The State Bank of India (SBI) has invited bids from asset reconstruction companies, and other financial institutions to sell an NPA account KSK Mahanadi Power Company, with total outstanding against the company standing over Rs 4,100 crore.
“In terms of the bank’s policy on sale of financial assets, in line with the regulatory guidelines, we place the account (KSK Mahanadi) for sale to ARCs/ Banks/ NBFCs/ FIs,” SBI said in an auction notice.
The e-auction of KSK Mahanadi is scheduled to take place on December 31, 2021.
With fund based outstanding of Rs 3,815.04 crore and non-fund based outstanding of Rs 286.83 crore, company’s total loan dues towards SBI stands at Rs 4,101.87 crore as on date, as per SBI.
The country’s largest lender has set a reserve price of Rs 1,423.17 crore for selling this non-performing asset (NPA).
SBI said the interested parties can conduct their due diligence of this asset with immediate effect after submitting an expression of interest by December 6.
A former subsidiary of KSK Energy Ventures, KSK Mahanadi had ceased to be its arm from May 2018, following invocation of pledged shares by a consortium of lenders upon default of loan repayment by the power company.
Back then, KSK Energy Ventures had said that KSK Mahanadi constituted over 80 per cent of the total power generation capacity of the group in the last 10 years (3,600 MW of the 4,472 MWs being operated/developed under the company and that lenders action would have adverse impact on the KSK Energy Ventures and its various stakeholders.
KSK Mahanadi Power Company is under the corporate insolvency resolution process.
Indiabulls Housing Finance Ltd (IBHFL) has decided to raise up to ₹1,000 crore via public issue of secured, redeemable, non-convertible debentures of face value of ₹1,000 each.
The base size of the public issue is for an amount up to ₹200 crore with an option to retain over-subscription up to ₹800 crore. The issue is within the shelf limit of ₹2,000 crore.
The minimum subscription amount is ₹10,000 (10 NCDs) across all 10 series of NCDs. Investment thereafter will be in multiples of ₹1,000 (one NCD). The NCDs will be issued for three tenors — 24 months, 36 months and 60 months.
Depending on the tenor and series of NCD, the effective yield per annum ranges from 8.35 per cent to 9.26 per cent, as per IBHFL’s exchange filing.
The NCD issue opens on December 9 and closes on December 20, 2021. The NCDs are proposed to be listed on BSE and NSE.
BENGALURU: SoftBank is the biggest foreign investor in India’s startup ecosystem, the Japanese conglomerate’s founder and CEO Masayoshi Son said on Friday at the Infinity Forum, a thought leadership forum on fintech..
Son said that he had made a commitment to Prime Minister Narendra Modi that he would invest $5 billion in India, but in the last ten years, Softbank has already invested $14 billion. This year alone it has invested $3 billion.
“We are providers of about 10% of the funding to all unicorns in India,” Son said.
SoftBank’s investments in India include those in Flipkart, Paytm, Swiggy, Zeta, among others. “I believe in the future of India. I believe in the passion of young entrepreneurs in India. I tell the young people in India—let’s make it happen, I will support,” he said.
Asserting that Indian banks have been behind the curve in tapping payments technology, Kotak Mahindra Bank Managing Director Uday Kotak on Friday said they need to wake up before large parts of the traditional financial markets move out from them. Indian bankers have been short-sighted on the payments business in the last couple of years as they saw no money in payments, Kotak said at Infinity Forum organised by the International Financial Services Centres Authority (IFSCA) and Bloomberg.
As a result, they have allowed the growth of unified payments interface (UPI) payments monopolised by two players, Google Pay and PhonePe which have got 85 per cent market share, he said.
Therefore, it’s a wake-up call for Indian banking, he said: “Wake up, you will see large parts of the traditional financial markets move out.”
Having said that, he said, “We have to keep in mind that consumer tech companies have revenue models outside of finance. For instance, the advertising model or the e-commerce model. Banks, by law, under Section 6 of the Banking Regulation Act cannot get into non-financial business as defined.”
Therefore, there are serious issues about how you are going to draw the lines and simultaneously, there is an issue about financial stability, he said.
“I was reading an article which said that when you put a regulated entity into competition with a fintech or a consumer tech, the standard approach of the consumer tech is to play fast and loose on regulation and gain market share at great speed.
“I am not against competition. All that I’m saying is we need to make sure that in the name of better competitive service, we don’t have a systemic and a stability challenge at the same time,” he said.
Recalling Prime Minister Narendra Modi’s assertion that the most important aspect of digital growth is consumer trust that has to be protected at all costs.
“So, we need to make sure that as we go for fintech and grow it, we must also be clear that we do not betray trust,” he said.
On the homegrown payments ecosystem, Kotak said UPI payments as well as Aadhaar unique identity basis for transactions are remarkable innovations and they could be exported globally.
The only thing I have done for a few of my client portfolios is that we have not sold off a lot of equity positions, but we purchased put options for the month ending January, says Rajat Sharma, CEO, Sana Securities.
Whether it is Tata Group, Birla Group, Indiabulls, or Reliance, all have done a lot of deleveraging during the Covid period. They got plenty of cost savings, and that led to debt improvement. Do you think those are some companies, sectors, groups that you would look at? What the smarter companies do when interest rates are low, there is so much liquidity, is that they would do more issues of paper and reduce the leverage on their books. Reliance has done that. I was reading about their treasury operations, where they have picked up money at very, very good rates at this time.
I am not worried about what happens to the balance sheets of some of these larger companies. Instead, financial services-particularly large banks is the sector I am worried about.
For the last two years, since there has been a lockdown, nobody has compelled or at least I have not read anything about the amount of loan restructured, how many people took advantage of the moratorium and did not pay interest. Everything keeps getting delayed.
Auditors are being pushed to increase the time to six months, eight months and give us more time to make provisions or declare NPAs. If interest rates were to go up even by 25-50 bps and the cost of capital becomes expensive, you will see a lot of pain in financial services.
It may not be hard to believe right now because everything is hunky-dory. There is so much liquidity around, but this cannot go on forever. There must be some pain somewhere for people not working, not getting salaries and businesses shut. How could that all disappear? So I am more worried about how they will perform over the next four-five quarters.
Have you been a buyer in the recent decline that we have seen from the October highs? No, not at all. The only thing I have done for a few of my client portfolios is that we have not sold off a lot of equity positions, but we purchased put options for the month ending January. That is to disclose about 1% of the total portfolio size. For example, if somebody has a portfolio of Rs.20 lakhs, then 1% would be something like Rs. 20,000 and so on. So three lots of Nifty for every Rs.20 lakhs, so that is the only thing we have done for clients where portfolios are in equity, and we have not sold off anything, but other than that, we sold off stocks and are holding cash.
Canara Bank announced on Saturday that it has a limited period offer wherein home loans interest rates will start from 6.65% per annum. “This offer is applicable to all customers irrespective of the loan amount. Along with the attractive rate of interest and quick & hassle free sanction, the Bank has waived processing and documentation charges. This is a great opportunity to get home loan from Canara Bank to derive the benefits of this limited period offer,” stated a press release from the bank.
Adding to the customer convenience, the Bank is providing facility wherein the request for home loan can be made online by scanning the QR code and instant approval can be obtained. ‘Scan & apply’, ‘get instant approval’ is available for car loan, education loan, gold loan and personal loan also.
Till the end of November many banks were offering low home loan rates as part of their festive season offers. Already at really low levels, it was a good time for prospective borrowers to avail of a home loan. Although, the festive season offers are over, interest rates on home loans are still are low levels. Many banks had also waived off processing and documentation charges just like Canara Bank as for its latest home loan offer.
55% of Jan Dhan account holders are women, and 67% are in rural and semi-urban areas. (File image)
by Manoranjan ‘Mao’ Mohpatra
Recently, we celebrated the 7th anniversary of Pradhan Mantri Jan Dhan Yojana (PMJDY). Ever since its launch in 2014, Jan Dhan has been the biggest driver of financial inclusion and one of the largest financial inclusion schemes globally.
Well, that’s true. It’s because more than 430 million bank accounts have been opened under this scheme since inception, amounting to INR 1.46 trillion. Out of which, 370 million that is 86%, are currently operative. In the last seven years, Jan Dhan has financially included the segments like women and the rural population into the formal banking system, thereby empowering them financially to hold a bank account. In fact, today, 55% of Jan Dhan account holders are women, and 67% are in rural and semi-urban areas. Moreover, a total of 312.3 million RuPay cards have been issued to PMJDY account holders.
Hence, the figures mentioned above clearly attest that a significant shift towards financial inclusion is in progress in India.
However, before delving deep into the initiatives leading to financial inclusion in the country, it’s essential to understand what it means.
Financial inclusion is about delivering banking services to all sections of society. Primarily, it’s enabling to reduce the economic gap between the rich and the poor with an aim to lead economic progression in the country.
Initiatives towards financial inclusion
Among several initiatives driving financial inclusion, JAM trinity (linking Jan Dhan accounts with Aadhaar and mobile numbers) is one of them as it’s creating a holistic financial inclusion ecosystem. JAM trinity is serving as an important medium in strengthening financial delivery mechanisms and social welfare schemes and also enhancing the efficacy of several Direct Benefit Transfer (DBT) Programmes.
For instance, to avail schemes like PM-KISAN or life and death insurance, the first step requires people to have a bank account – and that’s what PMJDY provides.
In addition, Aadhaar helps identify and register beneficiaries, and mobile numbers allow communication with them via SMS.
At the same time, during the pandemic-induced lockdown, JAM played a game-changing role as it helped reach out to the citizens staying in the farthest corners of the country. It is because of JAM a total of INR 309.45 billion were credited to women PMJDY account holders during Covid-19 lockdown.
Clearly, Jan Dhan, as the first step towards financial inclusion, followed by banking services like debit cards, insurance, pension scheme, etc., is bringing the financially excluded segment into the formal banking system. Today, the number of individuals visiting banks and ATMs has considerably increased in rural and urban areas.
In addition, Aadhaar Enabled Payment System (AePS) is another service to facilitate financial inclusion in India. It helps in withdrawing money (financial aid received) at micro-ATMs using Aadhaar number and fingerprint. Providing authentication of customers, availability of services, accessibility through AePS channel, and affordability as it’s free of cost, AePS is undoubtedly playing a crucial role in the journey of financial inclusion. In fact, the National Payments Corporation of India (NPCI) highlights that the value of transactions through AePS has nearly doubled to approx. INR 219.78 billion in January 2021 from INR 112.87 billion in January last year.
Role of digital payments in financial inclusion
For several SMEs, digital payment services like Paytm, PhonePe, and Google Pay are becoming the first formal banking service. Even a small roadside kiosk now accepts payment digitally using a QR Code. According to a recent survey done by a merchant payment solutions company, India is estimated to experience the fastest growth in the transactions of mobile payments in terms of value, with a CAGR of over 20% between 2019 and 2023.
Alongside, PM SVANidhi scheme is providing an incentive or cashback facility to street vendors for adopting digital transactions. The network of lending institutions and the digital payment aggregators such as Paytm, NPCI (for BHIM), Google Pay, Amazon Pay etc., will help to onboard the vendors for digital transactions. The onboarded vendors will receive incentives in the form of a monthly cashback in the range of Rs.50 to Rs.100.
Conclusion
Even banks are driving the initiative of financial inclusion by shifting towards digital banking. Those living in remote areas and women are now better equipped with banking facilities via an online system. The traditional financial institutions are leaving no stone unturned in moving their operations online, thereby thus allowing financial inclusion to widen its scope.
All in all, the vision is to bring more and more people – especially those who are underserved customers – into the formal financial ecosystem.
(The author is chief executive officer at Comviva. Views expressed are personal and not necessarily that of Financial Express Online.)
The Reserve Bank of India (RBI) may deflate the hype around reverse repo hike in the monetary policy by explaining the virtues of using reverse repo change as a pure liquidity tool and not a rate tool, according to State Bank of India’s economic research report “Ecowrap”.
It emphasised that delaying normalisation measures is prudent in the current situation which would also give time for economic recovery to strengthen further.
“We believe the talks of a reverse repo rate hike in the Monetary Policy Committee (MPC) meeting may be premature as the RBI has been largely able to narrow the corridor without the noise of rate hikes and ensuing market cacophony,” said Soumya Kanti Ghosh, Group Chief Economic Advisor, SBI.
Reverse repo rate is the interest rate that banks earn for parking short-term surplus liquidity with RBI.
Section 45Z (3) of the amended RBI Act of 2016 clearly states that, “The Monetary Policy Committee shall determine the policy rate required to achieve the inflation target”.
Ghosh emphasised that nowhere in the MPC’s mandate is there any reference to its role in liquidity management, which remains internal to the functioning of the Bank consistent with its policy stance. Thus, the RBI is not obliged to act on reverse repo rate only in MPC.
Unconventional tool
Also, change in reverse repo rate is an unconventional policy tool that the RBI has effectively deployed during crisis when it moved to a floor instead of the corridor.
In this regard, the report made a reference to Goodhart’s (2010) observations that the width of the policy corridor acts as an independent instrument for the central bank in a crisis and an asymmetric corridor is a logical outcome.
According to SBI’s economic research department, the central bank can (for whatsoever reason) supply any amount of additional liquidity without pushing short-term money market rates below the key policy rate.
“Thus, the interest rate can be set to achieve monetary goals, while the amount of liquidity in the banking system can play the role of financial market stabilisation. Since the pandemic, the RBI has done exactly this balancing act, and the pandemic is not yet over!” Ghosh said.
Referring to the US Fed indicating accelerating the bond tapering program, thereby ending it earlier than anticipated, the report observed that the rate hikes are also in offing sooner than expected as inflation is no longer considered as transitory.
“Unless Omicron proves more fatal than Delta variant, this in turn would imply strengthening of the dollar and depreciation pressures for the rupee. Thus RBI would have to look for multiple objectives,” the report said.
Ecowrap noted that the forthcoming monetary policy comes against the backdrop of the global scare of Omicron, that we are still trying to unravel.
However, the good thing is India has now vaccinated 125 crore people and this might have given the country better preparation for the future as the gap between the first and second wave was only 2 months.
“…The pandemic has also worked its way through the population resulting in larger herd immunity…” the report said.
Calibrated progress
Ghosh noted that the RBI has made a calibrated progress towards liquidity normalisation since the October policy with amount parked in overnight fixed reverse repo declining to ₹2.6 lakh crore from ₹3.4 lakh crore in pre-October policy
The lower increase in currency in circulation as more people are now using digital modes of payments has also contributed to the build-up of the surplus liquidity.
The report said the RBI has also largely achieved its objective of pushing up short term rates with 3 month T-Bill rate which was below reverse repo for major part of August now at 3.52 per cent, factoring in the impact of variable reverse repo rate. Similarly, 6 month and 1-year T-Bill rates have shifted upwards by 20-30 basis points since last MPC.
MUMBAI: Payments banks promoted by corporates will not be eligible to seek a transition to a small finance bank with the Reserve Bank of India not accepting the internal working group proposal on bank licenses for corporates.
Of the payments banks that are already licensed, Airtel Payments Bank and Jio Payments Banks are promoted by corporates. These are the only two payments banks of the 11 that were granted approval that continue to function. Aditya Birla Payments Bank had surrendered its licence in 2019 others including Sun Pharma’s Dilip Shanghvi had dropped their plans earlier.
This would mean that small finance banks would have to come from the NBFC microfinance segment or cooperative banks that choose to convert themselves into small finance banks. Most of the small finance banks operating today were largely converted from microfinance companies or non-banking finance companies engaged in small loans.
Among the non-corporate promoted payments banks, Paytm PB and Fino PB have indicated that they would pursue an SFB licence if the opportunity arises.
RBI’s internal working group on bank ownership had said that small finance banks would be considered for transitioning into a universal bank provided they meet the minimum paid-up capital and net worth requirement applicable to universal banks.
SFBs are considered to have a better business model compared to payments banks as they can lend and issue credit cards. They also do not face any geographic or size restrictions, unlike cooperative banks. However, they do face restrictions in extending large loans to corporate houses.
The country’s largest lender State Bank of India (SBI) saw its yield on domestic advances fall 71 basis points on a year-on-year basis in Q2FY22 to 7.51%.
By Piyush Shukla
Yields on advances by banks have fallen between 54-166 basis points (bps) in the September quarter (Q2FY22) compared to the same period last year, due to interest rate competition from capital markets and lower credit offtake.
The country’s largest lender State Bank of India (SBI) saw its yield on domestic advances fall 71 basis points on a year-on-year basis in Q2FY22 to 7.51%. Its total domestic advances, as on September end, rose 4.6% year on year to Rs 21.56 lakh crore. ICICI Bank, on the other hand, saw its yield on advances fall to 8.34% in Q2FY22 from 8.88% a year ago. The private lender’s total loan book, as on September end stood at Rs 7.65 lakh crore, up 17.2% on year.
“Credit offtake in the system remains weak at around 6%-6.5%. On the capital markets side, the borrowing rates are very fine so some part of the borrowing is moving toward the capital market and thus banks are also passing on the benefit of lower cost of funds to borrowers and which is why you see the yield coming down,” said Karan Gupta, director – financial institutions, India Ratings and Research.
Gupta added that presently banks are not witnessing a significant impact on their net interest margins (NIMs) despite lower yields because of lower cost of funds. For SBI, the cost of deposit has fell from 4.35% in Q2FY21 to 3.84% as on September end. Similarly, private sector banks including ICICI Bank and IDBI Bank saw their cost of deposits fall to 3.53% and 3.66% in Q2FY22 from 4.22% and 4.53% a year ago, respectively. But while not visible yet, NIMs may be impacted going ahead due to any significant increase in concerns on asset quality deterioration resulting in interest income reversals, Gupta said. In July-September, Bank of Baroda’s global NIM fell 19-bps quarter-on-quarter to 2.85% due to interest income reversal pertaining to a non-banking finance company account, as per an Edelweiss Securities report.
“…If we were to look at the net of one offs, including interest reversals on account where there was a stay, our net interest margins would be broadly unchanged between last quarter and this quarter,” said Sanjiv Chadha, MD and CEO at Bank of Baroda in a post earnings analyst call.
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