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Bank of Maha sees 15% credit growth, may not need capital infusion from govt, BFSI News, ET BFSI

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Bank of Maharashtra may not need capital infusion from the government this fiscal as it has adequate funds to meet the expected credit growth of 14-15 per cent, but may raise growth capital in the next quarter.

“Our capital adequacy ratio is 14.68%. As of now we don’t require any capital from the government. Capital is also a cost, the only thing is – when to raise the capital,” Bank of Maharashtra CEO A S Rajeev told ETBFSI in an interview.

The bank has raised Rs 400 crore towards equity in the current fiscal and Rs 1,000 crore as Tier-II capital two weeks back. If the Tier II capital is considered the adequacy ratio would rise to 15.50. The bank expects Rs 1,000 crore minimum profit in the current year, which would be added to the capital. It has also provided Rs 1,000 crore for Covid, which would be added to the capital if the provisioning is not required.

Credit growth

The bank sees credit growth in the infrastructure sector and segments such as hotels that are opening up with the easing of the pandemic. The MSME segment that was witnessing restructuring is also growing.

“The retail growth is on an average 15% in all banks. In our case, it is 17-18%. MSME is around 20% in spite of all these issues. So definitely it will be above 20% in this half year,” Rajeev said.

Home loans are growing 20% growth while auto 28%. The lender expects that the chip shortage will be sorted out in the second half of this fiscal.

Bank of Maha sees 15% credit growth, may not need capital infusion from govt

Outreach programme

The bank’s outreach programme is yielding 300-350 accounts with one credit outreach programme with loans of Rs 200-250 crore, he said, adding a recent SLBC in Pune it fetched loans of Rs 348 crore for the banks involved. The bank’s core business is improving with net interest margin at 3.27%. “If you’re able to maintain a NIM of 3% and you continue with 17% core profitability. And earlier NIM was affected by huge provisioning, now risk adjusted NIM is improving because the provisioning component has come down,” Rajeev said.

FinTech collaboration

The bank is investing a huge amount for FinTech and digital, and have tied with a number of companies, especially in the analytics space. The lender has tied up with around 15 companies for joint lending, including start-ups and NBFCs. The bank is also looking at buying stakes in FinTech firms and at leasing model.

Transfer to NARCL

The lender has identified around Rs 1,800 crore of loans for transfer to the National Asset Reconstruction Company Ltd and plans to shift Rs 3,500-4,000 crore fraud reported assets to the bad bank.



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CGST officers unearth Rs 34 crore input tax credit fraud involving 7 firms, BFSI News, ET BFSI

Personal Finance

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Based upon specific intelligence, the officers of the Anti Evasion branch of Central Goods and Service Tax (CGST) Commissionerate, Delhi (East) have unearthed a case of availment/utilization and passing on of inadmissible input tax credit (ITC) through bogus GST invoices without actual movement of goods of Rs 34 crore.

The seven firms were created in order to generate bogus GST invoices with intent to pass on fraudulent ITC without actual movement of goods and without paying actual GST to the Government, according to a press release.

These entities have generated goods less GST invoices of value Rs 220 crore (approx.) and passed inadmissible ITC amounting to Rs 34 crore (approx.). Rishabh Jain was the mastermind behind running this racket of creating bogus firms and generating/selling bogus GST invoices.

The modus operandi involved creating multiple firms with the intent to avail/utilize & passing on of inadmissible credit. The firms involved in this network are Blue Ocean, Highjack Marketing, Kannha Enterprises, S S Traders, Evernest Enterprises, Gyan Overseas & Viharsh Exporters Pvt. Ltd.

Rishabh Jain tendered his voluntary statement admitting his guilt. He admitted that due to non payment against Overdraft account of Central Bank of India, the business premises were sealed by bankers. Thereafter, he indulged into issuance of bogus GST invoices without actual movement of goods.

Rishabh Jain has knowingly committed offences under Section 132(1)(b) of the CGST Act, 2017 which is cognizable and non-bailable offences as per the provisions of Section 132(5) and are punishable under clause (i) of the sub section (1) of Section 132 of the Act ibid. Accordingly, Rishabh Jain has been arrested under Section 132 of the CGST Act on 13.11.2021 and remanded to judicial custody by the duty Metropolitan Magistrate till 26.11.2021.

Further Investigations are in progress. (ANI)



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MNC banks to RBI, BFSI News, ET BFSI

Banking & Finance

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Large multinational banks have impressed upon the Reserve Bank of India (RBI) the need to open a ‘dollar placement window’ to absorb sudden foreign currency inflow, and extend forex trading hours with the T-plus-One (T+1) settlement in stock exchanges and the expected inclusion of GoI securities in global bond index next year.

These banks, which act as custodians for foreign portfolio investors (FPIs), fear a dollar pile-up could cause a breach of regulatory exposure limits if they are unable to convert the foreign currency that FPIs bring in. The matter was discussed between bankers and senior RBI officials in two meetings over the past few weeks, two persons familiar with the issue told ET.

Shortening the stock settlement cycles from T+2 to T+1 would require arranging funds a day earlier. It’s believed if the forex market issues are not addressed, India could become a pre-funded market, which would raise the cost for FPIs. After several representations, custodian banks and FPIs have managed to buy some time with stock exchanges deciding to introduce the new settlement cycle in a staggered way. FPIs, according to the rollout plan, will have to deal with the T+1 mechanism around mid next year.

  • IN FOREX: market, cash deals happen till 3/3:30 pm
  • CONVERTING $: From FPIs to INR is tough in the evening
  • SO BANKS WANT: RBI to offer a window to accept $ from banks
  • A WINDOW FROM RBI will also enable banks selling $ to meet CRR

A T+1 settlement would require conversion of dollars (from FPIs operating in different time zones) into rupees well after the normal market hours. While the forex market is open 24/7, custodian banks would find it difficult to sell the dollar (and generate rupees) in the evening when very few banks trade and liquidity dries up. Besides equities, there could be bouts of dollar inflows into debts once government debt papers are part of a global bond index and restrictions on foreign investments in sovereign securities are loosened.

Regulatory Cap on Exposure
Under T+1, the dollar would have to be converted into the local currency on the same day as trade confirmation and payment of margin or the full deal amount (an FPI buying equities must pay) has to be given to the clearing corporation by 7.30/8 pm. If the custodian bank can’t find a buyer for the dollar, it would park the dollar with its head office or an overseas branch. And this could raise its exposure beyond the regulatory limit.

Under the RBI rule that restricts a bank from taking an exposure of more than a quarter of its tier-1 capital (i.e, equity and free reserves) to a single counterparty, the India branch of a foreign bank and any of its overseas offices are considered as two distinct entities. So, the extra, unsold dollars a foreign bank’s Mumbai branch places with its London or New York office is counted as the local branch’s exposure to the overseas branch.

“Of course, the situation can change dramatically if US rate hikes result in large outflows. But as a medium term strategy, it could make sense for the central bank to offer a dollar window. It would also make the forward premia less volatile. A dollar deposit facility may require regulatory changes. As far as extending cash (forex) market timing goes, it’s up to the banks to decide. But there is a need for a more active market beyond regular hours,” said a senior banker.

“While the T+1 issue is some months away, banks have initiated discussion with RBI after realising that Sebi and the ministry want to go ahead with it. Today, cash forex trades (where the conversion happens the same day) take place till 3/3.30 pm. Even if you extend it and change the Dollar/INR clearing timings, banks have to meet the CRR (cash reserve ratio) requirement. So, it will be easier if a bank can sell the dollar to the central bank under a special window as well as give the extra cash to fulfil CRR requirement. Stock preferred by FPIs would come under T+1 only in the second half of next year. But before that, many in the market expect Gsecs to be included in the bond market,” said another person.



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Reliance makes final call for payment on rights issue, BFSI News, ET BFSI

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Reliance Industries Ltd (RIL) has a second and final payment from those who were issued 42.26 crore company shares in a rights issue. And to assist shareholders, it has re-activated WhatsApp Chatbot 7977111111.

In a regulatory filing, the company said a notice for payment of Second and Final Call on 42,26,26,894 partly paid-up equity shares of the face value of Rs 10 each issued and allotted on rights basis on May 15, 2020, has been issued.

Reliance had made a Rights Issue of 42.26 crore equity shares at Rs 1,257 each. The final call of 50 per cent of the amount – Rs 628.50 per share – has now become due.

Reliance’s rights issue at a total size of Rs 53,125 crore was the largest ever rights issue in India. This was the world’s largest rights issue by a non-financial company in the last 10 years.

The existing shareholders of the company were offered new shares of the company in a 1:15 ratio.

November 10, 2021, was the record date to decide holders of the Reliance Partly Paid-up shares, who need to pay the Second and Final Call.

On payment of the Second and Final Call amount, the partly paid-up shares will transition into fully paid-up shares of Reliance Industries, which are traded under symbol RELIANCE on both NSE and BSE.

To assist investors on the issue, Reliance has re-activated WhatsApp Chatbot.

The AI-enabled easy-to-use Chatbot is developed by Jio‘s group company Haptik and was previously used at the time of Rights Issue in May 2020, and the First call in May 2021.

Reliance in the notice said the Second and Final Call can be paid through online ASBA, Physical ASBA, 3-in-1 account, R-WAP facility (enabled for Net-banking, UPI, NEFT and RTGS payments) and payments through cheque/demand draft.

Payment of the Second and Final Call can be made from November 15 to November 29, 2021 (both days inclusive).

The credit of the fully paid-up equity shares on payment of the Second and Final Call is expected to take place within two weeks from the last date for payment mentioned in the Final Call Notice i.e. within two weeks from November 29, 2021. PTI ANZ BAL BAL



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How does RBI’s staff accountability framework on NPAs work?, BFSI News, ET BFSI

Banking & Finance

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Ahead of a big credit push, the government has moved to remove the bankers’ fears of vigilance in extending small loans with a staff accountability framework.

Bankers fear investigation, hurt to career prospects and retirement if a loan sanctioned by them turns sour. This has made them averse to giving loans, which has led to obstacles in the flow of credit to deserving individuals and firms. The banking system is flush with liquidity but one of the reasons for credit not percolating is the risk-averseness which the new staff accountability norms seek to remove.

Loans up to Rs 10 lakh

Staff accountability need not be examined in NPA accounts with outstanding up to Rs 10 lakh. Most loans up to Rs 10 lakh are “template-based” and do not constitute a major percentage of the NPA portfolio by amount. Such accounts can turn into NPA even due to a slight change in circumstances including a family health crisis or a shutdown, leading to disruption in cash flows.

The credit risk assessment in these kinds of loans is driven by digital algorithms/templates and pre-designed schemes with low human intervention. The borrower community under this tier neither has financial literacy nor credit history.

Loans between Rs 10 lakh and Rs 1 crore

For examining staff accountability, banks may decide on a threshold of Rs 10 lakh or Rs 20 lakh, depending on their business size. These loans are processed at centralised back offices and not specifically at branches. They use lending automation templates, built-in digital algorithms and information drawn from aggregators with low use of discretion.

They have support of empanelled advocates and valuers. The staff accountability is to be examined by a committee formed at regional/controlling offices. For preliminary examination, the controller will submit to the committee a brief report, covering details of the loan and observations in inspection/audit reports for the previous four years.

If the committee finds a case of staff accountability exists, this will be examined by a fact-finding officer. But inspection and audit department staff will not be involved in conducting staff accountability. While conducting staff accountability examination, they should follow RBI guidance/norms. Standard operating procedure is to be followed in carrying out the task. This process will reduce the number of NPAs needing staff accountability examination to a large extent.

Loans between Rs 1 crore and Rs 50 crore

Accounts in this range are mostly credit facilities sanctioned to business units warranting examination by a specialised unit within the banks. NPA accounts in this range should undergo a preliminary examination by a committee constituted at one level higher than the sanction level — an account sanctioned at the regional office will be taken up at the zonal level, those at the zonal level by the circle office or head office, and so on.

The committee should be headed by an official senior to the sanctioning authority. For preliminary examination by the committee, a detailed report should be submitted through the controller. If the committee finds material lapses in any of the processes, the account may be referred at the discretion of the committee to the controlling audit office for a detailed examination of staff accountability.

A detailed report on the account will be submitted to the committee covering the borrower profile with reasons leading to the account turning into NPA. The comments of the internal and external auditors of the last four years and compliance thereof will also be submitted to the committee. Preliminary examination by the committee will be based on all monitoring, follow up, compliance of observations of the auditors.

If the committee finds material lapses in the stages of sanction, disbursement, monitoring and follow up, the committee may at its discretion refer the NPA account to the controlling audit office/audit vertical for detailed staff accountability examination. The audit vertical will rely upon the observations/remarks of the external/internal auditors of the last four years and after the conclusion of analysis shall submit a report to the committee for taking a final view.

For loans above Rs 50 crore

In the large accounts, after examining staff accountability, the vigilance and non-vigilance angle is to be identified by the Internal Advisory Committee (IAC).

Recommendations of IAC, where staff accountability is established, will be referred to the chief vigilance officer (CVO) for vetting. For banks with business of up to Rs 10 lakh crore, the cases of Rs 10 crore and above are to be sent to CVO. Banks with business of between Rs 10 lakh crore and Rs 25 lakh crore can refer cases of Rs 30 crore and above. Banks with business of over Rs 25 lakh crore may refer cases of Rs 50 crore and above.

Banks will have to complete an accountability exercise within six months from the date an account is classified as NPA. Depending on the banks’ business size, the guidelines suggest threshold limits for scrutiny of the accountability by the chief vigilance officer. If NPA is caused by external factors — such as change in government policy, natural calamities, non-release of government subsidy/grant — it should not attract a staff accountability examination, according to the framework.



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Govt to soon clear list of independent directors for various banks, BFSI News, ET BFSI

Banking & Finance

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The government is expected soon to clear a list of independent directors to be appointed on various public sector banks and financial institutions to meet regulatory norms of corporate governance. There have been vacancies at the independent director level across the public sector space, leading to regulatory non-compliance, sources said.

A list of eligible persons to be appointed as independent directors has gone to the Prime Minister’s Office and it will take a final call soon, the sources said.

Appointments Committee of the Cabinet headed by Prime Minister Narendra Modi makes all high-level appointments, including that of independent directors.

As per the Companies Act 2013, every listed public company shall have at least one-third of the total number of directors as independent directors.

Since many listed public sector banks (PSBs) and some financial institutions (FIs) are short of the mandated number of directors, it is in violation of the Companies Act as well as listing norms of market regulator Securities and Exchange Board of India, the sources said.

For example, some of the banks like Indian Overseas Bank, Indian Bank and UCO Bank are not compliant with independent director norms.

Except for State Bank of India (SBI) and Bank of Baroda, the position of chairman in most of the state-owned banks is vacant. The posts of workman director and officer director, representing the employees and officers of the banks, respectively, have been vacant for the past 7 years.

There are 12 public sector banks, four public sector general insurance companies, and one life insurance firm. Besides, there are some specialised insurance players like Agriculture Insurance Company of India Ltd.

In addition, there are state-owned financial institutions like IFCI, IIFCL, ECGC Ltd and EXIM Bank.

The Boards of Directors of nationalised banks are guided by the provisions of Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and Nationalised Banks (Management and Miscellaneous Provisions ) Scheme, 1970. PTI DP ANZ BAL BAL



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RBI’s retail direct scheme clocks over 12,000 registrations

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The Reserve Bank of India (RBI) on Saturday said its Retail Direct Scheme (RDS) has received ‘encouraging response’, clocking over 12,000 registrations since its launch on November 12. The scheme is aimed at facilitating investment in Government Securities (G-Secs) by individual investors.

“Encouraging response to RBI Retail Direct Scheme; 12,000+ registrations as of 2.30 pm on November 13, 2021,” tweeted the central bank.

According to central bank sources, investors in Sovereign Gold Bonds (SGBs), currently estimated at around 4.50 lakh, are expected to actively invest in G-Secs via RBI-RDS, which is envisaged as a one-stop solution for retail investments in G-Secs.

New investment avenue

Retail investors can invest a minimum of ₹10,000 and in multiples thereof in Central Government Securities (CG), State Government Securities (SG) and Treasury Bills (T-Bills) using the online portal (https://rbiretaildirect.org.in) by opening a Retail Direct Gilt (RDG) account with RBI. In the case of Sovereign Gold Bond (SGB), the minimum investment unit is 1 gram. The maximum investment limit per bid specified by RBI is ₹2 crore for CG/T-Bill and 1 per cent for SG.

Raghvendra Nath, MD, Ladderup Wealth Management, said, “Indian fixed income markets have always been very shallow… From retail investors’ perspective, easy access to government securities was not available before. With the ability to buy the government securities through the RBI, retail investors shall now have the flexibility to invest from 1 year to 30-year periods in a completely risk-free environment.” Nath felt that the RBI should create a mechanism for buying back the G-Secs. If that happens, the portal will immediately attract a lot of interest.

Bond market players said Primary Dealers (PDs) are expected to provide buy-sell quotes so that retail investors can buy and sell G-Secs in the secondary market.

Madan Sabnavis, Chief Economist, CARE Ratings, emphasised the importance of creating awareness among retail investors. According to the scheme, no fee will be charged for opening and maintaining RDG account with the RBI. Payments for transactions can be made using saving bank account through internet-banking or Unified Payments Interface (UPI).

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IPO craze continues; 2 public issues to open next week for subscription, BFSI News, ET BFSI

Personal Finance

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The current month will continue to be a busy one for the primary market, as two companies –Tarsons Products and Go Fashion (India) Ltd — are set to float their IPOs next week to collectively raise Rs 2,038 crore. The three-day IPO of life sciences firm Tarsons Products will open on November 15 and conclude on November 17, while that of Go Fashion, which owns women’s wear brand Go Colors, will open for public subscription during November 17-22.

This comes after eight firms have successfully concluded their initial public offerings (IPOs) in November so far.

These eight firms are — One 97 Communication, owner of Paytm; FSN E-Commerce Ventures, which runs online marketplace Nykaa, Policybazaar‘s parent entity PB Fintech, Fino Payments Bank, Latent View Analytics, Sapphire Foods India, SJS Enterprises and Sigachi Industries.

So far in 2021, as many as 49 companies have floated their IPOs to raise Rs 1.01 lakh crore, according to an analysis of data with exchanges.

Apart from these, PowerGrid InvIT, the infrastructure investment trust (InvIT) sponsored by the Power Grid Corporation of India, mopped-up Rs 7,735 crore through its IPO and Brookfield India Real Estate Trust raised Rs 3,800 crore via its initial share sale.

The fundraising so far this year is way higher than Rs 26,611crore collected by 15 companies through initial share-sales in the entire 2020.

Such impressive fundraising through IPOs was last seen in 2017 when firms mobilised Rs 67,147 crore through 36 initial share sales.

Individually, Tarsons Products and Go Fashion are looking to raise Rs 1,024 crore and Rs 1,014 crore, respectively, through their public listing of shares.

Tarsons Products’ initial share sale comprises fresh issuance of equity shares worth Rs 150 crore an offer for sale of 1.32 crore equity shares by promoters and an investor.

As a part of the OFS, promoters — Sanjive Sehgal will offload up to 3.9 lakh equity shares, and Rohan Sehgal will sell up to 3.1 lakh equity shares — and investor Clear Vision Investment Holdings Pte Ltd will divest up to 1.25 crore equity shares.

The IPO price band has been set at Rs 635-662 a share, and at the upper end of the price band, the public issue is expected to fetch Rs 1,024 crore.

Proceeds from the fresh issue will be utilised towards paying debt, funding a part of the capital expenditure for the new manufacturing facility at Panchla in West Bengal, and general corporate purposes.

On Friday, Tarsons Products raised Rs 306 crore from anchor investors.

Go Fashion’s IPO comprises a fresh issue of equity shares aggregating up to Rs 125 crore and an offer for sale of up to 12,878,389 equity shares by the promoter and existing shareholders.

Under the OFS, PKS Family Trust and VKS Family Trust are going to offload 7.45 lakh equity shares each, Sequoia Capital India Investments will sell up to 74.98 lakh shares, India Advantage Fund S4 I will divest up to 33.11 lakh shares and Dynamic India Fund S4 US I will sell up to 5.76 lakh shares.

Currently, PKS Family and VKS Family Trust hold 28.74 per cent stake each in the company, Sequoia Capital holds 28.73 per cent stake, India Advantage Fund has a 12.69 per cent stake, and Dynamic India Fund owns a 1.1 per cent stake in the firm.

The company has fixed a price band of Rs 655-690 apiece for the issue, and at the upper end of the price band, the IPO is expected to garner Rs 1,013.6 crore.

Proceeds from the fresh issue will be used to fund the rollout of 120 new exclusive brand outlets, to support working capital requirements and general corporate purposes.

The equity shares of both companies will be listed on BSE and NSE. PTI SP BAL BAL



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Ujjivan Financial Services Q2 loss at Rs 68 cr, BFSI News, ET BFSI

Personal Finance

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Ujjivan Financial Services on Saturday reported a consolidated net loss of Rs 68.18 crore for September quarter 2021-22. It had posted a net profit of Rs 89.76 crore in the year-ago same period. Sequentially, the net loss narrowed from Rs 99.33 crore in quarter ended June 2021.

Total income was down at Rs 731.90 crore in the quarter under review as against Rs 828.47 crore in the year-ago period, Ujjivan said in a regulatory filing.

Expenses were higher at Rs 822.73 crore during the quarter. In the year-ago period, expenses stood at Rs 704.95 crore.

“Barun Kumar Agarwal, CFO of the company has tendered his resignation from the company to take up a senior position role in the finance department of the bank,” the filing further said.

His resignation from the company will be effective from November 15, 2021 (close of business hours), it said. Ujjivan Financial Services is the parent company of Ujjivan Small Finance Bank. PTI KPM ANU ANU

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Consortium of PSU banks agrees to infuse funds for completion of stalled Amrapali projects: SC told

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On the occasion of Diwali, 150 flats completed by National Buildings Construction Corporation (NBCC) in a stalled project of Amrapali were given to the homebuyers in a small ceremony organised with the help of court receiver.

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