Category: Banking & Finance

IFC invests ₹916 crore in Federal Bank for 4.99% stake

Banking & Finance

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IFC, along with two investment funds managed by IFC Asset Management Company (IFC Financial Institutions Growth Fund and IFC Emerging Asia Fund) have picked up 4.99 per cent stake in Federal Bank for ₹916 crore.

“Increased financing for climate friendly projects as well as more financing for small businesses to help accelerate India’s economic recovery from Covid-19 are expected in the wake of a $126 million (₹916 crore) equity investment in Federal Bank,” the private sector lender said in a statement on Thursday.

The investment will also support Federal Bank’s commitment to environmental social and governance (ESG) standards, and also strengthen its Tier 1 capital adequacy ratio (CAR) and expand its micro, small and medium sized enterprises (MSME) and climate finance portfolios, it further said.

“After the bank’s board approved issuance of shares to the IFC group to an extent of 4.99 percent of the bank’s paid-up capital, IFC has become a significant shareholder of the bank,” said Shyam Srinivasan, Managing Director and CEO, Federal Bank.

The investment also marks IFC’s first in India aligned to the Greening Equity Approach, which will enable the Federal Bank to reduce its exposure to coal and increase its climate lending.

Roshika Singh, Acting Country Manager for IFC in India said the move is in line with IFC’s strategy to support green growth and will also help create jobs.

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Poonawalla Fincorp strengthens its leadership team

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Poonawalla Fincorp (formerly Magma Fincorp) revamped and strengthened its leadership team, bringing-in various industry leaders through a string of top executive hiring across functions.

Rajendra Tathare, with more than two-and-a-half decades of experience in credit risk and policy formulation, has joined Poonawalla as its Chief Credit Officer. He was last associated with Fullerton India as Head of credit underwriting and spent almost 15 years with them.

The appointments

Manish Kumar has joined as the Group Chief Human Resources Officer. He brings with him vast experience across the BFSI space with players like RBS, IDFC and ICICI bank.

Rashmi Prasad has joined as Head-Analytics. With rich experience of more than 16 years, Prasad was last heading Analytics for Tata Capital and has previously been associated with players like Bajaj Finance and L&T Finance.

Mitul Budhbhatti joined the company for Credit and Risk Monitoring from CARE Ratings where he worked for more than 15 years managing the BFSI ratings.

The company has appointed Surya V as its Chief Strategy Officer. He has more than two decades of experience in BFSI segment and was last associated with ICICI Bank.

Indiresh Phaltankar will lead the company’s foray into the loan against property (LAP) business as Business Head . An ISB graduate with over two decades of experience, he was previously associated with HSBC and Aditya Birla Finance.

Abhay Bhutada, Managing Director, Poonawalla Fincorp said in a statement, “It is great to see our leadership team getting strengthened across different verticals in line with our philosophy of making it a professionally run company with a strong governance culture. We want to rebuild the organisation with a very solid footing and firmly believe that the right talent is an essential ingredient for the same. We have a new but highly experienced and talented management team, having onboarded the best of the industry talent with rich, varied, and diverse experience. This talent will definitely be a pillar for our growth journey.”

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LIC Housing Finance Q1 profit falls to ₹153 crore

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LIC Housing Finance Ltd (LIC HFL) reported an 81 per cent drop in net profit at ₹153 crore in the first quarter ended June 30, 2021 against ₹817 crore in the year-ago period.

The bottomline was weighed down by a sharp rise in provision towards “impairment on financial instruments” and wage revision.

Net interest income (difference between interest earned and interest expended) increased by 4.5 per cent yoy to ₹1,275 crore (₹1,221 crore in the year-ago quarter).

Provision towards “impairment on financial instruments” jumped to ₹830 crore (₹56 crore).

Y Viswanatha Gowd, Managing Director & CEO, said there has been an increase in delinquencies, mostly due to economic activities being impacted in Q1.

He emphasised that with improvement in economic activities and increased and focussed efforts in recovery, LIC HFL is confident of controlling the same.

Wage revision impact

Employee benefit expenses rose to ₹215 crore (₹80 crore). Based on board of directors approval on June 15 on wage revision with effect from August 1, 2017, a sum of ₹124 crore has been recognised by the company during the quarter on an estimated basis.

The lender, in a statement, said total disbursements soared 143 per cent yoy to ₹8,652 crore in Q1 FY2022 from ₹3,560 crore in the year-ago period.

Out of this, disbursement in the individual home loan segment shot up 152 per cent yoy at ₹7,650 crore as against ₹3,034 crore in the year ago period. Project loans disbursement were at ₹237 crore compared with ₹159 crore for the same quarter in the previous year.

Outstanding loans portfolio increased by 11 per cent yoy to ₹2,32,548 crore (₹2,09,817 crore).

Net interest margin (NIM) for the quarter declined to 2.20 per cent as against 2.32 per cent for the same period in the previous year.

Covid wave

Gowd said LICHFL’s performance was impacted due to the second wave of Covid-19, resulting in lockdowns being imposed in several States.

“However, with increased vaccination drive and containment of the pandemic spread, since June 2021, the business has picked up. We expect a rebound in the remaining months of FY2022,” he added.

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Punjab & Sind Bank reports Q1 net profit at Rs 174 cr, BFSI News, ET BFSI

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State-owned Punjab & Sind Bank on Thursday reported a net profit of Rs 173.85 crore for the first quarter ended June 30. The bank had posted a net loss of Rs 116.89 crore a year ago. Sequentially, it had registered a net profit of Rs 160.79 crore in the March 2021 quarter.

The total income of the bank during Q1FY22 rose to Rs 2,039.61 crore from Rs 1,954.39 crore in Q1FY21, Punjab & Sind Bank said in a regulatory filing.

Provisions for bad loans and contingencies for the quarter fell to Rs 77.30 crore from Rs 382.56 crore in the year-ago period.

The bank’s asset quality showed an improvement and the gross non-performing assets (NPAs or bad loans) came down to 13.33 per cent of the gross advances as of June 30, 2021, against 14.34 per cent a year ago.

In absolute value, the net NPAs stood at Rs 9,054.96 crore, up from Rs 8,848.06 crore.

The net NPAs ratio fell to 3.61 per cent (Rs 2,206.70 crore), from 7.57 per cent (Rs 4,326.41 crore).

The bank said it has kept the account of Delhi Airport Metro Express Pvt Ltd (DAMEPL) as standard, in accordance with the Supreme Court order and RBI guidelines.

The bank has not treated an outstanding of Rs 166.63 crore towards DAMEPL as NPA, it said. It has held the provisions of Rs 92.24 crore against this, higher than the required Rs 49.59 crore.

The provision coverage ratio of the bank stood at 84.22 per cent as of June 30, 2021, and the liquidity coverage ratio at 215.52 per cent.

Shares of the bank jumped 4.37 per cent to close at Rs 20.30 apiece on BSE.



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slice raises Rs 75.5 crore in debt in Q1 FY22

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Fintech start-up slice has raised Rs 75.5 crore in debt in the first quarter of this fiscal from multiple financial institutions, including Northern Arc Capital, Niyogin Fintech, Credit Saison India and Vivriti Capital.

Rajan Bajaj, Founder and CEO, slice, said, “The banking industry in India often views credit cards as a loan product instead of a high-frequency payment instrument. Their main focus is to optimise the fees and portfolios while overlooking the experience. However, we see slice card as a classic payment product, and we are solving it as a customer experience problem with a customer-centric approach in mind.”

Launched in 2019, slice card focuses on millennials and Gen Z. It has three million registered users and is accepted at 99.95 per cent of merchants across the country that accept Visa.

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IFC’s investment in Federal Bank to promote green recovery, improve access to finance for SMBs, BFSI News, ET BFSI

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IFC and two investment funds managed by IFC Asset Management Company, IFC Financial Institutions Growth Fund, LP, and IFC Emerging Asia Fund, LP have made an equity investment for a 4.99 percent stake in Federal Bank Limited.

The $126 million (₹916 crores) equity investment is expected to increase financing for climate-friendly projects as well as more financing for small businesses to help accelerate India’s economic recovery from COVID-19.

The investment is expected to support FBL’s commitment to environmental, social, and governance standards with increased green portfolio financing for projects including energy efficiency, renewable energy, climate-smart agriculture, green buildings, and waste management.

The investment also aims to strengthen its Tier 1 capital adequacy ratio (CAR) and expanding its micro, small, and medium-sized enterprises (MSME) and climate finance portfolios – key for growth opportunities as the country recover from the pandemic.

Shyam Srinivasan, MD & CEO of Federal Bank said, “After the Bank’s board approved the issuance of shares to the IFC group to an extent of 4.99 percent of the bank’s paid-up capital, IFC has become a significant shareholder of the bank. The addition of this marquee name to the list of our prominent shareholders reinforces the trust and confidence reposed by the IFC group in the bank and its management. The infusion of quality capital further strengthens Tier 1 and overall CAR of the bank.”

IFC will also consult with the bank on developing a new Environmental and Social Management System (ESMS) that will be applied to its entire portfolio. IFC will also implement an E&S technical advisory program.

Roshika Singh, Acting Country Manager for IFC in India, said, “This move is in line with IFC’s strategy to support green growth by spurring investments to build back better and greener, seizing the opportunities to help India meet its climate goals and build a greener, resilient future.”

Additionally, India’s MSMEs have faced increasing difficulty gaining access to the financing they need. Around 63 million MSMEs typically contribute nearly 30 percent to GDP, but about 11 million MSMEs remain fully or partially excluded from India’s formal financial system with an estimated financing gap of around $400 billion. The COVID-19 pandemic has further hampered the availability of funding for MSMEs.

India ranks third globally in terms of greenhouse gas (GHG) emissions, with the country needing substantial investments to meet its goals under the Paris Agreement to reduce GHG emissions by 2030. IFC estimates a total climate-smart investment opportunity of $3 trillion in India by the year 2030.



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FamPay partners Visa to woo teenagers with personalised doodle cards

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FamPay, a fintech start-up focused on online and offline card payments for teenagers, has launched India’s first Visa prepaid card — FamCard Me — for teenagers with personalised doodles on it.

“This launch of FamCard Me marks yet another innovation in the fintech and card industry, being the first ever doodle card in India,” Sambhav Jain, Co-Founder, FamPay told BusinessLine. It will also be the first time Visa forays into numberless cards. Teens can select from a range of 200+ doodles and signature fonts to create unique designs on their FamCard Me.

With FamPay and its numberless pre-paid card, teens can make online and offline payments using the FamCard and the FamPay App and without the need to set up a bank account, Jain added.

FamPay was founded in 2019 by two Indian Institute of Technology (IIT) Roorkee Graduates, Kush Taneja and Sambhav Jain while in college.

Over 2 million registered users

FamPay crossed 2 million registered users within eight months of its launch and in June 2021 raised one of India’s biggest Series A funding of $38 Million with Elevation Capital and Sequoia Capital as lead investors.

Also read: FamPay raises $38 million in funding from Elevation Capital, others

FamPay rolled out their virtual Visa Cards in May 2021, and more than 2,00,000 users have adopted it in just the first few weeks.

Starting on Thursday, teens can order the FamCard once their account is set up on the FamPay app. In addition to being doodled and personalized, the FamCard Me also gives exclusive offers and subscriptions to its teen users. They can immediately start using their virtual FamCard for online payments, while they wait for their physical cards to arrive, Jain added.

T R Ramachandran, Group Country Manager, India and South Asia, Visa said these innovative, numberless payment cards with personalised doodles from FamPay will appeal to a generation that is seeking the best of innovation and convenience for its payment experience.

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Google updates policy for personal loan apps; adds new norms for India, Indonesia

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Google has updated its financial services policy for developers to include clarifications related to personal loan apps, as also new requirements for such apps in India and Indonesia.

“We’re updating the Financial Services policy to clarify the definition of the total cost of the loan and require all personal loan apps be properly tagged under the Finance category. We are also adding new requirements for personal loan apps in India and Indonesia,” Google said on its support page.

The changes will be effective from September 15, 2021.

As per the policy, “Apps that provide personal loans, including but not limited to apps which offer loans directly, lead generators, and those who connect consumers with third-party lenders, must have the App Category set to “Finance” in Play Console.”

The apps will have to disclose a range of information in the app metadata including minimum and maximum period for repayment, the maximum annual percentage rate (APR), which generally includes interest rate plus fees and other costs for a year, or other similar rate consistent with local law.

“A representative example of the total cost of the loan, including the principal and all applicable fees,” explains the policy.

The apps will also be required to include a privacy policy that “comprehensively discloses the access, collection, use and sharing of personal and sensitive user data”.

Google publishes first transparency report in accordance with the new IT Rules

Google also specified additional requirements for personal loan apps in India and Indonesia. Apps must complete the additional proof of eligibility requirements in these countries.

In India, such apps will have to complete the personal loan app declaration, and provide documentation to support their declaration. For instance, for platforms licensed by the Reserve Bank of India (RBI) to provide personal loans, they must submit a copy of their licence for review.

RBI received complaints against over 1,500 loan apps: Thakur

Platforms not directly engaged in moneylending, and only facilitating lending by registered non-banking financial companies (NBFCs) or banks, will have to accurately reflect this in the declaration.

They must also ensure that the developer account name reflects the name of the associated registered business name provided through their declaration.

Google in January this year had reviewed hundreds of personal loan apps in India and removed those that violated its policies.

The tech giant’s crackdown comes a day after the RBI announced that it has set up a working group to study all aspects of digital lending activities by both regulated and unregulated players, in a bid to put in place an appropriate regulatory approach.

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RBI to HC, BFSI News, ET BFSI

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In a revelation, the Reserve Bank of India (RBI) has clarified that banks all over the country are witnessing increasing incidents of fraud due to their failure to adhere to its directives issued from time to time. In an affidavit submitted to the Nagpur bench of Bombay high court, the apex bank further disclosed that it doesn’t have the power to conduct investigations in banking frauds, nor does it have the machinery to do it.

The affidavit was filed while hearing a suo moto PIL for Rs25 crore losses caused to UCO Bank. Rajnish Vyas has been appointed as amicus curiae in the PIL. The embezzlement had taken place due to alleged forgery committed by a bank officer at its Wardha and Hinganghat branches. A division bench comprising justices Vinay Deshpande and Amit Borkar adjourned the hearing by six weeks.

Filed by RBI’s counsel SN Kumar, the affidavit added that as a regulator of the banking system in the country, it issued ‘Master Circular of Frauds’ to sensitize banks against scams and to have deterrent systems. “In spite of guidelines issued from time to time, it was observed that the frauds perpetrated in banks showed an increasing trend, mainly on account of non-adherence or improper implementation of circular directives issued by us. To enable the banks to have all current instructions in one place, a master circular incorporating all guidelines, instructions and directives on the subject was issued on August 1, 2001,” the affidavit mentioned.

Moreover, to enable the Government of India to have the required information on frauds, a suitable reporting system was introduced. Though the circular of March 22, 2002, has prescribed the period of reporting of frauds, it was realized that the banks aren’t following it scrupulously, the apex bank said.

At the RBI governor’s instance, the Central Vigilance Commission (CVC) has set up a high-level group to study incidents of fraud and suggest measures to prevent them. “This group observed that banks are not adhering to the time frame stipulated by RBI for reporting fraud cases. It has suggested that suitable penal action should be taken against defaulting banks. The banks are supposed to report frauds within a week of their detection and then a detailed report needs to be submitted in the prescribed format in the next three weeks,” the affidavit said.

The top bank added that to minimize incidents of fraud in the banking system, it has been making continuous efforts and regularly issuing circulars directing the banks to initiate appropriate action to contain them. “The Banking Regulation Act doesn’t empower RBI to conduct any investigations. The action may be initiated only after the offence is established by the law enforcement agencies. It’s mandatory for the banks to lodge a complaint of frauds with the police,” Kumar said.



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Rupee Bank admins express merger hope after Bapat’s Parliament speech, BFSI News, ET BFSI

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The current administrators of the stressed Rupee Cooperative Bank have expressed hope of a resolution of the financial institution, including a possible merger after Lok Sabha member Girish Bapat raised the issue in Parliament during the monsoon session.

Bapat urged the government to intervene regarding Rupee Bank, which has been run by Reserve Bank of India (RBI)-appointed administrators following allegations against the bank’s erstwhile management of misappropriation of funds and has been placed by the central bank under severe restrictions regarding withdrawals and advances.

Bapat said due to the restrictions, deposits worth more than a thousand crores of rupee could not be accessed by its customers, many of whom were senior citizens. He requested the Centre to revive talks of the bank’s possible merger with the Bank of Maharashtra.

When approached by TOI, a Bank of Maharashtra official declined to comment on Bapat’s speech. A source familiar with the issue said talks between the banks went on till 2018 when the Bank of Maharashtra was scheduled to take over Rupee Bank’s assets and liabilities under a scheme formulated by the RBI. However, the talks cooled after that. Rupee Bank is currently awaiting clearance from the RBI to merge with the Maharashtra State Cooperative Bank (MSCB), which is largely involved in agricultural banking, rather than retail.

“Bapat’s speech sparks hope of some resolution to the situation of the bank. If the Centre or the RBI decides to revive Rupee Bank’s merger with Bank of Maharashtra, we are ready to take the necessary steps,” said Sudhir Pandit, the administrator of Rupee Bank.



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