Category: Banking & Finance

RBI expands scope and coverage of Bharat Bill Payment System

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The Reserve Bank of India (RBI) has expanded the scope and coverage of Bharat Bill Payment System (BBPS) to include all categories of billers who raise recurring bills (except prepaid recharges) as eligible participants, on a voluntary basis.

BBPS, as an interoperable platform for repetitive bill payments, currently covers bills of five segments —Direct to Home (DTH), Electricity, Gas, Telecom (landline, mobile post-paid, broadband) and Water.

BBPS was conceptualised to offer interoperable and accessible bill payment services to customers through a network of agents with multiple payment modes and instant confirmation of payment.

Also read: Amid economic uncertainty, many banks eye capital raising plans

The pilot phase of BBPS was launched on August 31, 2016 and BBPS live operations commenced from October 17, 2017.

The system offers ‘anytime anywhere’ bill payment service to customers using online payments as well as through a network of physical agent locations.

As per NPCI data, the volume of BBPS transactions almost doubled in FY21 to 154.482 crore from 77.809 crore in FY20.

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Amid economic uncertainty, many banks eye capital raising plans

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With expectations of further economic uncertainty as the second wave of the Covid-19 pandemic continues and expectations of a third wave, banks are looking to raise funds to improve their capital buffers and fund expansion plans.

Private sector lender Federal Bank said its board will meet on June 16 to consider proposals for issuance of equity shares by way of a preferential allotment and raising of equity capital of the bank either through Rights Issue, Private Placement, Preferential Issue, Further Public Offer, Qualified Institutional Placement, Global Depository Receipts, American Depository Receipts annd Foreign Currency Convertible Bonds.

Also read: Public sector banks support for Covid-19 health infra gathers pace

The board will also consider a proposal for borrowing or raising of funds in Indian Currency or any other permitted foreign currency by way of issue debt instruments including but not limited to Additional Tier-I bonds, Tier-II bonds, Long Term Bonds (Infrastructure and Affordable Housing), Masala Bonds, Green bonds, Non-convertible Debentures or such other debt securities as may be permitted by RBI from time to time, in domestic market and/or overseas market, on a private placement basis, it said in a regulatory filing.

More plans ahead

In recent weeks, other lenders too have announced plans to raise funds and expectations are that more will be finalising plans soon. Private sector lender Yes Bank had on June 10 said it has received approval from its board of directors to raise ₹10,000 crore through debt securities.

Similarly, public sector Canara Bank has also announced board approval for its capital raising plan for 2021-22, amounting up to ₹9,000 crore by way of equity and debt instruments.

Bank of Maharashtra is also looking to raise up to ₹2,000 crore through the qualified institutional placement route before end of July. Reserve Bank of India governor Shaktikanta Das had on June 4 also urged banks and NBFCs to build capital buffers and ensure adequate provisioning to face challenges emanating from the second wave.

“Building adequate provisioning and capital buffers, together with sound corporate governance in financial entities, have become much more important than ever before, more so in the context of banks and NBFCs being at the forefront of our efforts to mitigate the economic impact of Covid-19,” he had said on June 4.

Public and private sector lenders had also raised funds in 2020-21 amidst the Covid-19 led economic uncertainty.

“Banks and need to augment their capital because there could be stress arising out of the second wave,” Das had told reporters post the monetary policy announcement. Their overall capital position is at a very stable level currently, he had further said.

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ARCs bank on retail loans in pandemic shift and bad bank competition, BFSI News, ET BFSI

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As the bad bank is set to take away the big chunk of their business, asset reconstruction companies (ARCs) are thinking smaller to grow big.

ARCs have been banking on retail loans to drive business in the pandemic-hit FY21 and see the share of retail loans reaching 50% of the pie.

The ARCs are also hit by the RBI-mandated loan restructuring and moratoriums, which had led to a drop in bad loans among corporates,

The Rs 1.5-lakh-crore asset reconstruction market comprises over a dozen players. The upcoming national bad bank will add to the competition in the market and lead to distortion due to government guarantees.

The pandemic-hit FY21 saw tepid overall growth for ARCs, but retail loan portfolio grew faster adding at least 25 per cent more to the assets under management (AUM).

Retail growth

Lenders like HDFC Bank, Indusind Bank, IDBI Bank, Federal Bank and non-banks like Bajaj Finance among others have been aggressively selling their stressed retail books — auto, home and personal loans as well credit cards dues to ARCs like Edelweiss, Phoenix ARC run by Kotak Mahindra Bank, JM Financial and Reliance ARC among others since the past few years.

While Reliance ARC snaps up only retail loans, Phoenix ARC has 20 per cent of its Rs 8,500-crore total book/AUM as retail loans.

Edelweiss ARC, which has AUM of Rs 40,8000 crore, and has made a recovery of Rs 5,400 crore in FY21 from 179 accounts. The company expects about around 50 per cent of overall ARC assets coming in from retail loans in the next two years from the 10% now. On industry level, the share of retail in ARCs is around 20%.

Why retail loans?

In the past two years retail loans are rising, while corporate NPAs are coming down due to the moratorium and restructuring allowed by the Reserve Bank, which has led to a rise in interest in retail loans.

Retail loans give higher margins and better recovery rates despite the high costs.

ARCs which focus on retail portfolio may be better placed to cushion the impact of the national bad bank on their business, as the proposed national ARC will primarily be dealing with large chunky loans of Rs 500 crore and above and that too mostly from public sector banks which have the highest bad loans piles. So to secure their business, it makes better sense for ARCs to focus on retail loans as it offers better margins and faster resolution too, he adds.

However, the retail book may not grow too big for too long as once the pandemic situation normalises and large corporate books may come up for sale.

The national bad bank will leave the field uneven for private players like us due to the proposal of government guarantee.



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Raghuram Rajan says privatisation is a blunder; Rajnish Kumar cites failures in private banks, BFSI News, ET BFSI

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As the government speeds up on privatisation of public sector entities, industry mavens are not sure about the move. Former RBI chairman Raghuram Rajan spoke against privatisation while Rajnish Kumar former chairman of SBI has said that there are failures in private banks as well.

The government has made it clear that it doesn’t want to have more than five entities in any business. That’s a strategic decision that the government has taken recently. But the government has been talking about reducing its stake in PSBs for a long time. It merged 10 PSBs into 4. There are many recommendations for the government to reduce its stake in banks to only 51%. The idea is this will give enough funds to the government and the banks will also become more professionalised. But while the government is thinking of divesting its stake, Raghuram Rajan believes that it has not benefited the developed countries like the US.

“Time has come to recognise the crucial sectors of the country to be preserved. The Indian government is trying hard to sell the public sector banks to corporate hands which is a grave concern for an economy like India. Time is to understand Privatization is a blunder,” Raghuram Rajan, former Governor RBI and IMF Chief Economist, tweeted.

Rajan was replying to US President Joe Biden’s tweet on the divestment of government companies.

The developed countries like the US too are finding it difficult to create jobs after disinvesting heavily. Biden tweeted about his focus on creating government jobs.

“After decades of disinvestment, our roads, bridges, and water systems are crumbling. We must pass the American Jobs Plan. Together, we will rebuild our country’s infrastructure and create millions of good-paying union jobs in the process,”

This is not the first time Rajan made his viewpoint clear on privatisation. In an interview with PTI in March, he said, “I think it would be a colossal mistake to sell the banks to industrial houses. It will also be politically infeasible to sell any decent-sized bank to foreign banks,”

Bank employees’ associations and federations are already opposing the bank privatisation decision and held the 3-4 day strike very recently.

In an interaction with ETBFSI, Rajnish Kumar, former Chairman of SBI presented a different view to this discussion. He said if the government’s agenda is to bring governance then the government should change the ownership. “If the government wants to improve only the governance they can shift the ownership of the PSBs to RBI. And the issue would have been resolved. RBI would become the sole regulator and banks would achieve similar results,” said Kumar.

He also added, “The major issue is how long should the government capitalise the PSBs. And the government’s policy is also that it doesn’t want more than four entities in non-strategic sectors. There can be a question whether private banks perform better? But there is not an easy answer to this because there are failures in private banks as well.”



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Bank of Maharashtra plans to raise up to Rs 2,000 crore through QIP, BFSI News, ET BFSI

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MUMBAI: State-run Bank of Maharashtra is looking to raise up to Rs 2,000 crore through qualified institutional placement (QIP) route before July-end, its Managing Director and CEO A S Rajeev said. In April this year, the Pune-based lender had received board approval to raise Rs 5,000 crore by way of QIP/rights issue/ preferential issue or by issuing Basel III bonds.

“We are planning to raise around Rs 2,000 crore equity through QIP immediately. The process has already started and we will raise it before July-end,” Rajeev told in an interaction.

The base size of the issue is Rs 1,000 crore and it has a greenshoe option of another Rs 1,000 crore, he said.

Following this equity raise, the government’s holding in the bank will reduce to below 85 per cent from 94 per cent currently, and the capital adequacy ratio will improve to 17-18 per cent from around 14.49 per cent as of March 31, 2021, Rajeev said.

This fund will be deployed for expansion of the loan book, which the bank is looking to grow by 16-18 per cent to around Rs 1.25 lakh crore in this fiscal from Rs 1.08 lakh crore as of March 31, 2021, he said.

Of the total loan book of the bank at present, the share of corporate loans is 37 per cent and of retail, agriculture and MSME (RAM) segment is 63 per cent, he said adding, “We want the ratio of RAM to the corporate segment to be 65:35 during the current fiscal.”

The bank is envisaging a 20-25 per cent growth in the retail, agriculture and MSME (RAM) segment this year.

The lender’s corporate loan size is close to Rs 40,000 crore and it is targeting to grow it by another Rs 10,000 crore in this financial year. It has a sanction pipeline of Rs 25,000 crore in the corporate and MSME segments for the current fiscal, he said.

“We have churned our portfolio with improvement in the share of lending to better-rated corporates. This will minimise the delinquencies and attract lower capital requirement,” Rajeev added.

In the corporate segment, the bank will continue lending to better-rated corporates, including sunrise sectors such as infrastructure, pharmaceuticals and FMCG, he said.

Under the government’s Emergency Credit Line Guarantee Scheme (ECLGS), the bank’s total disbursement, so far, is around Rs 2,100 crore, and it plans to lend another Rs 500 crore this year.

Rajeev said the bank’s exposure to the healthcare sector is Rs 2,000-2,400 crore, which is 2 per cent of the total advances portfolio. In April and May, it had already disbursed over Rs 225 crore to the sector.

“We intend to double our portfolio under the healthcare sector and make it 4 per cent of our total advances portfolio during the current fiscal. We have also come out with two to three products in tune with the RBI policy,” he said.

Last month, the RBI had announced an on-tap term liquidity facility of Rs 50,000 crore under which banks can provide fresh lending support to a wide range of entities from the healthcare segment.

The government has also announced ECLGS 4.0, under which a 100 per cent guarantee cover to loans up to Rs 2 crore will be provided to hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants.

Rajeev further said since the exit from the RBI’s prompt corrective action (PCA) framework in January 2019, the lender has taken several steps to strengthen its balance sheet, which has resulted in a significant improvement in all its financial parameters.

“We have been successful in registering profits quarter on quarter since March 2019. Our net profit rose 41.39 per cent to Rs 550 crore during FY21 from Rs 389 crore in FY20. Operating profit also rose 39 per cent to Rs 3,958 crore in FY21 from Rs 2,847 crore last year,” he said.

The bank’s CASA (Current Account and Savings Account) improved to 54 per cent as of March 31, 2021, which according to Rajeev is one of the best in the banking industry.

The bank has also managed to bring its gross non-performing assets to 7.23 per cent as of March 31, 2021, from 18.64 per cent in September 2018, when it was under PCA. Net NPAs stood at 2.48 per cent as of March 31, 2021.

At present, market capitalisation of the bank stands at Rs 17,500 crore against Rs 3,948 crore as of March 2019, he said.

In FY22, the bank is targeting to bring down gross NPA to below 6 per cent and net NPA to below 2 per cent. Net interest margins (NIM) will remain above 3 per cent in this fiscal, he said.

It has set a recovery and upgradation target of Rs 2,500-2,600 crore during the current year. The lender is also expecting Rs 500 crore recovery from written-off accounts in this fiscal, Rajeev said.

The lender is looking at opening 200 banking outlets with a hub and spoke model in this fiscal, he added.



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Pvt ARCs moving to retail loans as national bad bank nearing reality, BFSI News, ET BFSI

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With RBI-mandated loan restructuring and moratoriums ebbing the tide of bad loans among corporates, ARCs have been banking on retail loans to drive business in the pandemic-hit FY21 and player like Edelweiss ARC expects the industry-wide retail assets under management to hit nearly half of the overall pie.

The Rs 1.5-lakh-crore asset reconstruction market comprises over a dozen players led by Edelweiss ARC that controls over 30 per cent of the market, and the soon-to-be operationalised national bad bank, to be funded mostly by public sector banks and guaranteed by the government, will add to the clutter of the market and has private players fearing the government guarantee unlevelling their fields.

The pandemic-hit FY21 has seen tepid overall growth for asset reconstruction companies (ARCs), but retail loan portfolio grew faster adding at least 25 per cent more to the assets under management (AUM).

According to industry players, lenders like HDFC Bank, Indusind Bank, IDBI Bank, Federal Bank and non-banks like Bajaj Finance among others have been aggressively selling their stressed retail books — auto, home and personal loans as well credit cards dues to ARCs like Edelweiss, Phoenix ARC run by Kotak Mahindra Bank, JM Financial and Reliance ARC among others since the past few years.

While Reliance ARC snaps up only retail loans, for Phoenix ARC comprises 20 per cent of its Rs 8,500-crore total book/AUM.

Rashesh Shah, chairman and chief executive of Edelweiss Financial Services Group whose ARC arm sits over an AUM of Rs 40,8000 crore, and has made a recovery of Rs 5,400 crore in FY21 from 179 accounts, sees over the next two years around 50 per cent of overall ARC assets coming in from retail loans.

The retail portfolio of Edelweiss ARC is around 10 per cent now, but it will be “deleveraging the corporate portfolio and focusing on retail going forward, while at the industry level it’s about 20 per cent. But I see this touching almost half of the market over the next two years”, Shah told over the weekend.

Going forward, focus will be more on snapping up retail loans as it gives higher margins and better recovery rates, Shah added.

“For the past two years retail NPAs have been rising, while corporate NPAs coming down due to the moratorium and restructuring allowed by the Reserve Bank. This has seen interest rising among ARCs for retail assets,” Sanjay Tibrewala, the chief executive of Phoenix ARC, which is among the top five players, told on Sunday.

Tibrewala said their retail portfolio accounts for 20 per cent of the AUM of Rs 8,500 crore, and which grew marginally last year, while the overall retail assets for the industry jumped by 25 per cent.

On why the industry is snapping up more retail assets despite it being a high cost business, Tibrewala said it’s because of better margins and higher recovery levels.

Shah said that so far his group’s ARC business has been very good with strong margins, better recoveries/collections, which stood at Rs 5,400 crore in FY21 from across 179 accounts.

“Going forward, we will focus more on recoveries and when it comes to buying assets the focus will be retail portfolios. Over the past few years, retail has been growing very big, and I see it taking up half the market,” Shah said, adding they entered this space only three years ago.

He further said since then Edelweiss added 200-strong team to man the retail portfolio as its more people intensive.

On the asset purchase side Shah noted that on average their acquisition cost varies from 60 to 70 paise and sometimes they also go for profit sharing with lender/seller.

Shah is driving retail as it’s more predictable when it comes to recoveries.

An industry expert also opined that ARCs which focus on retail portfolio may be better placed to cushion the impact of the national bad bank on their business, as the proposed national ARC will primarily be dealing with large chunky loans of Rs 500 crore and above and that too mostly from public sector banks which have the highest bad loans piles.

So to secure their business, it makes better sense for ARCs to focus on retail loans as it offers better margins and faster resolution too, he adds.

However, Tibrewala does not see the retail book growing too big for too long as once the pandemic situation normalises, he sees large corporate books coming up for sale.

“We have been in retail segment for many years but do not see faster growth for retail once pandemic related restrictions and benefits normalise, and corporate accounts come back to the markets again,” Tibrewala said.

The national bad bank, he said, will leave the field “uneven for private players like us due to the proposal of government guarantee. However, it can be one area for sourcing assets for us. We are actively looking at assets”.

Edelweiss ARC closed FY21 with a revenue of Rs 340 crore of which Rs 79 crore came in Q4 and earned a Rs 186 crore net profit for the year and Rs 45 crore for Q4. It has comfortable liquidity position of Rs 540 crore as of end March.



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Pvt ARCs moving to retail loans as national bad bank nearing reality, BFSI News, ET BFSI

Banking & Finance

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With RBI-mandated loan restructuring and moratoriums ebbing the tide of bad loans among corporates, ARCs have been banking on retail loans to drive business in the pandemic-hit FY21 and player like Edelweiss ARC expects the industry-wide retail assets under management to hit nearly half of the overall pie.

The Rs 1.5-lakh-crore asset reconstruction market comprises over a dozen players led by Edelweiss ARC that controls over 30 per cent of the market, and the soon-to-be operationalised national bad bank, to be funded mostly by public sector banks and guaranteed by the government, will add to the clutter of the market and has private players fearing the government guarantee unlevelling their fields.

The pandemic-hit FY21 has seen tepid overall growth for asset reconstruction companies (ARCs), but retail loan portfolio grew faster adding at least 25 per cent more to the assets under management (AUM).

According to industry players, lenders like HDFC Bank, Indusind Bank, IDBI Bank, Federal Bank and non-banks like Bajaj Finance among others have been aggressively selling their stressed retail books — auto, home and personal loans as well credit cards dues to ARCs like Edelweiss, Phoenix ARC run by Kotak Mahindra Bank, JM Financial and Reliance ARC among others since the past few years.

While Reliance ARC snaps up only retail loans, for Phoenix ARC comprises 20 per cent of its Rs 8,500-crore total book/AUM.

Rashesh Shah, chairman and chief executive of Edelweiss Financial Services Group whose ARC arm sits over an AUM of Rs 40,8000 crore, and has made a recovery of Rs 5,400 crore in FY21 from 179 accounts, sees over the next two years around 50 per cent of overall ARC assets coming in from retail loans.

The retail portfolio of Edelweiss ARC is around 10 per cent now, but it will be “deleveraging the corporate portfolio and focusing on retail going forward, while at the industry level it’s about 20 per cent. But I see this touching almost half of the market over the next two years”, Shah told over the weekend.

Going forward, focus will be more on snapping up retail loans as it gives higher margins and better recovery rates, Shah added.

“For the past two years retail NPAs have been rising, while corporate NPAs coming down due to the moratorium and restructuring allowed by the Reserve Bank. This has seen interest rising among ARCs for retail assets,” Sanjay Tibrewala, the chief executive of Phoenix ARC, which is among the top five players, told on Sunday.

Tibrewala said their retail portfolio accounts for 20 per cent of the AUM of Rs 8,500 crore, and which grew marginally last year, while the overall retail assets for the industry jumped by 25 per cent.

On why the industry is snapping up more retail assets despite it being a high cost business, Tibrewala said it’s because of better margins and higher recovery levels.

Shah said that so far his group’s ARC business has been very good with strong margins, better recoveries/collections, which stood at Rs 5,400 crore in FY21 from across 179 accounts.

“Going forward, we will focus more on recoveries and when it comes to buying assets the focus will be retail portfolios. Over the past few years, retail has been growing very big, and I see it taking up half the market,” Shah said, adding they entered this space only three years ago.

He further said since then Edelweiss added 200-strong team to man the retail portfolio as its more people intensive.

On the asset purchase side Shah noted that on average their acquisition cost varies from 60 to 70 paise and sometimes they also go for profit sharing with lender/seller.

Shah is driving retail as it’s more predictable when it comes to recoveries.

An industry expert also opined that ARCs which focus on retail portfolio may be better placed to cushion the impact of the national bad bank on their business, as the proposed national ARC will primarily be dealing with large chunky loans of Rs 500 crore and above and that too mostly from public sector banks which have the highest bad loans piles.

So to secure their business, it makes better sense for ARCs to focus on retail loans as it offers better margins and faster resolution too, he adds.

However, Tibrewala does not see the retail book growing too big for too long as once the pandemic situation normalises, he sees large corporate books coming up for sale.

“We have been in retail segment for many years but do not see faster growth for retail once pandemic related restrictions and benefits normalise, and corporate accounts come back to the markets again,” Tibrewala said.

The national bad bank, he said, will leave the field “uneven for private players like us due to the proposal of government guarantee. However, it can be one area for sourcing assets for us. We are actively looking at assets”.

Edelweiss ARC closed FY21 with a revenue of Rs 340 crore of which Rs 79 crore came in Q4 and earned a Rs 186 crore net profit for the year and Rs 45 crore for Q4. It has comfortable liquidity position of Rs 540 crore as of end March.



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Post SC order, banks move to assess value of promoters’ assets

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Armed with the Supreme Court’s order on invoking personal guarantees of defaulting promoters, banks have set in motion the process to assess the value of assets held by promoters of at least 40 companies that are under the insolvency process.

This includes assets owned by Kapil and Dheeraj Wadhwan of DHFL; Videocon promoters Venugopal and Rajkumar Dhoot; Lanco Infratech’s Madhusudhan Rao and family; IVRCL’s Sudhir Reddy; and Jatin Mehta of Winsome Diamonds.

“Banks are in the process of appointing valuation advisors to arrive at the current fair value of the assets owned by the promoters. Most of the personal guarantees given by the promoters are well documented but their value may not have been determined properly when the loan agreements were signed,” said a banking industry source.

Resolution process

“Once the value is known, the banks can take the next step of initiating the resolution process under which the defaulting promoters will be given 180 days to come up with a settlement plan,” the source added.

In May, the Supreme Court upheld the amendment to the Insolvency and Bankruptcy Code (IBC) that allowed lenders to invoke the personal guarantee of promoters to recover their dues.

This means that if the promoter of a defaulting company does not offer a credible repayment plan, creditors can initiate bankruptcy proceedings against them.

“This judgment gave teeth to the provisions of the Code, by clearing the air of uncertainty and other legal hurdles caused by the top brass promoters facing bankruptcy proceedings,” said Sushmita Gandhi, Partner, IndusLaw.

Sumit Batra, a Corporate Lawyer, said: “Earlier, with no remedy in sight for the lenders to go after the personal guarantors, promoters had an easy escape route, and at times,they used it as a roadblock in the Corporate Insolvency Resolution Process. One can expect more debt realisation for the lenders as personal guarantors would now want to settle with the lenders to avoid any unwarranted consequences.”

 

Challenges ahead

Banks can also invoke promoters’ guarantees even in cases where the company has been sold off under the IBC. This could spell trouble for former promoters of companies like Essar Steel and Bhushan Power. However, lenders could still face several challenges despite the ruling.

One of the biggest hurdles is that many of the promoters are scam-tainted and being investigated for fraud. DHFL’s former promoter Kapil Wadhawan, for example, is in prison for alleged fraud.

“Most of these promoters in default are scam-tainted and their multi-billion assets are already attached by the Enforcement Directorate and Economic Offence Wing of the Police. Getting this released from investigating agencies will take its own time,” said a lawyer on conditions of anonymity because he is representing one of the defaulting promoters.

“The actual scope of recovery in view of these provisions in each case would vary based on net worth of the guarantors, etc. Further, the other challenges that a lender may face are the huge backlog of cases plaguing the NCLTs, due to which decisions are often being delayed to a great extent, more so ever since the pandemic,” Gandhi said.

Nakul Sachdeva, Partner, L&L Partners, said though the SC judgment has brought promoters’ personal guarantee under the ambit of the IBC and provided a great boon to the banks, impediments may arise as the procedure for personal guarantors is yet to be tested to the fullest.

(With inputs from Surabhi)

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Public sector banks support for Covid-19 health infra gathers pace

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Public sector banks in the country appear to be supporting the government’s efforts to boost Covid-19 related healthcare infrastructure in the country by actively lending to the healthcare and associated segments that are in need of liquidity.

Last month, the Reserve Bank of India (RBI) announced a term liquidity facility of ₹50,000 crore for Covid-related healthcare infrastructure and services in the country. This was done for fresh lending support to a wide range of entities in the healthcare space.

Fresh lending provided under this facility will be classified as ‘Priority Sector Lending’ till the repayment or maturity of these loans. The RBI has also allowed on-lending to other financial entities that are regulated by the Central bank. Further, banks are eligible to park surplus liquidity equivalent to the loan amount in the reverse repo window at a rate that is 40 bps higher than the prevailing reverse repo rate.

After the RBI announcement, public sector banks are reported to be enthusiastically extending credit to healthcare sector players and entities. A couple of banks have already extended more than ₹500 crore worth of loans each under the Covid loan book.

‘Identifying customers’

Padmaja Chunduru, Managing Director & CEO of Indian Bank, said the bank had already identified many of its own customers to lend. She said the bank had fixed a target of ₹4,000 crore for its Covid loan book, while it had sanctioned more than ₹600 crore till a couple of weeks ago under this portfolio. “There is good traction and a lot of enthusiasm to do this business,” she said.

State Bank of India has indicated that it could create a Covid loan book to the tune of about ₹10,000 crore. The bank is keen on supporting the hospitals and nursing homes in augmentation of their oxygen facilities and other requirements.

LV Prabhakar, Managing Director & CEO, Canara Bank, had indicated that the Bank had done a lot of homework as far as medical services financing is concerned, under this Covid loan book. It had sanctioned more than ₹1,200 crore worth of loans under this medical loan book till a few weeks ago and said it could comfortably sanction and disburse about ₹4,000 crore to ₹4,500 crore.

G Rajkiran Rai, Managing Director & CEO, Union Bank of India, said the bank is very positive about building a good Covid-19 loan book. It has products for this category and the branches are already canvassing and reaching out to potential borrowers.

While the pandemic has created a lot of challenges across sectors, it has also thrown up some new opportunities. Banking sector is also expected to be one of the beneficiaries.

With a greater focus by Central and State governments, the healthcare segment offers potential opportunities for the banks to build a good portfolio over the short and medium terms at a time many other segments are grappling with slowdown.

Several private sector lenders, both old and new, are also actively looking at lending opportunities in the healthcare infra space.

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DHFL case: CoC decision on shareof FD holders can set a precedent

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Amidst the ongoing Covid-19 pandemic and job losses, the National Company Law Tribunal (NCLT) has asked lenders of Dewan Housing Finance Corporation Ltd (DHFL) to reconsider the distribution of funds to fixed deposit holders and provident funds within two weeks.

Considering the number of small investors and senior citizens who had deposited their hard-earned money and who now face a financial crisis due to the pandemic, the Resolution Plan should provide for an increased share for them, the NCLT said in its order dated June 7.

“It’s generally considered that the investment in the fixed deposit, NCDs are low-risk investment [compared with investing in equity shares]. Therefore, these small investors should not be put to more risk, take more hair cut than the stronger financial institutions viz banks, financial institutions.

“Accordingly, for this limited purpose, we direct the Committee of Creditors (CoC) to reconsider their distribution method amongst various members of the CoC within two weeks from today and report the same to this Adjudicating Authority,” the NCLT said.

Legal experts said that the NCLT has only made a request to the CoC and the final decision will be taken by the lenders. “If CoC agrees to give more to the FD holders, then it could set a precedent for other insolvency cases,” said a legal expert.

Nakul Sachdeva, Partner, L&L Partners (formerly Luthra & Luthra Law Offices), said it seems that the NCLT, on compassionate grounds, has requested the CoC to reconsider the distribution of funds while holding that the plan is in accordance with the law.

However, many of the fixed deposit holders and the NCD holders plan to appeal in the National Company Law Appellate Tribunal seeking full recovery of their deposits.

While approving the resolution plan for DHFL, the NCLT, however, made it clear that there is no additional monetary obligation for the Piramal Group to pay anything more than what it has committed in the Resolution Plan, which is ₹37, 250 crore. “It is only an inter se distribution of resolution money amongst various creditors,” the NCLT said. Significantly, the NCLT has also told the CoC to reconsider the claim of the Army Group Insurance Fund and pay the full admitted claim amount of ₹39 crore, which amounts to just 0.0001 per cent of the total plan.

Army group

The suggestion by the NCLT came “considering the nature of duties performed by them who are protecting the nation, sacrificing their lives, difficult working conditions and human service to keep peace of the country.”It would be appropriate for the members of the CoC “to reconsider and repay their entire admitted claim without any hair cut thereby expressing our deep concern, gratitude and respect to the Army Personnel,” it said.

The NCLT also noted that the Army Group did not challenge/oppose the plan and has only sought a sympathetic view of the CoC.

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