Category: Banking & Finance

Cholamandalam Investment & Finance Company Ltd, a leading player in vehicle finance, has forayed into the financing of electric vehicles even as the Murugappa Group NBFC is in the process of identifying long-term growth areas (15-20 years).

Chola has now entered the sphere of financing electric vehicles to make them more prevalent in the economy, and plans to establish its presence in this domain, the company said in its latest annual report.

Electric three-wheelers

Its group company, Tube Investments, is also gearing up to enter the electric vehicle segment, and is expected to introduce its first set of electric three-wheelers this fiscal. While Cholamandalam is expanding its vehicle portfolio, it is also working on long-term growth plans

“We have currently embarked on a journey in finding out what we would want Chola to look like in 15-20 years. This calls for building on our current business model and scaling up. It requires us to add sets of skills in analytics, technology, and digital areas,” said Vellayan Subbiah, Chairman, in the report.

The idea is also to move more to an ecosystem model and to understand how Chola can present itself in such a model.

The natural logical ecosystem for Chola will be the vehicle ecosystem.

However, this alone may not be adequate for the next 15 to 20-year time frame. “Therefore, we have embarked on a process of identifying other ecosystems and evaluating how to compete effectively in each of these ecosystems,” he added.

The company’s three key business segments include vehicle finance, loans against property/ home loans, and SME loans. Vehicle finance contributed about 72 per cent of the company’s loan book as of March 31.

Vehicle business’ AUM

The AUM of the company stood at ₹69,996 crore as of March 31and vehicle business’ AUM was ₹50,415 crore during the period. In the vehicle portfolio, used vehicles and LCV segments accounted for 27 per cent and 20 per cent, respectively, while heavy commercial vehicles, cars and tractors accounted for 10 per cent each.

Subbiah said that while the long-term outlook continued to remain bullish, FY22 presented an uncertain outlook due to the impact of the second wave of Covid-19.

Apart from agriculture and related activities, most other sectors of the economy have been adversely impacted by the pandemic, and are expected to show de-growth.

“Cholamandalam will strive to consolidate its position as a leading player in the NBFC space. We are cautiously optimistic that a robust collection mechanism aided with a strong credit risk assessment framework and investment in digital platforms will support the company to steer through the strong currents of the pandemic in FY22, too,” he added.

The Reserve Bank of India has approved the re-appointment of Shyam Srinivasan as the Managing Director and CEO of Federal Bank for a three-year period.

“We wish to inform you that the approval from Reserve Bank of India has been received on July 9 for the re-appointment of Shyam Srinivasan as the MD and CEO of the bank for a period of three years with effect from September 23, 2021, till September 22, 2024,” said Federal Bank in a stock exchange filing on Friday.

Holds AGM

Meanwhile, at the bank’s annual general meeting on Friday, Srinivasan assured shareholders of steady and consistent performance by the lender.

The government’s cost of borrowing is likely to go up in FY22 as the Reserve Bank of India (RBI), on Friday, accepted bids at the auction of the new 10-year Government Security (G-Sec/GS) at a higher cut-off yield of 6.10 per cent.

The previous 10-year G-Sec (maturing in 2030) was issued at a cut-off yield of 5.85 per cent.

So, effectively, the government paid 25 basis points more to raise resources via the new 10-year G-Sec.

This comes in the backdrop of the RBI trying to pull out all the stops – by mopping up the 5.85 per cent GS 2030 via Special Open Market Operations (OMO) and G-Sec Acquisition Programme (G-SAP) – to keep G-Sec yields from rising. In its monetary policy report (April 2021), the RBI observed that despite a sharp increase in the quantum of the borrowings in FY21, ample surplus liquidity, regular open market operations (OMO), including special OMOs, regulatory measures and forward guidance, enabled the government to complete its borrowings at a 16-year low weighted average cost – 5.79 per cent compared with 6.84 per cent in 2019-20 – along with the highest weighted average maturity.

Marzban Irani, CIO-Fixed Income, LIC Mutual Fund, said that the cut-off yield at the auction of the new 10-year G-Sec indicates that interest rates have bottomed out and will gradually inch upwards, going ahead.

Cash raised

Overall, the government raised ₹26,000 crore through the auction three G-Secs – 4.26 per cent GS 2023 (₹3,000 crore), New GS 2031 (₹14,000 crore) and 6.76 per cent GS 2061 (₹9,000 crore).

In the secondary market, G-Sec prices declined as the RBI neither cancelled the auction of the new 10-year G-Sec nor devolved it on primary dealers despite the market demanding more in terms of yield.

Rising yields

Market players are of the view that by accepting the cut-off yield at 6.10 per cent, the RBI seems to be acknowledging the rising yields in the secondary market.

Following the introduction of the new 10-year G-Sec, the price of the erstwhile 10-year benchmark 5.85 per cent G-Sec fell 43 paise to ₹97.63 (previous close: ₹98.06), with its yield rising about 6 basis points to 6.18 per cent (6.12 per cent).

Irani said once the float in the new 10-year GS increases after two-three auctions, there will be more trading in the paper.

The Reserve Bank of India (RBI) has asked banks to compulsorily send employees posted in sensitive positions or areas of operation on ‘mandatory leave’ for a few days (not less than 10 working days) in a single spell every year without giving any prior intimation to them.

The ‘no prior intimation’ in the updated instructions on ‘mandatory leave’ is aimed at maintaining an element of surprise and is part of prudent operational risk management measure.

This directive has been prescribed as part of ‘mandatory leave’ policy for bank employees posted in sensitive positions or areas of operation such as treasury, currency chests, risk modelling, and model validation.

Element of surprise

The earlier circular (April 23, 2015) on ‘Mandatory Leave for Employees Posted in Sensitive Positions or Areas of Operation’ did not have the ‘element of surprise’ part in it. That means employees could decide when they want to go on the annual mandatory leave.

The central bank said banks have to ensure that the employees, while on ‘mandatory leave’, do not have access to any physical or virtual resources related to their work responsibilities, with the exception of internal/ corporate e-mail, which is usually available to all employees for general purposes.

The RBI said banks should, as per a board-approved policy, prepare a list of sensitive positions to be covered under ‘mandatory leave’ requirements, and the list has to be reviewed periodically. Implementation of this policy should be reviewed under the supervisory process.

The central bank said its revised instructions on mandatory leave for employees will be applicable to all banks. They have comply with these instructions within six months.