Category: Banking & Finance

The bank said its action plan aiming to improve asset quality started yielding results. The portfolio at risk (PAR) reduced to 21.7% from 30.8% in June with Rs 725 crore loan recovery. PAR was 25.2% in July. The lender’s collection efficiency improved to 95% in August from 93% in July, according to a regulatory filing to stock exchanges..

Chief executive Nitin Chugh resigned on August 18 after the bank’s holding company Ujjivan Financial Services raised alarms over his alleged mishandling of asset quality and human resource. The bank saw a series of exits from senior and mid-management level. Several board members also resigned before their scheduled term over the past one year.

The gross non-performing asset ratio rose further to 11.9% at the end of August from 10.8% a month back.

The bank said it is following a 100-day action plan for each business vertical with focus on PAR reduction and bad loan recovery with periodic monitoring and corrective action. The focus is on initial buckets and vintage of accounts for reducing PAR and further strengthening collection team and legal recovery for small enterprise loans and affordable housing loan portfolio.

Its gross loan portfolio rose marginally to Rs 14334 crore by the end of August from Rs 14, 137 crore a month back. Gross loan was at Rs 15,140 crore at the end of March. The unsecured microfinance loans contribute 67% of its total portfolio.

The bank’s restructured portfolio rose to Rs 1,405 crore from Rs 769 crore at the end of June.

Micro ATMs have been gaining traction steadily even as the traditional ATM model faces challenges amid cost and infrastructure-related issues.

According to RBI data, the number of micro ATMs deployed by banks stood at 4.94 lakh by August-end, a 60.9 per cent increase compared to the 3.07 lakh deployed a year ago.

In contrast, there were 2.41 lakh ATMs by August-end, a 3.4 per cent increase from 2.33 lakh deployed last August.

“Micro ATMs, through business correspondents (BCs), are a cost-effective retail model of banking vis-à-vis the more sophisticated ATM operations,” said the RBI’s Booklet on Payment Systems in January. Fino Payments Bank had the largest network of micro-ATMs in the country, with 2.44 lakh micro ATMs by July, followed by State Bank of India with 43,960 such devices.

With the surge in AePS transactions in recent years, along with the Covid pandemic, micro-ATMs have been gaining more popularity.

This is also reflected in cash withdrawals from micro ATMs, which amounted to ₹26,830 crore in August this year, compared to ₹19,513 crore a year ago.

Fintechs are also working on micro ATMs as they try to expand the market by offering financial services to the unserved and underserved population.

“Micro ATMs are important as they are the touch point to acquire and support the user. That is the onboarding practice,” said Ram Shriram, Founder and CEO, Mahagram.

Unlike its name, a micro ATM cannot store cash like a traditional ATM, but can be used by the merchant to authenticate the customer and physically dispense cash or take deposits.

It is a portable device that can be used by a merchant or business correspondent to connect with their bank, authenticate users, and perform financial transactions.

Many fintechs and banks are also partnering to provide banking services and cash withdrawals through micro-ATMs. PayPoint India and Bank of Baroda recently announced a tie-up to widen the reach of banking services.

PayNearby has partnered with Visa and RBL Bank to launch SoftPoS and mPOS for its over 15 lakh retail network.

As per the Master Direction – Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021, exposures to securitisations that are STC (simple, transparent and comparable)-compliant can be subject to the alternative capital treatment.

Lenders can provide supporting facilities such as credit enhancement facilities, liquidity facilities, underwriting facilities and servicing facilities supporting securitisation structures.

Securitisation involves transactions where credit risk in assets are redistributed by repackaging them into tradeable securities with different risk profiles, which may give investors of various classes access to exposures which they otherwise might be unable to access directly.

The RBI emphasised that the priorities of payments for all liabilities in all circumstances should be clearly defined at the time of securitisation and appropriate legal comfort regarding their enforceability should be provided.

This is aimed at preventing investors being subjected to unexpected repayment profiles during the life of a securitisation; listing of securitisation notes, especially in respect of certain product class, such as Residential Mortgage Backed Securities, and/ or generally above a certain threshold is recommended, though not mandatory, the RBI said.

In any case, any offer of securitisation notes to fifty or more persons in an issuance would be required to be listed in terms of Securities and Exchange Board of India (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008.

To help provide investors with full transparency, all triggers affecting the cash flow waterfall, payment profile or priority of payments of the securitisation should be clearly and fully disclosed in offer documents and in investor reports, per the Directions.

Investor reports should give information that clearly identifies the breach status in respect of expected cash flows to the note holders, the ability for the breach to be reversed and the consequences of the breach.

To ensure rights and interest of the securitisation note holders are protected, definitions, policies and remedies pertaining to the contours and caveats around the performance of the underlying loans must be suitably communicated.

Further, the rights and control of the securitisation note holders must be documented to account for all circumstances, including insolvency of all entities involved in securitisation, such as the originator Special Purpose Entity.