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India ahead of China in financial inclusion metrics: Report

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India is now ahead of China in financial inclusion metrics according to a report authored by Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India.

Sound financial inclusion policies have a multiplier effect on economic growth, reducing poverty and income inequality, while also being conducive for financial stability.

India has stolen a march in financial inclusion with the initiation of PMJDY accounts since 2014, enabled by a robust digital infrastructure and also careful recalibration of bank branches and thereby using the BC model judiciously for furthering financial inclusion. Such financial inclusion has also been enabled by use of digital payments as between 2015 and 2020, mobile and internet banking transactions per 1,000 adults have increased to 13,615 in 2019 from 183 in 2015.

“The number of bank branches per 100,000 adults rose to 14.7 in 2020 from 13.6 in 2015, which is higher than Germany, China and South Africa. Our research also shows that States with higher PMJDY accounts balances have seen a perceptible decline in crime. We also observed that there is both statistically significant and economically meaningful drop in consumption of intoxicants such as alcohol and tobacco products in States where more PMJDY accounts are opened,” the report said.

BC Model

The Banking Correspondent (BC) model in India is enabled to provide a defined range of banking services at low cost and hence is instrumental in promoting financial inclusion. Interestingly, the new branch authorisation policy of 2017 – which recognises BCs that provide banking services for a minimum of 4 hours per day and for at least 5 days a week as banking outlets has progressively obviated the need to set up brick and mortar branches. For example, the number of ‘Banking Outlets in Villages – BCs’ has risen from 34,174 in March 10 to 12.4 lakh in December 20. Such progress shows an impressive outreach of banking services through branchless banking.

However, the success of financial inclusion depends upon BCs who are micro-level entrepreneurs. As per RBI guidelines, under the BC Model, while a BC can work for more than one bank, at the point of customer interface, a retail outlet or a sub-agent of a BC shall represent and provide banking services of only one bank. Interoperability of transactions is permitted by RBI at the retail outlets or sub-agents of BCs (i.e. at the point of customer interface), subject to certain conditions. Herein lies the problem.

“It is sometimes observed that there is no uniformity among the BCs across banks regarding adherence to the above guidelines. PSBs mostly follow ‘branch-led BC model’ , while other banks follow ‘branch less/corporate BC model’. The BCs of PSBs extend basic banking services, including opening of accounts, from a fixed location under the oversight of specific bank branch. The BCs of other banks operate through ‘micro ATM/kiosk application on mobile’ and primarily provide fee-based financial services, viz. withdrawals and remittance services, using hand-held devices. This also adds to the bottom-line by way of interchange fee from the PSBs or remittance fee from PSB customers. As a typical example, BCs convert AePS ON-US transactions of one set of bank customers, to AePS OFF-US issuer transactions and also carry out multiple AePS ON-US and AePS OFF-US transactions on the primary bank application/software,” the report said.

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Dollar firm as US inflation poses next test, BFSI News, ET BFSI

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SYDNEY: The dollar made a steady start to the week on Monday but was kept below Friday peaks, as currency traders seek a path between markets’ volatile interest rate projections and central bankers vowing to keep rates low even as inflation surges.

Figures due Wednesday are expected to show U.S. consumer price growth running hot at 5.8% year-on-year, the next big test of faith in the Federal Reserve‘s insistence it will be patient with interest rate hikes.

In early Asia trade, the dollar was marginally higher against the yen and crept from a one-week low to 113.49 yen.

After briefly touching a 15-month top of $1.15135 on the euro in the wake of strong U.S. labour data on Friday, the greenback steadied at $1.1566 per euro.

Sterling, which was walloped when the Bank of England surprised traders by holding rates steady last week, fell to a five-week low of $1.3425 on Friday, before bouncing to hold at $1.3487 on Monday.

The Bank of England’s surprise triggered a sharp reversal late last week in what had become quite aggressive bets on imminent rate hikes in Britain and globally, while stocks have meandered higher through the maelstrom in bond markets.

“Central banks have distorted a whole lot of markets, pumping up the equity market and pumping up the bond market,” said Jason Wong, a strategist at Bank of New Zealand in Wellington.

“Currencies are sort of in the middle of all that, wondering what the hell’s going on,” he said, with the market seemingly in a holding pattern but with risks building up, especially in China where a slowing economy brings global implications.

The risk-sensitive Australian and New Zealand dollars struggled to make much headway in early trade, with the Aussie

pinned just below $0.74 and the New Zealand dollar

around $0.7108.

“AUD/USD risks remain skewed to the downside this week in our view,” said Kim Mundy, an analyst at Commonwealth Bank of Australia, especially if U.S. inflation data is strong or if Australian employment data on Thursday is particularly weak.

“A dip towards $0.7300 is possible,” she said.

Elsewhere, weekend data showed Chinese exports unexpectedly strong, but imports unexpectedly soft in another indicator of underwhelming demand, especially as China tightens movement restrictions to keep a lid on COVID-19.

The Communist Party begins a meeting on Monday which is expected to pass a resolution in praise of President Xi Jinping and lay the groundwork for a third term of his leadership.

Traders are also looking ahead to Chinese producer and consumer price data due on Wednesday, with annual producer price growth seen surging to 12% in perhaps a harbinger of further price pressure to come through global supply chains.

The Chinese yuan was marginally weaker in early trade at 6.3951 per dollar. The U.S. dollar index was flat at 94.225, putting it roughly in the top half of a range it has traded for a little more than a month.



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PNB Housing chief on Carlyle deal pull-out, BFSI News, ET BFSI

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Pulling out from the Rs 4,000-crore Carlyle-led deal was a conscious choice of PNB Housing Finance as the company did not want to entangle in a protracted legal battle and lose focus on the lending business, its Managing Director and CEO Hardayal Prasad said.

Last month, the company said it has decided not to proceed with the Rs 4,000-crore capital infusion deal led by Carlyle as a legal battle will not be in the best interests of the company and its stakeholders.

The deal was finalised on May 31. Soon after, it mired into a controversy with regards to the valuation of the shares being offered to the investors. Subsequently, the matter reached the Securities Appellate Tribunal (SAT) after the intervention of markets regulator Sebi.

“If you look at it, there is nothing that we did wrong. We followed the policy of the Sebi, the LODR instructions, we tried to do everything. It was only a question of interpretation.

“But, it was looking like a long-drawn process due to hurdles in legal approvals,” Prasad told PTI in an interview.

He said the split verdict of the SAT also proves that it was a matter of interpretation only as the company’s contention was vindicated by one of the judges in the matter, reiterating: “I don’t think we did anything wrong”.

Prasad added that one of the judges, the presiding officer, gave the judgment in the company’s favour. “But, we are very clear that we don’t want any protracted legal battle. We want to concentrate on our work and go ahead.”

He said a significant amount of bandwidth is utilised when you are going to do it and it would have been a slightly long-protected legal battle.

“I am not in that business, we are in the business of lending, in the business of financing. What is the point in remaining distracted by these kinds of things. So, we decided that okay they are the regulator and we decided to go ahead with the pull-back (from the deal),” Prasad said.

After the split verdict of the SAT in August, Sebi had approached the Supreme Court. However, the apex court dismissed Sebi’s appeal in late October as it became infructuous when PNB Housing Finance said it will pull out from the deal.

The company has filed an application to withdraw its appeal to the Securities Appellate Tribunal.

Prasad said the company is much in the need of the desired capital and it will look for all the venues to raise money, be it through borrowings, qualified institutional placement (QIP), rights issues or preference issues.

“Whether we do it through borrowings or QIP, preferential issue, rights issue, any other things that we can do, we are keeping everything open and we will see to it and at the right time, we will approach the board to permit us to raise the money,” Prasad said.

He added that the company will continue to look for opportunities.

“We remain engaged with everybody. See how we can move forward in terms of capital raising. We require to raise the capital, despite a solid capital adequacy ratio, and the gearing position.

“But, we would still like to raise capital to enable us to grow even faster than we are growing,” he said.

Right now, all stakeholders of the company remain supportive of the company. They know that the capital is required, they know that the company has a great, bright future, Prasad added.

They have also seen that in the past nine quarters, there has been a slow and steady movement on a lot of fronts.

“So, we would do it, since they are all supportive and they understand that the company requires it. We will look at all options that are there in terms of raising the money,” Prasad said.

State-owned Punjab National Bank (PNB) is the company’s promoter with a 32.6 per cent holding in the company.

On being asked what was PNB’s opinion on pulling out from the deal, he said: “We explained to them that this is the reason and we would like to pull back from the deal. Because of the protracted legal nature, it is not taking us anywhere and it is distracting the overall focus of the business.”

All of them agreed that this is the right thing to do, Prasad added.

In the second quarter ended September 2021, the company posted a net profit of Rs 235 crore, down by 25 per cent from a year ago, mainly on account of a fall in interest income and higher provisioning for bad loans.



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IndusInd Bank, BFSI News, ET BFSI

Banking & Finance

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IndusInd Bank on Saturday admitted that its micro-finance arm gave nearly 84,000 loans “without customer consent” due to a “technical glitch” in May 21, but denied whistleblowers’ allegations of “ever greening” — a ploy to mask defaults with new loans. An independent review has been initiated by IndusInds “to see if there is any process lapse or accounting failure at Bharat Financial Inclusion (BFIL), the bank’s wholly-owned micro-lending subsidiary, said an IndusInd release. “The Bank wishes to reiterate that there is a strong risk management and control framework in place, both within the Bank and at BFIL,” said the bank.

In multiple emails to the Reserve Bank of India (RBI) and the IndusInd board in October, a whistleblower group comprising officials of the BFIL had alleged that the bank had ever-greened loans, inflated revenues and under-reported nonperforming assets. The emails followed a month after similar allegations by former BFIL vice-chairman MR Rao who, in his resignation letter, had said that the loans disbursed without customer consent did not appear as “process lapse” but a “deliberate attempt to shore up repayments.” The letters from the whistleblower group and Rao’s parting observations were reported by ET on Friday.

Reacting to the whistleblowers’ allegations, a statement issued by the bank on Saturday, said, “…the technical glitch was rectified expeditiously. Out of the above, only 26,073 clients were active with the loan outstanding at Rs 34 crore, which is 0.12% of the September end portfolio. The bank carries necessary provision against this portfolio. The standard operating procedure (SOP) has since been revised to make biometric authorisation compulsory.”

While strongly denying allegations of ‘ever greening’, the IndusInd statement said, “All the loans originated and managed by BFIL, including during the Covid period which saw the first and second waves ravaging the countryside, are fully-compliant with the regulatory guidelines… During the pandemic, the customers faced operational difficulties and some have turned intermittent payers, though a large part of them demonstrated a strong intent to repay on many occasions. Basis the requirements, the Bank adopted a multi-pronged approach depending upon the need of the client. (sic)”

The whistleblower group has blamed BFIL CEO Salabh Saxena and CFO Asish Damani for the alleged under-provisioning of loans running into thousands of crores. Neither of them responded to ET’s query on the whistleblower emails. According to a media report, both Saxena and Damani may soon quit BFIL and join Spandana Sphoorty, a micro-finance institution.

However, this could not be independently confirmed. According to the IndusInd release, the loans follow a weekly repayment model and the customers are required to make payments week on week. “.. if there is any default, the same gets recorded as missed instalments. In view of the weekly repayment model, the concept of ever greening is infeasible,” said the statement. “The level of non-performing assets reported by BHIL is significantly lower than other MFIs. So, we would like to know more, given that many lenders have seen a drop in collection efficiency during the pandemic.. If a loan is given by mistake without taking the borrower’s consent, it should be reversed,” said an analyst who did not wish to be named.



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DHFL recovery lifts PSU banks’ Q2 net profits, offsets Srei group account slip, BFSI News, ET BFSI

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Most top public sector banks have reported steady second-quarter earnings, with lower slippages as the economy opened up and COVID-19 cases fell.

State Bank of India reported a robust performance as it bravely fought off the COVID-19 impact and displayed remarkable resilience in asset quality performance.

India’s largest bank reported a steady quarter, with net earnings growing 67% YoY to Rs 7630 crore, aided by controlled provisions, as asset quality showed remarkable strength, despite the impact of the second Covid wave.

The bank has been reporting continued traction in earnings, led by controlled provisions. However, business trends remain modest, impacted by continued deleveraging by corporates. The bank has been able to maintain a strong control on restructured assets at 1.2% of loans, while the special mention account (SMA) pool declined sharply.

It created a family pension provision of Rs 7,420 crore, instead of amortizing it over five years, thus prudently deploying one-off gains from the DHFL recovery and tax refund. The bank has fully provided for its exposure towards the SREI group.

GNPA/NNPA ratios improved by 42 basis points /25bp quarter on quarter (QoQ) to 4.9%/1.5% as fresh slippage subsided to Rs 4180 crore. Restructured book remained in check at 1.2% of loans, while the SMA pool declined sharply to Rs 6,690 crore (27bp of loans).

According to analysts, the slippage trajectory of the bank is likely to moderate further assuming there is no third Covid wave, while credit cost may undershoot the normal cyclical trends. The bank has a healthy PCR of 70% and holds unutilized Covid-related provisions of Rs 6200 crore.

Canara Bank

State-run Canara Bank reported a three-fold jump in its standalone net profit at Rs 1,333 crore in the quarter ended September, aided by lower bad loan provisioning, rise in non-interest income, and recovery from DHFL resolution. The lender had reported Rs 444 crore profit in the year-ago quarter.

“Despite moderate credit growth of 6% YoY and soft NIMs (Net interest margin), Canara Bank reported a strong beat on PAT versus our estimate, mainly helped by higher treasury income, contained provisions and cash recovery from DHFL,” said Emkay in a note.

Union Bank

Union Bank of India reported healthy earnings, supported by recovery from the DHFL resolution.

The bank reported a PAT of Rs 1530 crore, up 195% year on year, supported by higher recoveries from written-off accounts of Rs 1760 crore, including recovery of

Rs 1,650 crore from the resolution of the DHFL account.

Furthermore, fee income trends improved, while domestic margins declined; muted loan growth affected net interest income growth. On the other hand, asset quality performance was stable despite elevated slippage, largely led by Corporate – this includes slippage from SREI Infra (Rs 2,600 crore). However, higher write-offs and upgrades aided improvement in asset quality on a sequential basis. Moreover, it now carries provisions of 65% on SREI Infra (higher versus peers).

The SMA-2 book declined to 2.3% of loans (versus 3.7% of loans in first quarter of FY22). Thus, slippage would moderate from fiscal 2023 onwards, and credit costs are expected to come in at 2.2%/1.9% for FY22/FY23, according to analysts.

Punjab National Bank

Punjab National Bank (PNB) delivered a weak operating performance in the second quarter as the bank was impacted by a decline in net interest income with domestic margins contracting sharply by 36 basis points quarter on quarter, while net earnings grew 78% year on year, aided mainly by tax reversals. The total recovery from the DHFL resolution was Rs 1,270 crore and was predominantly utilised for making provisions for one large corporate account (SREI Infra). On the business front, loans/deposits grew 2% sequentially.

PNB reported a 78% YoY and 8% QoQ increase in PAT at Rs 1,110 crore aided mainly by tax reversals (Rs 340 crore) and controlled provisions (34% QoQ decline). However, PNB’s operating performance was weak with the PPoP declining 27% YoY due to a decline of 25% YoY in net interest income and domestic margins declining sharply by 36 bps QoQ to 2.45%.

On the asset quality front, slippages were elevated (~5.4% annualised) due to two large corporate accounts (Rs 3600 crore) which included slippage of Rs 2,800 crore from Srei Infra. However, higher recoveries and upgradations supported the bank’s asset quality with its GNPA/NNPA ratio declining by 70bp/35bp sequentially. PNB’s total restructured book (earlier Covid schemes) stood at 3.1% of loans, while total SMA overdue (Rs 5 crore) amounted to Rs 25,000 crore.

UCO Bank

UCO Bank’s net profit for July-September jumped 581.9% on year to Rs 210 crore on improvement in asset quality, lower overall provisions, and growth in other income. Sequentially, the net profit increased 101.7%. In the quarter ended September, provisions and contingencies excluding current tax, stood at Rs 1,020 crore, down 21.7% on year and largely unchanged on quarter. Provisions for tax were at Rs 100 crore, against a Rs 260 crore write-back last year. Provisions for non-performing assets stood at Rs 1,590 crore, up 54.6% on year and 88.9% on quarter.

The bank said it had identified two Kolkata-based accounts of the same group as non-performing assets during the quarter, post lifting of a legal stay on identifying them as bad loans. While UCO Bank didn’t name the account or group, it possibly referred to Srei Infrastructure Finance and Srei Equipment Finance.

The Srei twins are under the scanner after the Reserve Bank of India superseded their boards, citing corporate governance issues. UCO Bank said it had provided for these two stressed accounts as per regulatory norms. Despite this, UCO Bank’s gross non-performing asset ratio eased to 8.98% as on September 30 from 9.37% on Jun 30, and 11.62% a year ago.

The net non-performing asset ratio fell to 3.37% as on Sep 30 from 3.85% a quarter ago and 3.63% a year ago. The bank said that to guard against the impact of any future waves of Covid on its books, it was making an ad hoc provision of 2.5 bln rupees in July-September, taking the total provisions linked to Covid to Rs 750 crore as on September 30.



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Ten steps for overhaul of ARCs as competition for bad bank arrives, BFSI News, ET BFSI

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In a bid to streamline the functioning of asset reconstruction companies (ARCs), a Reserve Bank committee has come out with a host of suggestions including the creation of an online platform for the sale of stressed assets and allowing ARCs to act as resolution applicants during the IBC process.

Amortise loss

To incentivise lenders to sell their financial assets to ARCs at an early stage of stress, the RBI panel has recommended a dispensation to lenders, on an ongoing basis, to amortise the loss on sale, if any, over a period of two years. To optimise upside value realisation by lenders, it recommends a higher threshold of investment in security receipts (SRs) by lenders, below which provisioning on SRs held by them may be done on the basis of Net Asset Value (NAV) declared by the ARC instead of IRACP norms.

Online platform

An online platform may be created for sale of stressed assets and infrastructure created by the Secondary Loan Market Association (SLMA) may be utilised for this purpose. For all accounts above Rs 500 crore, two bank-approved external valuers should carry out a valuation to determine the liquidation value and fair market value and for accounts between Rs 100 crore to Rs 500 crore, one valuer may be engaged. Also, the final approval of the reserve price should be given by a high-level committee that has the power to approve the corresponding write-off of the loan.

Acquiring financial assets

In the interest of debt aggregation, the scope of Section 5 of the SARFAESI Act, and other related provisions, may be expanded to allow ARCs to acquire ‘financial assets’ as defined in the Act, for the purpose of reconstruction, not only from banks and ‘financial institutions’ but also from such entities as may be notified by RBI. RBI may consider permitting ARCs to acquire financial assets from all regulated entities, including AIFs, FPIs, AMCs making investment on behalf of MFs and all NBFCs (including HFCs) irrespective of asset size and from retail investors. ARCs should be allowed to sponsor SEBI registered AIFs with the objective of using these entities as an additional vehicle for facilitating restructuring/ recovery of the debt acquired by them.

Binding on lenders

If 66% of lenders (by value) decide to accept an offer by an ARC, the same may be binding on the remaining lenders and it must be implemented within 60 days of approval by majority lenders (66%). 100% provisioning on the loan outstanding should be mandated if a lender fails to comply with this requirement. Given that the debt aggregation is typically a time-consuming process, the planning period is elongated to one year from the existing six months. In cases where ARCs have acquired 66% of debt of a borrower, the Act should provide for two years of moratorium on proceedings against the borrower by other authorities. The Act should also provide that Government dues including revenues, taxes, cesses and rates due to the Central and state governments or local authority will be deferred in such cases.

Equity sale

For better value realisation for originators and enhancing the effectiveness of ARCs in recovery, even the equity pertaining to a borrower company may be allowed to be sold by lenders to ARCs which have acquired the borrower’s debt. The Committee recommends that ARCs may be allowed to participate in the IBC process as a Resolution Applicant either through a SR trust or through the AIF sponsored by them.

Allowing HNIs to buy SRs

For giving impetus to listing and trading of SRs, the list of eligible qualified buyers may be further expanded to include HNIs with minimum investment of Rs 1 crore, corporates (Net Worth-Rs 10 crore & above), all NBFCs/ HFCs, trusts, family offices, pension funds and distressed asset funds with the condition that (a) defaulting promoters should not be gaining access to secured assets through SRs and (b) corporates cannot invest in SRs issued by ARCs which are related parties as per SEBI definition.

Minimum SR investment

The interest of investors and investing lenders should be weighed against the need for distribution of risk among the willing investors. Therefore, it recommends that for all transactions, per SR class/ scheme, the minimum investment in SRs by an ARC should be 15% of the lenders’ investment in SRs or 2.5% of the total SRs issued, whichever is higher.

Credit rating agencies

Recognising the critical role of Credit Rating Agencies (CRAs) in the valuation of SRs and, therefore, the need for continuity in engagement of CRAs, the Committee recommends that ARCs must retain a CRA for at least three years. In case of change of a CRA, both parties must disclose the reason for such change.

Tax pass through

In the matter related to taxation of income generated from investment in SRs issued by ARCs, the possibility of a ‘pass-through’ regime for AIF investors may be looked into by the Central Board of Direct Taxes (CBDT). The CBDT may consider clarifying on the tax rate applicable to FPIs.



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Good Banking: The role of banking in driving ESG goals

Banking & Finance

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Rajashekara Maiya

By Rajashekara Maiya

The 2030 Agenda for Sustainable Development that includes 17 Sustainable Development Goals (SDGs) and the landmark Paris Agreement, which came into force in 2016, as well as the growing awareness on climate change have had an impact on Environmental, Social, and Governance (ESG) goals of organisations across industries, including banking and financial services. As per a BCG report on sustainable finance, large institutional investors are increasingly incorporating ESG metrics into their capital allocation and stewardship criteria.

Banks undoubtedly hold considerable clout in shaping and enabling the ESG goals of industries and corporates. In addition, they also have an opportunity to enable their own ecosystem by embracing the right technology and designing policies around employment and inclusivity. Some of the areas where banks have an opportunity to participate and drive ESG goals are:

Financial inclusion
Financial inclusion is key to achieving the goal of ‘ending poverty’ as part of the UN SDGs for 2030. Banks have an opportunity as well as a responsibility to provide banking services to the unbanked and underbanked population across the globe, thereby allowing them to participate effectively in the economic arena. Access to banking helps encourage savings and makes inclusion into welfare schemes easier.

Inclusive financing, which entails a systemic mandate to encourage access to finance for populations that traditionally fall outside the ambit of traditional financing is key. Grameen Bank in Bangladesh is a successful example. Ujjivan Small Finance Bank in India has successfully followed a similar model. Besides these private players, government initiatives such as the Pradhan Mantri Jan Dhan Yojana, a financial inclusion programme of the government of India have had a significant impact.

Investor activism
Shareholders and investors are seeking greater openness and disclosure around issues that concern ESG, whether it is about curbing the gun culture in the US, penalising chronic polluters such as big oil, or encouraging sustainable businesses. The fact that banks and financial institutions play a key role in providing the necessary funding and capital for the functioning of various industries, puts them in the center of the ESG revolution.

Sustainable operations
Aside from lending policies and customer offerings, there is also an opportunity to streamline internal operations of banks to make them more ESG friendly. This includes the adoption of technologies such as cloud, AI etc. to ensure more efficient operations, inclusive hiring policies, and adopting eco-friendly practices that help reduce their carbon footprint. The pandemic has created its own challenges and opportunities. For example, remote banking operations have become mainstream, spurred by the need for social distancing as well cost cutting.

Overall, banks need to be mindful of their impact on larger environmental, social, and governance issues and closely track their reputational risk index. As governments, customers, shareholders, become more aware, banks must rise to the occasion and deliver.

The writer is vice-president, global head – Business Consulting-Finacle at Infosys

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Festival season brings cheer to bond market

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Although the week was short due to the festive season and yield movements were narrow, all the newsflow last week turns out to be positive for the domestic bond market. The benchmark yield closed at 6.36 per cent on Wednesday, down by almost 3 basis points compared to the week before.

Global events

On the global front, the US Fed announced tapering of its bond buying programme on much anticipated lines at $15 billion per month. The 10-year US treasury yields, which had been having a negative impact on the domestic bond market, cooled down to 1.45 per cent last week compared to 1.56 per cent the week before. Brent crude prices also softened a bit, even nudging the $80/barrel mark last week before closing near the $83/barrel level.

Domestic development

On the domestic front, the Centre announced an excise duty cut of ₹5 per litre on petrol and ₹10 per litre on diesel last week. Bond dealers say this will be a positive for the market which expects the yields to fall further down to near the 6.3 per cent mark. Meanwhile, the Reserve Bank of India continued to absorb the excess liquidity out of the system even as it conducted a 15-day variable rate reverse repo auction where the cut-off rate stood at 3.99 per cent. The central bank accepted offers worth ₹4.34 lakh crore against the notified amount of ₹5 lakh crore.

Subdued CPI expected

This week, the market is looking forward to the announcement of the consumer price index inflation print. Market participants say the CPI figure will most likely stand below the 4 per cent mark owing to the base effect for October, post which it may slightly start moving up gradually.

Vijay Sharma, Senior Executive Vice-President at PNB Gilts opined that so far, all the developments seen during the week are positive for the domestic bond market. “The two factors that were responsible for the upward movement in yields have turned positive over the last few days. The US Treasury yields came down even as the Fed decision on tapering stood pretty much in line with the market expectations. Crude prices coming down and a cut in excise duty are also conducive for the yields. It seems the benchmark yield could move towards the 6.3 per cent level in the short term. The inflation print for October is expected to come down below 4 per cent, mostly due to base effect.”

 

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Ola Financial Services plans international expansion of its insurance business

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Ola’s subsidiary, Ola Financial Services (OFS) will expand its insurance business internationally to support the operations of Ola’s mobility business through innovative insurance products designed for the UK, Australia and New Zealand market.

According to Ola’s recent MCA filings, OFS will also be launching new capabilities to the pay-later instrument to make it more appealing for the users. Further, OFS will expand its suite of products by launching new lending products in the form of two- and four-wheeler loans and personal loans to offer a comprehensive financial product ecosystem to the customer.

During 2020-21, Ola Financial Services has had a turbulent year due to external factors such as Covid on the lending environment in general and the double impact on mobility business and its spillover to the Ola Money brand. Through these new growth avenues, OFS hopes to generate regular and sustainable financial results.

Ola is looking to go public by next year and is estimated to raise around $1 billion – $2 billion from the IPO. The company is expected to file its DRHP (Draft Red Herring Prospectus) soon, after the board reaches a consensus on the route of listing. BusinessLine has earlier reported in September that the company’s board is divided between no-promoter and promoter route of listing.

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Banks, HFCs on hiring spree amidst rising home loan demand

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Banks, housing finance companies and NBFCs are on a hiring spree amidst rising demand for home loans.

Industry experts and players say that hiring for home loan departments is up by at least 20 per cent to 25 per cent in recent months as players look to expand their home loan portfolios in smaller towns and attract more customers through lower home loan rates.

“Hiring has gone up by 22 per cent to 25 per cent by banks, NBFCs and HFCs. This is especially the case in the last three to four months, especially after the second wave of the pandemic. A small portion seasonal in nature but we expect it to be largely sustained for the next few years. The requirement for additional staff is equally in urban and rural markets,” said Amit Vadera, Vice President – Staffing, TeamLease Services.

About 90 per cent of the requirement is in the sales function with starting salaries in the range of ₹15,000 to ₹20,000 along with attractive variable incentives.

Amidst the pandemic and work from home, many people are now looking at their own homes as well as larger homes, leading to the demand for home loans. Banks, HFCs and NBFCs consider the home loan portfolio to perform better as typically borrowers do their best not to default on home loans. They have been offering interest rates as low as 6.4 per cent (such as Union Bank) and are also charting out aggressive expansion plans.

“There has been increased hiring as most small finance banks, HFCs and NBFCs in different segments are expanding their reach to newer locations and need people,” said the head of a housing finance company.

However, he noted that many employees as are moving from one company to leading to higher manpower costs.

“Every company is in a hiring spree. Everybody feels that there will be a huge uptick in housing and other credit demand,” he, however, noted.

Shriram Housing Finance had in September announced that it plans to hire 350 employees in Andhra Pradesh and Telangana as part of its expansion plans in the region. ICICI Home Finance had also announced in September that it would hire over 600 people by the end of this calendar year to meet the demand for home loans.

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