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Today, the Reserve Bank released the preliminary estimates of Household Financial Savings for Q3: 2020-21 and Household Debt-GDP Ratio at end-December 2020 on its website under the tab “Statistics” => “Data Releases” => “Quarterly”. Highlights:
(Yogesh Dayal) Press Release: 2021-2022/411 |
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Central Bank of India in a bid to encourage Covid 19 vaccination in April this year launched a scheme Immune India Deposit Scheme with a maturity of 1111 days. Here the incentive is 25 bps higher return or interest rate than applicable otherwise.
Likewise another state-run lender has run a unique FD scheme that is paying 30 bps higher return on FDs of 999 days. This is for those who have taken at least one dose of Covid 19 vaccination.
On the Facebook page of the company, the company in a post has stated that we are committed to support Covid 19 vaccination drive. Further the post read “We applaud consumers who have taken at least 1 dose of the COVID-19 vaccine and offer them a 6-month free extended warranty on the purchase of any of our appliances.”.
Statement from the low-frill air-carrier said that starting Wednesday the airline will offer 10% discount to all those passengers who have taken at least one dose of vaccination against the lethal Covid 19 virus. Further as per the terms of the offer, the discount shall be offered on the base offer and it is part of the ‘limited inventory’ offer.
Also, even after passengers have availed the offer, they will be required to produce the vaccination certificate at the boarding gate as also the airport check-in counter.
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Planning
oi-Vipul Das
When it comes to debt instruments or debt investments, Public Provident Fund (PPF) is the most preferred option to bet for long-term investors. It is among the most prominent small savings scheme of post office, with one of the highest interest rates in its sector as well as a longer maturity period of 15 years. The present interest rate on a PPF savings account is 7.1 per cent, which is compounded on an annual basis, and it is set by the government on a quarterly basis.
A PPF account allows an individual to deposit up to Rs 1.5 lakh per year and an initial deposit of Rs 500. PPFs are classified as EEE (Exempt, exempt, exempt), which implies that the deposit amount interest earned, and maturity amount are all tax-free, which makes it more appealing to debt-oriented investors. Apart from all the discussed perks, a PPF account can be inactive if you do not follow certain rules. So let’s start discussing in brief that why a PPF account becomes inactive and how to reactivate it.
1. If you don’t deposit the mandatory amount of Rs 500 every financial year, your PPF account will be classified as “inactive.”
2. To keep a PPF account active, it is recommended that you deposit Rs 500 by March 31 of each financial year cycle.
3. Withdrawal and loan facilities will be unavailable to depositors with inactive or dormant accounts.
4. In the event that a PPF account is inactive, the overall deposit for the year must include deposits made in prior financial years’ default years.
5. PPF accounts that have been inactive cannot be extended. However, after reactivating a PPF account, a depositor can continue to make deposits and make one withdrawal every fiscal year, up to a maximum of 60% of the amount at the time of maturity in a 5-year block.
6. A discontinued account can be reopened during its maturity period with a penalty of fifty rupees plus arrears of five hundred rupees in minimum contribution for each year of delinquency.
7. The outstanding or remaining balance in a discontinued account that is not revived by the depositor before the account’s maturity date continues to earn interest at the scheme’s prevailing rate.
8. A discontinued account holder will not be allowed to open a new account until the discontinued account has been closed upon maturity.
9. To activate an inactive PPF account, the responsible account holder will have to submit a written application to the concerned bank or post office.
10. The application for reactivating a PPF account must be submitted at any time throughout the account’s or scheme’s 15-year tenure.
Story first published: Wednesday, June 23, 2021, 12:43 [IST]
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The Cabinet had in May given in-principle approval for IDBI Bank’s strategic disinvestment along with transfer of management control.
The central government and LIC together own more than 94 per cent equity of IDBI Bank. LIC, currently having management control, has 49.24 per cent stake, while the government holds 45.48 per cent. Non-promoter shareholding stands at 5.29 per cent.
The last date for submission of bids by both transaction advisor and legal advisors is July 13, the Department of Investment and Public Asset Management (DIPAM) said.
Transaction advisor
The transaction advisor would be required to advise and assist the government on modalities of disinvestment and the timing; recommend the need for other intermediaries required for the process of sale/disinvestment and also help in identification and selection of the same with proper Terms of Reference.
The transaction advisor will also assist in the preparation of all documents like Preliminary Information Memorandum (PIM), organise roadshows to generate interest among the prospective buyers and suggest measures to fetch the optimum value.
The advisor would also be supporting IDBI Bank in setting up an e-data room and assisting in the smooth conduct of the due diligence process.
The extent of shareholding to be divested by the central government and LIC shall be decided at the time of structuring of transaction in consultation with the RBI, the government had earlier said.
Insurance giant LIC had acquired a controlling stake in IDBI Bank in January 2019.
Finance Minister Nirmala Sitharaman in her Budget for 2021-22 had said the process of privatisation of IDBI Bank would be completed in the current fiscal.
The government aims to mop up Rs 1.75 lakh crore in the current fiscal from minority stake sale and privatisation.
Of the Rs 1.75 lakh crore, Rs 1 lakh crore is to come from selling government stake in public sector banks and financial institutions, and Rs 75,000 crore through CPSE disinvestment receipts.
Under PCA
Under the PCA imposed by RBI in 2017, the bank’s balance-sheet shrank as it could not extend loans to corporates and was not allowed to open branches.
It used the four years of PCA to restructure its business, cut exposure to large loans and bulk deposits and create verticals for various lending businesses to speed up turnaround time.
The bank has worked for the last four years on various parameters, done recoveries and raised its provision coverage ratio to 97%.
The lender was looking at Rs 4,000 crore of recoveries in this fiscal.
Retail loans
The share of corporate loans, which was about 67% four years back when it went under PCR, has shrunk to 40% now with 60% loans being retail. The bank is now targeting 55% loan book as retail and rest corporate. It wants to maintain low costs retail deposits at 48% of total deposits.
As a result, the institution has transformed from a project financier to a retail lender.
The company is looking to target the mid-corporate segment and will now avoid overexposure to certain industries and grow the business in a calibrated manner.
It sees over 12% growth in retail loans and an 8-10% rise in corporate loans.
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The Committee of Creditors (CoC) of Dewan Housing Finance Corporation Ltd (DHFL) are understood to have voted against the proposal for redistribution of funds to small deposit holders.
Sources said a majority of financial creditors including fixed deposit holders have voted against the proposal.
This will mean that the current distribution pattern for DHFL will continue. The Committee of Creditors is expected to move the National Company Law Tribunal on June 24 to apprise it of the voting results.
Based on the NCLT recommendation, the CoC had proposed higher distribution of funds to small investors including fixed deposit and NCD holders and pension funds.
According to the proposal, the entire admitted claim of ₹39 crore of Army Group Insurance Fund, ₹72.93 crore of Air Force Group Insurance Society and Navy Children School of ₹2.54 crore would be paid fully in cash.
Also read: DHFL lenders begin voting on proposals to redistribute funds
Further, it was proposed that all fixed deposit holders will be paid additional amounts in cash in order to ensure that the entire amount paid to them is about 40 per cent of the admitted claims, similar to the recovery to secured financial creditors.
Unsecured NCD holders with investments up to ₹10 lakh were proposed to be repaid 40 per cent of the admitted claims like in the case of fixed deposit holders.
The total outgo for lenders of DHFL on these proposals would have been ₹1,853.21 crore.
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The government is looking to measures to strengthen corporate governance and human resource practices in nationalised
banks. It plans a diversified board structure, strengthening of board-level committees and a robust performance management system for employees.
The government wants to further professionalise the boards of PSBs and bring experts in risk management, information technology and human resource management.
The key proposals include longer tenure for executive directors, hiring of specialists in areas such as NPA management and fast track promotion for high performers.
Leadership plan
These discussions may be further taken up with the Banks Board Bureau to formulate a long-term strategy.
One of the key mandates of BBB is to help banks to develop a robust leadership succession plan for critical positions and advise the government on evolving suitable training and development programmes for management personnel.
BBB will also maintain a database on performance of the officers of PSBs. This will have information regarding postings, placements, promotions and vigilance of senior officers.
Ease 4.0
Banks through Ease 4.0 may also take up these issues at their board level. Launched in January 2018, Enhanced Access and Service Excellence (Ease) is the common reform agenda for all public sector banks aimed at institutionalising clean and smart banking.
State-run banks will focus on co-lending with non-banking firms, digital agriculture financing, synergies and technological resilience for 24×7 banking as part of their reforms agenda for this fiscal.
This year PSBs will focus to introduce and promote new analytics-based offers to existing retail customers like pre-approved car loans, EMI offers on e-commerce purchases and also for existing MSME customers.
Such offers will be based on bank transactions, income tax and GST returns, transactions on e-commerce portals, and other operational data.
As per the reform agenda, banks will leverage partnerships with third parties, including agritech firms and strive to automate processing and sanction of agricultural loans based on field visits, borrower interaction, and risk assessment in states with digitised land records.
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Emkay Global sees a 36% upside in the stock of IndusInd Bank and has recommended buying the stock with a target of Rs 1,375 in one-years time. The stock of IndusInd Bank as last seen trading at Rs 1014 on the NSE.
“IndusInd Bank scripted a major turnaround 1.0 since 2009/10, but faltered lately with higher corporate NPAs/deposit scare. The bank has largely rectified its past mistakes, built prudent capital/provisioning buffers and is preparing to build sustainable & digitally agile retail bank, delivering yesteryear’s superior RoA trajectory of 1.7-1.9% over FY23/24E.
Amid the ongoing pandemic, the bank intends to shore up contingent buffer (1% of loans) including counter-cyclical buffers given cyclical retail book to bring stability to earnings in long run. We believe that retailization of assets (55% vs. 52%)/liabilities (50% vs. 37%) should structurally improve NIMs/core-PPoP, while moderating LLP should drive-up RoAs,” the brokerage firm has said.
According to Emkay Global, IndusInd Bank assured that risk/governance standards have been strengthened while promoter interference has been virtually NIL, and its recent capital subscription at a premium should provide investor comfort.
“IndusInd Bank is waiting for holding company norms to enter into broking/AMC/non-life insurance business, and is open to strategic stake in fintech to strengthen digital offering. We believe a resurgent IndusInd with higher retail orientation/risk guards in place should be deliver sustainably higher return ratios, providing a good turnaround story to play on. Retain Buy with a target price of Rs 1,375 (vs. 1,175), now based on 2x Jun’23E ABV (1.7x earlier),” Emkay Global has said.
Emkay Global sees a 51% upside on the stock of power generation company NTPC. The stock of NTPC was currently trading at Rs 118 and the broking firm has set a target of Rs 179 on the shares.
“NTPC is set to add 14GW of thermal and 14GW of RE capacity over the next 3-4 years. NTPC has raised its RE target to 60GW by 2032 from 30GW, and we believe given the huge opportunity in the country and low cost of funding for NTPC, the company is set to achieve it,” the broking firm has said.
According to it, low penetration of durables, various PLI schemes, focus on localization in defense and rising per capita income will all boost demand growth in the medium term.
“We assume coverage on NTPC with a Buy rating and a target price of Rs 179, based on SoTP. We estimate RoE in FY21-FY24 to be 12.5% – 200bps higher than the last 5-year average. We believe that improving RoE profile is one of the most important factors for re-rating in Utilities. We also note that EPS CAGR in FY21-FY24E stands at 8%,” the broking firm has said.
The stock of NTPC was trading at Rs 118 on the NSE.
The stocks mentioned above are based on the report of Emkay Global Financials. Investing in stocks are risky and investors should do their own research. The author, the brokerage firms or Greynium Information Technologies are not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise due caution as markets have run-up significantly. Please consult a professional advisor.
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In a paper titled ‘Bitcoin, Currencies and Bubbles’, Taleb said: “In its current version, in spite of the hype, Bitcoin failed to satisfy the notion of ‘currency without government’ (it proved to not even be a currency at all).
The noted author said that Bitcoin can neither be a short-term or long-term store of value, cannot operate as a reliable hedge against inflation, and “worst of all does not constitute, not even remotely, a tail protection vehicle for catastrophic episodes”.
The former admirer of the cryptocurrency asserted that the true value of a Bitcoin is no higher than zero. “Gold and other precious metals are largely maintenance free, do not degrade over a historical horizon, and do not require maintenance to refresh their physical properties over time. Cryptocurrencies require a sustained amount of interest in them,” Taleb wrote in his paper.
After a trailblazing run for much of 2020 and better part of 2021 so far, Bitcoin has undergone a sharp fall over the past two months triggered by China’s crackdown on cryptocurrency miners and backlash from famous enthusiast Tesla Founder Elon Musk.
After hitting a record high of $62,741 in April, Bitcoin has given up more than 50 per cent over the past two months and is now vulnerable to falling closer to its high hit during the 2017-18 bull market of around $19,000.
The surge in the price of the cryptocurrency over the past 14 months had largely been driven by new interest institutional investors such as hedge funds and certain corporations like Tesla and MicroStrategy.
Much of the interest in the coin from institutional investors rested on the notion that Bitcoin can act as a true hedge against inflation, better even then gold in some opinions. Taleb believes that for a currency to be a hedge against inflation it should have minimum variance against a basket of goods and services, a quality Bitcoin lacks.
Taleb’s paper is likely to further ignite debate in the global investment world on the true role of Bitcoin and other cryptocurrencies. In India, cryto enthusiasts often call Bitcoin an asset, not a currency. If that is the case, Taleb’s paper may give them a headache.
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Among several criteria listed for eligibility, bidders should have completed at least one transaction of strategic disinvestment, strategic sale or merger and acquisition of Rs 5000 crore or more in size, between April 2016 and March, 2021. The last date for submissions is July 13.
The professional financial consulting firm, investment banker, merchant banker, financial institution or bank bidding for the contract, should have at least five years’ experience in providing advisory service in such transactions.
“The Transaction Advisor (TA) will be required to undertake tasks related to all aspects of the proposed strategic disinvestment culminating into successful completion of the transaction and would, inter alia include but not limited to advising and assisting government of India on modalities of disinvestment and the timing,” the department said as it set out terms of reference for the advisor in the RFP.
The advisor would recommend the need for other intermediaries required for the process of sale or disinvestment, help in identification and selection of the same with proper terms of reference, prepare documents such as the Preliminary Information Memorandum (PIM), Confidential Information Memorandum (CIM), Request for Proposal (RFP), Confidentiality Agreement et al.
It will also structure the transaction, organize roadshows, suggest measures to fetch optimum value, position of the strategic sale, invite and evaluate bids, assist and professionally guide during the negotiations with prospective buyers, draw up the sale or other agreements and advise on post-sale matters on a continuous basis.
DIPAM has barred a person or company owning more than 50% equity interest in the merchant banker or controls the merchant bankers, from participating in the competitive process for acquisition of IDBI Bank.
“For clarity, parent entity cannot participate in transaction process in case the selected bidder is subsidiary of an existing retail bank.
In case the interested Transaction Advisor is a subsidiary of an existing retail bank, they need to provide documentation explaining firewall or Chinese-wall structure to maintain confidentiality and conflict of interest.
DIPAM has also barred public sector banks cannot participate as bidders for acquisition of IDBI Bank in the transaction process. Subsidiaries of IDBI Bank – IDBI Capital Markets – cannot participate as bidders for transaction advisors.
The Cabinet Committee on Economic Affairs had given an in-principle approval for the strategic divestment of IDBI Bank in May this year. The extent of shareholding to be divested by the Indian government and Life Insurance Corporation of India will be decided at the time of structuring of transaction in consultation with Reserve Bank of India, it had said.
IDBI Bank is classified as a private sector bank by RBI with government shareholding at 45.48%, LIC of India shareholding at 49.24% and non-promoter shareholding at 5.29%.
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