Category: Banking & Finance

Fabindia appoints five bankers to raise up to $1 bn via IPO, BFSI News, ET BFSI

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New Delhi: Ethnic wear retailer Fabindia Overseas is gearing up for its initial stake sale as it has hired five investment banks to raise up to $1 billion through the primary offering, said sources.

According to people familiar with the matter, the fabric maker has hired ICICI Securities, SBI Capital Markets, JP Morgan, Credit Suisse and Nomura as investment bankers for its planned IPO.

Fabindia is the latest player intending to capitalize on the buoyant investor sentiments in the primary and secondary market as benchmark indices are at record highs.

The company is expected to file the draft paper with market regulator Sebi in next two months, the sources added. It is expected to seek a valuation of about $2 billion and sell 25-30 per cent stake in the IPO.

Azim Premji’s private equity fund, PremjiInvest, is among investors who will sell partial stakes in the company. Infosys co-founder Nandan Nilekani and his wife Rohini Nilekani are also shareholders.

Over three dozen companies have hit the primary market so far this year, raising more than Rs 60,000 crore.



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Social commerce platform Coutloot raises $8 million from Ameba Capital, 9Unicorns and others

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Coutloot, an offline-to-online (O2O) social commerce platform, raised $8 million in a pre-series round led by venture capital firm Ameba Capital.

Other investors such as SOSV, 9Unicorns, Astarc Ventures also participated in the round, including existing investor Venture Catalysts.

The new funding is a precursor to a bigger $25 million round to be closed soon, the company said.

Fund deployment

Coutloot plans to use the funds for launching more services for retailers such as working capital solutions, video-stories commerce features, scaling its B2B supply chain, and stepping-up hiring activities across verticals, including tech, marketing and leadership roles.

Founded by Jasmeet Thind and Mahima Kaul, the company is aiming to build an online buying and selling platform in India, replicating the success of platforms such as Alibaba Group’s Taobao.

It is a platform that allows buyers and sellers to bargain while shopping. It helps sellers list non-MRP (non-fixed-price), unbranded local market products across fashion, electronics, home decor, sports and other boxed categories that account for 75 per cent of India’s retail sector at present.

Its app also allows buyers to chat in their preferred language, which gets translated into the seller’s preferred language.

Jasmeet Thind, Co-founder and CEO at Coutloot, said, “We are here to humanise e-commerce in India that is still just 10 per cent of the total retail and FMCG sector. Most commerce still happens offline for various reasons, including low trust and bargain.”

“Coutloot helps sellers and buyers with that power to decide the prices after a bargain on the chat. We are trying to create Coutloot as India’s Taobao, which is one of fascinating e-commerce success stories around the world,” Thind said.

The company has grown 11 times during the pandemic and has been growing at a CAGR of 300 per cent over the last three years. Coutloot is looking to clock a platform GMV of ₹1,000 crore in 2022 on the back of rising demand coming from smaller towns.

The company’s best-performing sellers come from smaller towns like Nagaon in Assam, Basai near Gurugram, Korba in Chhattisgarh, Surat in Gujarat, and Ludhiana in Punjab. The platform has a quarterly seller retention rate of 42 percent.

Top sellers on Coutloot are making upto ₹8 lakh a month while an average seller makes around ₹14,650.

It provides business opportunities to over 5,00,000 offline retailers, mom-and-pop stores, home sellers, and street hawkers, the company said. It has over 20 million listings on its app, which has been downloaded over 7.2 million times.

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ADB, India government sign loans for projects in Maharashtra and Jharkhand, BFSI News, ET BFSI

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The Asian Development Bank (ADB) and government of India have signed two loans worth $412 million for projects in Maharashtra and Jharkhand.

ADB has signed an additional loan of $300 million for Maharashtra to ramp up rural connectivity projects. The lender had approved $200 million in August 2019.

The additional financing of $300 million for the ongoing Maharashtra Rural Connectivity Improvement Project will improve an additional 1,100 rural roads and 230 bridges for a total length of 2,900 km in 34 districts.

Rajat Kumar Mishra, additional secretary in Department of Economic Affairs, signed the loan, along with ADB India Director Takeo Konishi.

“With additional financing, the overall project will improve the condition and safety of 5,000 km of rural roads and over 200 bridges connecting rural communities with productive agricultural areas and socioeconomic centres in Maharashtra,” Mishra said.

The project is expected to generate around 3.1 million person-days of employment for local communities, of which at least 25% is for women.

For Jharkhand, ADB and the government of India signed a loan of $112 million.

This will be utilised for developing water supply infrastructure and capacity of urban local bodies for improved service delivery in four towns in the state. In these towns, four water plants with a combined capacity of 275 million litres per day will be established, along with 940 kilometers of water distribution network that will supply to around 115,000 households.

This is ADB’s first urban project in the state. The bank said that low-income states could look up to this model for continuous water supply.



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Global index inclusion to bring turning point for India, says Morgan Stanley

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India is likely to be added to the global bond indexes by the first quarter of 2022, which would lure $40 billion of inflows to the country’s debt market in the next two years, according to Morgan Stanley.

“Foreign ownership of Indian government bonds has been declining, but 2022 would be the turning point that could bring an acceleration of bond inflows,” Morgan Stanley strategists led by Min Dai, wrote in a note. The inclusion in global bond indexes should bring $18.5 b in inflows every year over the next decade, compared to just $36.4 b in the last ten years.

India has been striving to get its sovereign bonds included in the famed global bond indexes to lure foreign inflows and reduce the chronic budget deficit, which widened to a record in the fiscal year-ended March as the coronavirus weighed on the economy.

The global bond inclusion “will push India’s balance of payments into a structural-surplus zone, indirectly create an environment for a lower cost of capital and ultimately be positive for growth,” according to Morgan Stanley.

Potential flattening of yield curve

Structural surplus in balance of payments and better productivity could drive 2 per cent appreciation per year in the rupee’s real effective exchange rate. Foreign inflows could flatten India’s sovereign bond curve by 50 bps, recommend going long 10-year bonds, targeting 5.85 per cent yield level.

“A historically steep curve suggests enough risk premium being in the price and foreign demand could drive the curve flatter,” it said.

The inflows would also reduce India’s borrowing cost and improve its debt sustainability, helping retain its investment grade rating. Banks will benefit from stronger growth and lower borrowing costs and private banks, particularly large ones, should be the key beneficiaries. Among non-bank financials, potential beneficiaries are likely to be HDFC, Bajaj Finance, SBI Cards, Mahindra Finance and Cholamandalam Finance.

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Bank Board Bureau recommends Atul Kumar Goel for PNB MD post, BFSI News, ET BFSI

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Banks Board Bureau (BBB) on Wednesday recommended Atul Kumar Goel for the post of Managing Director of Punjab National Bank.

Currently, Goel heads UCO Bank, which was removed from Prompt Corrective Action (PCA) restrictions. He will succeed SS Mallikarjuna Rao, who was recently given an extension till January 2022.

BBB interviewed 11 candidates for the post of MD and CEO of PNB – the country’s second-largest public sector lender. BBB is headed by former secretary of the Department of Personnel and Training BP Sharma.

“Keeping in view their performance at the interface, their overall experience and the extant parameters, the Bureau recommends Atul Kumar Goel for the position of MD and CEO of PNB,” BBB said in a statement.

The incoming managing director and chief executive will hold office for a term of three years from the date of entering office.

The name of the selected candidate would go for final approval to the Appointments Committee of Cabinet (ACC), headed by the Prime Minister.

The secretary of the Department of Financial Services, secretary of Department of Public Enterprises and the RBI deputy governor in charge of banking are part of BBB.

In 2016, the government approved the constitution of BBB as a body of eminent professionals and officials to make recommendations for the appointment of whole-time directors as well as non-executive chairpersons of PSBs and state-owned financial institutions.



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Mudra loan ratio trebles to 20% during pandemic as stress hits small businesses, BFSI News, ET BFSI

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A man displays new 2000 Indian rupee banknotes after withdrawing them from a State Bank of India (SBI) branch in Kolkata, India, November 10, 2016. REUTERS/Rupak De Chowdhuri/Files

Gross NPAs in the Mudra loan book is estimated to have reached around 20 per cent at June-end 2021, from around 6 per cent at March-end 2020.

As the stress builds up in the economy due to pandemic, lenders are seeing a sharp uptick in NPAs in Mudra loans, which have trebled in June 2021 over the pre-Covid fiscal of 2019-20.

Gross NPAs in the Mudra loan book is estimated to have reached around 20 per cent at June-end 2021, from around 6 per cent at March-end 2020.

In Maharashtra, public sector banks’ Mudra loan NPAs have risen to 32 per cent at June-end 2021, from 26 per cent at June-end 2020.

SBI’s NPA on Mudra loans in the state is at 59 per cent as on June-end 2021 followed by Punjab National Bank at 44 per cent, Indian Bank at 33 per cent and Bank of Maharashtra at 31 per cent at June-end 2021.

In Jharkahnd, Canara Bank Mudra NPAs as high as 114.35 per cent as bad loans were Rs 183.63 crore against the outstanding amount of loans at Rs 160.58 crore.

Among private sector banks, HDFC Bank’s Mudra loan NPA in Jharkhand was at 26.21 per cent, followed by IDFC First Bank at 24.93 per cent.

The Credit Guarantee Fund for Micro Units (CGFMU) provides guarantee against loan losses in Mudra loans, but 75 per cent of NPAs in Mudra loans, while the rest of losses have to be borne by the banks.

Loan losses

Public sector banks (PSBs) have seen a sharp surge in the amount of Mudra loans turning into non-performing assets (NPAs) over the last three years. NPAs in Mudra loans had jumped to Rs 18,835 crore in 2019-20, from Rs 11,483 crore in 2018-19 and Rs 7,277 in 2017-18, according to the Finance Ministry data.

Mudra loan disbursements by state-owned banks rose to Rs 3.82 lakh crore in 2019-20, from Rs 3.05 lakh crore in 2018-19 and Rs 2.12 lakh crore in 2017-18. The Mudra loan NPAs as a percentage of total loans rose to 4.92 per cent in 2019-20 from 3.42 per cent in 2017-18.

Banks and financial institutions have sanctioned Rs 14.96 lakh crore to over 28.68 crore beneficiaries in the last six years. The average ticket size of the loans is about Rs 52,000, it said.

Under PMMY collateral-free loans of up to ₹10 Lakh are extended by Member Lending Institutions (MLIs) viz Scheduled Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks (SFBs), Non-Banking Financial Companies (NBFCs), Micro Finance Institutions (MFIs) etc.

The scheme

Under the scheme, credit up to Rs 10 lakh is provided by banks and non-banking financial companies to small and new businesses.

The loans are given for income generating activities in manufacturing, trading and services sectors and for activities allied to agriculture.

The government has sanctioned loans of Rs 15.5 lakh crore under PMMY since its inception in April 2015.

Till March 31, 2021, the Government had sanctioned 29.55 crore loans under the scheme. Of this more than 6.8 crore loans worth Rs 5.2 lakh crores have been given to new entrepreneurs.

For FY22, loans worth Rs 3,804 crore have been sanctioned by 13 public sector banks (PSBs) as on June 25.



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India Ratings retains overall negative outlook for microfinance institutions, BFSI News, ET BFSI

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FILE PHOTO: A customer hands Indian currency notes to an attendant at a fuel station in Mumbai, India, August 13, 2018. REUTERS/Francis Mascarenhas

India Ratings and Research has maintained an overall negative outlook on the microfinance sector for the second half of the current financial year due to liquidity concerns in small and mid non-bank microfinance institutions, which could lead to a constraint in their disbursements.

The ratings agency retained a stable outlook for the large and strong sponsor-backed microfinance institutions, while small and mid non-bank microfinance institutions, including those with over 50% of assets under management in microfinance, were on a negative outlook rating.

Liquidity constraints of small and mid-sized companies could have a larger impact on Kerala and West Bengal, while harmonisation guidelines, government guaranteed loans, mechanism of Assam debt waiver and equity raise by some of these companies in the second half of the year could support sentiment in the near term.

According to the agency, microfinance institutions can be categorised as per their funding access. For most large companies, bank funding lines could continue and they may not face immediate liquidity stress. However, small and mid-size companies would need to conserve their liquidity, which could to a lag in their performance.

“The lower rated (BBB and below category) entities have witnessed a rising trend in incremental cost of borrowing which is not the case with large entities. If they are able to get a disproportionate share in government guarantee backed loans, it could help them in funding cost,” the agency said in its report.

Credit costs for microfinance institutions are likely to be in the range of 5%-10% this financial year, depending on their size and scale, access to liquidity, that is the ability to continue to disburse, and geographic concentration, the ratings agency said.

India Ratings also noted the recovery efforts taken by microfinance institutions. The collection efficiency improved over July-August 2021 from June 2021, given that around 70% of the borrowers were in the essential goods and services segments. The current collection efficiency at the end of June lagged behind March levels by 15%-20%, according to the agency.



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Bank of Baroda launches one-stop digital platform ‘bob World’, BFSI News, ET BFSI

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State-owned Bank of Baroda on Wednesday announced the launch of its digital banking platform ‘bob World‘, aimed at providing all banking services under one roof. The lender aims to provide an all-inclusive and seamless virtual banking experience, encompassing all digital banking services under one roof for the convenience of customers, the bank said in a release.

‘bob World’ will offer a wide gamut of banking products and services, to be rolled out in phases, under four key pillars — Save, Invest, Borrow and Shop — the lender said.

The pilot of bob World began on August 23, and the application (app) is already being used by more than 50 lakh users, it added.

Over 220 services will be converged into one single app, covering nearly 95 per cent of all retail banking services, which can be accessed by customers domestically and globally, Bank of Baroda said.

“With an ultra-modern look and feel, the app aims to provide an intuitive experience to the customers and is carefully crafted to balance the needs of the millennial users with that of the more experienced customers.”

The bank said ‘bob World’ offers digital account opening in 10 minutes with instant virtual debit card issuance, online loan application with instantaneous disbursal for selected loan products.

It has also integrated e-commerce to provide a wholesome and rewarding experience of banking and beyond, under one roof to the customers.

“The new corporate sub-brand for digital is testimony to our commitment to serve the customers across the world…With ‘bob World’, we offer all our digital offerings under one umbrella so that the customer is provided with all digital services under one roof with a consistent experience,” Sanjiv Chadha, Managing Director & CEO, Bank of Baroda said.



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RBI penalises 2 co-op banks for deficiencies in regulatory compliance, BFSI News, ET BFSI

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MUMBAI: The Reserve Bank of India (RBI) on Wednesday said it has imposed penalties on two cooperative banks for deficiencies in certain regulatory compliance.

A penalty of Rs 5 lakh has been imposed on The Swasakthi Mercantile Cooperative Urban Bank, Vijayawada, for contravention of/ non-compliance with certain provisions of the directions issued under a 2015 circular on ‘Board of Directors- UCBs’.

In another statement, the RBI said a penalty of Rs 40,000 has been imposed on Shikshak Sahakari Bank, Nagpur, for non-compliance with regulatory directions contained in the directive on ‘Membership of Credit Information Companies (CICs)’ and the provisions of Credit Information Companies Rules, 2006.

In both cases, however, the central bank said the action on the lenders was based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by them with their customers.

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Borrowers of syndicated loans over Rs 2,000 crore may not have to approach all lenders, BFSI News, ET BFSI

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The Reserve Bank of India is looking to revise guidelines and creating a new framework for syndicated loan arrangements of Rs 2,000 crore and above that would cut turnaround time.

The Indian Banks‘ Association has submitted a report to the RBI that looks into plugging the shortcomings in the existing arrangement.

How it will work?

Under the new framework, long-term borrowers need not approach all lenders for funding and getting sundry clearances.

It will have a detailed single point inspection of syndicated loan accounts and norms for a more structured approach by lenders to take care of the entire life cycle of the loan.

The new framework envisages the lead bank to draw terms and conditions, and setting up an independent administrative agent who manages the escrow account and routine loan inspections.

IBA will also be addressing issues such as information portal, drafting of common documents and identification of service providers.

The current system

At present, most consortium lending is down-selling of large value loans by the lead bank, while each bank comes up with its own additional terms and conditions.

Currently, the banking regulator supervises loan syndication through various circulars on loans and advances.

International model

The IBA also proposed strengthening the current ecosystem for the syndicated loan system and aligning it to international models such as those being practised in more developed financial markets.

The recommendations are in sync with the current framework followed in the US through Loan Syndications and Trading Association. The new framework may come up with specifics on minimum retention requirement, centralised supervisory oversight and audit, and development of a secondary market for corporate loans.

Banks will also explore whether such a model can deal with existing issues such as stressed assets and the issues relating to non-performing loans can be taken up while structuring security documents.



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