Category: Banking & Finance

RBI imposes monetary penalty on 14 banks for non-compliance

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The Reserve Bank of India (RBI) imposed monetary penalty aggregating ₹14.5 crore on 14 banks for non-compliance with certain provisions of its directions after a scrutiny in the accounts of the companies of a Group.

The central bank imposed ₹2 crore penalty on Bank of Baroda, ₹1 crore each on 12 other banks and ₹50 lakh on State Bank of India.

RBI imposed ₹1 crore penalty each on Bandhan Bank, Bank of Maharashtra, Central Bank of India, Credit Suisse AG, Indian Bank, IndusInd Bank, Karnataka Bank, Karur Vysya Bank, Punjab and Sind Bank, South Indian Bank, The Jammu & Kashmir Bank and Utkarsh Small Finance Bank.

Bank of Baroda and Karnataka Bank, in their stock exchange disclosures, said the penalty has been imposed on them for non-compliance with the directions issued by the RBI with respect to advances sanctioned to Infrastructure Leasing and Financial Services (IL&FS), and its group companies.

Non-compliance

The central bank, in a statement, said the banks were non-compliant with certain provisions of its directions on ‘Lending to Non-Banking Financial Companies (NBFCs)’, ‘Bank Finance to NBFCs’, ‘Loans and Advances – Statutory and Other Restrictions.’

Further, they were also non-compliant with certain provisions of directions on on ‘Creation of a Central Repository of Large Common Exposures – Across Banks’ read with the contents of Circular on ‘Reporting to Central Repository of Information on Large Credits’, ‘Operating Guidelines for Small Finance Banks’ and for contraventions of provisions of two Sections of Banking Regulation Act, 1949.

“A scrutiny in the accounts of the companies of a Group was carried out by RBI and it was observed that the banks had failed to comply with provisions of one or more of the aforesaid directions issued by RBI and/or contravened provisions of the Banking Regulation Act, 1949,” RBI said in a statement.

In furtherance to the same, the central bank issued notices to the banks advising them to show cause as to why penalty should not be imposed for non-compliance with the directions/contraventions of provisions of Banking Regulation Act, 1949.

“The replies received from the banks, oral submissions made in the personal hearings, wherever sought by the banks, and examination of additional submissions, where made, were duly considered, and to the extent the charges of non-compliance with RBI directions/contraventions of provisions of Banking Regulation Act, 1949 were sustained, RBI concluded that it warranted imposition of monetary penalty on aforementioned fourteen banks,” the statement said.

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Goa Min claims facing NPA risk, writes to PM, FM, BFSI News, ET BFSI

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Panaji, Goa‘s Ports Minister Michael Lobo on Thursday said that he had written to Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman urging them to provide relief from paying loan EMIs for businesses impacted by the second wave of Covid-19.

A cabinet minister in the BJP-led coalition government led by Chief Minister Pramod Sawant, Lobo is also a hotelier himself.

He told a press conference here, that he was forced to write to the Centre after a bank manager informed the Minister that his own account was in the danger of being declared as a non-performing asset (NPA).

“I am also a businessman. I am getting calls from banks from which I have taken loans. A manager of a bank told me yesterday (Wednesday) that if I do not pay my loan instalment by tomorrow (Thursday), it will be declared NPA.” Lobo said.

“If a bank manager can call me and inform me that my account will be declared as an NPA, what about the common man? What about people who live hand-to-mouth and run small businesses? How will they pay instalments. This is an issue which is plaguing people in Goa as well as the rest of India.” Lobo said.

In his letter to Modi and Sitharaman, Lobo has also urged the top ruling duo to urge the Reserve Bank of India to issue a circular directing all nationalised banks to not declare accounts impacted by the second wave of the Covid pandemic, as NPAs.

“There is a need for a decision on this. The Finance Minister should take a decision and instruct all banks.” Lobo said.

The cabinet minister also said that the central government should also replicate the moratorium on loan EMIs provided to businesses during the first Covid wave last year.



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Deutsche Bank AG’s net profit in India rises 48% in FY21

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Deutsche Bank AG announced its India branches have posted a 48 per cent increase in net profit for the year-ended March 31, 2021 at ₹1,527 crore. It had reported a net profit of ₹1,031 crore in 2019-20.

Net revenue in the fiscal 2020-21 grew 23 per cent to ₹5,537 crore as against ₹4,510 crore a year ago.

The growth in net revenue was “driven by consistent performance across all our businesses in India, aided in large part by a strong cost and risk discipline,” it said in a statement on Thursday.

Its net non-performing assets fell by 44 basis points to 0.86 per cent of net advances in 2020-21 as against 1.31 per cent in 2019-20.

Advances increased by three per cent on an annual basis to ₹52,438 crore as on March 31, 2021 while deposits grew by 11 per cent to ₹66,224 crore.

Increase in capital deployment

“The last financial year was hugely challenging by any measure but by staying close to our clients and supporting them with their liquidity and risk requirements, the teams at Deutsche Bank once again demonstrated their resilience and dedication. Despite the impact of Covid, our asset quality continues to be strong,” said Kaushik Shaparia, CEO at Deutsche Bank India.

The additional capital infused during the year positions the bank strongly for 2021-22 as well, he further said.

“During 2020-21, Deutsche Bank increased the capital deployed in its India branches by ₹3,326 crore to support growth across all its business lines, taking the total capital deployed to ₹19,345 crore,” the bank said.

The bank’s Capital Adequacy Ratio in March 2021 stood at 17.28 per cent – an increase over the March 2020 level of 14.93 per cent.

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DealShare raises $144 million in Series D led by Tiger Global

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Social e-commerce start-up DealShare, known for pioneering the community group buying (CGB) model in India, has raised $144 million in Series D funding.

The round led by Tiger Global was co-led by WestBridge Capital, Alpha Wave Incubation (a venture fund backed by ADQ, and managed by Falcon Edge Capital) and Z3Partners with participation from Partners of DST Global, Matrix Partners India, and Alteria Capital. This transaction marks the third funding for the company in a span of seven months, with the valuation increasing nine-fold to $455 million within two-and-a-half years, on the back of high growth momentum. With the current round, the total funding raised by DealShare stands at $183 million.

DealShare has built a new disruptive retail model for India with a focus on the affordability and price component for mass consumers targeting middle and lower income groups. It procures products from local manufacturers and provides them with a platform to digitise their business and compete with national brands. It offers high quality, low-priced essentials coupled with a gamified, fun and virality-driven vernacular shopping experience that makes it easy for first-time internet users to experience online shopping.

Founded by Vineet Rao, Sourjyendu Medda, Sankar Bora and Rajat Shikhar, DealShare provides a sharp and curated assortment at highly competitive prices and has built an innovative community leader-driven ultra-low-cost delivery mechanism collectively leading to best-in-class unit economics.

“We believe India is a unique market with its highly diverse demographics and requires an indigenous model that is built based on first principles and differentiates itself from western and Chinese e-commerce models. DealShare has pioneered this model with innovations in app experience and technology, direct from factory procurement, gamified and viral demand generation and building a DealShare dost (community leader) network that enables DealShare to operate at the lowest cost operations in the world,” said Vineet Rao, CEO and founder, DealShare.

Fund deployment

The funds will be utilised to invest in AI-driven innovations in user experience, to scale up operations and increase footprint from 20 warehouses across 5 States to over 200 warehouses across 10 States by the year-end. DealShare caters to about 1 lakh orders daily and has partnered with over 1,000 local and regional brands.

“In FY 2021, we grew 5X to reach $200 million annual GMV run rate. In a short span of 2 years, we have serviced more than 3 million consumers and over 20 million orders. We are confident of hitting a $1 billion GMV run rate by the end of the year, thereby, building a strong 10 million customer base. We currently serve 40 cities and towns across 5 States and will increase our footprint to 100 cities/towns and 10 States by year-end. We are also close to breaking even,” Sourjyendu Medda, founder, Chief Business Officer and CFO, DealShare told BusinessLine.

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DBS Bank India FY’21 net profit surges to ₹312 crore

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DBS Bank India’s net profit surged by 181 per cent in 2020-21 to ₹312 crore from ₹111 crore in the fiscal year 2019-20.

As of November 27, 2020, Lakshmi Vilas Bank (LVB) was amalgamated with DBS Bank India Ltd (DBIL) and the results include LVB’s performance since that date.

Net revenue for DBIL grew by 85 per cent to ₹2,673 crore in 2020-21 from ₹1,444 crore in 2019-20. The net revenue for last fiscal includes ₹134 crore from LVB.

Total deposits increased by 44 per cent to ₹51,501 crore, which includes ₹18,823 crore from LVB.

Savings account balances grew by about 207 per cent, and current account balances grew by about 98 per cent year on year, including the growth on account of the amalgamation.

NPA

Overall CASA ratio improved to 31 per cent from 19 per cent.

Gross non performing assets (NPA) remained moderate at 1.83 per cent for DBIL excluding the LVB portfolio.

While gross NPA deteriorated to 12.93 per cent after the amalgamation of LVB, the net NPA for the bank on a combined basis, stands at 2.83 per cent given 84 per cent provision coverage.

“After the amalgamation, the bank’s primary focus has been on welcoming the employees and customers of LVB into the DBS family, unifying the LVB and DBS workforces and re-building the LVB business,” DBIL said in a statement.

Platforms integration

The integration of operating platforms and branches is currently underway.

“The steady growth in LVB current and savings account balances as well as in the gold loans portfolio in 2021 is an early indicator of the success of the current strategy,” it further said.

Surojit Shome, Managing Director and CEO, DBIL said there has been considerable progress with the integration of LVB since the amalgamation in November 2020 even with the dislocations due to the second wave of the pandemic.

“While, as expected, there has been an immediate impact on our financial results due to the high Net NPAs and operating losses at LVB, we are confident of realising the long-term prospects of the combined franchise,” he said, adding that in the erstwhile LVB operations, DBIL has already been able to revitalise the gold loans business and grow deposits.

“Our immediate priority is to integrate the operating systems and processes so that we can deliver best-in-class solutions to a wider customer franchise,” he further said.

DBIL’s capital adequacy ratio stood at 15.13 per cent, with CET1 at 12.34 per cent. During the year, DBS Bank infused ₹2,500 crore into DBIL to support the amalgamation.

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Fresh NPAs may see a spike, but overall bad loans may decline to 7.1% in FY22, BFSI News, ET BFSI

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Notwithstanding the Reserve Bank of India projections of gross non-performing assets rising to 9.8% of total loans this fiscal, the bad loans may decline to at least 7.1 percent by March 2022, as against 7.6 percent at FY21-end.

The NPAs will go lower on higher recoveries and upgrades, and also faster credit growth, ratings agency Icra said, adding that the fresh accretion to the NPAs will be higher in FY22 due to the absence of any regulatory dispensations like moratoriums.

The GNPAs and NNPAs (net NPAs) are expected to decline to 6.9-7.1 percent and 1.9-2.0 percent respectively by March 31, 2022, it said.

What RBI said

The Reserve Bank’s financial stability report had said the GNPAs at March 2021 had come at 7.6 percent and estimated it to rise to 9.8 percent in FY22-end under its base-case assumptions. RBI Governor Shaktikanta Das had said the dent on balance sheets and performance of financial institutions in India has been much less than projected earlier, but a clearer picture will emerge as the effects of regulatory reliefs fully work their way through.

The new math

The rating agency said the fresh NPA generation declined to Rs 2.6 lakh crore or 2.7 percent of advances in FY21 compared to Rs 3.7 lakh crore or 4.2 percent in FY20 and added that the same will be higher in FY22. The headline asset quality numbers of banks do not reflect the underlying stress on the income and cash-flows of the borrowers impacted because of COVID-19 and various regulatory and policy measures such as the moratorium on loan repayment, standstill on asset classification and liquidity extended to borrowers under Emergency Credit Line Guarantee Scheme (ECLGS) had a positive impact on the reported asset quality of lenders.

In the absence of standstill on asset classification, we expect the fresh NPAs generation to be higher, however, we also expect the recoveries and upgrades to improve in FY22, it said, adding that the first half of the ongoing fiscal can see higher accretions due to the second wave of the pandemic. The credit provisions for the banks moderated to 2.5 percent of advances in FY21 compared to 3.7 percent in FY20, even as the core operating profits improved with the cost curtailment measures.

PSB turnaround

Within the sector, the turnaround was remarkable for public sector banks, which reported profits after five consecutive years of losses and with NNPAs at the lowest levels seen over the last six years (3.1 percent as of March 31, 2021), ICRA expects the public sector banks (PSB) to remain profitable going forward. After the capital raising exercises, the improved capital positions coupled with lower NNPAs mean a better solvency profile as well as an improved outlook on the ability to support growth and better future profitability.

“We believe that the banks are relatively better placed to handle the stress from the second wave and hence we continue to maintain a stable outlook on the sector.” the rating agency said.



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RBI penalises SBI, 13 other banks for non-adherence to NBFC lending rules

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The banks were also called out on not adhering to restrictions and provisions on loans as well as advances and reporting to the central database on large exposures.

The Reserve Bank of India (RBI) has penalised 14 banks including State Bank of India, IndusInd Bank, Bandhan Bank and Bank of Baroda for non-compliance of various lending norms. RBI found that these lenders were non-compliant with certain provisions of directions that the regulator had issued on lending to Non-Banking Financial Companies (NBFCs). The banks were also called out on not adhering to restrictions and provisions on loans as well as advances and reporting to the central database on large exposures.

In view of this, RBI levied a penalty of Rs 2 crore on Bank of Baroda. For Central Bank of India, IndusInd Bank, Credit Suisse AG, Bandhan Bank, Indian Bank, Bank of Maharashtra, Utkarsh Small Finance Bank, Karur Vysya Bank, Karnataka Bank, South Indian Bank, Punjab and Sind Bank, and Jammu & Kashmir Bank, the regulator has levied a fine of Rs 1 crore. State Bank of India, on the other hand will have to pay a penalty of Rs 50 lakh.

“A scrutiny in the accounts of the companies of a Group was carried out by RBI and it was observed that the banks had failed to comply with provisions of one or more of the aforesaid directions issued by RBI and/or contravened provisions of the Banking Regulation Act, 1949,” RBI said in a statement. The regulator said it had issued notices to these banks seeking show cause as to why RBI should not impose penalty on them for non-compliance.

After examining the replies received from the banks along with oral submissions made in the personal hearings, RBI concluded the imposition of monetary penalty on these banks.

“The penalties have been imposed in exercise of powers vested in RBI under the provisions of section 47 A (1) (c) read with sections 46 (4) (i) and 51 (1), of the Banking Regulation Act, 1949, as applicable. This action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers,” RBI added.

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IL&FS recoveries may top 61%, lift sagging IBC average in 2021, BFSI News, ET BFSI

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Amid the near liquidation value recovery of Videocon and Siva Industries assets, IL&FS resolution may bring some cheer for the lenders.

At the group level, it is likely to recover 61% against the average 39% for IBC overall. The average IBC recoveries for the last fiscal had dropped to a quarter.

IL&FS is likely to recover Rs 61,000 crore assets from the group debt of Rs 99,000 crore as of October 2018, an increase of 5,000 crore over the earlier estimate.

“Between now and September 2021, we see this (Rs 43,000 crore of addressed debt) number going up in excess of Rs 50,000 crore. Thereafter, we are increasing our overall estimate of what we think we can resolve to Rs 61,000 crore, or close to 62 per cent, of the total debt,” Kotak said. The upgrade in potentially addressable debt by Rs 5,000 crore (to Rs 61,000 crore) has been largely on account of improved valuations, better operating performance and enhanced recoveries from non-group exposures, the Group had said in September. This includes the debt addressed through resolution, restructuring and liquidation across 347 IL&FS companies.

According to the quarterly newsletter of the Insolvency and Bankruptcy Board of India for March 2021, the recovery through resolution amounted to about 39% and through liquidation around 4%. According to bankers, recovery in the IBC process has had extreme outcomes.

The IL&FS playbook

As of end-March 2021, of the 347 entities, 186 have been resolved with Rs 43,000 crore of debt addressed.

The 347 companies in the group have been reduced to 167 and are expected to drop further to below 100 by the end of the year. This was done by shutting down or selling off a large number of foreign and local subsidiaries.

In the case of road projects, where conventional investors were spoilt for choice given the road projects on

sale, the board decided to go for the alternative option of setting up an infrastructure investment trust (InvIT).

While the new board has addressed a major chunk of the debt, the challenge is resolving IL&FS Financial Services and the remaining cases of dozens of companies where the amounts involved are relatively small. In the case of I-FIN, the board is understood to have dropped the plan to sell Rs 5,000 crore worth of loans after bids came in the range of 5%.



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RCom bidding may be back to square one, haircut may exceed 65%, BFSI News, ET BFSI

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Lenders of Reliance Communications are staring at lesser recovery prospects as they may have to go for fresh bidding.

They are worried that similar to the Aircel case, the Reserve Bank of India (RBI) is unlikely to permit asset reconstruction firm UVARCL buying RCom’s spectrum and other assets under a resolution plan.

The delay is rapidly eroding the value of the assets, especially spectrum, further depleting the amount the lenders were hoping to recover.

Aircel case

In the Aircel case, RBI denied UVARCL permission to buy Aircel’s assets for flouting norms under the Sarfaesi (Securitisation and Reconstruction of

Financial Assets and Enforcement of Securities Interest) Act. The RBI decision came even after the National Company Law Tribunal (NCLT) had approved the Aircel resolution plan.

According to the Sarfaesi Act, asset reconstruction companies cannot infuse equity into an insolvent company at the resolution stage.

The RCom resolution

RCom’s committee of creditors (CoC) cleared the resolution plan in March 2020, which would have seen UVARCL buy all assets, including spectrum, under RCom and Reliance Telecom, while a Reliance Jio unit was to buy the company’s towers housed under Reliance Infratel.

The plans were filed in the NCLT a few days later.

While the NCLT has cleared the tower sale to Jio, it has not cleared the transfer of the other assets to UVARCL yet. The tower sale, though, has not yet been implemented, with Jio recently approaching the NCLT with fresh concerns. RCom had filed for bankruptcy in 2019.

Under the resolution plan, UVARCL is expected to pick up RCom’s spectrum for Rs 12,760 crore, with the total recovery expected to be in the Rs 20,000-23,000 crore range against claims of Rs 57,382 crore, a roughly 65% haircut for lenders. Jio is to buy the towers for nearly Rs 5,000 crore.

Recovery worries

The IBC process has recently come under criticism after high-profile accounts such as Videocon were sold for near liquidation value and settlement in the case of Siva Industries yielded pittance.

The realisation for financial creditors from IBC declined significantly in FY2021 with a total resolution amount of around Rs 26,000 crore, almost a quarter of the realisations in fiscal 2020.

The pandemic has increased operational challenges for the various parties involved in a CIRP, which resulted in limited cases yielding a resolution plan. The suspension of new proceedings under the IBC for the entire FY21 resulted in a sharp slowdown in the resolution process.

Out of the total 4,300 cases that have been admitted to bankruptcy courts since FY17, only 8% has been resolved and nearly 40% of the cases are still pending. About 30% of the cases have seen liquidation.



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With $25 billion Citi frames sustainable finance strategy for Asia Pacific, BFSI News, ET BFSI

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In the first half of 2021, Citi has raised over US$25bn for Asia Pacific clients from global and local capital markets to support their sustainable financeng needs. Citi has been working on managing and reducing the direct environmental impacts of its operations by tracking energy use, greenhouse gas emissions, water use, waste, and green building initiatives. Citi has initiated this process in close to 100 markets where it is present.

“As a global, value-driven firm, Citi is supporting the transition to a low-carbon economy. We view sustainable financing both as a mandate and as an opportunity to partner with our clients across geographies — to help them decarbonize their operations and achieve their enterprise sustainability goals,” said Peter Babej, Citi Asia Pacific CEO.

The bank has raised finances from various clients. The first half include Alibaba Group’s US$5bn four-part offering in February, which included a 20-year sustainability tranche — its debut sustainable capital markets transaction. From the hardware sector, SK hynix issued a US$2.5bn bond in January with a 10-year green tranche. Citi likewise led a US$3bn sukuk for the Republic of Indonesia in June, which included a 30-year green tranche — the longest-ever green offering in Islamic format.

The capital raised for Asian clients is part of Citi’s overall global financing targets. In 2019, the bank met its $100 billion Environmental Finance goal four years early. In April 2021, the bank announced a US$500 billion environmental finance goal, as part of the US$1 trillion sustainable finance goal, all by 2030. As the partnership with clients evolves, the dialogue though is widening further away from just financing.

“The scope of our sustainable financing efforts is growing continuously, and covers all client segments – from investors repositioning their portfolios toward greener industries, to corporates realigning their business models through acquisitions and divestitures. Our institutional commitment to building a greener future cuts across all these activities,” added Babej.

Recently Citi has installed 360 solar panels at their main office in Hong Kong. The rooftop Installation also includes a wind turbine, which generates electricity on-site for local use.



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