Category: Banking & Finance

NBFC-MFIs: Sector sees nearly 25% decline in FY21

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The Covid related economic slowdown and an increased focus on recovery and collections has dragged down disbursements made by NBFC-MFIs in FY-21. The sector witnessed nearly 25 per cent decline in disbursements at ₹57,891 crore in 2020-21, as compared to ₹76,956 crore in 2019-20.

The Gross Loan Portfolio (GLP) of NBFC-MFIs stood at ₹81,475 crore as on March 31, 2021, a growth of around 11 per cent as compared to ₹73,412 crore as on March 31, 2020, as per data available in the 36th issue of Micrometer, a report put out by MFIN (Microfinance Institutions Network).

Also read: Microfinance loan portfolio grows 11.9% to ₹2,59,377 cr as on March-end: MFIN

The number of loan accounts was also down by 39 per cent at 1.70 crore accounts, as against 2.78 crore accounts, however, the average loan amount disbursed per account was higher by around 20 per cent at ₹35,726 during FY-21, compared to the same period last year.

Microfinance loan disbursals during the fourth quarter of FY-21 was up by 29 per cent at ₹91,516 crore as against ₹71,090 crore during the same period last year. Sequentially, disbursements grew by 54 per cent from ₹59,508 crore during the third quarter of FY-21.

Loan disbursal up

The number of loans disbursed during Q4 2020-21 increased to 2.30 crore from 1.79 crore in Q3, signifying steady progress towards normalcy, the report said.

The overall microfinance industry currently has a total GLP of ₹2,59,377 crore as on March 31, 2021, an increase of around 12 per cent on a year-on-year basis as compared to ₹2,31,787 crores as on March 2020. This is on the back of healthy addition of four lakh unique borrowers during the pandemic-struck 12 months for the period ending March 2021, the report said.

While NBFC-MFIs portfolio increased by nine per cent, banks’ share increased by nearly 23 per cent, SFBs saw a marginal rise of around two per cent while NBFCs witnessed a decline of around five per cent.

In terms of regional distribution of GLP, East, North East and South together account for 66 per cent of the total portfolio.

PAR improves

On the asset quality front, the portfolio at risk (PAR), which had been on an upward trend since March 2020, has witnessed an improvement post December 2020. However, the improvement in 30-day PAR as of December 2020 is mainly due to write-offs and restructuring of loans under RBI resolution framework, the report said.

According to Alok Misra, CEO and Director, MFIN, the industry has been able to cover up well for the standstill in operations in the first two quarters of FY-21, thereby showing an overall growth in portfolio and first time borrowers during the year.

“Going forward, RBI’s consultative document on regulation of microfinance would bring a paradigm shift in how microfinance is implemented by restoring parity among various types of lenders. Further, proactive measures by RBI through its resolution framework and pushing liquidity through targeted schemes along with the Finance Minster’s latest announcement on credit guarantee scheme on term loans to MFIs, provides renewed impetus to the sector’s recovery and its contribution towards financial inclusion,” he said.

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All India Insurance Employees’ Association urges govt to drop United India privatisation plan

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The All India Insurance Employees’ Association (AIIEA) has opposed any move towards privatisation of United India Insurance.

“It is unfortunate that the government which had earlier decided on merger of three public sector general insurance companies has given up these plans and is now pushing for privatisation. The AIIEA demands the government to revive the plan for merger which would bring economies of scale and benefit the national economy and weaker sections of population,” the Association said in a statement on Wednesday.

Finance Minister Nirmala Sitharaman had in the Union Budget 2021-22 announced that the government would take up the privatisation of one general insurance company in 2021-22. According to reports, the NITI Aayog has recommended privatisation of United India Insurance.

Urging the government to drop any move towards privatisation of United India Insurance, the association also said it has been mobilising public opinion against the disinvestment of public sector institutions in general and public sector general insurance companies in particular.

Its units have also approached over 350 Members of Parliament on the issue.

“Insurance employees under the banner of the AIIEA are determined to carry forward the resistance against the move of the government to privatise United India Insurance Company and the public sector institutions at large,” it said.

The association also pointed out that public sector general insurance companies implement all the schemes announced by the government, including the recently announced scheme of death coverage to frontline workers due to Covid-19.

United India is the insurer for TN Chief Minister Health Insurance Scheme for 10 years and Maharashtra Government’s Mahathma Jyothiba Phule Jan Arogya Yojana Health Insurance Scheme from 2020. It has also underwritten the Prime Minister Suraksha Bima Yojana on a large scale which the private insurance companies hesitate to underwrite, the association said.

The AIIEA is of the firm opinion that privatisation of United India Insurance or any other public sector general insurance company will be antithetical to the government’s objective of Aatmanirbhar Bharat, it further said.

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Repco Home Finance Q4 net up 32%

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Repco Home Finance (RHFL) has posted a 32 per cent growth in standalone net profit for the fourth quarter at ₹63.2 crore as against ₹47.7 crore profit in the corresponding quarter of the previous fiscal.

Total income of the lender dropped to ₹340.34 crore in Q4FY21 from ₹346.11 crore in the year-ago quarter.

Also read: All-India HPI increases by 2.7% yoy in Q4FY21

Standalone net profit for the full year grew by 3 per cent to ₹287.60 crore (₹280.35 crore) while total income during this period grew to ₹1,392.23 crore (₹1,351.1 crore).

During FY21, Repco Home Finance disbursed ₹1,840.9 crore of loans and its outstanding loan book as of March 2021 stood at ₹12,121.5 crore.

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HDFC Bank, BFSI News, ET BFSI

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The RBI‘s ban on selling new credit cards has impacted market share on an incremental basis, HDFC Bank said on Wednesday, promising to get back to the market “with a bang” once the “temporal” embargo is lifted and recoup the losses. The bank’s head of consumer finance, digital banking and information technology, Parag Rao, said that it has used the last six months to “introspect, re-engineer and innovate” about the cards business, where it has 15.5 million customers.

The bank has lost its market share by a couple of percentage points because of the ban, but the actions taken internally have ensured that it continues to hold on to market share by spends, he said.

In December, the RBI acted against repeated technological outages at HDFC Bank over two years by slapping unprecedented penalties, which included a ban on any new credit card issuance and also prohibition on launching new digital initiatives.

“We have got very aggressive plans to get back in the market with a big bang… You will rapidly see HDFC Bank not just regaining market share but also significantly increasing our spend market share,” Rao said.

Without sharing any details over when he expects the ban to be lifted, Rao said within 3-4 months of the ban getting lifted, one should expect a correction in the incremental market share back to the pre-ban levels, launch of new products and features and also partnerships which have been forged during this period.

“We were very clear that this is at best a temporal situation. During the six months when we were not issuing new credit cards, we increased our merchant acceptance base, our liability franchise increased and today we are sitting on a large base of already analytically data mined customers who have already kept ready and pre-approved,” he said.

The “large sales force” has been trained, re-skilled and primed for the aggressive play ahead and backend processes for them have also been made more streamlined, Rao said.

He admitted that rivals have seized up on the opportunity once HDFC Bank stopped issuing the cards, amidst reports on how ICICI Bank and SBI, among others have grown. It can be noted that HDFC Bank’s credit card customers decreased by 4.67 lakh between December and April, when they stood at 14.9 million, while SBI has gained over 6 lakh new cards and ICICI gained 10 lakh.

The bank has been in constant discussion with RBI ever since the ban was imposed and has upgraded its systems as per the indications from the regulator, Rao said, adding that it has now presented a plan which focuses on the immediate, short term, mid-term and long term plan to the central bank.

“We are awaiting the comments from the RBI. We are hopeful that RBI will be satisfied with the plan which we had submitted,” he said.

Rao said the bank’s investments in technology were already at par with global standards, but the recent regulatory action will see higher spends on technology over the next two or three years.

Reiterating its focus outlined earlier, he said outages do happen and they happen with rivals as well, but the important aspect will be how it manages its way out of a crisis.

The bank’s shares were trading 0.17 per cent down at Rs 1,499 apiece on the BSE at 1344 hrs, as against gains of 0.28 per cent on the benchmark. AA MKJ



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PayNearby onboards 10,000 women business correspondents, BFSI News, ET BFSI

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The branchless banking and digital payments network, PayNearby will be onboarding 10,000 women BC Sakhis from Self Help Groups (SHGs) to offer banking services to various Gram Panchayats in Uttar Pradesh.

The company aims to digitize transactions worth ₹1000 crores through the Self Help Group (SHG) ecosystem across Uttar Pradesh, while enabling BC Sakhis to earn additional revenue. PayNearby has entered into a partnership with YES Bank to onboard BC Sakhis across 9 districts in the state across Uttar Pradesh, viz. Badaun, Sitapur, Etah, Ballia, Ghazipur, Behraich, Balrampur, Gonda and Azamgarh.

The business processes and transactions that happen through SHGs are mostly cash-based. As of March 2019, an estimated ₹1,00,000 crore has been transacted within the SHG ecosystem, the bulk of it being in cash. Under the Uttar Pradesh State Rural Livelihood Mission (UPSRLM) program, the Government of Uttar Pradesh (GoUP) has decided to appoint one Business Correspondent (BC) – Sakhi (BC-Sakhi) from the members of the SHGs in each of its 58,000 Gram Panchayats.

The project is aimed at improving banking access in rural UP and enhancing the household income of these women and empowering them. Post the onboarding, PayNearby said it will work on upskilling BC Sakhis on the usage of the digital ecosystem while also providing them digital solutions to further the cause of financial inclusion across the state and bring many to the formal banking fold.

Anand Kumar Bajaj, Founder MD & CEO said, “Our country is going through a digital revolution and it is therefore important that we empower our women to lead this change. While the Business Correspondent model ensures low-cost delivery of accessible banking services to every section of the society, the SHG platform has proven to be pivotal in this task, owing to its comprehensive reach and influence at the community level.”

“The UPSRLM program is an excellent initiative by the government of Uttar Pradesh and PayNearby is extremely honoured to be a facilitator of this program and drive empowerment.” he added.



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Microfinance loan portfolio grows 11.9% to ₹2,59,377 cr as on March-end: MFIN

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The overall microfinance industry’s gross loan portfolio (GLP) surged by 11.9 per cent to ₹2,59,377 crore as on March 31, 2021 from ₹2,31,787 crore as on March 31, 2020, says a report.

The growth was driven by an addition of four lakh borrowers during the pandemic-struck 12-month period ending March 2021, according to a report – Micrometer, released by Microfinance Institutions Network (MFIN).

Also read: In a boost to MFIs, FM hikes ECLGS limit by ₹1.5-lakh cr

MFIN is an industry association comprising 58 NBFC-MFIs and 39 associates, including banks, small finance banks (SFBs) and NBFCs. As on March 31, 2021, the microfinance industry served 5.93 crore unique borrowers, through 10.83 crore loan accounts, the report said.

It said 13 banks hold the largest share of the portfolio in micro-credit with a total loan outstanding of ₹1,13,271 crore, which is 43.67 per cent of total micro-credit universe.

Non-banking financial companies-microfinance institutions (NBFC-MFIs) are the second-largest provider of micro-credit with a loan amount outstanding of ₹80,549 crore, accounting for 31.05 per cent to total industry portfolio, the report showed.

SFBs have a total loan amount outstanding of ₹41,170 crore with a total share of 15.87 per cent.

NBFCs account for another 8.36 per cent, and other MFIs account for 1.05 per cent of the total microfinance universe, it said.

The report further showed that the gross loan portfolio of NBFC-MFIs increased by 11 per cent to ₹81,475 crore as on March 31, 2021, compared to ₹73,412 crore as on March 31, 2020.

This GLP on NBFC-MFIs includes owned portfolio of ₹68,894 crore and managed portfolio of ₹12,581 crore, it said.

The association said its NBFC-MFI members disbursed ₹57,891 crore of loans in fiscal 2020-21 through 1.70 crore accounts.

Also read: RBI proposes regulatory framework for microlenders

Average loan amount disbursed per account during FY20-21 was ₹35,726, an increase of around 20 per cent in comparison to last financial year, the report said.

During FY2020-21, NBFC-MFIs received a total of ₹40,797 crore in debt funding which is 9.2 per cent higher than in FY2019-20.

Total equity of the NBFC-MFIs grew by 15 per cent to ₹18,663 crore as on March 31, 2021.

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LIC registers improved persistency ratio for individual business in FY21

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Life Insurance Corporation of India seems to have beaten the odds of the pandemic, with its 13th month persistency for individual business registering improvement in 2020-21.

For the quarter ended March 31, 2021, LIC reported a 13th month persistency of 63 per cent by number of policies and 74 per cent in terms of annualised premium for its individual regular business.

For the full fiscal 2020-21, its 13th month persistency for individual business was 67 per cent by number of policies and 79 per cent by annualised premium.

In contrast, LIC had reported a 13th month persistency of 61 per cent by number of policies and 72 per cent by annualised premium in 2019-20 for individual business.

The IPO bound life insurance behemoth also showed improved persistency ratios for the 61st month in the segment under review.

It was 48 per cent by number of policies and 59 per cent by annualised premium in 2020-21 as against 44 per cent and 54 per cent respectively in 2019-20.

Persistency ratio is an important benchmark for life insurers as it reflects the number of policyholders who paid their renewal premium. It is widely seen as an indicator of the quality of the sale as well as future growth.

This was especially important last fiscal when many insurers had initially announced a drop in persistency levels as customers faced job losses and salary cuts. However, by the end of the fiscal year, most life insurers reported a return in renewals and persistency levels.

Over the last year, LIC had also launched special measures to help customers amidst the pandemic, including a special campaign to revive lapsed individual life cover policies.

Meanwhile, in terms of first year premium this fiscal, LIC has seen better performance compared to last fiscal.

According to IRDAI data, it registered a drop of 12.38 per cent in May 2021 to ₹8,947.64 crore in May 2021, compared to a decline of 24.3 per cent in May 2020.

It registered flat growth in first year premium in the first two months of the fiscal 2021-22 at ₹13,804.40 crore compared to ₹13,793.18 crore in the same period last fiscal.

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Post lifting of embargo, HDFC Bank ready to return with a bang in cards segment

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Private sector lender HDFC Bank, which is under an embargo by the Reserve Bank of India for credit card acquisitions and digital launches, is hoping to return with a “bang” and regain its incremental market share in cards.

“We have used the last six month period since December to introspect, reinvigorate and re-engineer for the future. We will use tech and digital to help us continue being dominant in the space and will get back to the market with a bang. We have the entire system ready and charged up,” said Parag Rao, Group Head – Payments, Consumer Finance, Digital Banking and IT, HDFC Bank.

Also read: Standard Life sells ₹6,783 cr worth shares of HDFC Life

He expressed hope that the embargo on the bank would be lifted by the RBI soon and said the lender has been in continuous dialogue with the regulator.

“We have very aggressive plans to get back to the market with a big bang. You will see a significant correction in the incremental marketshare,” Rao told reporters at a virtual press conference.

Laying out future plans for when the embargo will be lifted, he said the bank has a much more wholesome strategy.

“It is not only to regain our (credit cards) number and value market share but also to forge new partnerships, build more scale, introduce newer products and services and continue on our journey of being the dominant payments bank player in the space,” he said.

Also read: HDFC Bank acquires 7.4% stake in Virtuoso Infotech

RBI data reveals that lenders such as ICICI Bank and State Bank of India have seen a sharp rise in acquisition of credit card customers since the embargo on HDFC Bank.

ICICI Bank added over 8.15 lakh new credit card customers between January and April this year.

However, HDFC Bank continues to have the largest credit card customer base with 1.49 crore outstanding credit cards as on April 30, 2021.

Rao said the bank has been using the six month period to work on its technology and digital processes and also has a base of pre-approved customers, who will be offered credit cards when the embargo is lifted.

“Our growth on the liability and asset side has continued. We have acquired a significant number on liability and asset side. Our strategy of 75 per cent to 80 per cent internal customer for card base still continues. We have a large database of customers who have one relationship with the bank. We have pre-approved them, we have primed our channels and have set milestones,” he said.

Also read: Focus is to strengthen internal checks and balances: HDFC Bank MD & CEO

In the interim, HDFC Bank has been working with its existing card customers and engaging them in deeper relationships.

“We saw very good results by refocussing on our customer base. We have a far more engaged portfolio, significant increase in activation,” he said, adding that the lender has also broadened the skills of its sales force and reskilled it.

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Amid worries over demand revival, Axis Bank sees 10 times growth in online shopping fest

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Even as policy makers grapple with ways to revive demand in the pandemic-hit economy, an online sale fest launched by Axis Bank offering 15 per cent discounts is witnessing a 10-times surge in daily volumes, a senior official has said.

The bank is giving its debit and credit card holders a flat 15 per cent cashback on partner e-commerce portals like Flipkart and Amazon as part of the ten-day ‘Grab Deals Fest’ which is on till July 4.

“We are witnessing a 10x jump in overall spends by gross merchandise value (GMV) if I were to compare it with daily average in the month prior to launch and almost similar increase in the number of customers who are availing the offer,” its president and head of digital business and transformation, Sameer Shetty, told PTI.

 

It can be noted that the second wave of the Covid-19 pandemic has hit demand across the economy, with many analysts saying that private consumption has fallen in such a way that even staples have been hit. Even as the lockdown measures get eased, demand will take time to revive as income generation needs to come back first.

Usually, a lot of the e-commerce sales activity happens around the festive season towards the end of the year. There are reports saying the e-commerce players are expecting a subdued activity this year.

Shetty said the bank is witnessing a surge in ordering from urban areas where e-commerce ordering is active but stressed that the ordering is across income segments.

The products ordered can largely be called discretionary items, Shetty said, hinting that the bank’s experience cannot be exactly compared with the macro picture because of a slew of factors like a small set of people in the economy it serves and their background.

The bank launched the offer because it thought that the second wave is now receding and people are coming out of stressful times. The lender’s main focus is making as many customers avail of the offer rather than looking at the GMV, he said, adding that such schemes aim to deepen the connection with customers.

The discounts are shared between the bank and the e-commerce major, Shetty said, maintaining that the bank does not want to do big bang shopping festivals and will continue with such deals regularly.

The response to the current offer is “far beyond” expectations, Shetty said, exuding confidence that by the time the offer ends, the bank would have done significantly better than what it aimed for initially.

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Spocto Solutions plans US foray, eyes buyout in AI space

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Fintech firm Spocto Solutions Pvt Ltd, which helps banks and financial institutions in collections related activities with its digital analytics platform, proposes to enter the US market with an acquisition of a technology firm.

“We are looking at acquiring a tech firm in the US in the area of artificial intelligence over the next 12-18 months” said Sumeet Srivastava, Co-Founder and CEO, Spocto Solutions. “We will be looking for firms in the $8-10 million size. Our books are strong, and we can always raise debt, if required to fund the deal,” he added.

Spocto is in talks with strategist companies to help identify potential target firms in the US. Spocto, Srivastava said, sees an opportunity in the collections and recovery processes of banking in the US, where deployment of technology such as artificial intelligence and machine learning is yet to take place.

Client base

The four-year bootstrapped, profitable fintech firm counts eight of the top 10 private banks in the country among its customer base. Spocto’s digital analytics platform, which supports some 26 regional languages and dialects, is being used by financial institutions for EMI collections and to prevent defaults, Srivastava added.

“We serve the entire retail product portfolio such as credit card and retail loans for the banks. In any given month, close to 15 million borrowers are being touched by our platform on behalf of 10-12 banks and financial institutions,” Srivastava said. Spocto has also approached a public sector bank, which has shown interest in deploying its tech platform.

Further, Spocto has also been helping banks and FIs with EMI collections in the agriculture segment for products such as Kisan Credit Card and small equipment loans. It also expects to start work on the tractor loan segment for a bank soon, Srivastava added.

Besides India, Spocto has an overseas presence in the Middle East, where the company is helping four of the top ten banks in the region with collections. Currently, about 15-20 per cent of Spocto’s revenues come from the Middle East operations. Srivastava did not disclose Spocto’s earnings but said the company charges banks on pay per use or software as a service (SAAS) model.

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