Category: Banking & Finance

RBI’s first financial inclusion index at 53.9

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The first reading of the Reserve Bank of India’s annual Financial Inclusion (FI) Index for the period ending March 2021 has come in at 53.9 against 43.4 for the period ending March 2017.

The index captures information on various aspects of financial inclusion in a single value ranging between 0 and 100, where 0 represents complete financial exclusion and 100 indicates full financial inclusion.

The FI Index comprises three broad parameters (weights indicated in brackets) – Access (35 per cent), Usage (45 per cent), and Quality (20 per cent), with each of these consisting of various dimensions computed based on a number of indicators.

RBI comes up with Digital Payments Index

The Index, which has been has been constructed without any ‘base year’ and as such reflects cumulative efforts of all stakeholders over the years towards financial inclusion, is responsive to ease of access, availability and usage of services, and quality of services, comprising all 97 indicators, the RBI said in a statement.

A unique feature of the Index is the Quality parameter, which captures the quality aspect of financial inclusion as reflected by financial literacy, consumer protection, and inequalities and deficiencies in services, it added.

The FI Index, which will be published annually in July every year, has been conceptualised as a comprehensive index incorporating details of banking, investments, insurance, postal as well as the pension sector in consultation with government and respective sectoral regulators.

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HDFC Bank approves issuance of debt instruments in the form of AT1 bonds from overseas markets

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HDFC Bank on Monday said it will issue debt instruments in the form of Additional Tier 1 bonds in international markets. “…we had informed the stock exchanges that the Board of Directors of HDFC Bank in its meeting held on July 17, 2021, is contemplating raising of long term funds through the issuance of Basel III compliant Additional Tier 1 Bonds (Notes), in the international markets, subject to market conditions,” it said in a stock exchange filing.

An offering memorandum has been prepared and shall be made available to the prospective investors in relation to the contemplated issue of Notes, it further said. The bank, however, did not specify the amount to be raised.

Ba3 (hyb) rating

Meanwhile, Moody’s Investors Service in a statement said it has assigned a Ba3 (hyb) rating to HDFC Bank’s proposed USD-denominated, undated, non-cumulative and subordinated AT1 capital securities. “The Ba3 (hyb) rating is three notches below HDFC Bank’s baa3 Baseline Credit Assessment (BCA) and Adjusted BCA, reflecting the probability of impairment associated with non-cumulative coupon suspension, as well as the likelihood of high loss severity when the bank reaches the point of non-viability,” it said. In its meeting on July 17, the bank’s board had approved the issue of standalone foreign currency-denominated Perpetual Debt Instruments as Basel III-compliant AT1 bond for foreign (global) investors outside India, on an unsecured , public or a private placement basis, along with a proposed listing of the AT1 Bonds and other related activities in the course of the financial year 2021- 22, subject to market conditions and applicable approvals.

Also read: Is HDFC Ergo Optima Secure value for money?

Earlier, the State Bank of India had also raised capital by AT1 bonds in the overseas market. The capital raised through the AT1 bonds will help enhance the bank’s capital base. HDFC Bank’s total Capital Adequacy Ratio was at 19.1 per cent as on June 30, 2021 as against a regulatory requirement of 11.075 per cent.

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Afghanistan central banker flees as currency drops to record low

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Afghanistan’s central bank governor departed the country as Taliban fighters took control of the capital, with the rising political turmoil pushing the nation’s currency to a record low.

The Afghani fell 1.7 per cent Tuesday to 83.5013 per dollar, a fourth day of decline, according to data compiled by Bloomberg. The central bank was told there would be no more dollar shipments on Friday, which curtailed its ability to supply currency and led to more panic, Governor Ajmal Ahmady wrote in a Twitter thread.

The governor got on a military plane at the airport where thousands sought to leave as the Taliban’s rapid territorial advance led to the collapse of the government. There was no evacuation plan, and President Ashraf Ghani’s departure without creating a transitional government contributed to the chaos, Ahmady wrote.

Also read: MEA sets up Afghanistan cell to coordinate repatriation

“Currency spiked from a stable 81 to almost 100 then back to 86,” the central banker wrote. “I held meetings on Saturday to reassure banks and money exchangers to calm them down.”

On Sunday, the governor left the central bank and went to the airport where he saw other government leaders. More than 300 passengers were packed into his flight, though it had no fuel or pilot, he wrote. “It did not have to end this way. I am disgusted by the lack of any planning by Afghan leadership,” he wrote.

The turmoil in Afghanistan spilled over into markets in Pakistan. Sovereign dollar bonds due 2031 for Pakistan dropped 1.8 cents on Monday, the biggest decline since the government priced the notes in March. Pakistani dollar bonds were the biggest losers in Asia on Monday, according to a Bloomberg Barclays index. The notes rose 0.2 cents on the dollar on Tuesday to 100.5 cents.

Also read: US President says he stands ‘squarely behind his decision’ to withdraw troops from Afghanistan

Investors are concerned over any impact on law and order in Pakistan, and whether “global forces will try to isolate Pakistan” due to its alleged support of the Taliban, said Abdul Kadir Hussain, the head of fixed-income asset management at Dubai-based Arqaam Capital.

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BoM tops PSU banks in terms of loan, saving deposit growth in Q1, BFSI News, ET BFSI

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New Delhi: State-owned Bank of Maharashtra (BoM) has emerged as the top performer among public sector lenders in terms of loan and savings deposit growth during the first quarter of the current financial year. The Pune-headquartered lender recorded 14.46 per cent increase in gross advances at Rs 1,10,592 lakh crore in April-June period of 2021-22, as per the published data of BoM.

It was followed by Punjab & Sind Bank which posted 10.13 per cent growth in advances with aggregate loans at Rs 67,933 crore at the end of June 2021.

When it came to deposit mobilisation, BoM with nearly 14 per cent growth was a notch behind Punjab and Sind Bank, while the country’s largest lender State Bank of India recorded 8.82 per cent rise.

However, in absolute terms SBI’s deposit base was 21 times higher at Rs 37.20 lakh crore as against Rs 1.74 lakh crore of BoM.

Current Account Savings Account (CASA) for BoM saw 22 per cent rise, the highest among the public sector lenders, during the quarter.

As a result, CASA was 53 per cent or Rs 92,491 crore of the total liability of the bank.

Total business of BoM increased 14.17 per cent to Rs 2.85 lakh crore at the end of June 2021.

For the first quarter, BoM’s standalone net profit more than doubled to Rs 208 crore as against Rs 101 crore in the same period a year ago.

The bank’s asset quality improved significantly as the gross bad loans or gross non-performing assets (NPAs) dipped to 6.35 per cent of gross advances by the end of June 2021 as against 10.93 per cent by the end of first quarter of the previous fiscal.

In absolute terms, gross bad loans stood at Rs 7,022 crore at the end of June 2021, lower than Rs 10,558.53 crore recorded in the same period a year ago.

Net NPAs nearly halved to 2.22 per cent (Rs 2,352.75 crore) from 4.10 per cent (Rs 3,677.39 crore).



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Microfinance captains expect a turnaround during festive season, BFSI News, ET BFSI

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Microfinance loan repayment has risen sharply to about 90% on an average by the end of July from a low of 65-75% in May-June with economic recovery and the number of Covid-19 cases coming down. Industry captains expect business to be back to full swing not before the third quarter as the impact of the second wave is still being felt while the sectoral loan volume shrunk 14% in the April-June period.

“We are expecting recovery around the Durga Puja season. This is the time when business grows. But if the third wave comes, the recovery may be delayed by another quarter,” said Chandra Shekhar Ghosh, managing director at Bandhan Bank, the country’s largest microfinance lender. About 60% of Bandhan’s loan assets are unsecured micro loans.

The largest NBFC-MFI CreditAccess Grameen in terms of loan outstanding said its collection efficiency improved to 91% (excluding arrears payment) in July compared with 81% in June. The same parameter for Ujjivan Small Finance Bank improved to 93% in July from 78% in June. It was 79% as against 70% for Suryoday Small Finance Bank.

Bandhan Bank’s collection efficiency in micro loans was 77% in June.

All microfinance lenders have collectively disbursed Rs 25,820 crore in the June quarter, which was 14% lower than in the March quarter, according to data collated by Sa-Dhan, the oldest microfinance industry association.

Lenders across the board have raised their respective loan provisions in the June quarter to cover the possible future credit risk and took a hit on their profitability.

“We expect business — both in terms of loan disbursement and repayment – to be back to March level (pre-second wave level) by September,” Satin Creditcare Network chairman HP Singh said.

The sector’s gross loan outstanding fell 14% to Rs 2,14,528 crore from Rs 2,49,333 crore three months back.

“We have seen a recovery in microfinance operations since July,” said P Satish, executive director at Sa-Dhan.

A third wave, if it comes, can create further disruptions.

“Just about when we were coming out of the impact of Covid-19, the second wave struck. Though we had higher disbursement during the first quarter of the current fiscal compared to the same period of previous fiscal, business of the sector faced major challenges with full and partial lockdowns. Small MFIs bore the major brunt as access to funds from banks was restrained,” Satish said.



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HDFC Bank’s AT1 bonds get Moody’s Ba3 rating, BFSI News, ET BFSI

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MUMBAI: HDFC Bank‘s proposed Additional Tier 1 (AT1) bonds have been rated Ba3, three notches below their deposit ratings by Moody’s, with limited likelihood of any rating upgrade in the next 12-18 months due to possible weakness in sovereign rating and the likelihood of rising bad assets in the Indian financial system.

The bank will be the first private sector lender to offer those quasi-equity securities offshore if it finally launches the overseas sale that is expected to open for subscription in the next 7 days.

HDFC Bank will likely set a benchmark for many other local lenders including Union Bank of India, State Bank of India and Axis Bank.

S&P is also expected to come out with a similar rating grade for HDFC Bank’s AT1 series.

The initial guidance is likely to be less than 4 per cent, although it could finally settle anything between 3.5 per cent and 4 per cent, said people familiar with the matter. The size of the issue is expected to be in the range of $500 million to $1 billion depending on investor demand, ET reported on July 29.

“Roadshows have just begun across the world,” one of the persons cited above said.

In between, there were hard negotiations for the pricing particularly after a Thai bank raised AT1 at about 4 per cent two weeks ago.

The borrower is actually looking for 3.5 per cent, which looks tough. Still, there will be good demand for any paper series, branded with the HDFC mark, dealers said.

HDFC Bank and individual investment bankers could not be contacted immediately for comments.

Nearly a dozen banks have been appointed to help the proposed bond sale. Those banks include Barclays, Bank of America, Citi, HSBC, JP Morgan, Standard Chartered, MUFG, Sofgen, BNP Paribas and Morgan Stanley.

AT1, also known as perpetual bonds, add to banks’ capital base unlike perpetual papers issued by any corporate. Such securities do not have any fixed maturity but generally have a five-year call option that allows an exit route for investors.

“The Ba3 (hyb) rating is three notches below HDFC Bank’s baa3 Baseline Credit Assessment (BCA) and Adjusted BCA, reflecting the probability of impairment associated with non-cumulative coupon suspension, as well as the likelihood of high loss severity when the bank reaches the point of non-viability,” Moody’s said in a report Monday.

The principal and any accrued but unpaid distributions on these capital securities would be written down, partially or in full, if HDFC Bank’s common equity tier 1 (CET1) ratio is at or below 5.5 per cent any time prior to 1 October 2021, and 6.125 per cent from and including 1st October, 2021.

In such a scenario, the write-down may be temporary, and the amount could be reinstated subject to the Reserve Bank of India‘s (RBI) conditions, Moody’s said.

“A lowering of HDFC Bank’s BCA (Baseline Credit Assessment) will lead to a rating downgrade of the proposed AT1 securities,” Moody’s added.



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Citibank granted IFSCA licence to set up banking unit at GIFT City, BFSI News, ET BFSI

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GIC had set up its international operations in Dubai in 2007 and had been providing reinsurance to the African continent.

Ahmedabad: US-headquartered Citibank NA has received the regulatory approval to open a banking unit at India’s only International Financial Services Centre at Gandhinagar, to carry out offshore transactions, said sources privy to the development.

This has paved the way for the first US bank to set up a branch at the Gujarat Finance Tec-City (GIFT City). “We issued a licence to Citibank on Monday to set up its IFSC banking unit at GIFT,” confirmed Dipesh Shah, development head, International Financial Services Centres Authority, the unified regulator for development and regulation of financial products, financial services and financial institutions at IFSCs.

Citibank will service both Indian and global customers from its IFSC branch. The new IFSC unit aims to undertake credit business such as execution of foreign currency loans and external commercial borrowings, working capital loans including trade finance facilities, payment/remittance as well as treasury business including borrowing and deposits, said sources.

Last year, Citibank received in-principle nod from the Reserve Bank of India for the banking unit after which it was awaiting the final nod from IFSCA to start operations.

Recently, Deutsche Bank, a global bank with presence in over 70 countries, became the first German bank to set up its IFSC banking unit at GIFT IFSC. “Global banks are finding the IFSC a great strategic opportunity to serve international clients at a very competitive cost. The IFSC is fast emerging as the preferred gateway for international financial services and is enabling many new business opportunities for global investors,” said Shah.

Leading Indian and foreign banks such as HSBC, Standard Chartered, Barclays, State Bank of India, Bank of Baroda, ICICI Bank, Axis Bank, Kotak Mahindra Bank and HDFC, among others are already operating from GIFT IFSC.



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SBI announces fees waiver, lower rates to commemorate Independence Day, BFSI News, ET BFSI

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State Bank of India announced concessional interest rates, waiver of processing charges on loans and higher deposit rates on specific tenures to commemorate India’s 75th Independence day.

SBI said it will waive processing fees for its car loan customers, and has offered up to 90% on-road financing for their car loans. Customers applying for a car loan through the bank’s YONO app will get a special interest concession of 25 basis points (bps). YONO users can avail car loans at an interest rate starting at 7.5 per cent per annum, the bank said.

Customers looking for gold loans will get a 75 basis point reduction in the interest rates at 7.50%. One basis points is 0.01 percentage point. No processing fees will be charged for customers applying for gold loans through the YONO app.

The bank had announced a waiver on processing fees on home loans till August 31, 2021. Its home loan starts at 6.70% per annum.

There will be no processing fees charged on personal and pension loan customers.

Frontline healthcare workers will get a 50 basis point concession on personal loans, which will soon be available for application under car and gold loans as well.

SBI is also introducing a ‘platinum term deposits’ for retail depositors giving customers an additional interest rate of up to 15 bps on term deposits for 75 days, 75 weeks, and 75 months tenors starting August 15, 2021 to September 14, 2021.

“We believe that these offerings will help customers to save more on their loans and at the same time add value to their festive celebrations,” the bank’s managing director for retail and digital banking C S Setty said in a release.



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Lenders see 4% drop in microfinance loan portfolio in April-June

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NBFC-MFIs witnessed a decline of around 5%. Banks held a 44% market share in the microfinance segment at the end of June, followed by NBFC-MFIs, which held a 32% share.

Lenders saw their gross loan portfolio (GLP) in the microfinance segment fall 4% year on year (YoY) during the quarter ended June as the second wave of Covid took a toll on loan growth. Industry association Sa-Dhan said despite the ongoing pandemic, the microfinance sector witnessed a disbursement of Rs 25,820 crore by all lenders, though on a sequential basis, the GLP was down 14%. The combined GLP of microfinance institutions (NBFC-MFIs), banks, small finance banks (SFBs), not-for-profit (NFP) MFIs and other NBFCs stood at Rs 2.14 lakh crore as on June 30, down from Rs 2.49 lakh crore as on March 31, 2021.

P Satish, executive director, Sa-Dhan, said though the disbursements during Q1FY22 were higher compared to the corresponding period of FY21, the business of the sector faced major challenges amid lockdowns. “Small MFIs bore the major brunt as access to funds from banks was restrained. However, I must say that we have seen a recovery in microfinance operations since July,” Satish said.

On a Y-o-Y basis, banks witnessed around 4% growth in GLP, while SFBs saw a decline of around 14% in GLP. The highest growth in terms of GLP was seen in the NFP MFI segment, which clocked 15% growth, while NBFCs recorded a 22% decline in their microfinance GLP. NBFC-MFIs witnessed a decline of around 5%. Banks held a 44% market share in the microfinance segment at the end of June, followed by NBFC-MFIs, which held a 32% share.

Sa-Dhan said the industry average of the portfolio at risk (PAR), where repayments have been overdue for more than 30 days, stood at 17.16%. Fourteen states and Union Territories — Lakshadweep, Kerala, Assam, Andaman & Nicobar Islands, Manipur, Meghalaya, Chhattisgarh, Mizoram, Karnataka, West Bengal, Tamil Nadu, Madhya Pradesh, Pondicherry and Nagaland — have a PAR 30+ value higher than the industry average.

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SBI announces fees waiver, lower rates to commemorate Independence Day, BFSI News, ET BFSI

Banking & Finance

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State Bank of India announced concessional interest rates, waiver of processing charges on loans and higher deposit rates on specific tenures to commemorate India’s 75th Independence day.

SBI said it will waive processing fees for its car loan customers, and has offered up to 90% on-road financing for their car loans. Customers applying for a car loan through the bank’s YONO app will get a special interest concession of 25 basis points (bps). YONO users can avail car loans at an interest rate starting at 7.5 per cent per annum, the bank said.

Customers looking for gold loans will get a 75 basis point reduction in the interest rates at 7.50%. One basis points is 0.01 percentage point. No processing fees will be charged for customers applying for gold loans through the YONO app.

The bank had announced a waiver on processing fees on home loans till August 31, 2021. Its home loan starts at 6.70% per annum.

There will be no processing fees charged on personal and pension loan customers.

Frontline healthcare workers will get a 50 basis point concession on personal loans, which will soon be available for application under car and gold loans as well.

SBI is also introducing a ‘platinum term deposits’ for retail depositors giving customers an additional interest rate of up to 15 bps on term deposits for 75 days, 75 weeks, and 75 months tenors starting August 15, 2021 to September 14, 2021.

“We believe that these offerings will help customers to save more on their loans and at the same time add value to their festive celebrations,” the bank’s managing director for retail and digital banking C S Setty said in a release.



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