The Reserve Bank of India has imposed a monetary penalty of ₹2 crore on RBL Bank.
The penalty, imposed by an order dated September 27, is for contravention of section 28 (h) of the Reserve Bank of India (Interest Rate on Deposits) Directions, 2016 and for non-compliance with the provisions of clause (b) of sub-section (2) of section 10A of the Banking Regulation Act, 1949 and also for non-compliance with the provisions of section 10 A (2) (b) of the Act.
“This penalty has been imposed in exercise of powers vested in RBI under the provisions of section 47 A (1) (c) read with section 46 (4) (i) of the Act,” the RBI said on Monday.
The RBI conducted the Statutory Inspection for Supervisory Evaluation of RBL Bank for its financial position on March 31, 2019 (ISE 2019).
The examination of the Risk Assessment Report and Inspection Report pertaining to ISE 2019, RBI letter dated October 27, 2020 and related correspondence revealed contravention of the regulatory directions and non-compliance with the provisions of the Act in terms of opening of five savings deposit accounts in the name of a co-operative bank and failure to comply with the provisions of section 10A(2)(b) of the Act relating to the composition of the board of directors.
A notice was then issued to the bank advising it to show cause as to why the penalty should not be imposed for contravention and non-compliance.
“After considering the bank’s reply to the show-cause notice, oral submissions made during the personal hearing and examination of additional submissions made by the bank, RBI came to the conclusion that the aforesaid charge of contravention of / non-compliance with the directions /Act were substantiated and warranted imposition of monetary penalty on the bank,” it said.
Life insurance companies have pitched for a re-pricing of the government’s flagship Pradhan Mantri Jeevan Jyoti Beema Yojana.
According to calculations, the premium would have to be fixed at a little over ₹400 per annum per policy from the current ₹330.
Launched in 2015, the PMJJBY scheme provides a life cover of ₹2 lakh to people in the age group of 18 to 50 years (life cover up to age 55) having a savings bank account. The scheme is available for one year, stretching from June 1 to May 31 and is renewable every year.
The government had chosen to keep the premium rate low to enable more people to take life cover and get social security.
However, insurers point out that the premium for the life insurance cover was fixed a long time ago and needs to be reviewed. Further, there has also been a rise in claims under the scheme following the Covid-19 pandemic.
“It is very, very important that the premiums for the scheme increase. It has not been hiked even once since the scheme was launched. It is not sustainable at the moment,” said an official with a life insurance company.
“We are hoping that the premium is reviewed. A large number of people have joined the scheme, especially in the last two years. Claim ratio has also increased since the pandemic,” said another insurer.
On a cumulative basis, there were 10.34 crore persons enrolled under the scheme with a total of 2.6 lakh claims by May this year.
The government is also looking to bring more people under the scheme. The Finance Ministry had recently said it would try and bring the 43.04 crore eligible account holders of the Pradhan Mantri Jan Dhan Yojana announced under PMJJBY and Pradhan Mantri Suraksha Bima Yojana. Banks have already been communicated on the issue, it had said.
Federal Bank has partnered with the National Payments Corporation of India (NPCI) to launch the Federal Bank RuPay Signet Contactless Credit Card.
“One of the major highlights of this card is, it comes with the lowest Annual Percentage Rate (APR) starting from just 5.88 per cent per annum,” the private sector lender said in a statement on Monday.
At present, the card is offered to existing customers of the bank.
The bank has adopted a ‘Digital First’ and the card immediately made available for use in FedMobile. The physical card will be delivered to the customer in due course.
Federal Bank had launched credit cards for existing customers in June this year and had an exclusive tie-up with Mastercard. This had got impacted after the Reserve Bank of India barred Mastercard from acquiring new customers.
Shalini Warrier, Executive Director, Federal Bank had said in July that the bank would restart issuance of credit cards within two months and was in talks with both Visa and RuPay.
The Reserve Bank of India has imposed a penalty of Rs 2 crore on RBL Bank for offending regulatory directions, and being non-compliant with the provisions of the Banking Regulation Act, 1949.
The penalty has been imposed because of contravention of directions on interest rate and deposits, and failure of compliance with the provisions of the Act, pertaining to the extent of opening five savings accounts in the name of co-operative banks, and composition of the bank’s board.
“This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers,” the central bank said in a press release.
The decision came after the central bank conducted a Statutory Inspection for Supervisory Evaluation in 2019, and a Risk Assessment Report and Inspection Report based on the ISE.
The RBI has issued a notice to the bank, asking for reasons why the penalty should not be imposed.
The fine comes right after nearly 100% of RBL Bank’s shareholders approved the reappointment of Vishwavir Ahuja as the MD and CEO for the fourth term, starting June 1.
Though the board had approved his fourth 3-year term, the RBI in June had only cleared his reappointment only for one year.
With the gradual phasing out of social restrictions, there has been an improvement in the monthly collection ratios of securitised pools rated by Crisil Ratings.
These had declined between April and June 2021 following the second wave of the Covid-19 pandemic.
“The trend in improving collection efficiencies has been seen across asset classes and in a number of segments, the levels are quite close to pre-pandemic levels. Collection ratios in mortgage-backed securitisation (MBS) pools have rebounded to near-100 per cent―their pre-pandemic normal ― in the pay-out months of July and August 2021,” Crisil Ratings said on Monday.
MBS pools, with home-or property-backed loans as underlying, have shown extremely high resilience across economic cycles.
Says Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, Crisil Ratings, “In asset-backed securitisation (ABS) pools, collection ratios are set to reach January-March 2021 pay-out levels after dipping to 84 per cent in the first quarter this fiscal.”
Median collection
Median collection ratios for vehicle loan pools for August pay-out reached 100 per cent, just a tad short of the March collection ratio of 101 per cent, he further said.
Similarly, in the case of two-wheelers and small and medium enterprise (SME) loan pools, collection ratios have risen to 98 per cent and 90 per cent in August from 95 per cent and 78 per cent respectively, for June pay-out.
“The government’s focus on rural areas and agriculture, and launch of schemes for SMEs have helped here,” Crisil said.
Rohit Inamdar, Senior Director, Crisil Ratings, said, “Securitisation volume after the second wave remains a pale shadow of what it was before the pandemic began. What’s encouraging, however, is the limited decline in collections after the second wave. The ongoing recovery should improve investor confidence and increase interest in securitisation transactions.”
The country’s largest mortgage lender Housing Development Finance Corporation (HDFC) will raise up to Rs 6,000 crore by issuing bonds on a private placement basis to augment its long term resources. The bonds in the nature of secured redeemable non-convertible debentures (NCDs) have a base issue size of Rs 3,000 crore with the option to retain oversubscription up to Rs 3,000 crore, HDFC said in a regulatory filing on Monday.
“The object of the issue is to augment the long-term resources of the Corporation. The proceeds of the present issue would be utilised for financing/refinancing the housing finance business requirements of the Corporation,” it said.
The three-year tenor bonds rated ‘AAA‘ by Crisil and Icra will be up for redemption on September 30, 2024.
The bids for subscription will open on September 29, 2021, and close on the same day.
HDFC said the coupon rate on the bonds would be payable at a fixed spread of 80 basis points (0.80 per cent) over the benchmark that will be reset on a quarterly basis.
The benchmark will be a three-month T-bill (treasury bill) as published by FBIL and sourced from Bloomberg, it added. If Bloomberg data is not available, the simple average of FBIL 3-months T-bills closing rate, as published by Financial Benchmarks India Pvt Ltd (FBIL) may be recognised with certain parameters.
The first such quarterly setting of the coupon rate for September 30, 2021, would be 4.13 per cent per annum, HDFC said. Shares of HDFC closed flat at Rs 2841.10 apiece on BSE. PTI KPM BAL BAL
The Reserve Bank of India has imposed a monetary penalty to ₹11 lakh on The Jammu & Kashmir State Co-operative Bank, Srinagar.
The penalty, imposed by an order on September 23, is for contravention of section 23 read with section 56 of the Banking Regulation Act, 1949.
“This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949,” the RBI said on Monday.
The statutory inspection was by Nabard on its financial position as on March 31, 2019 and the Inspection Report revealed that the bank had opened branches without obtaining the prior permission of the RBI.
Based on the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for violation of the said directions, the RBI said.
“After considering the bank’s reply, RBI came to the conclusion that the aforesaid charge of contravention of section 23 read with section 56 of the Banking Regulation Act, 1949 was substantiated and warranted imposition of monetary penalty,” it further said.
MUMBAI: Some cardholders might see standing instructions for payment on their credit card fail from next month. These could be for subscriptions with online content platforms, edtech companies or standing instructions for online advertisement payments. Some of these merchants are yet to comply with RBI’s new requirement of additional factor authentication (OTP) for recurring payments through cards though the deadline is less than a week away.
According to sources, around 75% of the banks have put in place the technology to meet RBI’s directive. However, there are some banks and merchants who are still in wait-and-watch mode. Banks are writing to customers, warning that some transactions may fail: “Effective October 1, 2021, the bank will not approve any standing instruction (e-mandate on cards for recurring transactions) given at merchant website/app on HDFC Bank credit/debit card, unless it is as per RBI-compliant process.” The bank has recommended that customers use its bill-pay option for utilities or pay on the biller’s website using OTP.
According to Razorpay, which processes close to a third of all recurring payment transactions, a dozen banks have already put in place the new setup where even for repeat payments the bank will alert the customer a day in advance and also provide them with a link to discontinue the mandate. “In the short term, there may be some disruption but, in the long term, this move by the RBI can take growth in recurring payment mandates off the charts,” said Razorpay chief technology officer and co-founder Shashank Kumar.
Kumar says the RBI directive addresses two key issues. Earlier, discontinuing a standing instruction to a merchant could be extremely cumbersome with some asking for a letter to be sent by post asking to discontinue the subscription. Second, debit cards were a grey area and recurring payments were done largely in credit cards. Incidentally, even after October 1, international mandates will continue as neither banks nor the RBI has jurisdiction over international billers.
“There are 900 million debit cards in India and their inclusion could increase the market multifold,” said Kumar. According to Kumar, by empowering customers to stop the payments at any time, the RBI has increased the confidence level. This could also make online education or entertainment more affordable as the availability of this facility will encourage providers to have a monthly debit model rather than recover annual fees.
Besides requiring banks to alert customers, the RBI has capped automatic debits at Rs 5,000 per month. This would mean that billers, like insurance companies, with large instalments, would need to increase the frequency to enable auto-debit. In the case of utilities, many online payers use their bank’s bill payment platform for standing instructions and will have no impact.
Along with NARCL, India Debt Resolution Company Ltd (IDRCL), has also been set up, it will then try to sell the stressed assets in the market. (Representative image)
By Sandesh Dholakia
A few days back, in one of her key announcements Finance Minister Nirmala Sitharaman made good on one of her promises from the Budget 21-22 and announced the formation of India’s first-ever “Bad Bank”. National Asset Reconstruction Company (NARCL) which has already been incorporated as a company and received cabinet approval will acquire stressed assets worth Rs. 2 lakh crores from various banks in order to recover them. Along with NARCL, India Debt Resolution Company Ltd (IDRCL), has also been set up, it will then try to sell the stressed assets in the market. This NARCL-IDRCL structure is the new “Bad Bank of India.”
But why do we really need a Bad Bank ?
Insolvency and Bankruptcy Code (IBC), Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI Act), Debt Recovery Tribunals as well as setting up of dedicated Stressed Asset Management Verticals (SAMVs) in banks for large-value NPA accounts have brought much-needed focus on the recovery of non-performing assets. In spite of such efforts, a substantial amount of NPAs continues on the balance sheets of banks primarily because the stock of bad loans as revealed by the Asset Quality Review is not only large but fragmented across various lenders.
The situation becomes even duller when we benchmark India with other leading G-20 nations. As per World Bank data, the share of NPA to gross loans in Indian banking is significantly higher compared to all other leading G-20 nations with an exception of the Russian Federation. Large unresolved NPAs over a sustained period of time have proven detrimental to policymaking and economic growth for many economies in the past.
How will the new Bad Bank structure function ?
NARCL proposes to acquire Rs. 2 Lakh crores of (gross value) assets. As per the Secretary DFS, blended net realizable value of these assets is likely to be ~18% i.e. Rs. 36,000 crores (Rs. 30,000 crores post-tax). 15% of the net realizable value will be in the form of cash and rest through security receipts(SR).
GOI guarantee on SRs will be good between net realizable value and actual realized value. In a normal Asset Reconstruction Company (ARC) transaction, cash realization is recorded upfront and flow to profits and SRs are subject to MTM. Due to uncertainty on recovery, these SRs are illiquid hence locked capital for banks. Under the scheme, SRs are guaranteed by GOI so it will provide liquidity to SR and free up capital on immediate basis post conclusion of sale.
Let’s understand through an example : –
Let’s say a loan of Rs. 10,000 was written-off by a bank –
The book value of asset in bank’s balance sheet is zero
If the bad bank determines the recoverable value at 30% or Rs. 3,000 then:
Bad bank will have to pay 15% of Rs. 3,000 = Rs. 450 (or 4.5% of original loan value) – this will be paid in cash by bad-bank, which may source funds from banks themselves as equity. From accounting perspective, banks will report Rs. 450 as profit from recoveries of written off loans that gets added to net worth.
For the balance 85% of Rs 3,000 = Rs. 2,550 – bad bank will issue securitisation receipts (SRs) which will be partly guaranteed by government and partly non-guaranteed. For the guaranteed part, banks will recognise the value as investment but that will not require any capital for 5yrs as there is Govt. guarantee. For non-guaranteed part, banks might not recognise value until actual recovery is made.
What does the Global Experience say about Bad Banks?
Way forward for Bad Bank of India –
Aggregation of stressed assets at one entity’s hand is undoubtedly expected to speed up the process for finding interested buyers, transfer of assets, restructuring of debt etc. but more than anything else the quality of such asset will matter the most. Historically we have seen proven examples of formation of Bad Banks working, most of it were in the cases where not only a law was passed but the enforcement of it was done properly. A plenty of it also relied on the evolving socio-economic and political conditions of the country.
As India recovers from its hardest ever economic hit due to Covid-19 the challenges going to be faced by the Bad Bank are not going to be easy but if tackled properly this could provide a much-needed moment of renaissance to the entire Indian Banking Sector.
(The author is founder & CEO at Case Ace and Asia-Pacific chairman at International Finance Students’ Association. Views expressed are personal.)
To help those borrowers who have been finding it difficult to pay back loans, the Reserve Bank of India (RBI) had lent a helping hand in the form of loan restructuring.
In 2020, the RBI had announced a loan restructuring program. And then in May 2021, due to the second wave of Covid-19, it announced a second resolution framework for many borrowers including individual borrowers.
Various banks have announced the terms and conditions for availing their loan restructuring 2.0.
Here is a look at the FAQs of HDFC Bank‘s loan restructuring policy 2.0 as per the lender’s website.
What is the restructuring 2.0 scheme approved by RBI? RBI has provided a framework to banks & lending institutions for implementation of resolution plans for addressing the economic fallout due to the COVID-19 pandemic which has led to significant financial stress for customers. Basis the framework and regulatory guidelines, your bank has framed its policy for the restructuring of the loan/s of individuals and entities that have been impacted due to the COVID-19 pandemic.
Who is eligible for restructuring? a) Individuals and Entities that are classified as Standard with the bank as on April 1, 2021. b) The customer has to be impacted financially by COVID-19 pandemic in the form of reduction/ loss of income or cash flows. c) Only those accounts, which are on the bank’s book as on April 1, 2021 will be eligible. c) The reduction of income and its financial impact on the customer will be reviewed by the bank basis the documents / information provided which does show the drop in cash flow due to the COVID-19 impact. The bank will assess the viability of the customer to pay the restructured EMIs basis the documents provided, before granting the restructuring. Apart from the viability calculations, the repayment track record of the customer, credit bureau records, and the responses given by the customer while availing moratorium earlier will also be factored in the restructuring decision.
Which are the products covered under the regulatory restructuring relief package. * Credit Card receivables* Auto Loans and Two-wheeler Loans * Personal Loans (both for personal use and for business / commercial purposes)* Personal Loans to professionals * Education Loans* Loans given for creation/ enhancement of immovable assets (e.g., housing loans)* MSME loans with Udyam certificate (The borrower should be classified as a MSME on March 31, 2021 in terms of Gazette Notification S.O. 2119 (E) dated June 26, 2020)
What type of loans are not eligible for restructuring? Loans to the following entities/individuals are not eligible for restructuring: -* individuals/entities for agricultural purposes and classified as agricultural loans by the bank * agricultural credit societies * financial service providers* Central, State and local government bodies * HDFC Bank employees* Exposures to housing finance companies which have already been rescheduled* Loans which have been already restructured once
How do I avail the restructuring benefit on my loan? You may visit the bank’s website for the application link, fill the application form and submit the relevant details.Login to the application form with your Loan Account Number / Credit Card Number / Email ID registered with the bank and the OTP sent on your registered mobile number/ Email. If you have changed your number, please give a written request for change in number at the nearest branch, and apply post the number has changed on system.Alternatively, you may contact your Relationship Manager (RM).
Can I apply multiple times? No. You can apply for restructuring only once.
What are the restructuring options that are available to me? The balance tenure of the loan can be extended by a further period of maximum 24 months, including the moratorium period at the bank’s discretion to ease your monthly EMI repayment burden.
Do I need to submit any documents to avail of the restructuring benefit? The bank will require you to submit documents giving details about the current status of your employment or business. For salaried borrowers:* Salary slips for the month of March 2021 and latest salary slip for last 2 months* A declaration of estimated salary/income immediately after the end of the desired restructuring period (Maximum 24 months).* Letter of discharge from job (in case of job loss)* Bank account statements of the account where salary is credited in case of salaried employees from Oct 2020 to date For self-employed borrowers/ entities:* Current / CC account bank statement from 1st April 2020 till date * GST returns Oct-2020 till date * Income tax returns for FY-19 & FY-20 and FY-21 (if filed) * Profit and loss statement / Balance sheet for the last 2 years* Udyam certificate * Declaration by self-employed professionals/ businessmen declaring that their business is affected by Covid-19.Please do keep these documents ready before you apply on the link, as incomplete applications are unlikely to be processed.
Will opting for the restructuring package have an impact on my credit bureau report? As per regulatory guidelines, your loan/credit facility will be reported to the credit bureau as “Restructured”.
I hold multiple loans/credit facilities with the bank. Do I have to apply separately for each of these loans? The restructuring application form shall have the option to apply for one or all the loans by a single application on the bank’s website. The bank shall assess the application on regulatory guidelines, on the COVID-19 impact and the viability of the repayment plan before decisioning the same.
I have a credit card with EMI plans within my credit limit. Can I opt for restructuring of only the card outstanding and not the EMI plans? The entire credit card balance including the loans within the credit limit will be restructured and converted into a separate loan account.
I have a Jumbo Loan facility on my credit card. Is it mandatory to convert the Jumbo Loan if I choose to restructure the credit card? You may choose to restructure either the card balance or the Jumbo Loan or both the facilities.
Will my credit card be blocked or deactivated if I avail of the restructuring scheme? Your credit card will be deactivated without any further notice once the restructuring is approved for any of the loans / credit cards you have with the bank. The bank may choose to reinstate fresh limits at its discretion on the card after 12 months basis the repayment behaviour on the loan EMIs.
Is there a minimum outstanding requirement for availing the restructuring facility?v Minimum outstanding balance required to convert the card/loan outstanding is Rs. 25,000.
I am self-employed/ entity having my small-scale unit. Am I eligible for relief? Self-employed individuals/entities are eligible for relief for both under the MSME category as well as the Non-MSME category. The Bank would request its self-employed customers to register themselves as MSME through the Udyam portal of the Government wherever applicable. Udyam portal link: https://udyamregistration.gov.in/Government-of-India/Ministry-of-MSME/online-registration.htm
Can I apply for restructuring now as I was not able to apply for moratorium before? The scheme for restructuring is open to all customers of the bank irrespective of the moratorium applied status subject to the borrower meeting the regulatory guidelines of restructuring.
I have already availed of restructuring. Can I avail this once again? If you have already availed restructuring, you are not eligible for restructuring under this scheme. However if you have not availed of the full benefit of 24 month tenor extension in the earlier scheme which ended on 31st Dec, the bank can evaluate and provide relief to the extent of overall tenor extension of 24 months.
My loan was taken along with a co-borrower/s. Will all the co-borrowers of the original Loan agreement be required to sign the revised restructuring agreement? As per regulatory and legal requirements, all borrowers/co-borrowers of the original loan need to agree and sign on any changes in the loan structure including the restructuring agreement.
What is the last date of making applications through the portal. The link on the portal will be live till 20th September 2021 for customers with single loan or overall exposure less than 25 Lacs.
How much time will it take for me to know the status of the restructuring application. The bank will process and communicate the status of the application to the customers in 10 to 14 working days.
How will I get the approval and communication for acceptance? The bank will communicate the status of the restructuring request vide text message or email on the registered phone number or email address.
Will I need to do further documentation for restructuring? For all loans, you would have to sign the restructuring agreement post approval for the bank to effect restructuring. If you are sole borrower, bank will provide digital options for signing the agreements. In case there are two or more applicants on the loan structure, then all applicants will be required to accept the terms by putting physical signatures on the application and revised agreement, and this agreement will need to be submitted at the nearest customer service desk. The customer will get a copy of the revised terms and amort schedule on their registered mail id / by regular post.
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