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Banks in EU “window dress” to escape higher capital charges, says BIS paper, BFSI News, ET BFSI

August 13, 2021 root Banking & Finance

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LONDON: Some of the European Union‘s biggest banks are holding less capital than they should by using transactions to temporarily compress their balance sheets, a research paper from the Bank for International Settlements said on Thursday.

After several banks had to be rescued by taxpayers during the global financial crisis over a decade ago, global regulators now designate the biggest among them as globally systemic banks or G-SIBs to face tougher capital rules.

Each year, G-SIBs are slotted into buckets, with tougher rules for those in the higher buckets.

The paper from the BIS, a forum for central banks based in Basel, Switzerland, said “window dressing” or using transactions to compress assets and liabilities at the end of the year, is blurring data used by regulators and thus affecting the actions they take.

The volume and riskiness of assets and liabilities determine how much capital must be held, but banks are able to “manage down” their G-SIB score and reduce their capital surcharges, the paper said.

“Up to 13 banks in the EU would have faced more intense supervision and higher capital requirements in the absence of window dressing,” the paper said, without naming them.

“Of these, three banks would have been added to the G-SIB list, whereas 10 banks would have been allocated to a higher G-SIB bucket in at least one year,” the paper added.

Window dressing has long been a bugbear of regulators, but the paper from the BIS suggests that regulators should be taking a more granular approach to designating G-SIBs, which affect the stability of the financial system.

“Our findings underscore the importance of supervisory judgement in the assessment of G-SIBs and call for greater use of average as opposed to point-in-time data to measure banks’ systemic importance,” the paper said. (Reporting by Huw Jones)

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DCB Bank gets RBI nod to conduct govt related transactions, BFSI News, ET BFSI

August 13, 2021 root Banking & Finance

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DCB Bank on Thursday said it has received RBI nod to conduct government related transactions. The Reserve Bank has empanelled DCB Bank as an agency bank to facilitate banking and payment transactions for the central and state governments, it said in a release.

This empanelment follows the announcement by the Finance Ministry in May 2021 lifting the embargo on further allocation of government business to private sector banks.

Through this arrangement, DCB Bank will carry out specific banking services on behalf of both the central and state governments, while continuing to offer SME, micro SME and individual customers the convenience of routine financial transactions through its advanced banking platform, it said.

“DCB Bank’s focus is SME, micro SME, agri and inclusive banking, we look forward to supporting them by providing access to CBDT, CBIC, GST transactions amongst others,” said Praveen Kutty, Head of Retail Banking, DCB Bank.

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Indian Bank launches MSME mentoring programme in West Bengal, BFSI News, ET BFSI

August 13, 2021 root Personal Finance

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Kolkata, Indian Bank on Thursday announced the launch of its flagship Business Mentoring Programme ‘MSME Prerana’ in West Bengal. MSME Prerana is a unique and innovative business mentoring programme in collaboration with Poornatha and Co. to empower MSME entrepreneurs in driving business more efficiently by optimizing value and capacity, Indian bank said in a statement.

The programme will be in the local language of the state which is Bengali.

‘MSME Prerana’ has been launched with an aim to develop managerial and financial capabilities of MSME entrepreneurs besides creating awareness on various initiatives taken by Union and state governments and other regulators.

The bank said it has provided financial support to 20 lakh MSMEs with credit exposure of over Rs 70,170 crore.

Indian Bank, with 598 branches in the state, had an exposure of Rs 8,566 crore to MSMEs as on March 21.

It posted a growth of 27.64 per cent in the MSME portfolio on a year-on-year basis in the state and is confident to continue the momentum in the current fiscal.

The bank has developed 28 MSME Cluster schemes for providing financial support at very competitive rates of interest and terms to various sectors.

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NCLT orders liquidation of Siva Industries, BFSI News, ET BFSI

August 13, 2021 root Personal Finance

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The National Company Law Tribunal (NCLT) Chennai has dismissed the C Sivasankaran application and ordered the liquidation of Siva Industries.

NCLT said that Sivasankaran application under section 12 (A) does not stand. NCLT has also dismissed the SBI application.

Siva Industries and Holdings Limited (Siva Industries) will go into liquidation after the NCLT rejected the application.

This is as per provisions of the Insolvency and Bankruptcy Code where 90 per cent of the lenders had not given approval.

Lenders of Siva Industries and Holdings Limited (Siva Industries), founded by C. Sivasankaran (the former promoter of Aircel) had filed application under Section 12A of Insolvency and Bankruptcy Code 2016 (IBC) in National Company Law Tribunal (NCLT), Chennai Bench for withdrawing the insolvency proceedings against Siva Industries.
Siva Industries and Holding owes Lenders approx Rs 5,000 crore.

The settlement

The lenders to Siva Industries had told the National Company Law Tribunal that they will get 26% of their dues after taking into account third-party guarantors. Operational creditors were to get part of their dues under the settlement plan.

The deal had raised eyebrows as such offers by promoters were rejected in the past.
On the reason why they approved the 12A petition of promoters banks had told the court that if a company is liquidated or in a resolution plan involving a third party, all operational creditors, including tax authorities, are wiped out.

Also, the IDBI Bank‘s claim of Rs 644 crore will be paid while Blackstone-backed International ARC will get an additional amount of Rs 510 crore via land sale, they had said.

Unusual deal

Bankruptcy experts had termed the settlement unusual, citing the rejection of such offers by promoters in the past.
The acceptance of Sivasankaran’s offer differed from the usual pattern of rejection by creditors of such deals proposed by promoters seeking to withdraw their companies from bankruptcy proceedings.

Atul Punj of Punj Lloyd, Videocon’s Venugopal Dhoot, Sanjay Singal of Bhushan Power and Steel, and the Ruias of Essar Steel had all made offers to creditors to persuade them to drop bankruptcy proceedings. All were rejected.
In DHFL’s case, the promoter Kapil Wadhawan had offered to repay the debt in full, but the lenders ruled in favour of Piramal.

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Top 5 Highly Rated Equity Funds Based On 10-Year SIP Returns

August 12, 2021 root Personal Finance

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1. SBI Small Cap Fund:

The small cap fund from the house of SBI mutual fund was launched in September 2009 and aims to offer investors with avenues of long term capital growth by investing mainly in a well-diversified portfolio of small cap stocks.

Since inception the fund has yielded returns to the tune of 20.48%. Furthermore, the fund commands a sizable asset size of Rs. 9620 crore as on July 31, 2021 i.e. 46% of investment in the category. Expense ratio of the fund is 1.93% as on June 30, 2021.

For its performance, the fund tracks the benchmark S&P BSE Small Cap TRI. Over a 1-year period, the scheme has underperformed the benchmark with return of over 70%. NAV of the fund as on August 11, 2021 was 92.2625.

SIP in the fund can be started for Rs. 500, while for lump sum investment you need to put in a minimum of Rs. 5000.

Top holdings of the fund are Elgi Equipments, Carborundum, JK Cement, Sheela Foam, V-Guard Industries, Finolex Industries etc.

Notably, Value Research has accorded this scheme 4-Star rating.

2. Nippon India Small Cap Fund:

In existence since September 2010, this fund has assets under management of Rs. 16,613 crore (as on July 31, 2021). Expense ratio of the fund is higher than the category average at 1.98%. Despite being a small cap fund, the mutual fund risk-o-meter has classified the fund as moderately high on risk. Latest NAV of the fund is 75.0851. Since its launch the fund has offered return of 20.30%.

The scheme is benchmarked against NIFTY Smallcap 250 TRI and over a 1-year period has yielded return of 94.28%.

The scheme other than offering long term capital appreciation also works with the objective of generating consistent returns by investing in debt and money market instruments.

SIP in the plan can be initiated with a minimum of Rs. 100 and for lump sum investment investors need to put in Rs. 5000.

Top stocks in the fund’s portfolio include Deepak Nitrite, Birla Corp, Navin Fluorine, Balrampur Chini Mills, Tube Investments, Bajaj Electricals etc.

3. Mirae Asset Emerging Bluechip Fund:

It is a large and mid cap fund from the stable of Mirae Asset Mutual fund. The fund attracts over 20% of the investment into the category and its asset size as of July 31, 2021 is Rs. 19,568 crore. Expense ratio of the fund is 1.67% lower than the category average. The fund as per the risk-o-meter is placed under the high risk category.Latest NAV of the fund is 91.796.

The fund is in existence since July 2010 and tracks its return based on the benchmark NIFTY Large Midcap 250 TRI. The fund since launch has offered return of 22.11%. The fund gives investors a chance to participate in the growth of emerging companies that show the potential to become tomorrow’s blue-chips.

The fund employs bottoms up approach of investment: driven by value investing, in growth oriented businesses.

SIP in the fund can be kick-started for minimum of Rs. 1000. Also there applies an exit load in a case when the units are redeemed within 1 year of 1%.

The fund is parked 35-65% in large cap stocks and 35-65% in mid cap stocks. Top holdings of the fund include stocks like ICICI Bank, HDFC Bank, Infosys, Axis Bank, SBI, Bharti Airtel, JK Cement, Mphasis and Tata Steel among others.

4. Quant Tax Plan-G:

It is an ELSS or equity linked savings scheme from the house of Quant Mutual fund. NAV of the fund as on August 11, 2021 is 203.6. The fund is a very high risk plan and commands a fund size of Rs. 327 crore as on July 31, 2021. Expense ratio of the fund is 2.25%, slightly on the higher side in comparison to category average.

The fund is a 21 year old plan, in existence since and since launch has offered return of over 15%. The fund for analyzing performance is benchmarked against Nifty 50 TRI.

SIP as well a lump sum investment into the ELSS scheme by Quant can be started with an investment as low as Rs. 500. Being an ELSS, this has a lock-in period of 3 years. The fund has no exit load charges.

Other than capital appreciation through investment in a well diversified basket of equities, the fund also looks to supplement this income by giving out possible dividend and other income.

Top stocks in Quant Tax Plan include ITC, Indiabulls Real Estate, Vedanta, Aurobindo Pharma, RIL, Sun Pharma, ICICI Securities, Stylam Industries etc.

5. DSP Small Cap Fund

The fund is a 14-year old scheme being run by DSP Mutual fund. The asset size of the fund is Rs. 8266 crore as of July 31, while it charges an expense ratio equal to 1.9% as on June 30. NAV of the fund is 98.67 as on August 11.

The primary objective with which the scheme is in place is to generate long term capital appreciation from investment majorly in equity and equity related securities of small cap companies. Also, on a time to time basis, the fund would deploy money in other equity and equity related securities to realize optimal portfolio

The scheme is bench-marked against S&P BSE Small Cap TRI and since inception has yielded return of over 17%.

SIP as well as lump sum investment in the fund can be started for Rs. 500.

Top holdings of the fund’s portfolio comprise stocks like Nilkamal, Atul, KPR Mill, IPCA and Suprajit Engineering among others.

Top 5 Equity Mutual Funds Based On 10-Year SIP Returns

Equity Mutual fund	Latest value of Rs. 1000 SIP started on August 11, 2011, amounting to an investment of Rs. 1,20,000	10-year % Annualised return as on August 11,2021	Rating
SBI Small Cap Fund	Rs. 4,57,623	25.25%	4-Star Rating by Value Research
Nippon India Small Cap Fund (G)	Rs. 4,56,245	25.19%	4-Star Rating by Value Research and CRISIL
Mirae Asset Emerging Bluechip Fund	Rs. 4,42,213	24.61%	5- Star Rating by Value Research and CRISIL
Quant Tax Plan-G	Rs. 4,18,859	23.61%	5- Star Rating by Value Research and CRISIL
DSP Small Cap Fund	Rs. 3,83,107	21.96%	3- Star Rating by Value Research and CRISIL

Conclusion:

The equity mutual fund investments made for over a longer term are able to offset any major downsides during the course of the investment. Also, the above story that revolves around top performing equity funds based on 10-year SIP returns includes 3 small caps which may not be the suitable investment category for most mutual fund investors being extremely high on risk. These are typically high risk and high return schemes. Nevertheless the 2-other funds from the large and mid-cap space and ELSS can be added by most investor classes.

Disclaimer:

Mutual fund investments are subject to risk being linked to equity markets and debt securities. Also, note the above story is just for informational purpose and should be construed as investment advice into these mutual funds.

GoodReturns.in

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Reserve Bank of India – Notifications

August 12, 2021 root Notifications

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RBI/2021-2022/85
A.P. (DIR Series) Circular No.09

August 12, 2021

All Category – I Authorised Dealer Banks

Madam/Sir

Exim Bank’s Government of India supported Line of Credit (LoC) of
USD 100 million to the Government of the Republic of Mauritius

Export-Import Bank of India (Exim Bank) has entered into an agreement dated February 19, 2021 with the Government of the Republic of Mauritius, for making available to the latter, Government of India supported Line of Credit (LoC) of USD 100 million (USD One hundred million only) for procurement of defence items from India. Under the arrangement, financing of export of eligible goods and services from India, as defined under the agreement, would be allowed subject to their being eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this agreement. Out of the total credit by Exim Bank under the agreement, goods, works and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India, and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The Agreement under the LoC is effective from July 22, 2021. Under the LoC, the terminal utilization period is 60 months after the scheduled completion date of the project.

3. Shipments under the LoC shall be declared in Export Declaration Form as per instructions issued by the Reserve Bank from time to time.

4. No agency commission is payable for export under the above LoC. However, if required, the exporter may use his own resources or utilize balances in his Exchange Earners’ Foreign Currency Account for payment of commission in free foreign exchange. Authorised Dealer (AD) Category- I banks may allow such remittance after realization of full eligible value of export subject to compliance with the extant instructions for payment of agency commission.

5. AD Category – I banks may bring the contents of this circular to the notice of their exporter constituents and advise them to obtain complete details of the LoC from the Exim Bank’s office at Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005 or from their website www.eximbankindia.in.

6. The directions contained in this circular have been issued under section 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.

Yours faithfully

(R. S. Amar)
Chief General Manager

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Reserve Bank of India – Notifications

August 12, 2021 root Bank Jobs

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April 14, 2015

Dear All

Welcome to the refurbished site of the Reserve Bank of India.

The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved search – well, at least we think so but you be the judge.

With this makeover, we also take a small step into social media. We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy.

The site can be accessed through most browsers and devices; it also meets accessibility standards.

Please save the url of the refurbished site in your favourites as we will give up the existing site shortly and register or re-register yourselves for receiving RSS feeds for uninterrupted alerts from the Reserve Bank.

Do feel free to give us your feedback by clicking on the feedback button on the right hand corner of the refurbished site.

Thank you for your continued support.

Department of Communication

Reserve Bank of India

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Bank credit may catch up to deposit growth

August 12, 2021 root Banking & Finance

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Bank credit seems to be catching up to deposit growth, going by the Reserve Bank of India’s data.

The advances of all scheduled banks increased by ₹31,692 crore in the fortnight ended July 30. Deposits during the reporting fortnight were up ₹33,886 crore.

With the increase in advances, banks’ outstanding investment in central and state government securities came down by ₹13,514 crore, as per RBI’s “Scheduled Banks’ Statement of Position in India”.

The advances portfolio of all scheduled banks declined by ₹49,490 crore in the previous fortnight ended July 16, 2021. However, deposits swelled by ₹63,398 crore.

Vidya Shankar, Principal Director (Ratings), and Hemant Sagare, Senior Manager (Ratings), Brickwork Ratings (BWR), observed in a report that the measures of the Government and RBI have always been proactive in enhancing credit growth to support the business cycle across segments.

“While advances to the industry continue to grow slowly, measures including vaccination and the unlocking of services will surely assist in its revival, with supportive measures from the regulator for this segment as well.

“The business community also seems to be better prepared to accept the pandemic and resume their business activities under the ongoing pandemic scenario,” the authors said.

Considering the existing asset quality levels, a likely increase is expected over the medium term. However, BWR is of the view that maintaining healthy capitalisation levels shall assist the appetite of banks for enhancing their credit risk.

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RBI slaps ₹1-cr penalty on Cooperatieve Rabobank U.A.

August 12, 2021 root Banking & Finance

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The Reserve Bank of India imposed a monetary penalty of ₹1-crore on Cooperatieve Rabobank UA

Coöperatieve Rabobank UA, Mumbai Branch, is a part of the Netherlands-based Rabobank Group.

The penalty has been imposed for contravention of Section 11 (2) (b) (ii) of the Banking Regulation Act, 1949, and Reserve Bank directions on Sections 17(1) and 11(2)(b)(ii) of Banking Regulation Act, 1949- Transfer to Reserve Funds, the central bank said in a statement.

The central bank said, “The statutory inspection for supervisory evaluation (ISE) of the bank was conducted by RBI with reference to its financial position as of March 31, and the examination of the Risk Assessment Report pertaining to the same revealed, inter-alia, contravention of above-mentioned provisions of the Act and the 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 on it for contravention of the provisions of the Act and the RBI directions, as stated therein”, the statement added.

After considering the bank’s reply to the notice, oral submissions made during the personal hearing, and examination of additional submissions made by the bank, RBI came to the conclusion that the charge of contravention of aforesaid provisions of the Act and RBI directions was substantiated and warranted imposition of monetary penalty on the bank, the statement said.

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