No. – – – –
Weighted Average Yield (%) 6.8686 6.8715 6.8579 6.9773
Total Allotment Amount 147 1000 2500 1000

  Total
Notified Amount 13847
Tenure  
Competitive Bids Received  
(i) No. 1100
(ii) Amount 66612.2
Cut-off Yield (%)  
Competitive Bids Accepted  
(i) No. 154
(ii) Amount 12864.903
Partial Allotment Percentage of Competitive Bids  
(i) Percentage  
(ii) No.  
Non – Competitive Bids Received  
(i) No. 114
(ii) Amount 1012.330
Non-Competitive Price (₹)  
Non-Competitive Bids Accepted  
(i) No. 114
(ii) Amount 982.097
Partial Allotment Percentage of Non-Competitive Bids  
(i) Percentage  
(ii) No.  
Weighted Average Yield (%)  
Total Allotment Amount 13847

Ajit Prasad
Director   

Press Release: 2021-2022/863

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Punjab National Bank begins exit from Canara HSBC OBC Life Insurance

Banking & Finance

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Punjab National Bank, the country’s second largest public sector bank, has set the ball rolling for sale of if its entire stake in Canara HSBC OBC Life Insurance (CHOICE) by inviting bids for the appointment of a legal advisor for the proposed transaction.

After the three way amalgamation with Oriental Bank of Commerce and United Bank of India from April 1 last year, PNB had become a promoter shareholder, with 23 per cent stake in CHOICE. Prior to this amalgamation, OBC held 23 per cent stake in CHOICE.

Also see: Banks should embrace digitisation to ensure govt schemes reach needy: FM Nirmala Sitharaman

Canara Bank has a 51 per cent stake and HSBC Insurance (Asia Pacific) Holdings has 26 per cent stake in the life insurer, which is now an associate company of PNB.

It maybe recalled that PNB had, in May this year, said that PNB will divest stake in CHOICE at an “appropriate time, depending on market conditions and available options.”

IRDAI norm

The plan to exit CHOICE is in keeping with the insurance regulator IRDAI’s norm that a commercial bank should not hold more than 10 per cent stake in two life insurance ventures at the same time.

Post the OBC amalgamation, PNB had significant shareholding in two life insurance ventures — PNB MetLife insurance (30 per cent stake) and Canara HSBC OBC Life (23 per cent stake).

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Will US CPI Data At 5.3% Drag Down Gold Bullion Prices?

Personal Finance

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Personal Finance

oi-Kuntala Sarkar

|

The US today has published its Consumer Price Index (CPI) data for August, which will set a tone for the gold bullion market and US Federal Reserve tapering. US August headline inflation stayed at 5.3% in line with expectations, against a 5.4% in July. The CPI data remained moderate, not showing any outstanding improvement.

Will US CPI Data At 5.3% Drag Down Gold Bullion Prices?

The gold rates in the global market have been going down marginally, mostly on every trading day. Spot gold prices were subdued by around 0.50%, whilst the Comex gold rates dropped by 0.35% before the data came out. However, after the data was released, the spot gold prices hiked by 0.23% at $1798.70, and the Comex gold futures went up by 0.35% as of 8.12 EDT – showing a minor growth. The spot USD index, however, fell by 0.30%.

The US CPI data for August is released ahead of the US Fed meeting in the next week. As the reports came out setting a moderately positive outlook, the Fed might move up its tapering timeline. If the US starts tapering after this CPI data, the gold prices will not react positively, else a delayed tapering will help gold rates to go up, impacting Indian gold rates accordingly.

Tapering will indicate a slowdown in the pace of asset purchases or bond-buying programs by the Fed. The bond-buying program, known as quantitative easing (QE) is still going hot in the US, as the central banks find a need for economic stimulus or more liquidity in the system. It is happening because of the pandemic-led economic slowdown in the country. If this inflation figure drives Fed officials to gather motivations to start tapering, bond yield will go high, while bond prices will head south. In that case, investors will take shelter again under government bonds, leaving the yellow metal prices to fall drastically. The recent US economic data including non-farm payroll, have only spelled doom for the precious metal.

Story first published: Tuesday, September 14, 2021, 19:31 [IST]



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Reserve Bank of India – Press Releases

Press Releases

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The Reserve Bank of India (RBI) has imposed, by an order dated September 14, 2021, a monetary penalty of ₹5.00 lakh (Rupees five lakh only) on The Kuppam Co-operative Town Bank Ltd., Kuppam, Chittoor District., Andhra Pradesh (the bank) for contravention of / non-compliance with certain provisions of the directions issued by RBI contained in the Master Circular on Income Recognition, Asset Classification, Provisioning and other related Matters – UCB’s dated July 01, 2015 and Master Circular on Board of Directors – UCBs dated July 01, 2015. 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.

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 Inspection report of the bank based on its financial position as on March 31, 2019 revealed, inter alia contravention of / non-compliance with the directions issued by RBI on “Income Recognition, Asset Classification, Provisioning and other related Matters – UCB’s and also on Board of Directors – UCBs”. Based on 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 directions.

After considering the bank’s written reply and oral submissions made during the personal hearing, RBI came to the conclusion that the aforesaid charges of non-compliance with RBI directions were substantiated and warranted imposition of monetary penalty.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/862

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