Category: Banking & Finance

Enforcement Directorate attaches HDIL group’s shares worth Rs 233 crore, BFSI News, ET BFSI

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The Enforcement Directorate (ED) on Thursday said it has attached partly-paid compulsorily convertible preference shares worth Rs 233 crore of HDIL group companies in the alleged multi-crore-rupee PMC bank fraud and money-laundering case. It said “on the strength” of these shares, HDIL had the rights for allotment of under-construction flats measuring 90,250 square feet FSI (floor space index) in Mumbai’s Ghatkopar of developer Aryaman Developers Private Limited.

“The developer has given an undertaking to ensure not to sell, transfer, alienate or create any third-party rights on completion of the project,” the ED said.

The agency has filed a money-laundering case to probe the alleged loan fraud in the Punjab and Maharashtra Co-operative (PMC) Bank in October, 2019 against the Housing Development Infrastructure Limited (HDIL), its promoters Rakesh Kumar Wadhawan, his son Sarang Wadhawan, its former chairman Waryam Singh and former managing director Joy Thomas.

The others under the agency’s scanner include the promoters and executives of Somerset Construction Private Limited, Serveall Construction Private Limited, Sapphire Land Development Private Limited, Emerald Realtors Private Limited, Awas Developers and Construction Private Limited, Prithvi Realtors and Hotels Private Limited and Satyam Realtors Private Limited.

The father-son duo were arrested by the ED in the case in October, 2019 and they are lodged in a Mumbai jail at present.

“Rakesh Wadhawan and other promoters of HDIL have fraudulently utilised the funds taken from the PMC Bank in various projects by projecting the same as untainted.

“During 2011-12, an amount of Rs 233 crore was transferred from HDIL group companies to the group companies of Mukesh Doshi of Mumbai and these funds were finally utilised by Aryaman Developers Private Limited in the slum rehabilitation project being developed in Ghatkopar East, Mumbai,” the ED said in a statement.

According to the understanding between Rakesh Wadhawan and Doshi, HDIL group companies would be allotted constructed area of FSI measuring 90,250 sq. ft of the carpet area in the proposed building.

“For this project, Aryaman Developers had its own investments, including loans from banks. The funds were utilised for the payment of land premium, rent to slum dwellers, construction of transit camps, fungible premium, construction of rehab and IOD (intimation of disapproval) deposit with the slum rehabilitation authority.

“The promoters of HDIL intended to take a backdoor exit from the project and approached Aryaman Developers for a settlement at Rs 150 crore for not causing hindrance in the ongoing project for slum rehabilitation,” the ED alleged.

It claimed that an “undertaking” was taken from Doshi in the form of an affidavit to ensure that the project after development would not fall in the hands of accused Rakesh Wadhawan.

Describing the role of HDIL in the alleged default with the PMC Bank, the ED said its group companies availed loans from the bank from time to time.

“The mode and manner of operation of bank accounts of HDIL clearly indicate the connivance of PMC bank officials with the promoters of HDIL.

“There was misconduct on the part of PMC officials as they ignored all the prevailing procedures to facilitate promoters of HDIL by extending unusual credit facility,” it alleged.

Instead of declaring those as non-performing assets (NPAs) for initiating actions for recovery, PMC bank officials chose to “accommodate” the HDIL group, the agency alleged.

“Due to such a criminal act of the promoters of HDIL group companies, the PMC Bank suffered a huge wrongful loss to the tune of Rs 6,117.93 crore,” it said.



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Axis Bank raises USD 600 mn via AT1 bonds, BFSI News, ET BFSI

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Axis Bank on Thursday said it has raised USD 600 million (around Rs 4,380 crore) through the sale of sustainability-focused AT1 bonds. The dollar-denominated, Basel III-compliant AT1 notes were finally priced at 4.10 per cent, 0.30 per cent lower than the initial price guidance, the bank said in a statement.

Under the Basel-III capital regulations, banks globally need to improve and strengthen their capital planning processes.

This is the maiden USD AT1 bond by an Indian issuer in a sustainable format and first time that the bank has accessed international bond markets after a 4-year hiatus.

The bank said the issue was oversubscribed 3.8 times ahead of the final pricing announcement and was well diversified across geographies and nearly half of the bonds were allotted to sustainability-focused investors.

The bank has set up a board-level ESG committee and has a sustainable financing framework, the statement said, adding that a second party opinion provider has graded it as ‘Credible & Impactful’.

“This successful transaction, which is also the largest single-tranche USD bond issuance ever for Axis Bank, reflects the faith and confidence that international investors have reposed in the bank’s franchise and robust credit and business model,” its group executive and head of treasury Neeraj Gambhir said.

The issue follows similar AT1 bond issuances by HDFC Bank (USD 1 billion) and SBI (Rs 4,000 crore) done over the last fortnight, which are seen as signs of interest revival in the instrument.

Merchant bankers had on Wednesday said that Bluebay, Blackrock, Fidelity and HSBC Asset Management Company were among the major investors in the issue.

The merchant bankers to the issue include Bank of America, BNP Paribas, HSBC, Citigroup and Standard Chartered Bank.



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Covid effect: Insurers tighten underwriting norms for group life policies, hike premium

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Life insurance companies have tightened underwriting norms for group life insurance policies and hiked premium in some cases after the second wave of the Covid-19 pandemic led to a surge in death claims.

While many insurers are seeking medical information or tests for such policies, others have increased premium rates between 15 per cent and 100 per cent.

An additional perk

Group life insurance covers are often taken by companies as an additional perk for their employees.

Noting that Covid-related death claims are still pouring in following the second wave of the pandemic, life insurers said group insurance policies have become challenging as they are not sure about the exposure they have. Re-insurers, too, have increased the rates for such policies.

Sources said many companies are now finding it difficult to renew or purchase such policies for employees due to the high prices. In many cases, insurers have also withdrawn policies. “Group term policies have got risky since the pandemic, especially after the second wave, due to rising claims, risk of anti-selection and co-morbidities that are triggered off due to Covid and can lead to death. As a result, insurance companies have made underwriting more stringent for group term policies, and the pricing has also become more expensive,” said Vighnesh Shahane, Managing Director and CEO, Ageas Federal Life Insurance.

In many cases, insurers are choosing not to launch these policies or are withdrawing them for the time being, he further said.

Ashwin B, COO, Exide Life Insurance, also said underwriting norms for group life insurance have indeed become stricter over the last one year and the pricing has also risen significantly. “This has happened largely after the second wave that saw a steep rise in mortality, especially among the age group of 25 to 55 years, which is the core profile of the group business,” he said.

Insurers were forced to re-look at the group portfolio from two aspects – revise the pricing as reinsurance companies have increased their rates and absolute increase in the mortality experience, he further said.

The group policies are typically renewable annually, so the current pricing and underwriting may be reviewed next year again depending on the experience going forward.

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Aon increases stake to 100% in Aon India Insurance Brokers

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Aon, a global professional services firm, increased its stake in Aon India Insurance Brokers from 49 percent to 100 percent by acquiring the remaining shares from Catamaran Ventures.

Catamaran Ventures is an investment firm launched by Infosys’ co-founder NR Narayana Murthy, which manages over $1 billion across asset classes. In 2020, Aon had acquired a 49 percent stake from Catamaran Ventures in the Indian composite broking firm, Anviti Insurance Brokers. Anviti was founded by Catamaran in 2016 and rebranded as Aon India Insurance Brokers Private Limited in June 2021.

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Jonathan Pipe, CEO, Aon India Insurance Brokers, said, “We have strong local capabilities and have nurtured trusted advisory relationships in India. We are committed to addressing unmet client needs and look forward to continuing to bring the best of Aon to a dynamic market.”

Sandeep Malik, Executive Chairman, Asia Pacific, Aon, said, “This step reaffirms Aon’s commitment to the Indian market and further enables us to create new sources of value for our clients, accelerate innovation and deliver a unique colleague experience. We are happy to have worked with Catamaran, which built the foundation to deliver immense client value with integrity.”

MD Ranganath, President, Catamaran Ventures, said, “Catamaran’s objective has always been to bring world-class business practices to India by partnering with global companies and to create value and jobs in India. In a short period of time, Aon India Insurance Brokers has established itself as a leading, well-respected corporate insurance broking firm in India.”

Aon India Insurance Brokers has over 300 employees across nine locations in India. Aon also helps companies make better workforce decisions through data, analytics and advice in India through its fully owned subsidiary, Aon Consulting.

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TCS, Wipro among five firms shortlisted by SEBI for fraud detection project

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Markets regulator SEBI has shortlisted TCS, Wipro, Capgemini Technology Services, L&T Infotech and NEC Corporation India for implementing data analytics-based software to detect fraud and alert the regulator to take corrective measures and levy penalties.

The Securities and Exchange Board of India currently has a data warehousing system that acquires data from external entities such as exchanges, depositories, RTAs, and news on a daily basis. The warehouse holds data for the last 10 years. SEBI is also in the process of implementing a Data Lake which will host the data and analytical environment on which the data analytics models need to be deployed by the newly shortlisted entities.

The project is expected to be completed in 12 months from the date of signing of the agreement, said SEBI.

To check freak trades

While the cash segment of equity markets has enough safeguards including price filters and surveillance measures, such curbs aren’t present for derivatives, leaving the field open for manipulators, said a broker.

Freak trades in the equity futures and options segments are becoming more frequent. Late last month, derivative traders witnessed a sharp spike in some options contracts on the NSE. The call option contract for the NSE’s main index Nifty (16,450 strike price) for the August expiry jumped 800 per cent from ₹100 to ₹800. Similarly, the put option contract for the Bank Nifty index (37,000) strike price rose by 2,000 per cent from a low of ₹1 to touch a high of ₹2,040.

Interestingly, on all these occasions, the reversal to normal happened in a few seconds. Incidentally, it was the third such freak trade in the last two months. Such wild swing in prices triggers pre-determined stop-loss set by the traders, leading to heavy losses.

Scope of the project

SEBI has an Integrated Market Surveillance System for cross-market surveillance. It uses the SMARTS software engine for alert generation and graphical analysis.

The market regulator now intends to implement Data Analytics Projects and build Data Models to leverage artificial intelligence and machine learning.

The new software will enhance the current system to track abnormal trading behaviour through Trading Pattern Analysis at both member and client level, alert for block deal trades, circular trading besides spoofing — a form of market manipulation whereby a trader places one or more highly-visible non-bonafide orders to mislead the true value of the stock.

While the current system can identify spoofing by a single entity, there is a need to enhance the scope of identification of such trading patterns, so as to bring in those scenarios where a group of connected entities is involved in spoofing.

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SVC Bank gets new MD

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Ashish Singhal has taken charge as Managing Director of SVC Bank (SVC Co-operative Bank).

His appointment follows the retirement of Ajit Venugopalan as Managing Director on August 31.

Prior to joining this, Singhal was the Managing Director of Experian CIC in India.

Durgesh S. Chandavarkar, Chairman, SVC Bank, in a statement, said given the dynamic industry landscape, SVC Bank is fast evolving into a new-age phygital bank and Singhal will lead this transformation through innovation, expansion and customisation, going forward.

For the year ended March 31, 2021, SVC Bank registered a net profit of ₹150.21 crore as against ₹142.01 crore in FY20, the statement said.

The bank reported a 6 per cent year-on-year (yoy) growth in total advances to ₹12,328 crore as at March-end 2021.

Total deposits were up 5 per cent yoy to ₹17,332 crore. The bank said it has maintained the net non-performing assets at 1.81 per cent of net advances, same as last year.

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BRICS bank NDB admits UAE, Uruguay, Bangladesh as new members, BFSI News, ET BFSI

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By K J M Varma Beijing, Sep 2 (PTI): The New Development Bank (NDB) set up by the BRICS group of nations has admitted the United Arab Emirates, Uruguay and Bangladesh as the first batch of new members as part of its expansion drive, the bank announced on Thursday.

Launched in 2015 by Brazil, Russia, India, China and South Africa (BRICS), a group of major emerging economies, the Shanghai-headquartered bank mobilises resources for infrastructure and sustainable development projects in their respective countries and other developing nations, complementing the existing efforts of multilateral and regional financial institutions for global growth and development.

NDB has initiated its membership expansion and started formal negotiations with prospective members in late 2020, the bank said in a press release.

After a round of successful negotiations, NDB approved the admission of the UAE, Uruguay and Bangladesh as its first new member countries, it said.

“We are delighted to welcome the UAE, Uruguay and Bangladesh to the NDB family. New members will have in NDB a platform to foster their cooperation in infrastructure and sustainable development,” NDB President Marcos Troyjo said.

“We will continue to expand the bank’s membership in a gradual and balanced manner,” he said.

NDB has an authorised capital of USD 100 billion, which is open for subscription by members of the United Nations, the press release said.

Since the beginning of its operations, NDB approved about 80 projects in all of its members, totalling a portfolio of USD 30 billion.

Projects in areas such as transport, water and sanitation, clean energy, digital infrastructure, social infrastructure and urban development are within the scope of the bank, the release said.

Commenting on the admission of the UAE, Obaid Humaid Al Tayer, Minister of State for Financial Affairs of the UAE, said it “represents a new step to enhance the role of the UAE economy on the global stage, especially in light of the great capabilities and expertise that the country possesses in supporting infrastructure projects and sustainable development”.

Uruguay’s economy and finance minister Azucena Arbeleche said the country sees in the NDB a great opportunity to harness cooperation with its member nations, aiming to achieve stronger international integration in trade and cross-border investment flows.

Bangladesh’s finance minister A H M Mustafa Kamal said, “Membership of Bangladesh to NDB has paved way for a new partnership at a momentous time of 50th anniversary of our independence.”

“We look forward to working closely with NDB to build together a prosperous and equitable world for our next generation as dreamt by our Father of the Nation Bangabandhu Sheikh Mujibur Rahman,” he said. PTI KJV SCY SCY



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Rupee settles 2 paise higher at 73.06 against US dollar

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The Indian rupee settled with a marginal gain of 2 paise at 73.06 (provisional) against the US dollar on Thursday despite a sustained rally in domestic equities.

At the interbank forex market, the local unit opened at 73.04 against the greenback and witnessed an intra-day high of 72.96 and a low of 73.13.

It finally ended at 73.06 against the American currency, registering a gain of just 2 paise over its previous close.

On Wednesday, the rupee had settled at 73.08 against the US dollar.

On the domestic equity market front, the BSE Sensex ended 514.33 points or 0.90 per cent higher at a lifetime high of 57,852.54, while the broader NSE Nifty advanced 156.90 points or 0.92 per cent to close at record 17,233.15.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.06 per cent to 92.39.

Brent crude futures, the global oil benchmark, rose 0.32 per cent to USD $71.82 per barrel.

Foreign institutional investors were net buyers in the capital market on Wednesday as they purchased shares worth Rs 666.66 crore, as per exchange data.

 

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Karnataka Bank targets 15% credit growth for 2021-22

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Karnataka Bank Ltd (KBL) expects a credit growth of 15-17 per cent during the current fiscal.

Replying to a query by a shareholder on the sluggish credit growth during 2020-21 at the 97th annual general meeting of the bank on Thursday, Mahabaleshwara MS, Chief Executive Officer and Managing Director of the bank, said KBL utilised the pandemic-affected year 2020-21 for realignment of its credit portfolio.

Portfolio realignment

He said the bank was slightly tilted towards large advances, and it realigned towards retail and mid-corporate advances during 2020-21 by having about 5.99 per cent credit growth under retail, and about 6 per cent in mid-corporate sector.

Terming retail and mid-corporate as focus areas of the bank, he said the bank observed that delinquency is less in these segments, and it would also help the bank on improved yield on advances. Risk is also highly diversified.

Realignment of the portfolio was the reason for the sluggish credit growth during the 2020-21, Mahabaleshwara said.

“Now we have projected a credit growth of 15-17 per cent,” he added.

Increase borrowings limit

The 97th AGM also sought shareholder approval to borrow amounts not exceeding, in aggregate, ₹6,000 crore over and above the aggregate of the paid-up capital of the bank, free reserves and the securities premium.

Terming it as an enabling resolution, Mahabaleshwara said this is a resolution to facilitate the ordinary course of banking business. As of March 31, the total borrowings of the bank was ₹1,764.88 crore against the limit of ₹2,000 crore as approved by shareholders in the 95th AGM held on August 7, 2019. This consists of subordinated tier-2 debt instruments of ₹970 crore raised for the purpose of augmenting capital funds, and refinance availed from eligible financial institutions.

Also see: SBI eyes ₹3 lakh cr in farm credit by FY24

“Although the bank has sufficient liquidity, and does not have borrowings in the immediate future, the bank may consider the refinance option as a competitive tool when interest rates are conducive.

“Here, I also wish to state that as on the date of this meeting, there is no proposal for raising capital via bonds. However, in case, if the bank wishes to explore various options, bonds or debentures route is also kept in mind, considering various financial management aspects,” Mahabaleshwara said.

This resolution is only an enabling resolution in the ordinary course of banking business, he said, adding the existing borrowings of the bank will be subsumed within the proposed limit of ₹6,000 crore.

QIP

Speaking on another resolution seeking shareholder approval to raise equity capital by issuing 15 crore shares through a qualified institutional placement (QIP), Mahabaleshawara said it is an enabling, forward-looking resolution.

As of March 31, the capital adequacy ratio (CAR) of the bank stood at 14.85 per cent, which is well above the minimum regulatory benchmark of 10.875 per cent. He said the bank has been ensuring the ratio remain at least 1 per cent above the minimum regulatory benchmark as a matter of prudence, and added that KBL is well capitalized.

Stating that the board at various intervals has felt the need for on-boarding a few institutional investors, mainly to broad base the shareholding, by having approval of the shareholders for this QIP resolution the board can take a swift decision at the opportune time by thoroughly evaluating the suitability of the investors, pricing and quantity of dilution in the tranches etc., to the best advantage of the bank and its stakeholders.

“The resolution, once approved by the shareholders, will be valid for a period of one year and the board can take an informed decision at an appropriate time as and when the need arises. With this enabling resolution, the bank will be able to save its time and efforts towards obtaining shareholders’ approval via postal ballot,” he added.

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Castler partners with Mumbai Angels for secure transaction solutions

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Fintech start-up Castler has partnered with Mumbai Angels (MA) to provide digital escrow solutions.

Castler, an escrow-as-a-service provider, will help enable a convenient and safer financial transaction platform for the portfolio companies of Mumbai Angels. These companies can use Castler’s platform for several use-cases, including buyer and seller trust gap, lending, profit sharing, pooling of monies from investors, cash flow collection, mergers and acquisitions, marketplaces, gaming, real-estate, charities, and fund raisings.

Commenting on the partnership, Castler’s Co-Founder and CEO Vineet Singh (ex-CBO at Mobikwik, 99acres, and Naukri.com) said, “The current transaction environment in India is extremely uncertain and riddled with frauds, and this has led to a substantial trust gap between parties. A robust, secure, and convenient transaction ecosystem is the need of the hour for both consumers and enterprises. Teaming up with Mumbai Angels to extend secure digital escrow to their portfolio companies will act as a great catalyst for improving accessibility to the solution we offer.”

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