Category: Banking & Finance

Asirvad microfinance raises ₹262 crore worth securitised loans

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Asirvad Microfinance, India’s fourth largest NBFC-MFI and a subsidiary of Manappuram Finance, has securitised (by direct assignment) microfinance loans worth ₹262 crore in a deal with a leading public sector bank in India.

In a press release, the Chennai-based MFI said that the transaction comes at a time when the microfinance sector in India has faced higher stress from lockdowns imposed after the onset of the second wave of the pandemic.

“This deal, following closely on the heels of an ECB transaction with the US based WorldBusiness Capital, reaffirms the confidence that leading lending institutions have in India’s microfinance sector and its prospects for growth,” Raja Vaidyanathan, MD, Asirvad Microfinance was quoted in the release.

In May 2021, Asirvad raised a $15 million loan from US-based WorldBusiness Capital Inc.

The proceeds from the securitised loan will enable Asirvad to expand its business of providing small loans to low-income women business owners in rural areas to start and expand their income-generating business.

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Bandhan Bank acquires branding rights of Kolkata metro station

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Bandhan Bank has entered into an arrangement with Kolkata Metro for the branding rights of the Salt Lake Sector V metro station. With this, the station will now be called “Bandhan Bank Salt Lake Sector V Metro Station”.

The bank’s registered office and head office are in Sector V, which is also a major IT hub in Kolkata.

“Notably, this is the first of its kind arrangement for the Indian Railways where a private entity has been given the branding rights to an entire station. While such arrangements are seen across various metro stations in other larger cities, this is the first for Indian Railways and also for the city of Kolkata, whose metro service is the oldest in the country,” the bank said in a press statement.

Bandhan Bank had earlier tied up with Kolkata Metro for their smart card branding a few months ago. It is believed to have been a maiden deal in the history of Kolkata Metro as the rapid transit system joined hands with a private entity to leverage its vast user base via an exclusive medium.

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Novo raises $40.7 million in the largest Series A funding for neobanks

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Novo, a preferred business banking partner for SMEs, start-ups and freelancers, has raised $40.7 million (₹302 crore) in a Series A round of funding, making it the highest Series A funding for neobanks.

The independent tech company that enables small businesses to open accounts in minutes without a minimum balance requirement has raised the capital from Valar Ventures along with Crosslink Capital, Rainfall Ventures, Red Sea Ventures and BoxGroup.

Founded in 2016 by Tyler McIntyre and Michael Rangel, Novo has a client base of over one lakh SME customers. A neobank is a bank that is 100 per cent digital and does not operate physical branches.

Commenting on the funding, Michael Rangel, Co-Founder & CEO, Novo, said in a statement, “Novo has witnessed deeper investor interest in recent times, especially owing to the pandemic enhancing the role of virtual support ecosystem. India, being one of the fastest growing economies, is a vital market for us. Novo is focussed on creating jobs in India in support operations and building advanced technology, enabled by our funding partners. Presently, Novo has a strength of over 50 employees in India and plans to triple it to 150 by this financial year (FY22).”

Ajar Upadhyay, Director of Operations – India, Novo, said, “At Novo, we have support operations in India across Gurgaon, Ahmedabad and Bengaluru. The funding will be utilised to expand operations, banking, product and, most importantly, engineering verticals and enhance hiring across key and support roles in India.”

Prior to this Series A round, Novo had raised $6.7 million in its seed Round from Crosslink Capital, Red Sea Ventures, Hack VC, RRE, Rainfall, and the Stanford Law School Venture Fund.

Novo brings banking services to the largely underserved communities of freelancers, start-up founders, and small business owners.

At no hidden charges, Novo allows its clients to open business checking accounts in an enviable span of minutes and assures them of safe and secure transactions. The funding will enhance Novo’s platforms and services to provide a compelling banking experience to its clients.

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ED, BFSI News, ET BFSI

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NEW DELHI: The debts recovery tribunal (DRT) has sold shares worth over Rs 5,800 crore of United Breweries Limited (UBL) that were earlier attached under the anti-money laundering law as part of an alleged bank fraud probe against fugitive liquor baron Vijay Mallya, the Enforcement Directorate said on Wednesday.

Further realisation of Rs 800 crore by sale of shares is expected by June 25, the central probe agency said in a statement.

Recently, it said, the agency had transferred shares attached by it (worth about Rs 6,600 crore) to the SBI-led consortium as per order of the special Prevention of Money Laundering Act (PMLA) Mumbai.

“Today, DRT on behalf of SBI-led consortium, has sold shares of United Breweries Limited for Rs 5,824.50 crore,” the ED said.

Mallya, 65, has lost the case against his extradition to India and he has “been denied permission to file appeal in the UK Supreme Court.”

“His extradition to India has become final,” the ED said.



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Govt kicks of IDBI Bank stake sale, but doesn’t disclose quantum, BFSI News, ET BFSI

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The government has invited bids from transaction advisors and legal firms for assisting in the strategic sale of IDBI Bank.

The Cabinet had in May given in-principle approval for IDBI Bank’s strategic disinvestment along with transfer of management control.

The central government and LIC together own more than 94 per cent equity of IDBI Bank. LIC, currently having management control, has 49.24 per cent stake, while the government holds 45.48 per cent. Non-promoter shareholding stands at 5.29 per cent.

The last date for submission of bids by both transaction advisor and legal advisors is July 13, the Department of Investment and Public Asset Management (DIPAM) said.

Transaction advisor

The transaction advisor would be required to advise and assist the government on modalities of disinvestment and the timing; recommend the need for other intermediaries required for the process of sale/disinvestment and also help in identification and selection of the same with proper Terms of Reference.

The transaction advisor will also assist in the preparation of all documents like Preliminary Information Memorandum (PIM), organise roadshows to generate interest among the prospective buyers and suggest measures to fetch the optimum value.

The advisor would also be supporting IDBI Bank in setting up an e-data room and assisting in the smooth conduct of the due diligence process.

The extent of shareholding to be divested by the central government and LIC shall be decided at the time of structuring of transaction in consultation with the RBI, the government had earlier said.

Insurance giant LIC had acquired a controlling stake in IDBI Bank in January 2019.

Finance Minister Nirmala Sitharaman in her Budget for 2021-22 had said the process of privatisation of IDBI Bank would be completed in the current fiscal.

The government aims to mop up Rs 1.75 lakh crore in the current fiscal from minority stake sale and privatisation.

Of the Rs 1.75 lakh crore, Rs 1 lakh crore is to come from selling government stake in public sector banks and financial institutions, and Rs 75,000 crore through CPSE disinvestment receipts.

Under PCA

Under the PCA imposed by RBI in 2017, the bank’s balance-sheet shrank as it could not extend loans to corporates and was not allowed to open branches.

It used the four years of PCA to restructure its business, cut exposure to large loans and bulk deposits and create verticals for various lending businesses to speed up turnaround time.

The bank has worked for the last four years on various parameters, done recoveries and raised its provision coverage ratio to 97%.

The lender was looking at Rs 4,000 crore of recoveries in this fiscal.

Retail loans

The share of corporate loans, which was about 67% four years back when it went under PCR, has shrunk to 40% now with 60% loans being retail. The bank is now targeting 55% loan book as retail and rest corporate. It wants to maintain low costs retail deposits at 48% of total deposits.

As a result, the institution has transformed from a project financier to a retail lender.

The company is looking to target the mid-corporate segment and will now avoid overexposure to certain industries and grow the business in a calibrated manner.

It sees over 12% growth in retail loans and an 8-10% rise in corporate loans.



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CoC of DHFL vote against redistribution proposal

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The Committee of Creditors (CoC) of Dewan Housing Finance Corporation Ltd (DHFL) are understood to have voted against the proposal for redistribution of funds to small deposit holders.

Sources said a majority of financial creditors including fixed deposit holders have voted against the proposal.

This will mean that the current distribution pattern for DHFL will continue. The Committee of Creditors is expected to move the National Company Law Tribunal on June 24 to apprise it of the voting results.

NCLT recommendation

Based on the NCLT recommendation, the CoC had proposed higher distribution of funds to small investors including fixed deposit and NCD holders and pension funds.

According to the proposal, the entire admitted claim of ₹39 crore of Army Group Insurance Fund, ₹72.93 crore of Air Force Group Insurance Society and Navy Children School of ₹2.54 crore would be paid fully in cash.

Also read: DHFL lenders begin voting on proposals to redistribute funds

Further, it was proposed that all fixed deposit holders will be paid additional amounts in cash in order to ensure that the entire amount paid to them is about 40 per cent of the admitted claims, similar to the recovery to secured financial creditors.

Unsecured NCD holders with investments up to ₹10 lakh were proposed to be repaid 40 per cent of the admitted claims like in the case of fixed deposit holders.

The total outgo for lenders of DHFL on these proposals would have been ₹1,853.21 crore.

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Soon, PSBs may appoint specialists to manage NPAs, professionalise boards, BFSI News, ET BFSI

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After the mega mergers, it’s time for an overhaul at public sector banks.

The government is looking to measures to strengthen corporate governance and human resource practices in nationalised

banks. It plans a diversified board structure, strengthening of board-level committees and a robust performance management system for employees.

The government wants to further professionalise the boards of PSBs and bring experts in risk management, information technology and human resource management.

The key proposals include longer tenure for executive directors, hiring of specialists in areas such as NPA management and fast track promotion for high performers.

Leadership plan

These discussions may be further taken up with the Banks Board Bureau to formulate a long-term strategy.

One of the key mandates of BBB is to help banks to develop a robust leadership succession plan for critical positions and advise the government on evolving suitable training and development programmes for management personnel.

BBB will also maintain a database on performance of the officers of PSBs. This will have information regarding postings, placements, promotions and vigilance of senior officers.

Ease 4.0

Banks through Ease 4.0 may also take up these issues at their board level. Launched in January 2018, Enhanced Access and Service Excellence (Ease) is the common reform agenda for all public sector banks aimed at institutionalising clean and smart banking.

State-run banks will focus on co-lending with non-banking firms, digital agriculture financing, synergies and technological resilience for 24×7 banking as part of their reforms agenda for this fiscal.

This year PSBs will focus to introduce and promote new analytics-based offers to existing retail customers like pre-approved car loans, EMI offers on e-commerce purchases and also for existing MSME customers.

Such offers will be based on bank transactions, income tax and GST returns, transactions on e-commerce portals, and other operational data.

As per the reform agenda, banks will leverage partnerships with third parties, including agritech firms and strive to automate processing and sanction of agricultural loans based on field visits, borrower interaction, and risk assessment in states with digitised land records.



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DIPAM seeks bids for transaction advisor for IDBI Bank strategic disinvestment, last date July 13, BFSI News, ET BFSI

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The department of investment and public asset management (DIPAM) Tuesday issued a request for proposal for appointing transaction advisor for strategic disinvestment and transfer of management control in IDBI Bank Limited.

Among several criteria listed for eligibility, bidders should have completed at least one transaction of strategic disinvestment, strategic sale or merger and acquisition of Rs 5000 crore or more in size, between April 2016 and March, 2021. The last date for submissions is July 13.

The professional financial consulting firm, investment banker, merchant banker, financial institution or bank bidding for the contract, should have at least five years’ experience in providing advisory service in such transactions.

“The Transaction Advisor (TA) will be required to undertake tasks related to all aspects of the proposed strategic disinvestment culminating into successful completion of the transaction and would, inter alia include but not limited to advising and assisting government of India on modalities of disinvestment and the timing,” the department said as it set out terms of reference for the advisor in the RFP.

The advisor would recommend the need for other intermediaries required for the process of sale or disinvestment, help in identification and selection of the same with proper terms of reference, prepare documents such as the Preliminary Information Memorandum (PIM), Confidential Information Memorandum (CIM), Request for Proposal (RFP), Confidentiality Agreement et al.

It will also structure the transaction, organize roadshows, suggest measures to fetch optimum value, position of the strategic sale, invite and evaluate bids, assist and professionally guide during the negotiations with prospective buyers, draw up the sale or other agreements and advise on post-sale matters on a continuous basis.

DIPAM has barred a person or company owning more than 50% equity interest in the merchant banker or controls the merchant bankers, from participating in the competitive process for acquisition of IDBI Bank.

“For clarity, parent entity cannot participate in transaction process in case the selected bidder is subsidiary of an existing retail bank.

In case the interested Transaction Advisor is a subsidiary of an existing retail bank, they need to provide documentation explaining firewall or Chinese-wall structure to maintain confidentiality and conflict of interest.

DIPAM has also barred public sector banks cannot participate as bidders for acquisition of IDBI Bank in the transaction process. Subsidiaries of IDBI Bank – IDBI Capital Markets – cannot participate as bidders for transaction advisors.

The Cabinet Committee on Economic Affairs had given an in-principle approval for the strategic divestment of IDBI Bank in May this year. The extent of shareholding to be divested by the Indian government and Life Insurance Corporation of India will be decided at the time of structuring of transaction in consultation with Reserve Bank of India, it had said.

IDBI Bank is classified as a private sector bank by RBI with government shareholding at 45.48%, LIC of India shareholding at 49.24% and non-promoter shareholding at 5.29%.



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SucSEED Angel, IIIT-H fund exit Paymatrix

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SucSEED Angel Network and IIIT-Hyderabad’s seed fund have exited from Paymatrix, a fintech start-up established in 2016.

The two entities were offered an exit by the founders and Muthoot group that invested into the start-up.

The financial consideration for the two exits have not been revealed by the start-up.

The start-up lets users pay their rents, rental deposits and maintenance payments online using credit cards, giving them a window of credit-free period of 45-50 days.

The start-up, with a base of 82,000 users, processed ₹200 crore payment requests so far.

“Paymatrix was one of our very promising early-stage investments at IIIT-H Foundation. We believe that this partnership and investment from Muthoot group shall enable them to scale greater heights,” Ramesh Loganathan, COO at IIIT-H Foundation, said in a statement.

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IDBI Bank sell-off: Govt floats RFP for appointment of transaction and legal advisor

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The government on Tuesday floated a Request for Proposal (RFP) to appoint transaction advisor and legal advisor to assist in the strategic disinvestment of IDBI Bank.

The last date for interested parties to submit their bid is July 13 and the bid will be opened on July 14.

At present, IDBI Bank is classified as a private sector bank by the RBI with government shareholding at 45.48 per cent, Life Insurance Corporation of India shareholding at 49.24 per cent and the non-promoter shareholding at 5.29 per cent. LIC is the promoter while Centre is the co-promoter.

Also read: IDBI Bank has transformed into a retail bank: Samuel Joseph, Dy MD

The government proposes to go for strategic disinvestment along with transfer of management control. However, the extent of shareholding to be divested by the government and LIC will be decided at the time of structuring of transaction in consultation with the RBI.

Divestment target

The government has set a target of ₹1.75-lakh crore to be raised through disinvestment this fiscal, out of which ₹1-lakh crore is intended to be raised through off-loading the government stake in public sector banks and financial institutions. This also includes the stake sale in IDBI Bank. On May 5, the Cabinet Committee on Economic Affairs (CCEA) approved the strategic disinvestment of IDBI Bank.

LIC’s Board has already passed a resolution to the effect that LIC may reduce its shareholding in IDBI Bankthrough divesting its stake along with strategic stake sale envisaged by the government with an intent to relinquish management control and by taking into consideration, price, market outlook, statutory stipulation and interest of policy holders.

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