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PSU banks headed for privatisation may get a major makeover, BFSI News, ET BFSI

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The government plans to spruce up public sector banks’ balance sheets through capital support and sale of non-core assets and trim their workforce before putting them on block.

It may also look at transferring bad loans of these lenders to the upcoming bad bank.

On the radar

The NITI Aayog, which has been entrusted with the job of identifyng suitable candidates for the privatisation, has recommended names to a high-level panel headed by Cabinet Secretary Rajiv Gauba.

Central Bank of India, Indian Overseas Bank, Bank of Maharashtra and Bank of India are some of the names that may be considered for privatisation by the Core Group of Secretaries on Disinvestment.

The other members of the high-level panel are Economic Affairs Secretary, Revenue Secretary, Expenditure Secretary, Corporate Affairs Secretary, Secretary Legal Affairs, Secretary Department of Public Enterprises, Secretary Department of Investment and Public Asset Management (DIPAM) and the Secretary of administrative department.

Following clearance from the Core Group of Secretaries, the finalised names will go to the Alternative Mechanism (AM) for its approval and eventually to the Cabinet headed by Prime Minister Narendra Modi for the final nod.

VRS scheme

Two state-owned banks being picked up for privatisation by the government are likely to come out with an attractive voluntary retirement scheme (VRS) to get rid of the extra flab.

An attractive VRS will make them lean and fit for takeover by the private sector entities that are keen to enter the banking space, the sources said.

VRS is not forced exit but an option for those who would like to take early retirement with a good financial package, the sources said adding that it has been done in the past before the consolidation of some of the PSBs.

Out of PCA?

State-owned UCO Bank is hopeful of coming out of the Prompt Corrective Action (PCA) framework very soon.

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

The bank had also met the other major criteria including net NPA norm, Goel said. Net NPA was at 3.4 per cent in March quarter against requirement of below six per cent. Return on Asset is also positive at Rs 167 crore and latest leverage ratio stood at 4.53 against a requirement of four per cent.

The government in the last round had infused Rs 14,500 crore of equity in Central Bank of India, Indian Overseas Bank, Bank of India, and UCO Bank by issuing non-interest-bearing, non-transferable bonds to these state-owned lenders.

Central Bank had narrowed its loss to Rs 888 crore in FY21, from Rs 1,121 crore in FY20. IOB, which is yet to declare its results for Q4 of FY21, posted a profit of Rs 482 crore for the nine months to December 2020, as against a loss of Rs 8,527 crore for FY20. gross non-performing asset (NPA) for Central Bank are 16.55 percent while for IOB they are 12.19 percent.



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Leading crypto exchanges scout entry into India despite potential ban

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Global digital currency exchanges are exploring ways to set up in India, following in the footsteps of market leader Binance, industry sources told Reuters, while the government in New Delhi dithers over introducing a law that could ban cryptocurrencies.

Opponents of the potential ban say it would stifle the economic power of a tech-savvy, young nation of 1.35 billion people. There is no official data, but industry analysts reckon there are 15 million crypto investors in India holding over 100billion rupees ($1.37 billion).

Three cos scouting market

According to four sources, who declined to be identified as they were not authorised to comment on private discussions,U.S.-based Kraken, British Virgin Islands-based Bitfinex and rival KuCoin are actively scouting the market, which analysts say would only get bigger if it was given a free rein. “These companies have already begun talks to understand the Indian market and the entry points better,” said one source directly involved with an exchange that had begun due diligence for an Indian firm it was considering acquiring.

Also read: The cryptocurrency game: India and the world

The other two exchanges, he said, were in the initial stages of deciding whether to enter India and weighing their options,which effectively come down to a choice between setting up asub sidiary or buying an Indian firm, as Binance, the world’s biggest exchange, did two years ago.

Bitfinex declined to comment while Kraken and KuCoin did not respond to an email seeking comment.

All three exchanges are ranked in the world’s top ten by data platform Coin Market Cap, based on their traffic, liquidity and trustworthiness of their reported trading volumes. “The Indian market is huge and it is only starting to grow, if there was more policy certainty by now Indian consumers would have been spoilt for choice in terms of exchanges, because everyone wants to be here,” said Kumar Gaurav, founder of digital bank Cashaa.

Proponents of cryptocurrencies say they would be the most cost-efficient way for Indians abroad to remit funds home.

But authorities worry that rich people and criminals could hide their wealth in the digital world, and speculative flows of funds through digital channels, ungoverned by India’s strict exchange controls, could destabilise the financial system.

Bill delayed, fate unknown

Hitherto, India has had no rules specifically for cryptocurrency exchanges wishing to set up in the country. Instead they could register themselves as tech companies to obtain a relatively easy entry path.

In 2019, Binance acquired WazirX, an Indian cryptocurrency startup which has allowed users to buy and sell crypto with rupees on the Binance Fiat Gateway.

U.S. based exchange, Coinbase, has announced plans for a back office in India.

But with the regulatory environment for cryptocurrencies taking a turn for worse globally, Indian authorities are exercising greater scrutiny.

In China, authorities have forbidden banks and online payment companies from providing services related to cryptocurrency transactions.

And the Indian government was set to present a bill to parliament by March that proposed a ban on cryptocurrencies, making trading and holding them illegal. But the government has held it back, and conflicting statements since have fuelled uncertainty over the bill’s fate.

Meantime, major Indian banks have begun to sever ties with cryptocurrency exchanges and traders, amid Reserve Bank of India’s concerns about the financial stability risks posed by the volatile asset.

The RBI is looking at launching its own digital currency,but Governor Shaktikanta Das in February described those plans as a “work in progress”.

For all the uncertainty over what India will end up doing, some digital currency exchanges clearly reckon it would be better to gain entry rather than miss out. “It’s clear that the rewards outweigh the perceived risks,which is luring these global firms to the Indian market,” said Darshan Bathija, chief executive officer of Vauld, a foreign crypto exchange with a presence in India.

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DBS tops Forbes ‘World’s Best Banks’ list in India, BFSI News, ET BFSI

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DBS has been named by Forbes in their list of World’s Best Banks 2021. DBS was ranked #1 out of 30 domestic and international banks in India for the second consecutive year. This is the third edition of the ‘World’s Best Banks’ list by Forbes, conducted in partnership with market research firm Statista. Over 43,000 banking customers across the globe were surveyed on their current and former banking relationships. The customer survey rated banks on general satisfaction and key attributes like trust, digital services, financial advice, and fees.

“This year’s list includes a record number of award winners, reflecting consumers’ increasing confidence in their banks,” revealed Forbes in its official announcement. Commenting on the recognition, Surojit Shome, Managing Director and CEO, DBS Bank India, said, “We are humbled and proud to be featured on the ‘World’s Best Banks’ list for the second consecutive year. Over the years, we have built a strong customer-centric franchise, and this recognition shines the light on the resilience and a strong sense of purpose demonstrated by our employees to support customers amid the global crisis. We will continue to deepen customer relationships and build journeys that proactively address their needs.”

Felix Kapel, Lead Analyst at Statista for the World’s Best Banks project, said, “DBS India excels in multiple sub-dimensions. The general satisfaction and customer recommendation of DBS is great. These factors have helped DBS retain the No.1 spot in India.”

Recently, DBS Bank India was recognised as ‘India’s Best International Bank 2021’ by Asiamoney. DBS was named ‘Safest Bank in Asia’ for the 12th consecutive year by New York-based trade publication Global Finance in 2020. The bank was also Global Finance’s pick for ‘Best Bank in the World’ in the same year, making it the third consecutive global Best Bank accolade received by DBS. Previously, DBS was named ‘World’s Best Bank’ by leading financial publication Euromoney in 2019. DBS Bank has been present in India for 26 years and has grown consistently by strengthening its small and medium-sized enterprise business and consumer lending operations to build scale and become a full-service bank. Further, it has showcased a long-term commitment to India with the establishment of its local wholly-owned subsidiary, DBS Bank India Limited (DBIL) and the recent acquisition of Lakshmi Vilas Bank.

The amalgamation of Lakshmi Vilas Bank with DBIL in November 2020 bolstered the bank’s physical presence in the country. DBS now has a network of nearly 600 branches across 19 states in India. To view the complete Forbes list, visit https://www.forbes.com/worlds-best-banks/#5c1a16312951 About DBS DBS is a leading financial services group in Asia with a presence in 18 markets. Recognised for its global leadership, DBS has been named “World’s Best Bank” by Euromoney, “Global Banks of the Year” by The Banker and “Best Bank in the World” by Global Finance.

DBS was also ranked No 1 in India by Forbes in its 2020 list of the World’s Best Banks. DBS Bank has been present in India for 26 years, having opened its first office in Mumbai in 1994. DBS Bank India Limited is the first among the large foreign banks in India to start operating as a wholly-owned, locally incorporated subsidiary of a leading global bank. DBS provides an entire range of banking services for large, medium and small enterprises and individual consumers in India. In 2016, DBS launched India’s first mobile-only bank – digibank, which now has ~1 million savings accounts. In November 2020, Lakshmi Vilas Bank was amalgamated with DBS Bank India Limited.

The bank now has a network of nearly 600 branches across 19 states in India. DBS provides a full range of services in consumer, SME and corporate banking. As a bank born and bred in Asia, DBS understands the intricacies of doing business in the region’s most dynamic markets. DBS is committed to building lasting relationships with customers and positively impacting communities through supporting social enterprises as it banks the Asian way. It has also established an SGD 50 million foundation to strengthen its corporate social responsibility efforts in Singapore and across Asia. In 2020, DBS introduced the “Towards Zero Food Waste” initiative as part of a global sustainability practice to encourage a shift in behaviours and mindsets to reduce food waste. With its extensive network of operations in Asia and emphasis on engaging and empowering its staff, DBS presents exciting career opportunities. The bank acknowledges the passion, commitment and can-do spirit in all our 30,000+ staff representing over 40 nationalities.



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With just 24% recovery rate, IBC lags other mechanisms, BFSI News, ET BFSI

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The Videocon resolution, which yielded less than 10% for lenders, has brought back recovery woes in the Insolvency and Bankruptcy Code mechanism in the spotlight.

Bankers have lost over Rs 40,000 crore in the Videocon account, as Anil Agarwal’s Twin Star snapped the company for less than Rs 3,000 crore.

While RBI has pointed to a recovery rate of 45% in IBC so far, barring the recovery rates in the top nine accounts, recoveries in other accounts average 24%. The top nine accounts were from the steel sector which led to good recoveries, while accounts in the power and infrastructure sectors struggle for buyers.

Recoveries from earlier resolution mechanisms resulted in a loss of nearly 70%.

Fiscal 2021 drop

The realisation for financial creditors from IBC declined significantly in FY2021 with a total resolution amount of around Rs 26,000 crore, almost a quarter of the realisations in fiscal 2020.

The pandemic has increased operational challenges for the various parties involved in a CIRP, which resulted in limited cases yielding a resolution plan. The suspension of new proceedings under the IBC for the entire FY21 resulted in a sharp slowdown in the resolution process.

Out of the total 4,300 cases that have been admitted to bankruptcy courts since FY17, only 8% has been resolved and nearly 40% of the cases are still pending. About 30% of the cases have seen liquidation.

From its commencement in December 2016, 4,376 CIRPs have been admitted, of which 2,653 were closed till March 2021,

About 40% of the cases admitted by the NCLT were closed on appeal or settled or withdrawn under Section 12A which highlights that at least some promoters have been more willing to pay their dues to keep the IBC proceedings at bay. The extent of cases being referred to liquidation remains high at about 40% and only a quarter of such cases have seen the liquidation process come to a conclusion. The average realisation through liquidation has been a mere 3% of the claim amount.

Fiscal 2022 hopes

Although rating agency ICRA estimates that financial creditors could realise about Rs 55,000 crore to Rs 60,000 crore in FY2022 through successful resolution plans from the IBC. The higher realisation by the financial creditors would depend on the successful resolution of 8-9 big-ticket accounts, as more than 20% of ICRA’s estimated realisation for the year could be from these alone.



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Bandhan Bank Revises Savings Account Interest Rates, Check New Rates Here

Personal Finance

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Investment

oi-Vipul Das

|

The private sector lender Bandhan Bank has recently revised interest rates on savings accounts which are in force from June 7, 2021. Based on the daily balance limit, the bank is now offering savings account interest rates ranging from 3% to 6% after the most recent adjustment. As per the Bandhan Bank’s official website, the private lender is giving a 3% savings account interest rate on a daily balance of up to Rs 1 lakh. The bank is giving 4% savings account interest on a daily balance ranging from Rs 1 lakh to Rs 10 lakh. Bandhan Bank is providing customers with a 6% interest on a daily balance of over Rs 10 lakh. Check the revised interest rates on the savings account of Bandhan Bank here.

Bandhan Bank Revises Savings Account Interest Rates, Check New Rates Here

Minimum balance limit on Bandhan Bank savings account

Check the monthly average limit on different savings accounts of Bandhan Bank below:

Savings Account Type Monthly Average Balance
Neo+ Digital Savings Account Rs 5,000
Elite Savings Account Rs 5 lakhs
Premium Savings Account Rs 1 lakh
Advantage Savings Account Rs 25,000
Standard Savings Account Rs 5,000
Special Savings Account Rs 5,000
Sanchay Savings Account Rs 2,000

Bandhan Bank Savings Account Interest Rates

With effect from June 7, 2021, Bandhan Bank revises interest rates on its savings accounts, check new rates below:

Daily Balance Interest Rates In %
Daily Balance up to Rs 1 lakh 3.00%
b. Daily Balance above Rs 1 lakh to Rs 10 lakh 4.00%
c. Daily Balance above Rs 10 lakh to Rs 10 crore 6.00%
Source: Bandhan Bank, W.e.f. June 7, 2021

Note

  • The interest rate will be determined daily depending on the account’s end-of-day total balance.
  • Interest will be charged at a rate of 3% per year on an amount up to Rs 1 lakh, 4% per year on incremental balance above Rs 1 lakh up to Rs 10 lakh, and 6% per year on incremental balance beyond Rs 10 lakh up to Rs 10 crore.
  • You need to contact the branch office for rates on an amount of Rs 10 Crores and beyond.
  • Interest is paid on a quarterly basis, i.e. on June 30, September 30, December 31 and March 31 respectively, according to the bank’s website.

Story first published: Thursday, June 10, 2021, 11:24 [IST]



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As Covid 2.0 wanes, equity MFs net ₹10,000 cr in May

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Net inflows into equity mutual fund schemes hit a 14-month high in May at ₹10,083 crore crore compared to ₹3,437 crore logged in April, reflecting growing investor confidence in the recent market rally. This is the third straight month of net inflows.

Except for equity linked saving scheme, which recorded an outflow of ₹290 crore, all categories of equity funds registered net inflows, with multi-cap funds topping the table attracting investments of ₹1,954 crore, according to data released by the Association of Mutual Funds in India. Coincidentally, Aditya Birla Sun Life Multi Cap had raised ₹1,900 crore through its New Fund Offer in May.

While mid-cap and focussed equity funds received investment of ₹1,368 crore and ₹1,169 crore, thematic and small-cap funds got ₹1,137 crore and ₹1,081 crore, respectively.

Himanshu Srivastava, Associate Director, Morningstar India, said the significant dip in Covid cases over the last few weeks has provided comfort to investors while good positive earnings growth outlook and waning concern on the second wave will prompt investors to again allocate assets towards equities.

Redemption in equity schemes in May dipped compared to April suggesting that investors are gaining confidence on the market outlook and are willing to invest substantially.

NS Venkatesh, Chief Executive, AMFI, said retail equity-oriented contribution continues to be on the upward trend, while smart investors diversified to Fund of Fund schemes that invest in foreign equities.

Investment through systematic investment plans was up at ₹8,818 crore against ₹8,596 crorein April.

Debt funds recorded a net outflow of ₹44,512 crore largely due to withdrawal of ₹45,447 crore and ₹11,573 crore from liquid and overnight funds, respectively.

Inflows in Fund of Funds investing overseas jumped sharply by ₹2,424 crore largely due to two NFOs raising ₹1,704 crore.

Overall, the mutual funds industry’s AUM was up at ₹33.05-lakh crore in May against ₹32.37-lakh crorein April.

Akhil Chaturvedi, Head of Sales and Distribution, Motilal Oswal Asset Management Company, said it is broadly understood that the waves of Covid are short lived and eventually economic activities will revive giving boost to market sentiments.

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Religare Enterprises to infuse ₹411-crore capital into NBFC arm Religare Finvest

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Religare Enterprises Limited (REL), which is on a turnaround, proposes to invest as much as ₹411-crore capital into its NBFC arm Religare Finvest Ltd (RFL), its Executive Chairperson Rashmi Saluja has said.

The funding for this capital infusion into RFL will come out of the latest ₹570-crore fund raise that REL Board approved on Tuesday via preferential issue to existing and marquee investors.

Nearly 80 per cent of REL’s planned ₹570-crore capital mop-up will come from existing investors. Burman family is investing ₹175 crore, taking the family’s shareholding in REL to 14.5 per cent from 11 per cent now. Ares SSG Capital, a global fund and another existing shareholder in REL, is pumping in ₹75 crore in the preferential issue, taking its shareholding from 6.8 per cent to 8 per cent.

Preferential allotment

Under the preferential allotment, as many as 5,41,56,761 equity shares of REL will be issued at price of ₹105.25/share, which is almost a 28 per cent discount compared to Tuesday’s close of ₹146.5 in the stock markets. On Wednesday, REL shares closed on the NSE at ₹135.55, down nearly 8 per cent over the previous close.

Asked if Burman family or Ares SSG Capital have made any formal requests for a Board seat in the wake of the proposed increase in their shareholding in REL, Saluja replied in the negative. She however maintained that REL was not averse to this and could look at it if there is interest on the part of the investors.

Meanwhile, Saluja said the remaining ₹160 crore out of the ₹570-crore fund raise would be infused in REL’s Housing Finance and stock Broking arms.

She also expressed confidence that REL will be able to soon recover the fixed deposit of ₹750 crore parked with Lakshmi Vikas Bank (now DBS Bank). Religare Finvest had a 2018 pending suit against LVB alleging misappropriation of its fixed deposits of ₹750 crore.

“We are very hopeful this FD money is going to come back to us soon. This will be another boost to REL besides the debt restructuring of RFL that has already been proposed and expected to be completed in next few months,” Saluja told BusinessLine.

She also said that REL will look to take Care Health Insurance public through an IPO although no timeline has been decided by the Board.

REL is the holding company for four key businesses i.e. SME Finance via Religare Finvest Limited (RFL), Health Insurance via Care Health Insurance Limited (CHIL), Retail Broking via Religare Broking Limited (RBL) and Affordable Housing via Religare Housing Development Finance Corporation Limited.

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LIC Chairman’s tenure extended to March 2022

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The Appointments Committee of the Cabinet (ACC) has extended the term of Life Insurance Corporation (LIC) Chairman MR Kumar till March 13, 2022, the date he completes three years as the chief of the insurance behemoth.

Mega IPO

His currently notified term was to end on June 30 this year. The extension was widely expected, given that LIC is readying itself for a mega initial public offering (IPO), which is expected to help the government mop up close to ₹1-lakh crore in 2021-22.

It maybe recalled that Kumar was appointed as LIC Chairman on March 13, 2019. Kumar had joined LIC in 1983 as a direct recruit officer. In a career spanning nearly four decades, Kumar has headed three zones of LIC – Southern Zone, North Central Zone and Northern Zone.

The government had recently amended rules to specify that only Managing Directors of LIC will be eligible to appear for interviews to the post of LIC Chairman.

The Centre owns 100 per cent of LIC. It is looking to divest up to 10 per cent stake in the proposed IPO. Once listed, LIC will become the country’s largest company by market capitalisation, say capital market observers.

Bigger than Reliance Ind

LIC could get a value of $261 billion when listed, based on its assets under management and using private sector insurers, analysts at Jeffries India, led by Prakhar Sharma, had written in a note in February. That could make it bigger than Reliance Industries, which is India’s largest listed entity.

The government is widely expected to invite merchant bankers for the share-sale this month.

The government has already introduced amendments to the LIC Act to make it IPO-ready. Besides increasing the authorised capital of LIC to ₹25,000 crore from ₹100 crore to facilitate listing, there has been changes in the law to reserve a portion of IPO to existing policyholders.

In the just-concluded financial year FY21, LIC had recorded new business premium of ₹1.84-lakh crore, the highest ever in the history of the corporation.

LIC has been steadily losing market share to private players even as it had built a strong brand over the years. It has been reporting low shareholder profits as most of the profit is redistributed to policyholders and dividend payouts to the government are also high.

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Despite the turmoil, DHFL buy is an opportunity for Piramal Group

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Mortgage financier Dewan Housing Finance Corporation Ltd (DHFL) has been in troubled waters for over 18 months now with its financial position seeing a significant decline but it is expected to help Piramal Enterprises Ltd scale up its consumer lending business.

In the fourth quarter of 2020-21, DHFL was back in the black with a net profit of ₹96.75 crore. However, this was largely because it had not made provisions for interest on borrowing.

Losses widen

For the full fiscal 2020-21, its net losses widened to ₹15,051.17 crore from a net loss of ₹13,455.81 crore in 2019-20. Total revenue from operations or net sales fell 8.2 per cent to ₹8,770.65 crore in 2020-21 from ₹9,557.96 crore in 2019-20.

But compared to peers such as GIC Housing and SRG Housing Finance, DHFL’s net sales are still high.

Its total assets fell sharply by 18.3 per cent on an annual basis to ₹70,358.66 crore last fiscal and it had a negative net worth of ₹20,645.31 crore.

“In an IBC process, the quarterly profit and loss is not important. The asset side of the book is being bought and the liability side gets extinguished,” said an expert, who did not wish to be named.

“DHFL is a good buy. It continues to do well and the quality of its book is still fine despite all the turmoil,” he further said.

According to sources, PEL is hoping that the implementation of the resolution will be completed by August.

The main attraction of DHFL for the Piramal Group is the scale of its operations and branch network, which the latter hopes to use to build its retail lending book.

The mortgage financier also has close to 10 lakh customers. According to its annual report 2019-20, it was present in 305 locations in the country. PEL has a financial services business, which registered net sales of ₹7,033 crore last fiscal. Of this, PCHFL provides end-to-end financing solutions in both wholesale and retail funding across sectors.

As part of the resolution plan, DHFL shares will be de-listed after the acquisition. PCHFL would be merged with DHFL.

PEL has also launched a retail financing platform in November 2020, which offers seven products.

Lending book

“The overall lending book is at about ₹45,000 crore, of which ₹5,000 crore or 11 per cent is from retail. DHFL book has a substantial retail portion as well,” Jairam Sridharan, CEO, Piramal Retail Finance, had said in April, adding that in the medium term, it plans to grow the retail book to about two-thirds of the financial services business.

A recent note by ICICI Securities, after PEL’s annual results, had said that the group’s core objective is to transform into a well-diversified lending entity with share of retail rising to 50 per cent. “This will primarily be driven by organic build-up of retail lending, completion of DHFL acquisition, and rationalising wholesale lending and making it more granular,” it had said.

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