Category: Banking & Finance

Axis Bank commits Rs 30,000 cr till FY26 towards sustainable lending, BFSI News, ET BFSI

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The country’s third largest private sector lender Axis Bank has committed Rs 30,000 crore lending till fiscal year 2025-26 under its sustainable financing framework, a senior official said.

These commitments are in line with the Sustainable Development Goals (SDGs), supporting India’s commitments under the Paris Agreement.

“As part of its commitments, the bank has set a target of incremental lending of Rs 30,000 crore over the next 5 years, under wholesale banking towards pertinent sectors included in its Sustainable Financing Framework (SFF),” Rajesh Dahiya, Executive Director (Corporate Centre), Axis Bank told PTI.

Environmental, Social and Governance (ESG) is a measure which investors use as a tool to assess how good the practices of a company are. For the last 3-4 years, the words sustainability and ESG have made people sensitive about the whole idea of a sustainable planet, Dahiya said.

“These are the metrics which have been spoken about for about 3-4 years now. However, with COVID and all its problems, it highlighted the issue of sustainability in a very big and magnified manner.

“In the next five years, we want to lend Rs 30,000 crore more incrementally as wholesale banking towards pertinent sectors including Axis Bank’s SFF. We want to increase our portfolio of green lending,” Dahiya said.

He said the bank’s existing wholesale banking portfolio towards SFF, including green and social sectors, is little over Rs 29,000 crore and it intends to lend to companies where there are green practices.

After five years till 2025-26, the bank will assess these lendings to see positive social and environmental outcomes and increase it further, he added.

Going forward, the lender will also scale down its exposure to carbon-intensive sectors in its wholesale banking business portfolio.

The lender said it is expanding its ESG risk coverage in credit appraisal under its ESG policy for lending.

Axis Bank is building and deploying an ESG risk assessment toolkit, with ESG stress testing and ESG scenario analysis, for its large corporate, SME and agri-business verticals by 2022-23.

The lender will incentivise the borrowers for adopting good practices by offering 0.5 per cent interest waiver on new electric vehicle loans, effective immediately.

“We will make 5 per cent of our retail two-wheeler loan portfolio as electric by 2023-24 ,” he said.

Besides, the bank has set the target of incremental disbursement of Rs 10,000 crore by 2023-24 under Asha Home Loans for affordable housing, and increasing share of women borrowers.

Also, the bank will aim to reach 30 per cent female representation in its workforce by 2026-27, aligned to its #ComeAsYouAre Diversity Charter.

Among others, it will plant 2 million (20 lakh) trees by 2026-27 across India towards contributing to creating a carbon sink.

Dahiya said Axis Bank is probably the first among corporates to constitute an ESG Steering Committee comprising heads of key departments who shall act as ESG champions within and outside the bank.

“Since the day COVID hit, our board got us together and decided…we want to create a practice which is differentiated and which is measurable,” he added.

The bank has announced its commitments ahead of the upcoming 2021 United Nations Climate Change Conference (COP26) at Glasgow, UK from October 31 – November 12.

The participants are expected to talk about enhancing their commitments made at COP21 at Paris in 2015.

In line with its ESG strategy, Axis Bank has recently raised India’s first sustainable USD AT1 bonds of USD 600 million in the overseas markets.



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Lio raises ₹37 crore from Sequoia Capital India, Lightspeed India

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IT start-up Lio on Wednesday said it has raised around ₹37 crore in a seed funding round led by Sequoia Capital India and Lightspeed India.

The company plans to use the investment primarily to expand its engineering team and increase the number of users of the mobile application.

“The investment by Lightspeed India and Sequoia Capital India helps accelerate Lio’s vision of enabling small businesses to be smarter by leveraging their business data for better decision making. We aim to achieve this by helping people organise their data,” Lio Co-founder and CEO Anupam Vijayvergia said in the statement.

Tools provided by Lio

Lio provides variety of tools for tabulation, calculation and organising needs, such as creating tables of customer, stocks, payment data for businesses or organising to-do lists, class schedules or wedding registries.

It was launched in November 2020, and claims to have recorded 10 lakh downloads on the app store within 9 months.

In July 2021, the app was also launched in Indonesia, and has seen strong adoption.

Currently, the application is available in 10 Indian languages and Bhasha indonesia, with approx 45 per cent usage in vernacular languages, the statement said.

“Lio had raised an angel round from prominent names in the industry including Aakrit Vaish, Anupam Mittal, Ashish Hemrajani, Gaurav Munjal, Haresh Chawla, Kunal Bahl, Kunal Shah, Maninder Gulati, Miten Sampat, Prakshit Dar, Rohit Bansal, Roman Saini, Sachin Bhatia, Siddharth Rao in March 2021,” it added.

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Trojan posing as IT refund skulking to attack Android phone bank customers, BFSI News, ET BFSI

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A banking Trojan malware has been detected in the Indian cyberspace that is lurking to attack bank customers using Android phones and has already targeted those from more than 27 public and private sector banks, the country’s federal cyber security agency said in a latest advisory.

The phishing (a social engineering computer virus attack to steal personal data) malware is masquerading as an “income tax refund” and it can “effectively jeopardise the privacy of sensitive customer data and result in large-scale attacks and financial frauds”, the CERT-In advisory issued on Tuesday said.

“It has been observed that Indian banking customers are being targeted by a new type of mobile banking campaign using Drinik android malware,” it said.

“Drinik started as a primitive SMS stealer back in year 2016 and has evolved recently to a banking Trojan that demonstrates phishing screen and persuades users to enter sensitive banking information,” it said.

Customers of more than 27 Indian banks including major public and private sector banks have already been targeted by the attackers using this malware, the CERT-In said.

The Indian Computer Emergency Response Team or CERT-In is the federal technology arm to combat cyber attacks and guarding the cyber space against phishing and hacking assaults and similar online attacks.

The advisory describes the attack process.

The victim, it said, receives an SMS containing a link to a phishing website (similar to the website of the Income Tax Department) where they are asked to enter personal information and download and install the malicious APK file in order to complete verification.

“This malicious android app masquerades as the Income Tax Department app and after installation, the app asks the user to grant necessary permissions like SMS, call logs, contacts etc.”

“If the user does not enter any information on the website, the same screen with the form is displayed in the android application and the user is asked to fill in to proceed,” it said.

This data to be filled includes full name, PAN, Aadhaar number, address, date of birth, mobile number, email address and financial details like account number, IFS code, CIF number, debit card number, expiry date, CVV and PIN, it adds.

Once these details are entered by the user, it said, the application states that there is a refund amount that could be transferred to the user’s bank account.

When the user enters the amount and clicks “Transfer”, the application shows an error and demonstrates a fake update screen.

“While the screen for installing update is shown, Trojan in the backend sends the user’s details including SMS and call logs to the attacker’s machine,” it said.

“These details are then used by the attacker to generate the bank specific mobile banking screen and render it on user’s machine. The user is then requested to enter the mobile banking credentials which are captured by the attacker,” it said.

The advisory recommends some counter-measures to guard against such attacks and malware, like always download apps from official app stores, install appropriate Android updates and patches as and when available, use safe browsing tools, do extensive research before clicking on link provided in the message and look out for valid encryption certificates by checking for the green lock in the browser’s address bar before sharing sensitive personal data.

It also asked users to immediately report any unusual activity in their account to their bank and also send a complaint to CERT-In at incident@cert-in.org.in.



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Lenders hire specialist agencies to analyse default probability of borrowers, BFSI News, ET BFSI

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Risk-averse lenders wary of large exposures in the post-Covid era are hiring consultants and specialist agencies to analyse the default potential of all proposals in excess of Rs 500 crore.

Lenders want to ensure that they have a clear perspective of the borrower’s future default risks and cash flow situation in light of peculiar challenges brought about by the pandemic.

“The pandemic has disrupted cash flows of businesses in a significant way, and since large value loan proposals are on the rise, we thought it prudent to hire agencies and check the company’s default risk and default probability,” said a lender that has hired one such agency. “These agencies are checking the total debt, debt-service coverage ratio, cash flows and various other metrics to determine whether they will be able to service debt obligations.”

Banks want clear visibility over companies’ subsidiary operations and other activities, especially around the moratorium period. In many cases, companies are also approaching banks with expansion plans and lenders also wish to scrutinise whether firms have a clear strategy in place and what could be the macroeconomic and sectoral drivers.

“The pandemic, loan moratoriums and an uncertain business environment have led to many banks seeking clarity and additional comfort around the financial health of borrowers at the time of fresh loan proposals or renewal of facilities. There is heightened diligence, detailed financial analysis and a deeper assessment of credit risk and default around loan proposals – particularly when the amounts are Rs 500 crore and above,” said Gaganpreet Puri, leader, risk and regulatory, Alvarez & Marsal India, a turnaround specialist.

In several instances, the lenders claim that they have no visibility on operations of the companies. Many companies have seen a spurt in their valuations, especially the listed ones, but banks are concerned of the underlying assets and impact on future profitability and revenues.

“Many companies have even approached the banks as they are looking to undertake mergers and acquisitions and require financing. In these cases, banks want a rationale behind such manoeuvres,” said a person in the know.

Firms specialising in this segment say that they are being asked to give objective and automated credit analysis and rating based on the company’s financial metrics.

“AI driven automated predictive credit analysis tools are being increasingly adopted by banks and financial institutions,” said Amit Maheshwari, Strategic Advisor to FinMind – a start-up offering automated financial insights.

FinMind claims its predictive analytical capabilities enable early identification of potential credit risk events and has successfully predicted credit weakening of several companies in the past.

Bank credit growth has been languishing for the last few years. Central bank data showed that credit rose 6.61% for the fortnight ended August 13, from 6.2% in the previous fortnight. Loans to the corporate sector continued to remain weak and grew a meagre 1% during the same period.



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Imitating a fintech firm not the right business model: Former RBI Deputy Gov

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Banks should avoid ‘imitating’ fintech companies in their attempt to re-imagine themselves but should look for meaningful co-operation with such companies to enhance their business.

According to SS Mundra, Former Deputy Governor, Reserve Bank of India (RBI), the process of re-imagination of business models for banks has already started. However, increasingly a number of banks have been evolving like fintech companies.

“Banks have to realise that fintech companies are competitive and nimble. So a bank trying to imitate a fintech company in totality is not the right approach to my mind and it is not the right business model. I think what is beneficial for both of them is to have a meaningful co-operation,” he said at the 14th edition of the two-day Banking Colloquium organised by CII, held virtually on Tuesday.

Such co-operation would help them both leverage on their respective strengths, Mundra said. While fintech companies have the strength of being nimble, innovative and fast-footed banks have the advantage of having a good resource base, reach, faith and trust of people and these can be complementary.

Banks should further avoid the temptation of introducing too many products or too many processes at too short an interval as it tends to leave both their staff and customers confused.

Rationalise branches

“There has to be a well-designed and well-decided pace at which such changes are introduced. Otherwise we have seen in some cases it may lead to unforeseen problem or a regulatory displeasure so one has to be conscious,” he pointed out.

At a time when digital has become a way of life, it is very important to take a “hard look” at the traditional branch-led business model, he said, talking about the need to rationalise branches.

“I am not suggesting that branches should go away but there is a need to reimagine the business model. One has to see which are the branches that are loss-making, contributing positively, can be downsized and can be completely done away with, and where you can rely completely on technology and where you can rely on agency arrangement. For every bank, it is important to do a complete holistic assessment of their branch network and how to derive maximum value from this,” he said.

According to Mundra, corporate lending, which once constituted the biggest chunk in banks’ loan book, has shrunk, with corporates deleveraging and finding alternative methods of financing themselves.

It would no longer be profitable for a bank to sell only a product to a corporate, as most corporates are now expecting “solutions” from banking system. “You need to adopt a solution-based approach if you want to do corporate banking,” he said.

One of the sectors which banks could look to ramp up is the MSME portfolio as there is more availability of information, date and GST has changed the entire landscape of the sector, Mundra said. “But here again the gradual movement would have to be from product to solution. In the retail sector, banks should leverage on the co-origination model,” he added.

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Bank loans do not reflect credit risk adequately as RBI chases growth, BFSI News, ET BFSI

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The period of extended surplus liquidity is already witnessing fierce pricing wars across banks, some of which may not reflect credit risk adequately.

“However there is the risk of an Asset Liability mismatch if the liquidity is withdrawn quickly. As of now, the inflation numbers may not warrant such a decision from RBI, but if core inflation persists in the current range of 6% or above, that might act as a hindrance to continued liquidity abundance,” according to the State Bank of India’s economic research report Ecowrap.

The industry is replacing its long-term debts by very low-priced CP/working capital demand loan (ECDL) and this will obviously act as an enabler once the investment cycle revives

Margin pressure

Banks are now facing significant margin pressures despite surfeit of liquidity in the banking system, it said.

A back of envelope estimate suggests that the core funding cost of the banking system that includes cost of deposits, negative carry on Statutory Liquidity Ration (SLR) and Cash Reserve Ratio (CRR) and Return on Assets is currently at 6 per cent, while the reverse repo rate is at 3.35 per cent. Additionally, if the cost of provisions is added to the core funding cost, the total cost comes to around 12 per cent, the report said.

Credit risk

The report cited the example of 15 years loans, which are being priced at even lower than 6 per cent, linking with repo / treasury bill rates. It said that 10-year Government Security (G-Sec) is currently trading at 6.2 per cent and by the current pricing trends this could even gravitate towards 6 per cent again.

This anomaly not only negates the concept of tenor premium but may create a material risk with regard to sustainability of such rates in long term, on which borrowers and banks are basing their financial calculations, it said, adding that the only good thing is that such pricing war is mostly restricted to AAA borrowers.

According to the report, three year term loans are being quoted at close to 4 per cent repo rate and seven year term loans for borrowers below AAA are also quoting a risk premium of 15-20 basis points over the 10 year rates. Working Capital Loans (WCL) are currently being quoted at a notch above reverse repo rate at 3.35 per cent.

The report said that the concept of normally permitted lending limit (NPLL) for specified borrowers, meant to nudge them to move towards corporate bonds market, may lose its importance.

CP market

Ghosh observed that the commercial paper (CP) market is also witnessing significant churn with banks now almost absent.

Non-Banking participants like mutual funds who do not have access to RBI Reverse Repo window are creating pricing pressure in CP market as they are sometimes quoting below RBI reverse repo rate.

The CP market reflects the huge pricing gap between better and lower rated borrowers, it said.



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Depositors of scandal-hit PMC Bank, 20 others to get up to Rs 5 lakh within 90 days, BFSI News, ET BFSI

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The Deposit Insurance and Credit Guarantee Corp will pay depositors of 21 insured banks, which includes scandal-hit PMC Bank, the amount equivalent to the deposits, up to a maximum of Rs 5 lakh, within 90 days.

Necessary instructions have been issued to the banks to submit the claims within 45 days after obtaining the approval from depositors to claim deposit insurance. The verification and settlement of the claims should be done by November 29, 2021, DICGC said in a a release.

These banks shall submit a claim list by October 15 and update the position as on November 29, with principal and interest, in a final updated list, which will enable DICGC to discharge its insurance liability in full as per norms.

Unpaid or the difference in amount of deposits up to Rs 5 lakh, as per final updated list, will be paid within 30 days of receipt, that is by December 29.

The Parliament in August passed the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021, ensuring account holders get up to Rs 5 lakh within 90 days of the RBI imposing a moratorium on the banks.

In 2019, the Reserve Bank of India imposed restrictions on PMC bank after observing financial irregularities, including under-reporting of bad loans. From the findings of the probe, it was discovered that Rs 250 crore worth of fake deposits were shown in the system, and that the bank had manipulated its net time and deposits using HDIL and DHFL cheques.

Here’s the list of the 21 banks:

> Adoor Co-Operative Urban Bank, Kerala
> Bidar Mahila Urban Co-Op Bank, Karnataka
> City Co-Op Bank, Maharashtra
> Hindu Co-Op Bank, Punjab
> Kapol Co-Op Bank, Maharashtra
> Maratha Sahakari Bank, Maharashtra
> Millath Co-Op Bank, Karnataka
> Needs of Life Co-Op Bank, Maharashtra
> Padmashree Dr. Vithal Rao Vikhe Patil, Maharashtra
> People’s Co-Op Bank, Kanpur, Uttar Pradesh
> Punjab & Maharashtra Co-Op Bank (PMC Bank), Maharashtra
> Rupee Co-Operative Bank, Maharashtra
> Shri Anand Coop Bank, Pune, Maharashtra
> Sikar Urban Co-Op Bank, Rajasthan
> Sri Gururaghvendra Sahakara Bank Niyamitha, Karnataka
> The Mudhol Co-Operative Bank, Karnataka
> Mantha Urban Cooperative Bank, Maharashtra
> Sarjeraodada Naik Shirala Sahakari Bank, Maharashtra
> Independence Cooperative Bank, Nashik, Maharashttra
> Deccan Urban Co-Operative Bank, Vijaypur, Karnataka
> Garha Co-Operative Bank, Guna, Madhya Pradesh

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Union Bank of India bags pension disbursal mandate from NDMC, BFSI News, ET BFSI

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New Delhi, Union Bank of India on Tuesday said it has bagged pension disbursement mandate from North Delhi Municipal Corporation. Union Bank of India has entered into an agreement with North Delhi Municipal Corporation (NDMC) for pension disbursal of their retired employees, the lender said in a release.

A memorandum of understanding was signed at the Civic Centre, the headquarters of NDMC.

The agreement will come into effect immediately.

“Union Bank of India is committed to ensure timely, accurate and reliable disbursement of monthly pension to the pensioners of North Delhi Municipal Corporation (NDMC), along with serving the pensioners in a better manner.

“Our collaboration is a step forward in our relationship with NDMC and going to benefit Union Bank of India, NDMC and people at large,” R K Jaglan, GM, Government Business said.

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Kotak Mahindra Bank forays into healthcare lending; not to use RBI’s liquidity window, BFSI News, ET BFSI

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Kotak Mahindra Bank on Tuesday announced its foray into the healthcare lending space, where it will be taking exposures of up to Rs 15 crore apiece. The private sector lender, however, will not be seeking funds from the Reserve Bank’s on-tap liquidity scheme for the sector, as its cost of funds is very low, its President and Head of Business Banking Assets, Sunil Daga, said.

In May this year, the RBI had announced an on-tap liquidity window of Rs 50,000 crore for on-lending by banks to the healthcare sector, where they can take exposures of up to three years and access funding at the repo rate.

Daga said the bank’s cost of funds is “very competitive” and hence, it will not be accessing the RBI window. Even without the central bank’s special window, the business is exciting, he added.

Till now, Kotak Mahindra Bank had been providing funds to the healthcare sector but now it has a focused offering, Daga said, adding that the business will be part of its consumer segment.

Daga declined to specify the size of its current healthcare book, but added that it was miniscule. Now, the bank has created a dedicated pan-India team to cater to this business.

It will take exposures ranging from healthcare-related loans for an individual, to long-term project lending for doctors building healthcare infrastructure, he said, adding that single exposure can go up to Rs 15 crore.

The bank is targeting to start with signing up 100 customers a month and will be aiming to take it up to 500 a month, Daga said.

The loans will be both secured as well as unsecured, and also include a quick approval for exposures up to Rs 50 lakh, the bank said in a statement.

The loan tenure will be between 12 to 84 months, while the loan to value ratio can go up to 85 per cent, as per its website.

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