Category: Banking & Finance

Digital transactions grew 80% in last 250 days: Razorpay report

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Digital transactions have grown by 80 per cent during the 250 days between November 30, 2020 to August 6, 2021, based on transactions held on the digital payments platform Razorpay.

The financial solutions company on Monday released the ninth edition of ‘The (Covid) Era of Rising Fintech’ report with insights about digital payments in the last 500 days up till August 6, 2021.

August 6 marked 500 days of the pandemic since the national lockdown was first announced, starting March 25, 2020. The report based on transactions held on Razorpay platform between the first 250 days (March 25, 2020 to November 29, 2020) and the next 250 days (November 30, 2020 to August 6, 2021).

The report provides a detailed view of the evolving FinTech ecosystem, the digital spending patterns of consumers and an analysis of how different sectors and payment modes performed during this time, when businesses and life were hit by Covid, the company said.

Every sector and payment mode had been negatively impacted at the start of the pandemic and online payments declined by 30 per cent in early 2020

Multiple sectors have shown significant signs of recovery.

Businesses, especially from tier-2 and tier-3 cities have been a major boost for digital payments exhibiting a growth of 40 per cent from the first 250 days to the next 250 days.

While the metropolitan cities continued to show growth, businesses & consumers from places such as Jammu, Ahmedabad, Shimla and Coimbatore witnessed a growth of 195 per cent, 87 per cent, 49 per cent and 30 per cent, respectively

Additionally, the demand for payment options like Buy Now Pay Later (BNPL) has also increased, registering a growth of 220 per cent so far.

With increased digital adoption amid the pandemic, small businesses are also expected to increase investment in digital technologies in 2021. Affordable payment options such as Buy Now Pay Later (BNPL) have seen an increased preference which is expected to rise and increase transactions for SMBs, the report said.

The Services industry, that is the likes of home services such as carpentry, plumbing and more, has also increased adoption of digital payments with transactions increasing by 138 per cent.

The digital transactions by Freelancers and Homepreneurs saw a growth of 69 per cent during the last 250 days.

Digital transactions in Social Commerce grew by 65 per cent while Direct-to-Consumer (D2C) businesses witnessed a growth of 87 per cent during the last 250 days as compared to the first 250 days of the national lockdown.

Harshil Mathur, CEO and Co-Founder of Razorpay said, “The last 500 days haven’t been ordinary as almost every person and business has realised the need for digital awareness and presence. Fintech companies like us, banks, investors, government and regulators have worked hard during the last 16+ months to speed up digital innovation and adoption amongst consumers and small businesses.”

“What makes me really happy is the fact that not a single sector showed negative growth in the last 250 days. This was possible because businesses have recognised the crucial importance of using new payment technologies to support and improve their business growth. The way I see it, I expect this revolution of FinTech to extend from payment innovation to business banking innovation in the next two years,” added Mathur.

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Equitas SFB launches fintech accelerator programme ‘Equitech’

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Equitas Small Finance Bank on Monday announced the launch of ‘Equitech’ – a fintech accelerator programme aimed at the start-up ecosystem. The programme, designed to scale-up, will help fintechs to curate their products and define a go-to-market strategy.

In a press release, the Chennai-based lender said, Equitech will help fintechs to reach the next level and take its product to the market in a more targeted manner. The programme was launched on August 7 and the application process for the enrolment has commenced. “Indian fintech ecosystem is experiencing exponential growth from almost all the sub-segments ranging from payments and regtech to robo-advisory and blockchain. This growth is driven by the innovative fintech start-ups that were able to create unique banking trends like BaaS, neo banking, open banking, autonomous finance etc,” Murali Vaidyanathan, Senior President and Country Head – Branch Banking – Liabilities, Products & Wealth, Equitas Small Finance Bank said in the release.

Also read: After hit by pandemic hard, start-ups on growth path: EY

“These innovations have significantly impacted the way Indian banking industry functions and has resulted in India seeing a 60% increase in fintech investments despite the pandemic. We are glad to be able to assist and nurture the future unicorns in upgrading the banking system for the next level,” he added.

Focus on banking technologies

Equitech will focus on banking aspects such as payments, lending, CASA, transaction banking, API banking, governance & regulations as well as technologies such as agri-tech, banking tech, clean energy, government tech and other horizontal segments across key focus areas. The shortlisted firms will be granted direct access to a world class infrastructure through Equitas Small Finance Bank’s tech platform and API sandbox for product development.

Besides, there will be specific cohorts along with mentors and a panel of experts, the start-ups will work closely with these experts to create their products. Equitas will provide the necessary support required from legal and regulatory aspects. The selected fintech may also get to service Equitas SFB either as their first commercial business partner or as a co-brand partner, the bank’s release said.

Eligibility

To enroll, a fintech start-up must be registered / incorporated within the last 6 years as on date of the accelerator programme opening and should have at least two full-time employees, with most important team members having expertise in their field. The start-up must present an innovative product/ idea with significant advantages over current industry offerings and should represent original ideas wholly owned with the freedom to use.

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Sanjiv Chadha, Bank of Baroda, BFSI News, ET BFSI

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The CASA ratio moved up from 39% to nearly 40% over last 12 months. That is one abiding benefit for the bank, not only in terms of margins for this quarter but also going ahead, said Sanjiv Chadha, MD & CEO, Bank of Baroda. Edited excerpts:

Congratulations on a healthy quarter in a tough environment. What has led BoB back to profits with low slippages in the first quarter, as well as lower credit cost on a sequential basis?
There are two major aspects which I think have had CASA improve things. One is on the structural side where we have had very tight discipline both in terms of managing liability franchise and also on the asset side. So, on the liability side, when you have abundant liquidity, it is very impossible that you allow deposit growth to run too far ahead of loan growth which creates pressure on margins. We have tried to be disciplined, make sure that our deposits grow in line with our loan growth.

Because we were choosy there, we have been able to make sure that most of the growth has come from CASA deposits. So, the CASA ratio moved up within a year from 39% to nearly 40% over last 12 months. That is one abiding benefit for the bank, not only in terms of margins for this quarter but also going ahead. Similarly on the asset side, there is a lot of liquidity sloshing around, pressure on margins. We are trying to be disciplined there also.

While both slippages as well as credit cost has been lower sequentially, what is the kind of slippages as well as credit cost that you expect? Where do you see gross net NPAs settle at for the financial year close?
We had guided even before the second wave that we would expect slippages to be below 2% and credit cost to be between 1.5% to 2% and bearing towards the lower end of that scale. We believe that despite the second wave we should be able to deliver on the guidance.

Your overall exposure to NCLT accounts is a little over Rs 48,000 crore and the PCR is 94%. To what extent of this amount do you see resolution? What are the overall recoveries and upgrades you expect for the whole bank and from these NCLT accounts as well?
The NCLT accounts tend to be the very highly provided; upwards of 90%. In terms of you might say anticipating in which quarter would it happen is always very difficult and so we do look forward to the resolutions of NCLT accounts. We are making sure that in terms of our recovery efforts and in terms of our recovery budgeting, we are looking beyond the NCLT accounts also. It is very tough to say what will come in which quarter, but I would believe that there are some accounts which probably will happen within this year and they will contribute significantly to the recoveries.

What is your exposure funded and non-funded to Vodafone Idea, how much you have provided for and what is the provision you expected to make?
Our exposure is relatively small, so it is not something which could significantly impact the improvement in the corporate credit cycle we have knocked off.

Let us talk about return ratios and profits from a two-year perspective. What is the improvement that you can expect on those two fronts and how do you see yourself competing with the modern day players that are coming in and making waves in the space?
The question might have two segments, one in the terms of the improvement in the profitability. I think that is something which is likely to be sustained over the next two years simply because we have built strengths in terms of the business both on the asset and liability side. On the liability side in terms of a CASA ratio, which now pretty much compares with the best in the business. Or on the asset side in terms of retail growth, which again have been better than market. So, we are very positive in terms of the structural story.

As we discussed, the improvement in the corporate credit cycle is likely to sustain over the next two years despite the second wave. We have seen even in this quarter the impact on corporate has been very marginal, therefore we can be fairly confident that the improvement that we have seen should continue going ahead.

The structural improvements in the balance of the bank, the earning power that has accrued to the bank from new businesses, and also the cyclical story should again help us have sustainable improvement and get back to return ratios which are very respectable. Coming back to the second part, in terms of the challenge of fintechs, I think it is an opportunity for banks and it is a great opportunity for us to collaborate with fintechs to create new businesses. Even as we speak, we have a very significant digital initiative which is being rolled out where we are collaborating with a large number of fintechs.

We expect that a large part, particularly on the retail side, should be digitised over the next 12 to 18 months and all of this will happen in collaboration with fintechs who would be our partners. I do not see any competition with fintechs as a zero-sum gain which is at the cost of banks, I think it is a great opportunity for the banks to in fact become much more efficient.



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Now, depositors can withdraw up to ₹5 lakh if bank placed under moratorium

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Parliament has given its approval to a Bill to amend the Deposit Insurance and Credit Guarantee Corporation Act, 1961.

The amendment to the Act will enable depositors to access their deposit up to sum prescribed under deposit insurance, which is ₹5 lakh, in case the bank is placed under moratorium, and that too within 90 days. The Rajya Sabha gave its nod to this Bill last week and on Monday, Lok Sabha cleared it. Now, the Bill will be sent to the President for his assent post which it will become law.

New DICGC Bill will take care of PMC depositors’ woe: FM

Depositors of PMC Bank are likely to be covered under the new mechanism.

As of now, depositors have to wait for liquidation or passage of resolution to get the benefit of deposit insurance. This takes 8-10 years. Now, this will not be the situation. Finance Minister Nirmala Sitharaman has already said that payment is to be made within 90 days. “First 45 days will be taken by the banks for collecting the information and next 45 days for checking. Then on 91st or 92nd day or around that, payment will be made,” Sitharaman had said while announcing the Cabinet decision on July 28.

PMC Bank receives 1,229 applications for deposit withdrawal

Last year, the Government raised the deposit insurance to ₹5 lakh from ₹1 lakh. Sitharaman said that with this, 98.3 per cent in terms of number of deposit accounts and 50.9 per cent in terms of deposit value will be covered. Globally, these numbers are 80 and 20-30 per cent respectively.

Time-bound access

This Bill is a follow-up to the Budget announcement. Finance Minister had said that amendments to the DICGC Act would aim to streamline the provisions, so that if a bank is temporarily unable to fulfil its obligations, the depositors of such a bank can get easy and time-bound access to their deposits to the extent of the deposit insurance cover.

According to the legislative agenda prepared for the Monsoon session, the purpose of this Bill is to instil confidence in depositors about the safety of their money. The objective is to enable depositors access to their savings through deposit insurance in a time-bound manner in case there is suspension of banking business of the insured bank under various provisions of the Banking Regulation Act, 1949.

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Banks to DoT, BFSI News, ET BFSI

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Conversion of debt of the stressed telecom player Vodafone Idea Ltd (VIL) into equity could be an option to emerge out of the crisis, lenders led by State Bank of India (SBI) have suggested to Department of Telecommunications (DoT). DoT had called senior bank officials on Friday to discuss the stress in the telecom sector arising out of the Supreme Court order last month on the adjusted gross revenue (AGR)-related dues payable by telecom majors, including Vodafone Idea and Bharti Airtel, sources said.

The top court has given a time period of 10 years to telecom service providers struggling to pay Rs 93,520 crore of AGR-related dues to clear their outstanding amount to the government.

Bankers also told senior DoT officials that conversion of debt of VIL into equity is an option but not a sustainable one, sources said, adding that since VIL had not defaulted on its debts so far, they cannot take any action yet.

In a bid to keep a company a going concern, banks have used the option of converting debt into equity in many stress cases in the past.

Capital infusion by promoters is the best option in the given scenario, sources said quoting bankers.

The UK-based Vodafone has a 45 per cent stake while Aditya Birla Group owns a 27 per cent stake in the VIL.

Lenders, both public and private, stare at a loss of Rs 1.8 lakh crore in case VIL collapses. A large part of the loans to the lender is in the form of guarantees with public sector banks having a lion’s share of the debt.

Among the private sector lenders, Yes Bank and IDFC First Bank may be impacted the most. As a precursor, some private lenders with a funded exposure have already started making provisions.

For example, IDFC First Bank has marked the account of VIL as stressed and has made provisions of 15 per cent ( Rs 487 crore) against the outstanding exposure of Rs 3,244 crore (funded and non-funded).

“This provision translates to 24 per cent of the funded exposure on this account. The said account is current and has no overdues as of June 30, 2021,” the lender had said in its Q1 FY’22 investor presentation, referring to the account as “one large telecom account”.

According to official data, VIL had an AGR liability of Rs 58,254 crore out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

The company’s gross debt, excluding lease liabilities, stood at Rs 1,80,310 crore as of March 31, 2021. The amount included deferred spectrum payment obligations of Rs 96,270 crore and debt from banks and financial institutions of Rs 23,080 crore apart from the AGR liability.

In a backdrop of such large liabilities, both the promoter Vodafone (45 per cent stake) and Aditya Birla Group (27 per cent stake) expressed their inability to bring in additional capital.

Writing a letter to Cabinet Secretary Rajiv Gauba in June, Aditya Birla Group Chairman Kumar Mangalam Birla said investors are not willing to invest in the company in the absence of clarity on AGR liability, adequate moratorium on spectrum payments and most importantly floor pricing regime being above the cost of service.

“It is with a sense of duty towards the 27 crore Indians connected by VIL, I am more than willing to hand over my stake in the company to any entity-public sector/government /domestic financial entity or any other that the government may consider worthy of keeping the company as a going concern,” Birla said in the letter.

Birla has quit the post of non-executive chairman post of the floundering telecom giant last week. PTI DP ANZ ANS ANS



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Public sector banks’ corporate loans decline in Q1 as Covid, competition hurt, BFSI News, ET BFSI

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Lending to the corporate sector by public sector banks declined significantly in the first quarter as Covid kept the demand depressed and competition from private sector banks and the bond market rose.

The domestic corporate loans by the State Bank of India fell 2.23 per cent to Rs 7,90,494 crore in the quarter ended June 30, 2021, compared to Rs 8,09,322 crore in the same quarter last year. In the fi rst quarter of FY21, SBI reported 3.41 per cent growth in corporate advances.

Union Bank of India‘s share of industry exposure in domestic advances dropped to 38.12 per cent at Rs 2,40,237 crore from 39.4 per cent at Rs 2,47,986 crore in the same quarter a year ago. Corporate loans dropped 3% at Indian Bank during the last quarter. At PNB, corporate loans fell 0.57 per cent at Rs 3,264,66 crore in June quarter 2021 compared to

Rs 3,28,350 crore a year ago.

Up to May, the gross loans to large industries declined by 1.7 per cent year­-on­year, according to RBI data.

Ceding ground of private-sector rivals

The market share of public sector banks in loans declined to around 59 per cent (of all scheduled commercial banks’ outstanding credit) in December 2020 against around 65 per cent in December 2017.

However, during this period, PvSBs market share rose to around 36 per cent from around 30 per cent, going by Reserve Bank of India data.

Falling industrial credit

The share of banks in loans to the industrial sector dropped massively during 2014-2021 even as credit to the retail sector, including home loans, saw a boom.

As per the data, industrial credit fell to 28.9% by March 2021 from 42.7% at the end of March 2014.

“Over recent years, the share of the industrial sector in total bank credit has declined whereas that of personal loans has grown,” the Reserve Bank of India said in its Financial Stability Report.

The environment for bank credit remains lacklustre in the midst of the pandemic, with credit supply muted by persisting risk aversion and subdued loan demand and within this overall setting, underlying shifts are becoming more evident than before, it said.

Loans to the private corporate sector declined from 37.6% in 2014 to 27.7% at the end of March 2021. During the same period, personal loans grew from 16.2 to 26.3%, in which housing loans grew from 8.5% to 13.8%.

Fiscal 2021

Bank credit growth to the industrial sector decelerated 0.8% year-to-date as of May 21, 2021, due to poor loan offtake from the corporate sector.

Growth in credit to the private corporate sector, however, declined for the sixth successive quarter in the fourth quarter of the last fiscal and its share in total credit stood at 28.3 per cent. RBI said the weighted average lending rate (WALR) on outstanding credit has moderated by 91 basis points during 2020-21, including a decline of 21 basis points in Q4.

Overall credit growth in India slowed down in FY21 to 5.6 per cent from 6.4 per cent in FY20 as the economy was hit hard by Covid. and subsequent lockdowns.

Credit growth to the industrial sector remained in the negative territory during 2020-21, mainly due to the COVID-19 pandemic and resultant lockdowns. Industrial loan growth, on the other hand, remained negative during all quarters of 2020-21.”

The RBI further said working capital loans in the form of cash credit, overdraft and demand loans, which accounted for a third of total credit, contracted during 2020-21, indicating the impact of the coronavirus pandemic.

Shift to bonds

The corporate world focused on deleveraging high-cost loans through fundraising via bond issuances despite interest rates at an all-time low. This has led to muted credit growth for banks.

Corporates raised Rs 2.1 lakh crore in December quarter and Rs 3.1 lakh crore in the fourth quarter from the corporate bond markets. In contrast, the corresponding year-ago figures were Rs 1.5 lakh crore and Rs 1.9 lakh crore, respectively.

Bonds were mostly raised by top-rated companies at 150-200 basis points below bank loans. Most of the debt was raised by government companies as they have top-rated status.

For AAA-rated corporate bonds, the yield was 6.85 per cent in May 2020, which fell to 5.38 per cent in April 2021 and to 5.16 per cent in May 2021.



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Banks set for higher provisioning hit as Vodafone Idea totters, BFSI News, ET BFSI

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Banks are going for higher provisioning for the Vodafone Idea account even as the future of the company hangs by a thread.

IDFC First Bank has marked the account of VIL as stressed and has made provisions of 15 per cent (Rs 487 crore) against the outstanding exposure of Rs 3,244 crore (funded and non-funded).

“This provision translates to 24 per cent of the funded exposure on this account. The said account is current and has no overdues as of June 30, 2021,” the lender said in its Q1 FY’22 investor presentation, referring to the account as “one large telecom account”.

According to official data, VIL had an adjusted gross revenue (AGR) liability of Rs 58,254 crore out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

The company’s gross debt, excluding lease liabilities, stood at Rs 1,80,310 crore as of March 31, 2021. The amount included deferred spectrum payment obligations of Rs 96,270 crore and debt from banks and financial institutions of Rs 23,080 crore apart from the AGR liability.

More banks may go for provisioning in the next couple of quarters for the account as troubles mount for the company.

Discussions with banks

The Department of Telecommunications (DoT) has initiated discussions with banks to address financial stress in the telecom sector, particularly Vodafone Idea Ltd (VIL) that urgently requires fund infusion to stay afloat.

There was a meeting of DOT officials and senior bankers on Friday on the issue of Vodafone, sources said, adding that banks have been asked to look for a solution within the prudential guidelines.

According to sources, senior officials from the country’s biggest lenders State Bank of India and Bank of Baroda were also present among others in the meeting.

More such meetings are expected to take place in the coming days, they said.

Meanwhile, the finance ministry has asked public sector banks to collate and submit data related to their debt exposure to the telecom sector in general and VIL in particular.

Lenders, both public and private, stare at a loss of Rs 1.8 lakh crore in case VIL collapses. A large part of the loans to the lender is in the form of guarantees with public sector banks having a lion’s share of the debt. Among the private-sector lenders, Yes Bank and IDFC First Bank may be impacted the most. As a precursor, some private lenders with a funded exposure have already started making provisions.

Promoters in bind

In a backdrop of such large liabilities, both the promoter Vodafone Plc (45 per cent stake) and Aditya Birla Group (27 per cent stake) expressed their inability to bring in additional capital.

Writing a letter to Cabinet Secretary Rajiv Gauba in June, Aditya Birla Group Chairman Kumar Mangalam Birla said investors are not willing to invest in the company in the absence of clarity on AGR liability, adequate moratorium on spectrum payments and most importantly floor pricing regime being above the cost of service.

“It is with a sense of duty towards the 27 crore Indians connected by VIL, I am more than willing to hand over my stake in the company to any entity-public sector/government /domestic financial entity or any other that the government may consider worthy of keeping the company as a going concern,” Birla said in the letter.

Birla has quit the post of non-executive chairman post of the floundering telecom giant last week.

Giving relief to Vodafone on one front, the government has proposed to withdraw all back tax demands on companies with passage of ‘The Taxation Laws (Amendment) Bill, 2021’.



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Exempt public sector and commercial banks from Deposit Insurance Scheme: AIBEA

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Ahead of the Lok Sabha taking up the Deposit Insurance Bill for passage, the All India Bank Employees’ Association (AIBEA) has urged Finance Minister Nirmala Sitharaman to exempt from its purview public sector banks and/or commercial banks, which are covered under Section 45 of the Banking Regulation Act.

Commercial banks pay about ₹12,000 crore of premium to the Deposit Insurance and Credit Guarantee Corporation (DICGC), which is an unwarranted expenditure as it would otherwise have gone to the banks’ profit, CH Venkatachalam, general secretary, AIBEA, said in a letter to the Finance Minister on Sunday.

Recast deposit insurance

Venkatachalam pointed out that Section 45 empowered the government and the RBI to amalgamate any bank with another bank to avert closure and loss of customers’ deposits.

“That is why, while hundreds of banks were getting closed prior to 1960, with this amendment to Banking Regulation Act, not a single commercial bank has been liquidated or closed,” he pointed out, adding there was thus no question of any commercial bank getting closed down. The AIBEA strongly felt that the deposits of commercial banks and, importantly, public sector banks, need not be covered by the deposit insurance scheme, he said.

Leg-up for depositors

He highlighted that, year after year, public sector banks and all commercial banks were required to pay a huge premium to DICGC, yet the claim ratio was nil since there was no likelihood of liquidation. The AIBEA letter highlighted that the claim settled so far, since 1962, was only ₹5,200 crore, and that too for cooperative banks.

The AIBEA’s missive comes at a time when the government is looking to increase the deposit insurance coverage to ₹5 lakh from ₹1 lakh at present. The Lok Sabha is expected to take up the Bill for passage on Monday.

The AIBEA letter also highlighted the fact that of the 2,067 banks covered by the DICGC, the 1,923 cooperative banks were the only ones facing threats of closure and their deposits need protection. Even in their case, the premium should be charged only to the extent of deposits covered by insurance, rather than the total assessable deposits, which is much higher, the association said.

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Indian bankers in talks as court rulings threaten over $6 billion in loans

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Informal talks are taking place to deal with the fall-out from two rulings by the Supreme Court that threaten the repayment of loans totalling nearly ₹500 billion ($6.73 billion) to some of India’s largest banks, bankers close to the matter say.

Any failure to recoup the money adds to stress in the banking sector, which is already dealing with an increased level of bad loans and reduced profits because of the impact of the Covid-19 pandemic.

Biyani-Ambani deal in trouble as Supreme Court rules in favour of Amazon

Last week, the Supreme Court effectively blocked Future Group’s $3.4-billion sale of retail assets to Reliance Industries, jeopardising nearly $2.69 billion the retail conglomerate owes to Indian banks.

That ruling was delivered days after the Supreme Court rejected a petition to allow telecom companies to approach the Department of Telecommunications to renegotiate outstanding dues in a long-running dispute with Indian telecom players.

Following SC ruling, NCLT to pause hearing on Future-Reliance deal

That raises concerns, bankers say, over whether Vodafone Idea will repay some ₹300 billion ($4.04 billion) it owes to Indian banks and billions of dollars more in long-term dues to the government.

Future of Future?

Two bankers, speaking on condition of anonymity, said negotiations were taking place to try to limit potentially severe consequences.

Loans to Future worth nearly ₹200 billion were restructured earlier this year, giving it more time to come up with repayments due over the next two years, but that was on the premise that Reliance would bail it out, the bankers said.

Future group did not immediately respond to a request for comment.

Should Future be taken to a bankruptcy court, bankers say they are concerned they will have to take haircuts on the loans of more than 75 per cent.

“The immediate apprehension is that the restructuring deal will fall through for banks by December,” said a banker at a public sector bank that has lent money to Future.

Future’s leading financial creditors include India’s largest lender State Bank of India, along with smaller rivals Bank of Baroda and Bank of India.

Bank of India, the lead bank in the consortium lending to Future, did not immediately respond to an emailed request for comment.

Vodafone Idea

Banks have also started discussing Vodafone’s debt to lenders of nearly ₹300 billion. Top lenders to Vodafone include YES Bank, IDFC First Bank and IndusInd Bank, as well as other private and state-owned lenders.

Vodafone, YES Bank, IDFC First Bank and IndusInd did not immediately respond to a request seeking comment.

“Even though banks have the option of restructuring loans in case the company defaults, it will only make sense if there is clear cash flow visibility, which is not the case right now,” a senior banker at a public sector bank said on condition of anonymity.

Already, at the end of March, Indian banks had total non-performing assets of ₹8.34 trillion ($112.48 billion), the government has said. It has yet to provide more updated figures.

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Bankers in talks as court rulings threaten over $6 billion in loans, BFSI News, ET BFSI

Banking & Finance

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Informal talks are taking place to deal with the fall-out from two rulings by Supreme Court that threaten the repayment of loans totalling nearly 500 billion rupees ($6.73 billion) to some of India’s largest banks, bankers close to the matter say.

Any failure to recoup the money adds to stress in the banking sector, which is already dealing with an increased level of bad loans and reduced profits because of the impact of the pandemic.

Last week, Supreme Court effectively blocked Future Group’s $3.4 billion sale of retail assets to Reliance Industries, jeopardising nearly $2.69 billion the retail conglomerate owes to Indian banks.

That ruling was delivered days after the Supreme Court rejected a petition to allow telecom companies to approach the Department of Telecommunications to renegotiate outstanding dues in a long-runinng dispute with Indian telecom players.

That raises concerns, bankers say, over whether Vodafone Idea will repay some 300 billion rupees ($4.04 billion) it owes to Indian banks and billions of dollars more in long-term dues to the government.

FUTURE OF FUTURE?

Two bankers, speaking on condition of anonymity said negotiations were taking place to try to limit potentially severe consequences.

Loans to Future worth nearly 200 billion rupees were restructured earlier this year, giving it more time to come up with repayments due over the next two years, but that was on the premise that Reliance would bail it out, the bankers said.

Future group did not immediately respond to a request for comment.

Should Future be taken to a bankruptcy court, bankers say they are concerned they will have to take haircuts on the loans of more than 75%.

“The immediate apprehension is that the restructuring deal will fall through for banks by December,” said a banker at a public sector bank that has lent money to Future.

Future’s leading financial creditors include India’s largest lender State Bank of India, along with smaller rivals Bank of Baroda and Bank of India.

Bank of India, the lead bank in consortium lending to Future, did not immediately respond to an emailed request for comment.

VODAFONE IDEA

Banks have also started discussing Vodafone’s debt to lenders of nearly 300 billion rupees. Top lenders to Vodafone include Yes Bank, IDFC First Bank and IndusInd Bank, as well as other private and state-owned lenders.

Vodafone, Yes Bank, IDFC First Bank and IndusInd did not immediately respond to a request seeking comment.

“Even though banks have the option of restructuring loans in case the company defaults, it will only make sense if there is clear cash flow visibility, which is not the case right now,” a senior banker at a public sector bank said on condition of anonymity.

Already, at the end of March, Indian banks had total non-performing assets of 8.34 trillion rupees ($112.48 billion), the government has said. It has yet to provide more updated figures.



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