Category: Banking & Finance

SBI opens branch in President’s Estate, BFSI News, ET BFSI

Banking & Finance

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New Delhi, Jul 24: The country’s largest lender State Bank of India (SBI) on Saturday opened a branch at President’s Estate. The branch was inaugurated by President Ram Nath Kovind along with First Lady Savita Kovind, in the presence of Finance Minister Nirmala Sitharaman, SBI said in a statement.

The branch will provide all types of banking services including safe deposit lockers to the residents of President’s Estate, it said.

Secretary to the President K D Tripathi, SBI Chairman Dinesh Khara and other senior officials of the bank were also present at the inauguration ceremony, it said.

This branch at President’s Estate is a jewel in the crown for SBI and will offer a convenient and seamless banking experience to all the customers, said Khara.

SBI has the largest network of more than 22,000 branches and 60,000 ATMs serving around 45 crore customers through its 2.5 lakh employees. DP MR



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AU Small Finance Bank may convert to a universal bank

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Jaipur-headquartered AU Small Finance Bank may transition to a universal bank, going by its Chairman Raj Vikash Verma’s letter to shareholders.

If this happens, it will be the second transition for the lender. Before it converted into an SFB in 2017, AU was a non-banking finance company — Au Financiers (India) Ltd.

Verma observed that the bank is looking far and beyond the current status of the bank in the SFB space.

“We are propelling the bank’s journey to the next important milestone in the bigger banking space, with an aspiration to serve all sectors and segments of the economy under the larger agenda of national development and growth,” he said.

SFB

SFBs are niche banks. Their scope of activities is restricted to undertaking basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.

A universal bank’s scope of activities is much wider, spanning retail banking (retail, agriculture and micro, small and medium enterprises), wholesale (corporate) banking and infrastructure/project financing.

As per the Report of the Reserve Bank of India’s “Internal Working Group (IWG) to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks”, if an SFB aspires to transit into a universal bank, such transition will not be automatic.

Transition

The transition would be subject to fulfilling minimum paid-up capital/net worth requirement as applicable to universal banks; its satisfactory track record of performance as an SFB and the outcome of the Reserve Bank’s due diligence exercise.

The initial minimum paid-up voting equity capital for starting a universal bank is ₹500 crore, according to RBI’s guidelines for ‘on tap’ licensing of universal banks in the private sector.

The IWG has recommended that the initial paid-up voting equity share capital/net worth required to set up a new universal bank be increased to ₹1,000 crore.

As of March-end 2021, AU SFB had gross advances and deposits aggregating ₹35,356 crore and ₹35,979 crore, respectively.

The Bank’s loan portfolio mainly comprises vehicle loans, secured business loans (SBL) to MSMEs and housing loans.

AU SFB currently has a presence across 15 States and two Union Territories through 552 bank branches, 177 Business Correspondent Banking Outlets, 15 Business Correspondents and 343 ATMs.

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PAT surges 355% YoY to Rs 207 cr, highest in 10 quarters, BFSI News, ET BFSI

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MUMBAI: YES Bank today reported a 355.2 per cent year-on-year rise in its net profit to Rs 207 crore for the quarter ended June, the highest quarterly profit since December 2018. Analysts had expected the lender to report a net loss.

The strong bottomline performance of the lender was aided by a 41 per cent on-year fall in provisions during the reported quarter.

The lender’s net interest income in the quarter slumped 26.5 per cent year-on-year to Rs 1,402 crore, which was below Street’s expectations.

YES Bank’s gross non-performing loans ratio rose to 15.6 per cent in the June quarter from 15.41 per cent in the previous quarter. However, net NPA ratio declined sequentially to 5.78 per cent. YES Bank’s provision coverage ratio also saw a sequential improvement to 79.3 per cent in the quarter.

Gross non-performing loans in the quarter stood at Rs 28,506 crore, which was slightly lower than the previous quarter. Cash recoveries continued to show positive momentum at Rs 602 crore in the quarter.

While the overall advances fell 1 per cent in the June quarter, the lender reported 23 per cent growth in its retail and small businesses loan book that was above its full-year guidance of 20 per cent. The current account-savings account ratio improved to 27.4 per cent and remained on-track to meet the lender’s guidance of more than 30 per cent in 2021-22.

YES Bank’s operating performance in the quarter was disappointing as operating profit sank 20 per cent on-year to Rs 920 crore, which was the highest in several quarters. The net interest margin in the quarter was at 2.1 per cent as against 3 per cent in the year-ago quarter.

Shares of YES Bank ended 0.8 per cent higher at Rs 13.1 on the National Stock Exchange.



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Federal Bank records highest ever operating profit, BFSI News, ET BFSI

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Federal Bank recently announced the Unaudited Financial Results for the quarter ended 30th June 2021. Its operating profit has grown 21.75% to reach Rs. 1135.18 Cr with net total income growing 15.90% to reach Rs.2068.58 Cr.

Gold loans have registered growth of 53.90% to reach Rs. 15764 Cr and retail advances have grown 15.15% to reach Rs.43599.03 Cr.

Shyam Srinivasan, Managing Director & CEO, Federal Bank said “The external environment continues to be challenging however we have managed to keep our operating momentum intact by delivering our highest ever operating profit, for the quarter. Our CASA ratio is at an all-time high and we continue to build a granular liability franchise with more than 90% of our deposits being retail in nature.”

The total business of the Bank reached Rs. 299158.36 Cr registering Y-o-Y growth of 8.30% as on 30th June 2021. Total Deposits reached Rs. 169393.30 Cr registering Y-o-Y growth of 9.33%. Net advances grew by 6.98% Y-o-Y to reach Rs. 129765.06 Cr as on 30th June 2021.

The total Savings Bank deposit registered a growth of 18.71% to reach Rs. 49018.24 Cr as on 30th June 2021. CASA Deposits of the Bank stood at Rs. 58958.79 Cr registering a Y-o-Y growth of 18.83%. NRE Deposits of the Bank reached Rs. 66018.73 Cr registering a Y-o-Y growth of 9.53% as on 30th June 2021. NRE SB grew to reach Rs. 20010.09 Cr registering a Y-o-Y growth of 14.92%.

The Operating Profit of the Bank as on 30th June 2021 stood at Rs. 1135.18 Cr up from Rs. 932.38 Cr. with total income reaching Rs.4005.86 Cr. Net Profit of the Bank for the quarter ended June 2021 stood at Rs. 367.29 Cr.

“Our relationship with the NR diaspora continues to blossom with our share in personal inward remittances increasing to 18.20%. We have also managed to keep asset quality in check with only a marginal uptick in GNPA and NNPA. Investors believe in our brand and its operational efficiency which was testified by a reputed investor like IFC with their decision to invest in the Bank to the tune of 4.99%” Shyam Srinivasan added.

Net Interest Income grew 9.41% on a Y-o-Y basis from Rs.1296.44 Cr to Rs.1418.43 Cr, other income grew by 33.13% to reach Rs.650.15 Cr, compared to Rs.488.37 Cr as on 30th June 2020. Net total income of the Bank grew 15.90% to reach Rs.2068.58 Cr.

Gross NPA of the Bank as at the end of the quarter stood at Rs. 4649.33 Cr, which as a percentage of Gross Advances comes to 3.50%. Net NPA as on 30th June 2021 stood at Rs.1593.24 Cr, and Net NPA as a percentage of Net Advances is at 1.23%. The Provision Coverage Ratio (including technical write-offs) was strengthened substantially and stood at 78.66%.

The Bank’s Net worth on a Y-o-Y basis increased from Rs.14922.82 Cr to Rs. 16488.53 Cr from 2020 to 2021. The Capital Adequacy Ratio (CRAR) of the Bank, computed as per Basel III guidelines stood at 14.64% as at the end of the quarter. Book Value per share increased to Rs. 82.60 from Rs. 74.85.

Some key ratios include the ROA & ROE of the Bank for the quarter which stood at 0.76% and 9.03% respectively. The Net Interest Margin as on 30th June 2021 stood at 3.15% and cost to income ratio of the Bank has been contained at 45.12% clocking a reduction of 264 bps Y-o-Y. The EPS of the Bank on an annualized basis stands at Rs 7.38.



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NABARD wants state to speed up implementation of bank’s scheme, BFSI News, ET BFSI

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BHOPAL: National bank for agriculture and rural development (NABARD) wants the state government to speed up implementation of the schemes funded by the bank in MP.

Chairman of the bank GR Chitala said that almost half of the state’s cooperative bodies also need improvement. Talking to media here on Thursday, Chitala sighted the examples of the states of Andhra Pradesh and Tamil Nadu for implementing the NABARD schemes.

He has been on a six days’ visit to the state where he would Dewas and Indore also where the bank has funded many schemes. Talking about the state of affairs of the cooperative banks in the state, he hinted that 50 % of them need improvement in functioning.

He said that of 4800 cooperative banks in the state, almost half of them need technical upgradation for better and efficient functioning of the cooperative sector . He said that about 38 % of farmers did not have Kisan credit cards in the state and there are a variety of reasons.

“ Which is why a large number of farmers have not been able to get benefits of the government’s scheme”, he said Replying to a query on the NABARS’s help to the state , Chitala said it has disbursed Rs 55759 crore towards crop Loan covering more than 71 lakh farmers during the last few years in MP.

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RBI raises loan limit to Directors on bank boards to Rs 5 cr, BFSI News, ET BFSI

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Mumbai, The Reserve Bank of India (RBI) has raised the limit of loan that can be given by banks to a Director on the board of a bank to Rs 5 crore from the previous cap of Rs 25 lakh.

In a circular issued on Friday, the central bank said that unless sanctioned by the Board of Directors or the Management Committee, banks should not grant loans and advances aggregating Rs 5 crore and above to any relative other than spouse and minor or dependent children of their own Chairmen and Managing Directors or other Directors. Same would be the rule in terms of relatives of Chairman or Managing Director or other directors of other banks.

Further, any credit facility given to the Directors and relatives of Directors have to be sanctioned by the appropriate authority in the financing bank, and the matter has to be reported to the board, it said.

Board approval would be required for loans given to major shareholders of the bank, or his relatives, where the shareholder holds more than 10 per cent in the bank.

There have been instances in the past wherein existing Directors allegedly misused their position to grant loans to favour their family members, as in the case of the former ICICI bank MD & CEO Chanda Kochhar who is alleged to have misused her official post to grant a massive Rs 3,250 crore loan to Videocon.

Allegedly, the loan was part of a quid pro quo arrangement under which Venugopal Dhoot invested Rs 64 crore in Chanda Kochhar’s husband’s NuPower Renewables.



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No lumpy slippage gives us confidence: Shyam Srinivasan, MD & CEO, Federal Bank

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Our provisioning policy continues to be very conservative so that the balance sheet remains strong.

Federal Bank reported an 8.3% year-on-year decline in its net profit for the first quarter. Following are excerpts from a post-result virtual press meet by Shyam Srinivasan, MD & CEO.

Provisioning is seen higher for the quarter. Are the slippages higher than the run-rate?

Our provisioning policy continues to be very conservative so that the balance sheet remains strong. It is a choice. For Rs 640-crore of fresh slippages in the quarter, we have provisioned Rs 460 crore as a choice. Even in gold loans, which is 100% secure, we have provisioned 65%. Our unsecured book is very marginal. There is no lumpy slippages and it gives us the confidence.

Other income has grown sharply in the quarter.

We had a strong quarter in treasury and we had a one-off recovery in a large account which was written off in the past.

Your deposits and advances have de-grown sequentially.

We reduced our certificate of deposits by Rs 2,000 crore in Q1, while customer deposits went up. The credit growth is dependent on the environment and we believe that it will pick up from September onward and we will have a higher share.

What is the reason for higher provisioning in the gold loan portfolio? It is considered a secure asset?

Our NPA% in gold is 0.3%. Our loan-to-value (LTV) is 75-80% and it is manageable if prices fall is in that range. In case it becomes NPA, we can easily auction and collect our dues.

Any update on the credit card launch? How will you take it forward with the Mastercard issue?

We launched the credit card in June. Initial proposition was for existing customers and we saw good traction in July. We were a single Mastercard issuer and due to a recent direction from the RBI, we have stopped issuing cards to customers from July 22. There are two other franchisees in the country — Visa and Rupay, and in the next two months, we hope to be back in action.

Can you tell us about the stake sale to IFC? And is there any more stake dilution plans?

The process is complete as our board has approved the allotment of shares to IFC. They have taken up 4.9% share of the bank. As far as incremental equity issuance, we are very prudent about capital allocation and use, and in the last 10-12 years, we have done only one QIP and IFC is the only other transaction. Our capital adequacy is strong and we are not looking anything right now. However, we have an enabling resolution passed.

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Yes Bank June quarter net jumps 360% on lower provisions, higher other income

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Provisioning declined 41% year on year (YoY) and 88% sequentially to Rs 644 crore. The net interest income (NII) fell 26% YoY to Rs 1,908 crore, but rose 42% sequentially.

Yes Bank on Friday reported a 360% year-on-year jump in its net profit to Rs 207 crore for the June quarter, on the back of lower provisions and higher other income. This is the the lender’s highest profit since December 2018.

Provisioning declined 41% year on year (YoY) and 88% sequentially to Rs 644 crore. The net interest income (NII) fell 26% YoY to Rs 1,908 crore, but rose 42% sequentially.

However, other income increased 70% YoY and 29% quarter on quarter to Rs 1,056 crore. The other income included retail banking fees of Rs 342 crore and recovery from written-off accounts worth Rs 249 crore.

On the second wave of Covid-19, the lender said extent to which the pandemic would continue to impact the bank’s results would depend on ongoing as well as future developments, which are highly uncertain. Highlighting the impact of Covid-19, Prashant Kumar, managing director and chief executive officer, said, “The new business generation continued for the quarter with retail disbursements of Rs 5,006 crore, SME disbursements of Rs 3,242 crore and wholesale banking disbursements of Rs 3,625 crore.”

The bank’s net interest margin (NIM) declined 90 basis points (bps) YoY to 2,1%, compared to 3% in the same quarter last year. However, NIMs improved 50 bps sequentially.

The asset quality remained a mixed bag during the June quarter. Gross non-performing assets (NPAs) ratio increased 19 basis points (bps) to 15.6%, compared to gross NPAs of 15.41% in the previous quarter. However, net NPAs ratio improved 10 bps to 5.78% from 5.88% in the March quarter.

“The corporate recoveries and resolutions during the quarter at Rs 1,643 crore outpaced the slippages of Rs 1,258 crore,” Kumar said. The bank aims to make cash recoveries of Rs 5,000 crore during the financial year (FY22).

Total advances remained flat YoY to Rs 1.63 lakh crore. The lender mentioned that retail advances have crossed Rs 50,000-crore mark during the quarter. Total deposits grew 39% YoY to Rs 1.64 lakh crore. Current account/savings account (CASA) deposits grew 48% YoY to Rs 44,790 crore.

CASA ratio improved to 27.4%, compared to 25.8% in Q1FY21. The lender aims to reach CASA ratio of 30% by the end of FY22. The bank’s capital adequacy ratio (CAR) as per Basel III guidelines was at 17.9% as on June 30, 2021.

On the impact of RBI’s direction on Mastercard, the lender said it is tying up with Rupay and Visa for issuing new cards. “We have already signed up with Rupay and tie-up with Visa will be done in a week or so,” Kumar said. The banking regulator had barred Mastercard from adding new customers after it found that the company was non-compliant of RBI’s storage norms.

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Centre plans BRICS Bank’s regional office at GIFT SEZ

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The Centre is all set to give a nod to the setting up of the BRICS’ New Development Bank’s Indian regional office at the GIFT SEZ IFSC (International Financial Services Centre), in Gandhinagar, with the proposal scheduled to be taken up by the Board of Approval (BoA) for SEZs in a meeting later this month.

The Department of Economic Affairs (DEA), which has made the proposal, has also sought certain relaxation of SEZ rules for the smooth functioning of the Indian Regional Office (IRO) that will promote “effective and extensive’’ investment operations by NDB in India, as per the agenda of the BoA meeting scheduled on July 29. “Operationalisation of the IRO is one of the important agenda items of BRICS, 2021 under India’s chairship and the announcement of operationalisation of IRO is expected to be made in the BRICS Lenders Summit to be held on September 9,” per the agenda of the meeting scheduled on July 29.

NDB, a multilateral development bank established by Brazil, Russia, India, China and South Africa in 2014, aims at mobilising resources for infrastructure and sustainable development projects in BRICS and other emerging market economies and developing countries.The bank supports its members in infrastructure development through loans, guarantees, equity participation and other financial instruments. “Since India is one of the largest recipients of finances from the NDB, it is important that all measures are taken to ensure smooth functioning of the development bank’s regional office in the country. That is why the DEA and the Development Commissioner (DC) of the GIFT SEZ have also sought certain relaxation of SEZ rules for the functioning of the office,” an official tracking the matter told BusinessLine.

$4.7 billion loan assistance

As many as 15 sovereign projects amounting $4.7 billion of loan assistance have been posed to NDB for financing in different States in India, the agenda note pointed out. Owing to the importance of the project, the DC of the GIFT City SEZ has recommended to the BoA, so that the IRO may be exempted from certain provisions of SEZ rules. These include exemption from providing details on net foreign exchange earning, items of manufacture/service activity, employment, annual report, marketing collaboration and industrial licence, information of bank accounts, PAN, IEC numbers and exemption from application fee.

In July 2020, the Union Cabinet had approved the signing of an agreement between the Gol and NDB on hosting the NDB’s IRO at GIFT SEZ. Consequently, in September 2020, the Board of Directors of NDB accorded approval for signing the Host Country Agreement (HCA) with India. The Host Country Agreement (HCA) on the IRO was signed in December 2020.

In June this year, the Department of Commerce inserted a new rule in the SEZ Rules, 2006 allowing a multilateral agency to set up their local or regional office in the IFSC as a unit.

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Federal Bank, Yes Bank in talks with Visa and RuPay for onboarding new credit card users

Banking & Finance

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With the Reserve Bank of India barring Mastercard from onboarding new users, Federal Bank and Yes Bank are in discussions with Visa and RuPay to restart issuances of credit cards over the next two to three months.

Both the private sector lenders had exclusive tie-ups with Mastercard. They have stopped onboarding of new credit card customers following the embargo by the Reserve Bank of India (RBI) on Mastercard from acquiring new customers.

Shalini Warrier, Executive Director at Federal Bank said the lender is likely to restart issuance of credit cards within two months.

“There are two other franchises – Visa and RuPay. We have started the process with both of them and we will be back in action within the next two months. We will continue with existing to bank customers and at some point move to new to bank customers,” she said.

The bank had launched credit cards for existing to bank customers in a digital format in June this year and had onboarded 20,000 cards to date.

Yes Bank’s credit card ambitions

Yes Bank Managing Director and CEO Prashant Kumar also said the process to onboard RuPay and Visa for initiating issuance has started.

“The bank has already signed an agreement with RuPay and will sign an agreement with Visa within next week,” he said, adding that they expect issuance to restart in 90 to 120 days.

Yes Bank in recent months has been fairly ambitious in its credit card business. Kumar said over the next three months, the bank would not be in a position to issue 75,000 to 1 lakh cards

“There will be no impact due to the bar on Mastercard on existing 9,87,000 credit cards in force. It will not impact profitability of the bank in the short term and we will make up on the lost acquisition momentum in the current fiscal year,” he said, adding that the news of the embargo on Mastercard came as a surprise to the bank.

Earlier, RBL Bank, which too had an exclusive tie up with Mastercard, entered into an agreement with Visa on July 14 to issue credit cards enabled on the Visa payment network.

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