Category: Banking & Finance

HFCs may see robust growth but NPAs could rise: CARE Ratings

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The second wave of the Covid-19 pandemic is expected to lead to a rise in the non-performing assets of housing finance companies in the near term with the Gross Stage 3 ratio expected to increase by 30 basis points this fiscal.

According to a report by CARE Ratings, the Gross Stage 3 ratio for housing finance companies would be 3.1 per cent, which would be around 30 basis points higher that 2.8 per cent in 2020-21.

“The deterioration would be higher in the first half of 2021-22; however, we expect that collections and asset quality for housing finance companies would improve in the second half as the economy improves,” CARE Ratings said on Monday.

While a large portion of deterioration would come from developer loan book, it expects that retail prime loans would also witness stress as borrowers have also been impacted economically during the pandemic.

The agency had earlier estimated a 20 basis points increase in Gross Stage 3 assets to 2.9 per cent at the end of 2021-22 from an estimated 2.7 per cent last fiscal.

For the analysis, it has considered top six large housing finance companies it rates.

Robust business growth

However, business growth for housing finance companies has remained robust and early indications from this fiscal suggest there would be a growth of about 8 per cent to 12 per cent in their portfolios, it said.

It also noted that many large housing finance companies have raised equity capital during last fiscal and some are in the process of raising equity capital in this financial year. “This has improved the strength of their balance sheets and augmented their loss-absorption capacity,” it said.

CARE Ratings further said that according to its estimate, the total equity capital likely to be raised during the current fiscal along with actual equity raised last fiscal would be more than sufficient for the total increase in Gross Stage 3 assets during 2020-21 and 2021-22.

“While we expect that the impact of the pandemic on Gross Stage 3 assets would be higher than what was earlier estimated, stronger balance sheets of large housing finance companies and higher equity capital buffers provide good comfort,” it said, adding that improvement in fund-raising abilities of these firms by tapping retail deposits augurs well for their longer-term credit outlook.

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NBCC, BFSI News, ET BFSI

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Interference by the apex court in the matter at this stage may not be necessary as the high court has already taken it up on the judicial side, the bench said.

NBCC Ltd on Tuesday said that banks have shown interest in providing funds to complete the stalled projects of defunct Amrapali group. On July 23, 2019, the Supreme Court ordered cancellation of the registration of Amrapali Group under real estate law RERA. The court had directed NBCC to complete the stalled projects of the group.

In a statement, NBCC said that the monitoring committee appointed by the Supreme Court convened a meeting on Monday with nationalised and private banks to discuss the financing for Amrapali Projects. NBCC’s Executive Director was present in the meeting.

“Post MoU signing of Ld Court Receiver with SBICAP Ventures Ltd for funding 6 Amrapali Projects at Noida and Greater Noida last week, other reputed banks have shown interest in funding the stalled Amrapali Projects,” NBCC said in a statement.

More than 42,000 homebuyers, who have been waiting for possession of their dream homes, will be benefited by this progressive initiative, it added.

Currently, the NBCC is facing execution hurdles due to slow inflow of cash which is expected to get sorted soon.

“All the credit of these initiatives taken for completing the works of erstwhile Amrapali group projects goes to the Supreme Court of India, appointed Committee members and the team of NBCC collectively working to end the long wait of the suffered homebuyers,” the statement said.

Last week, NBCC informed that the SBICAP Ventures Ltd has agreed to provide Rs 650 crore for completing six stranded projects of erstwhile Amrapali Group in Uttar Pradesh.

SBICAP Ventures Ltd has signed a Memorandum of Understanding (MoU) with the Court Receiver for providing Rs 650 crore for the six stalled projects. The MoU will pave the way for completion of flats of 6,947 home buyers.

The six projects are — Silicon City-1, Silicon City-2, Crystal Homes, Centurian Park- Low Rise, O2 Valley and Tropical Garden across Delhi-NCR.

SBICAP Ventures Ltd manages the central government-sponsored Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund that is to be utilised for completion of stalled real estate projects.

In July 2019, the Supreme Court mandated NBCC to complete various stalled real estate projects in Noida and Greater Noida in Uttar Pradesh. These projects are currently under the Receiver appointed by the apex court. PTI MJH RAM MJH DRR DRR



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SoftBank’s Vision Fund posts $2 bn profit, share weakness casts shadow, BFSI News, ET BFSI

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TOKYO: SoftBank Group Corp‘s Vision Fund unit on Tuesday posted a 236 billion yen ($2.14 billion) profit in the first quarter after gains from listing portfolio companies were offset by falling shares in firms like e-retailer Coupang Inc.

The Japanese conglomerate posted record annual profit in May with executives pointing to further upside from Vision Fund investments such as Chinese ride-hailing firm Didi Global Inc and “Uber for trucks” startup Full Truck Alliance Co Ltd.

Those companies listed in New York during the quarter but Chinese regulatory action has subsequently hammered valuations, underscoring SoftBank’s China risk even as the group seeks to reduce dependence on its largest asset, a stake in Chinese e-commerce giant Alibaba Group Holding Ltd.

While the crackdown has affected returns expectations, “our broader thesis in China is unchanged: It’s still a large, growing and compelling economic opportunity,” said Vision Fund Chief Financial Officer Navneet Govil.

The turmoil is clouding the outlook for the group, whose shares have slipped a third from two-decade highs in March amid the completion of a record 2.5 trillion yen buyback. Shares closed up 0.9% ahead of earnings.

“Having a large public portfolio introduces volatility but at the same time it allows us to continue to monetise in a very disciplined manner,” said Govil.

More than two-thirds of the portfolio of the first $100 billion Vision Fund is listed or exited. SoftBank has distributed $27 billion to its limited partners since inception.

Further upside will come from listings by Indian payments firm Paytm and insurance aggregator Policybazaar as well as Southeast Asian ridehailer Grab, which is due go public via a blank-cheque company merger, Govil said. SoftBank is also ramping up investing through Vision Fund 2, to which it has committed $40 billion of capital, with the unit making 47 new investments worth $14.2 billion made in the April-June quarter alone.

In the first quarter, Vision Fund unit gains included 310 billion yen from selling shares in investments including delivery firm DoorDash Inc and ridehailer Uber Technologies Inc.

First-quarter group net profit, however, fell 39% to 762 billion yen.

SoftBank has also been betting on publicly listed shares through its SB Northstar trading unit. It held stakes in firms worth $13.6 billion at the end of June with the portfolio no longer including Microsoft Corp or Facebook Inc listed three months earlier.



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Neeraj Chopra roped in for RBI awareness campaign, BFSI News, ET BFSI

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A public awareness campaign is being run by the Reserve Bank of India to warn people of digital banking frauds. The RBI has roped in Neeraj Chopra, Olympic gold medalist for this campaign.

The RBI tweeted about this campaign, and asked people to be cautious when banking online.

Neeraj Chopra, in the video said, “RBI says not to share your OTP, CVV, ATM Pin with anyone, change your online banking passwords and pins from time to time and if you lose your ATM card, credit card then block it immediately”.After winning the country a gold medal at the Tokyo Olympics 2020, Neeraj Chopra was warmly welcomed at the airport in Delhi. He brought home the first Olympic gold in athletics.

The Javelin thrower has said, that he has now set his sight on the 2022 Asian Games.

“I want to thank everyone in the country, it is due to their blessings and I am really happy to win a gold medal. I did my best and now I look forward to the Asian Games that will take place next year,” Chopra said to ANI.



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Saverin-backed exchange becomes India’s first crypto unicorn

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CoinDCX became India’s first cryptocurrency unicorn after the exchange raised ₹670 crore ($90 million) from investors led by Facebook Inc. co-founder Eduardo Saverin’s B Capital Group, even as local authorities push back against crypto assets. The latest funding round values the firm at $1.1 billion, Chief Executive Officer and co-founder Sumit Gupta said in an interview on Tuesday. Other investors include existing partners Coinbase Ventures, Polychain Capital, Block.one, and Jump Capital.

Gupta plans to use part of the funds to double his team in the next six months to about 400 people in India, where investments in crypto grew to nearly $6.6 billion in May from some $923 million in April 2020, according to Chainalysis. The investment comes as policymakers continue to debate on the status of digital currencies in India — as recently as last week the central bank said it has “major concerns” about private virtual currencies and the government will take a final stance on the matter.

“I am pretty sure the industry will be regulated at the right time,” Gupta said. “We have chosen to put at stake our money and career as we feel this is going to be a very good wealth generation opportunity for people.”

Also read: ‘Ethereum Improvement Proposal’ all set to bring major change to crypto world

The 30-year-old engineer from the elite Indian Institute of Technology spent several hours daily reading about blockchain and cryptocurrencies before setting up CoinDCX in 2018. Registered in Singapore as Primestack Pte., it aims to expand its user base to 50 million from 3.5 million over the next few years and focus on educating users on crypto and blockchain.

Investments surged after the Supreme Court last year quashed a ban on banks facilitating crypto trades. The four biggest crypto exchanges in India saw daily trading jump to $159 million from $28.6 million a year ago, according to CoinGecko.

Volatile nature of asset

For regulators, the volatile nature of the asset has been a worry. After touching a high of $64,870 in April, Bitcoin lost more than half of its value and fell to $28,824 in June. The Reserve Bank of India is looking to create its own digital currency. Gupta believes India has what it takes to achieve dominance in the space.

The company plans to offer new products including for wealthy individuals in coming months. “We have a very tech savvy population, good mobile penetration, big base of engineers and developers who can leverage blockchain technology,” Gupta said. He believes India will produce more than 100 crypto unicorn start-ups in the next few years once regulation is firmed up.

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Five lenders jostle to grab Citi’s India premium retail business, BFSI News, ET BFSI

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The race for Citi Bank’s India retail business is set to get fierce as the five lenders in the race have either growth ambitions or gaps to fill.

HDFC Bank, Kotak Mahindra Bank, Axis Bank, IndusInd Bank and DBS Bank have emerged as the top five contenders to take over Citi India’s estimated $2-billion retail business that includes, credit cards, mortgages, wealth management and

deposits. The race will be narrowed down to three, with whom Citi would negotiate a higher value.

The bidders will look to pre-empt competition by denying rivals an opportunity to grab a bigger pie of the market.

The suitors

DBS Bank is considered one of the potential buyers of these businesses given its deep pockets and ambitions to expand in India. In November last year, the Singaporean lender completed the first of its kind RBI directed acquisition of a distressed lender taking control of Chennai based Lakshmi Vilas Bank (LVB).

DBS India has already infused more than $1 billion into India in its relatively new existence in the country and though LVB gives its wider access to South India, it may look at Citi’s credit card portfolio to kick start that business in India. DBS does not offer credit cards in the country currently.

Kotak Mahindra Bank, which was said to be exploring an acquisition of IndusInd Bank and refused the offer for Yes Bank, may be finally looking to lay its hands on the big business on offer.

HDFC Bank, which is facing a ban from the Reserve Bank of India for onboarding new customers, and facing stiff competition from ICICI Bank stands to gain some of the lost opportunity with the Citi business buy.

What’s on offer?

Citi’s total assets In India at the end of FY20, including credit extended to Indian institutional clients from offshore Citi entities, stood at Rs 2.99 crore.

The consumer banking business, which includes cards and loans against property, would be around Rs 32,000 crore. It also has a huge amount of savings accounts built over the last few years, which has a lucrative liability book and also credit cards, in which it was the largest among foreign banks in India.

The bank also had Rs 27,911 crore of loans to agriculture, affordable housing renewable energy and micro, small and medium enterprises (MSMEs). Of this, Rs 4,975 crore was to weaker sections, as part of Citi India’s priority sector lending obligations, results released last year showed.

Citi Bank has 2.8 million retail customers, 1.2 million bank accounts and nearly 2.6 million credit cards as of June.

Citi’s consumer business contributes about a third to the overall India business in terms of profitability, while total India business contributes 1.5% of profits to the global book. Overall, Citibank’s India unit had a market share of advances and deposits of 0.6% and 1.1%, respectively.

Citi credit cards

Citi started retail operations in India in 1985 and was among the pioneers of credit cards in the country. However, its share of credit cards has dropped from 13% to 6% now. Despite being the sixth-largest player in the space, Citi has the highest average spend on its card touching close to 2 lakh per card. The average spends per card for Citi is 1.4 times higher than the industry average, making it a profitable business for the bank in India. The other four major players have had nearly the same steady growth in spend per card at 11-12%.

Citibank’s outstanding credit cards as of February stood at 2.65 million, the largest among foreign banks in India, ahead of 1.46 million by Standard Chartered and 1.56 million by Amex. Citi India had 2.9 million retail customers with 1.2 million bank accounts as of March 2020.

At the end of March 2020, Citibank served 2.9 million retail customers with 1.2 million bank accounts and 2.2 million credit card accounts.

The market

The total number of cards in circulation in India, as per a Worldline India Digital Payment report for 2020, stood at 946.81 million as of December 2020. As of December 2020, the average ticket size of credit cards was Rs 3,653, while that of debit cards was Rs 2,568, Worldline said. However, according to a 2019 report, despite being the fifth-largest player in the space, Citi has highest average spend on its card touching close to 2 lakh per card. The Indian credit card market is a fairly crowded place with 74 players operating. The top 5 players, however, have a comfortable 78% share by the number of cards and 75% share by credit card spend. HDFC bank is the leader at close to 31% share followed by SBI cards at 19%, which is trailed by ICICI, Axis, and Citi.

Earlier acquisitions

Local lenders have profited from foreign banks’ exit from India over the last decade. IndusInd Bank for example brought and built up Deutsche Bank’s credit card portfolio in 2011 and followed it up by buying Royal Bank of Scotland’s (RBS) diamond financing business in 2015. Another private sector RBL Bank also started its credit card business by purchasing the portfolio from RBS in 2013.



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Peru central bank chief Velarde to stay for another term -source, BFSI News, ET BFSI

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LIMA – Peruvian central bank President Julio Velarde has agreed to stay on for an extra term, a source familiar with his decision said on Monday, a move poised to calm markets rattled by the election of the country’s new left-wing president.

“Julio Velarde has agreed to continue in the role and is following the conversations to define the members of the bank’s board,” said the source, who declined to be identified because the decision has not yet been made public.

A central bank representative was not immediately available for comment.

Velarde, a prestigious central banker, has been in the role since 2006 and helped cement Peru’s economy as one of the most stable in Latin America. Peru’s central bank is independent from the government, with the rest of the bank’s board split between nominees proposed by the executive and legislative branches.

Newly inaugurated President Pedro Castillo asked Velarde to stay in the role. Velarde initially said he planned to retire later this year.

Peruvian markets have been battered on Castillo‘s election, with the local sol currency hitting a record low against the dollar on Monday.

Castillo belongs to a Marxist-Leninist party, has named several hardliners to his Cabinet and is pushing to redraft the country’s constitution.

(Reporting by Marco Aquino; Editing by Christian Schmollinger and Leslie Adler)



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Key accused in co-op bank fraud case nabbed, BFSI News, ET BFSI

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THRISSUR: The crime branch team probing the fraud at Karuvannur Cooperative Bank on Monday arrested the first accused in the case.

T R Sunilkumar, former secretary of the bank and son of Thaivalappil Ramakrishnan of Thaliyakkonm near Irinjalakuda, was taken into custody at 4:40pm from Parappur Road area near Amala Hospital in Thrissur, said sources in the probe team. There are reports that he had surrendered before the police, but the probe team insisted that they had taken him into custody.

The absconding Sunilkumar was the secretary of the bank for the last 21 years, and he was hiding at different places after the case was registered. He will be produced before the court on Tuesday, sources said.

A manhunt is on in Andhra Pradesh, Tamil Nadu and Karnataka for remaining five accused, sources added.

Three of the accused have filed anticipatory bail applications at the principal district and sessions court here. The accused M Biju Kareem, who was the manager and C K Jilse, a bank accountant, and Reji Anilkumar, an accountant at the supermarket being run by the bank, filed the bail application soon after the fraud was exposed last month. The bail application had come up for hearing on July 21 and the prosecution was asked to file their responses, which was filed on August 6. The petitions have now been reserved for orders on Tuesday.

The probe team was facing criticisms from Congress and BJP for the delay in the arrest of the accused in the fraud. Congress and BJP leaders were alleging that the probe team was trying to protect the fraudsters because of their links with CPM.

However, the probe team expressed confidence that the remaining five will also be nabbed soon. They denied reports that one of the accused had gone abroad.



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HDFC Bank receives Rs 30,000 crore prepayments amid signs of economic recovery and deliveraging, BFSI News, ET BFSI

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In clear signs of a robust economic recovery and sustained deleveraging by top-rated Indian corporates, HDFC Bank received about Rs 30,000 crore in prepayments through the June quarter, primarily from companies in the commodities and infrastructure sectors, two people familiar with the development told ET.

“HDFC Bank has not seen such a high level of prepayment in the recent past,” said one of the persons cited above. “Other banks also obtained prepayments, but the scale is not that high because of lower business volumes.”

HDFC Bank, India’s most valuable lender, did not reply to ET’s queries on the subject. Industry sources didn’t reveal the names of individual corporate borrowers prepaying their loans to HDFC Bank.

In the April-June quarter, AAA or AA-rated companies sought to deleverage as they recorded solid cash balances, banking sources said. Cash flows were robust at commodity companies because of record iron ore or aluminium prices, boosting net profits. Infrastructure companies, too, reported fatter bottom-lines due to the government’s extensive highway-building programme.

HDFC Bank now expects renewed credit demand from these companies in a quarter or two, with the pace of economic recovery quickening and fueling the need for more funds.

The bank expanded its corporate loans in excess of 10% in the April-June quarter to about Rs 3.15 lakh crore. Wholesale banking advances largely include working capital loans. About four years ago, the book size was about Rs 1 lakh crore at the traditionally retail-focused HDFC Bank.

“Prepayments came from borrowers with more than two years of residual loans outstanding,” said a market source.

If a borrowing company runs a loan for two years and gives a prepayment notice of up to 30 days, the bank does not charge any penalty.

“Three months later, these companies will come forward with fresh credit demand,” said a senior banking executive, who advises companies on loan deals and works closely with HDFC Bank. “Demand is coming back as the second wave triggered only localised lockdowns.”

HDFC Bank is increasingly leaning toward companies, with the franchise built around individual consumption pushing credit to deleveraged corporates after Covid-induced job losses and wage cuts raised the risk perception of retail borrowers.

“Corporate loans will likely grow selectively,” Kaizad Bharucha, Executive Director, HDFC Bank, said in an interaction with ET two weeks ago. “The second wave has not destroyed demand for corporate loans but postponed it. With caseloads falling, companies will require money – both working capital and term loans.”



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INTERVIEW| Demand for loans has come back, says Nitin Chugh, MD & CEO, Ujjivan SFB

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Nitin Chugh, MD & CEO, Ujjivan SFB

Ujjivan Small Finance Bank restructured around Rs 571 crore of loans up to July under Resolution Framework 2.0, as around Rs 750-800 crore of loans might require restructuring in Q2, says MD & CEO Nitin Chugh. In an interview with Mithun Dasgupta, Chugh informs collection efficiency for every single state improved in July compared to June. However, Assam and Kerala are lagging behind. Excerpts:

In the first quarter this fiscal, Ujjivan Small Finance Bank’s net interest income (NII) fell 16% year-on-year at Rs 384.40 crore. What are the reasons behind that?

The NII was lower because we had elevated levels of non-performing assets (NPAs) at 9.8% (gross NPA ratio). So, that book did not earn very much. The overall book was more or less at the same level, where there was around 2% de-growth. Thus, income earning on assets reduced.

What is the outlook for the NII for second quarter?

That is the hard one to predict right now. Our business is improving and collections have also improved to 93% (in July, against 78% in June). We will be able to actually come out with it only when we finish the quarter. But things are improving, so that gives us confidence to at least believe that Q2 will be better than the Q1. Only caveat is that we don’t get confronted with the third Covid wave. In Q1, we had worked under very restricted conditions on account of Covid second wave and lockdowns. In lockdowns, both collections and business are impacted. And, then for our segment of customers, a lot of face-to-face interactions are required. Thankfully, in the first quarter, we got 15 days of April and 15 days of June to recover.

Disbursements in the Q1 was up by around 180% year-on-year, while quarter-on-quarter there was a 69% fall…
In Q1FY21, there was nothing at all, absolutely no movement because of the prolonged sets of lockdowns. Last year, things had probably opened up in June and July. In our business, in microfinance segment, we largely deal with a lot of existing customers. In Q1FY21, because we were unable to move for almost the entire quarter due to restrictions, face-to-face interactions did not happen and we could not deal with those customers. There were loan moratorium also. When people avail moratorium they don’t want to take any new loans.

However, this time, since we got 15 days of April because of the continuing momentum from the Q4FY21, that sustained itself for sometime till the lockdowns came in place. And when the restrictions started to go away by June 15, then the momentum started to come back. Right now, demands for all kinds of loans have come back quite strongly. Disbursements fell on quarter-on-quarter basis because Q4FY21 had been a very good quarter for us.

Do you have loan exposure in Kerala? What is the collection efficiency for the state?

In Kerala, our loan portfolio is around Rs 214 crore, not a very large one. Kerala for us is not among the top five states in any case. Our top five states are Tamil Nadu, West Bengal, Karnataka, Maharashtra and Bihar. Every single state improved in July compared to June, Kerala has also improved. However, it is not comparable to some of the other states, it is lagging behind. At the end of June, collection efficiency in Kerala stood at 39%, and in July, it was 86%.

In Assam, has the collection efficiency improved?
In Assam, the collection efficiency was 41% in June, while in July, it was 59%. So, Assam is still lagging. Most of the lenders are at the similar kind of numbers in the state.

Up to July, what was the total amount of loans restructured under Resolution Framework 2.0?

We have restructured around Rs 571 crore of loans. In July, we restructured around Rs 501 crore, out of whichRs 480 crore is from microfinance.

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