Banking & Finance – Page 308

ATM transactions beyond free permissible limit to cost more from January 1, BFSI News, ET BFSI

June 11, 2021 root Banking & Finance

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MUMBAI: The Reserve Bank on Thursday permitted banks to increase charges for cash and non-cash ATM transactions beyond free monthly permissible limit from next year.

Bank customers will have to pay Rs 21 per transaction, instead of Rs 20, with effect from January 1, 2022, if they exceed the monthly limit of free transactions.

“To compensate the banks for the higher interchange fee and given the general escalation in costs, they are allowed to increase the customer charges to Rs 21 per transaction. This increase shall be effective from January 1, 2022,” the RBI said in a circular.

However, customers will continue to be eligible for five free transactions (inclusive of financial and non-financial transactions) every month from their own bank ATMs. They would also be able to do three free transactions from other bank ATMs in metro centres and five in non-metro centres.

Also, effective August 1, 2021, banks are allowed to increase interchange fee per transaction from Rs 15 to Rs 17 for financial transactions and from Rs 5 to Rs 6 for non-financial transactions in all centres, the circular said.

ATMs are deployed by banks for serving their own customers and also provide services to other banks’ customers as acquirers where they earn interchange income.

The RBI said the charges have been allowed to be increased given the increasing cost of ATM deployment and expenses towards ATM maintenance incurred by banks/white label ATM operators, as also considering the need to balance expectations of stakeholder entities and customer convenience.

It is to be noted here that the central bank had set up a committee in June 2019 under the chairmanship of the chief executive of Indian Banks’ Association to review the entire gamut of automated teller machine (ATM) charges and fees with particular focus on interchange structure for ATM transactions.

The RBI said the suggestions of the panel were comprehensively examined.

“It is also observed that the last change in interchange fee structure for ATM transactions was in August 2012, while the charges payable by customers were last revised in August 2014. A substantial time has thus elapsed since these fees were last changed,” it said.

There were 1,15,605 onsite ATMs and 97,970 off-site ones as on March 31, 2021. About 90 crore debit cards issued by different banks were outstanding at end-March 2021.

The first ATM in India was set up in 1987 by HSBC in Mumbai. In the following twelve years, about 1,500 ATMs were set up in India. In 1997, the Indian Banks’ Association (IBA) set up Swadhan, the first network of shared ATMs which allowed interoperable transactions.

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SBI likely to transfer Rs 20,000 crore NPAs to National Asset Reconstruction Company

June 10, 2021 root Banking & Finance

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“In case the recovery is higher, assuming it to be 40%, the lenders will get the benefit via security receipts,” the bank official said.

By Ankur Mishra

State Bank of India (SBI) has identified bad loans worth Rs 20,000 crore that it plans to transfer to the National Asset Reconstruction Company (NARCL), sources close to the development told FE. These non-performing assets (NPAs) include Essar Power Gujarat, Coastal Energy and Reliance Naval.

In all, banks have identified 22 stressed accounts worth around Rs 89,000 crore that they want to transfer to NARCL in the first phase. Over time, lenders are expected to move loans worth nearly Rs 2 lakh crore to the bad bank.

In an email response to FE, SBI said, “It is a policy of the bank not to comment upon individual accounts and its treatment.”

FE also learned that the operational guidelines for NARCL are in the final stages, but the value at which the assets will be transferred is yet to be decided.

Explaining the process at NARCL, a senior bank official said: “Suppose NPAs worth Rs 89,000 crore are transferred to NARCL at an 80% haircut, NARCL will buy the exposure at Rs 17,800 crore.” Of the Rs 17,800 crore, NARCL will provide upfront cash of 15% to the banks and issue security receipts (SR) for the remaining 85% or Rs 15,130 crore. The upfront cash that banks receive would result in a write-back of provision for the lenders.

“In case the recovery is higher, assuming it to be 40%, the lenders will get the benefit via security receipts,” the bank official said.

The accounts that banks have chosen to transfer to NARCL should be completely provided for by the lenders, as per the Indian Banks’ Association (IBA) directions. The NPA accounts should also not be categorised as fraud or nearing a resolution for being eligible to be sent to NARCL.

IBA chairman Rajkiran Rai G has said banks have identified Rs 89,000-crore NPA accounts which could go to the ARC in the first phase. Rai added that only if the ARC management finds these assets worthwhile, it would make an offer to the banks.

Rai, who is also the MD and CEO of Union Bank of India, said, of the total amount, Union Bank has identified Rs 7,800-crore bad loans to be sent to NARCL. Similarly, Punjab National Bank (PNB) MD and CEO SS Mallikarjun Rao had said the lender had identified Rs 8,000-crore NPAs to be sent to NARCL.

In her Budget speech, finance minister Nirmala Sitharaman had announced setting up of an ARC and asset management company (AMC) for the resolution of stressed assets.

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Covid second wave: Auto debit payments bounce rate rises for 2nd month in May

June 10, 2021 root Banking & Finance

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Hit by the second wave of the Covid-19 pandemic and lockdowns, stress amongst borrowers seems to be on the rise, though it is lower than what was seen in the first surge of the pandemic. Data captured by the National Payments Corporation of India from its National Automated Clearing House (NACH) platform reveals that the number of unsuccessful auto debit requests increased for a second straight month in May.

Of the total auto debit transactions of 8.57 crore in May this year, 5.49 crore transactions were successful while 3.08 crore were returned. This reflects a return or bounce rate of 35.91 per cent in May compared to 34.05 per cent in April this year.

Also read: Bounce rates of auto debit transactions rise in April

NACH bounce rates have been spiking since last month after localised lockdowns hampered economic activity. It had hit a low of 32.7 per cent in March this year while the peak was in June 2020 when the bounce rate rose to 45.3 per cent.

To help small borrowers tide over the impact of the second wave of the pandemic, the Reserve Bank of India had announced the Resolution Framework 2.0 on May 5. The RBI on June 4 expanded the coverage of the scheme and announced the doubling of the maximum aggregate exposure to ₹50 crore.

Stress among small borrowers

Many companies have begun to indicate that there is rising stress amidst small borrowers.

In a mid quarter update, Bajaj Finance said the second wave has caused a marginal increase in EMI bounce rates in the first quarter of 2021-22 versus the fourth quarter of last fiscal. “Average EMI bounce rates in the first quarter of this fiscal were approximately 1.08X of the fourth quarter last fiscal,” it said.

Equitas Small Finance Bank reported a collection efficiency of 77.84 per cent in May this year as against 105.16 per cent in April. “We will be studying the impact of stress created by the second wave on our customers and any possible restructuring they may require to help revive their livelihood,” it said in a recent statement.

Post September 2020, the bank had seen a strong pick up in collection efficiency and ended the year with March 2021 at pre-Covid level collection efficiency.

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BoB pares MCLR by 5 bps in three tenors

June 10, 2021 root Banking & Finance

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Bank of Baroda has decided to pare its three-month, six-month and one-year marginal cost of funds-based lending rate (MCLR) by 5 basis points each with effect from June 12.

Floating rate rupee loans priced with reference to MCLR will become cheaper to that extent.

MCLR for the three-month tenure will be 7.10 per cent (existing: 7.15 per cent); six-month: 7.20 per cent (7.25 per cent); and one-year: 7.35 per cent (7.40 per cent).

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ATM usage to cost more

June 10, 2021 root Banking & Finance

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The Reserve Bank of India (RBI) has accepted the long-standing demand of banks and White Label ATM operators (WLAO) for a hike in interchange fee in view of increasing cost of ATM deployment and maintenance.

This could encourage deployment of ATMs, which has hit the slow lane in the last one year amid the Covid-19 pandemic.

The interchange fee (which is recovered by banks owning ATMs from card issuing banks for providing) has been upped from ₹15 to ₹17 per financial transaction and from ₹5 to ₹6 per non-financial transaction in all centres. The new fee will be effective from August 1.

Customer charges

Simultaneously, to compensate Banks for the higher interchange fee and given the general escalation in costs, they have been allowed to increase the customer charges for transactions beyond the stipulated free monthly ATM transactions to ₹21 per transaction from ₹20. This increase will be effective from January 1, 2022.

Customers are eligible for five free transactions (inclusive of financial and non-financial transactions) every month from their own bank ATMs. In other bank ATMs they are allowed three transactions in metro centres and five in non-metro centres.

RBI, in a circular, said applicable taxes, if any, will be additionally payable on the interchange fee and customer charges. The central bank added that its instructions also apply, mutatis mutandis (with the necessary changes having been made), to transactions done at Cash Recycler Machines (other than for cash deposit transactions).

ATM additions declined to 2,815 in FY21 against 8,564 in the previous year. The number of ATMs across the country is 2.13 lakh (2.10 lakh.)

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Max Life eyes VNB growth of 26 per cent in FY21-22

June 10, 2021 root Banking & Finance

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After clocking a robust 39 per cent growth in ‘Value of new business’ (VNB) in 2020-21, Max Life Insurance, a private life insurer, is now eyeing a VNB growth of at least 26 per cent this fiscal, its Managing Director & CEO Prashant Tripathy has said.

Seen globally as the true measure of a life insurer’s profits, the VNB as a concept is the profit the company (insurer) hopes to make on policies written during the year after accounting for all the costs incurred and assuming future persistence and mortality.

For 2020-21, Max Life Insurance’s VNB came in at ₹ 1,249 crore, up 39 per cent over previous fiscal and almost doubled in last 3 years. The average VNB growth for the company over the last five years stood at 26 per cent.

“Maintaining VNB growth at 39 per cent will be difficult. However, our aspiration this fiscal is to achieve VNB growth of atleast 26 per cent, which has been our last five years average,” Tripathy told BusinessLine in an interaction post the announcement of financial results for 2020-21.

Asked as to how Max Life achieved strong growth in VNB in a pandemic year, Tripathy said that the company sold more protection policies and changed product mix and sold more non participating products. There was also some base effect that aided such growth, he noted.

Tripathy highlighted that VNB —and not statutory profits —is true reflection of an insurer’s profitability.

Statutory profits dip

As regards statutory profits, Max Life on Tuesday reported that it has recorded net profit of ₹523 crore in FY’20-21. This reflected a decline of 3 per cent over the net profit of ₹ 539 crore recorded in the previous fiscal.

In 2020–21, total new business premium (individual and group) of Max life increased 22 per cent to ₹ 6,826 crore. In terms of individual adjusted premium equivalents (APE), the company recorded 19 per cent growth to ₹ 4,907 crore. Further, the renewal premium income (including group) grew 15 per cent to ₹ 12,192 crore taking gross written premium to ₹19,018 crore, an increase of 18 per cent over the previous financial year.

For the fourth quarter ended March 31, 2021, Max life recorded a gross premium of ₹ 7,106 crore, an increase of 21 per cent from ₹ 5,873 crore in the same quarter last year. Individual APE grew 35 per cent in the quarter to ₹ 1,893 crore from ₹ 1,398 crore in the year ago period.

Second wave

Tripathy said that despite the second wave, situation in April-May 2021 is not that bad as last year when it came to industry. In 2020-21, the company received 1,762 Covid death claims and out of which 1,746 claims were settled with an amount close to ₹ 200 crore. For the current fiscal, the company has made ₹ 500 crore provisioning towards likely Covid claims.

“Despite Covid claims, our claims payment ratio has improved. We have kept ₹ 500 crore extra provision. We will not have P&L impact if extra claims is less than ₹ 500 crore in 2021-22. Of course, claims are going to go higher and our financials are protected. Covid has impacted balance sheet marginally, but we have enough resources to take care of that,” Tripathy said.

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YES Bank receives board approval to raise ₹10,000 crore through debt securities

June 10, 2021 root Banking & Finance

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Private sector lender Yes Bank has received approval from its board of directors to raise ₹10,000 crore through debt securities.

“The board of directors of the bank, in its meeting held on June 10, 2021, have considered and approved seeking shareholders’ approval for borrowing or raising funds in Indian or foreign currency up to an amount of ₹10,000 crore by issue of debt securities including but not limited to non-convertible debentures, bonds, Medium Term Note (MTN),” it said in a regulatory filing on Thursday.

The bank’s capital adequacy ratio was 17.5 per cent as on March 31, 2021, while its CET1 ratio was 17.5 per cent.

Prashant Kumar, Managing Director and CEO, Yes Bank had told BusinessLine that the lender may consider fund raising if there is a lot of improvement in the economy, and credit growth takes place.

“All approvals are in place. Depending on the situation, we will take a call. We had taken an overarching approval of ₹10,000 crore but the requirement will not be so much,” he had said after the fourth quarter results of the bank.

Shifting its registered office

Meanwhile, the board also approved a proposal to move the bank’s registered office to Santacruz (East), Mumbai from ONE International Centre, Elphinstone (W), Mumbai. “This is with effect from June 14,” it said in a separate filing.

Significantly, its new office is the old headquarters of Reliance Anil Dhirubhai Ambani Group. The erstwhile Reliance Centre is spread over a 21,432.28 square metre plot.

Reliance Infrastructure Limited had sold off the property to Yes Bank for ₹1,200 crore in April this year. “Entire proceeds from sale of Reliance Centre, Santacruz is utilised only to repay the debt of YES Bank,” Reliance Infra had said in a statement.

Last year, Yes Bank had said that it was taking possession of the properties under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, and comes for non-payment of loans amounting to ₹2,892 crore.

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RBI may give banks/NBFCs more time to appoint auditors

June 10, 2021 root Banking & Finance

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The Reserve Bank of India may give more time to regulated entities, including banks, to implement the new guidelines on the appointment of statutory auditors.

Regulated entities are of the view that a year’s time should have been given for implementing the guidelines as some of them have already re-appointed auditors for FY22. The RBI’s new norms were unveiled on April 27. The guidelines allow regulated entities to appoint auditors for three years. What this means is that audit firms that have already completed the three-year period will have to discontinue their assignment.

Financial services industry veteran TT Srinivasaraghavan observed that some of the regulated entities have already had their AGMs in which appointment of Statutory Auditors is usually on the agenda. So, industry bodies want some more time (say, from April 1, 2022) for implementation of the guidelines.

“In the meantime, an advisory/ consultative group of key stakeholders — the RBI, the regulated entities, and the CA Institute — can be asked to assess the guidelines and give recommendations within two months… there will be a 360-degree view on the issues and the potential solutions,” Srinivasaraghavan suggested.

Applicable to banks

The guidelines are applicable to commercial banks (excluding Regional Rural Banks), urban co-operative banks and non-banking finance companies (NBFCs), including housing finance companies, from financial year 2021-22. However, non-deposit taking NBFCs with asset size below ₹1,000 crore can continue with their extant procedure.

Chartered Accountant Sethuratham Ravi said regulated entities can ask for a dispensation, seeking continuation of the current auditor for one more quarter. “A regulated entity can write to the RBI that it is in the process of appointing a new auditor and that the same needs to be ratified at the AGM… The RBI could have given one more year for implementation,” Ravi said.

P Sitaram, ED & CFO, IDBI Bank, said the guidelines came at a time when some banks would have proceeded with the appointment/re-appointment of auditors. “So, they should have done it (issued the guidelines) either in January or having issued it, they could have said the guidelines will be applicable from next year,” he said.

Banking expert V Viswanathan underscored that even if an audit firm has completed its three-year term, the status quo of March quarter will continue for the April-June quarter. The bank will apply for RBI approval, and it is given.

“Sometimes, public sector banks get the list (of eligible audit firms from RBI) after September also. In which case, the status quo continues for the second quarter also,” he said.

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Voting on Reliance Commercial Finance’s debt resolution underway

June 10, 2021 root Banking & Finance

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Voting on the resolution plan for debt-ridden Reliance Commercial Finance has started and is likely to be completed by June 25.

“Banks have begun voting for the successful resolution plan of Reliance Commercial Finance on June 7 and it is expected to be completed by June 25,” said a person familiar with the development.

The resolution would help address the ₹9,017 crore debt of Reliance Commercial Finance, which is a 100 per cent subsidiary of Anil Ambani-controlled Reliance Capital.

Final bidders

The four final bidders whose plans have been taken up for voting include Authum Infrastructure and Investment, UV ARC in consortium with Hawk Capital, Invent ARC and Alchemist ARC. Bank of Baroda is the lead banker under the Inter Creditor Agreement for the resolution.

The debt resolution of Reliance Home Finance is also underway and the voting is expected to be completed by June 15.

Lenders had initiated the resolution of both the companies under the June 7, 2019 circular of the Reserve Bank of India on Prudential Framework for Resolution of Stressed Assets Directions 2019 .

Reliance Commercial Finance, which has been re-branded as Reliance Money, offers small and medium enterprises loans, loans against property, infrastructure financing, agriculture loans, supply chain financing, micro financing, vehicle loans and construction finance.

The total financial indebtedness of Reliance Capital stood at ₹20,916.78 crore including accrued interest up to April 30, 2021, as per a recent regulatory filing. The total amount of outstanding from the banks and the financial institutions was ₹721.9 crore.

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Leave a comment Anil Ambani, reliance capital, Reliance Commercial Finance, Reliance Home finance

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