Category: Banking & Finance

SBI Card expects to return to ‘business-as-usual’ in Sept quarter

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The second Covid-19 wave may have, to some extent, dented SBI Card’s business growth in May, albeit on a lower scale than May last year, but the company sees a return to business -as-usual (BAU) scenario in the July-September quarter, its Chief Executive Officer Rama Mohan Rao Amara said.

However, the return to BAU depends on the pace of vaccination, return of consumer confidence and India being able to avoid a third wave, he told BusinessLine.

The first two months of this fiscal (April-May 2021) saw increased overall card spends as well as higher onboarding of customers compared to the same period last year.

“If we are able to avoid another wave before March 2022, I don’t have any doubt that our performance in the current fiscal will be equal to our performance last year or even better,” he said.

Rao highlighted that the impact of the second wave on SBI Card, which is the country’s largest pure play credit card issuer, was more in May and not much in April.

“Retail spends in April were not impacted adversely. It was a marginal impact and we were holding on. It was also much better than April 2020 when it was a national lockdown,” he said.

“We are confident that this (impact in May) is only a temporary blip and see customer confidence coming back and the expenditure that was postponed due to pandemic will return,” he said.

Dip in spends

Overall there has been a dip in credit card spends in May but certain new categories are seeing an increase, he said. Several State governments decision to restrict e-commerce deliveries to only essential items impacted overall business as online spends on discretionary items saw a dip in May, Rao added.

In quarter ended March, SBI Card’s card spend grew 11 per cent to ₹35,943 crore on a year-on-year basis.

Rao said he expects calibrated opening by States from June onwards. “From July onwards, we want to come back to our usual ability of sourcing (new customers). Our endeavour will be to achieve sustainable growth. We want to play up to our capacity and that is the minimum goal,” he said, adding that SBI Card had on boarded 26.85 lakh accounts last fiscal.

He also said that SBI Card — as was the case last year — would, in the subsequent quarters, catch up with the lost business of the first quarter.

On whether health spends through credit cards are on the rise in the current pandemic times, Rao said there is some bump up and new segments like online consultations are on the rise. “We are seeing usage in increase in spends on wellness through our card portfolio,” he said.

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Shriram Life Insurance eyes 15-20% growth

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Private sector Shriram Life Insurance, which has been focussing on rural markets, is hoping to grow by 15-20 per cent on an annual basis.

“The expectation is that the life insurance industry will grow by about 15 per cent or so for the next number of years. So we hope to grow slightly faster than that — maybe between 15 per cent and 20 per cent per year,” said Casparus Kromhout, Managing Director and CEO, Shriram Life Insurance.

While the second wave of the Covid-19 pandemic has raised further uncertainties on the economic outlook, Kromhout said the life insurer has been putting a lot of things in place for supporting its existing channels. It has also been working on innovation and creating new business models.

Net profit

The life insurer registered a threefold increase in its net profit to ₹106 crore in 2020-21.

“The first quarter of last fiscal was very difficult for everyone. But we ended the year with new business premium growth of 25 per cent,” he told BusinessLine in an interaction, pointing out that a large part of the company’s customer base is from rural areas and was impacted by the pandemic.

“When the first lockdown came last year, we were very worried because our customer base was impacted by both the medical emergency and loss of income. We thought that the business would really suffer and customers wouldn’t be able to pay their premiums or buy insurance. Fortunately, we were able to come back in the second half of the year,” he said.

In 2020-21, about 47 per cent of its new business and 54 per cent of claims came from the rural segment.

Its average premium size is about ₹17,400 while the average industry premium size is around ₹50,000.

The rural areas have been quite severely impacted in the second wave of the pandemic, he said adding there has been an uptick in Covid related claims in April and May this year. He, however, said the company is well prepared to meet the rising claims.

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Private banks see 21% jump in frauds as online frauds rise, BFSI News, ET BFSI

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The public sector banks seem to have learnt a lesson from the multi-billion dollar Punjab National Bank scam and worked to put their processes in order.

The number of frauds in PSBS fell 34% during fiscal 2020-21, more than double the overall 15% decline in frauds in the banking system. Interestingly, frauds in private banks rose 21% during the period, according to the RBI annual report for fiscal 2021.

The share of PSBs in total fraud value shrank to 59.2% this fiscal, from 80% in fiscal 2020, while it rose to 33.5% in the case of private sector banks this fiscal. In fiscal 2020 private banks had reported a 18.4% share.

The RBI in its annual report stated that a total of 7,363 frauds worth Rs 1,38,422 crore were reported. These frauds have been reported across all banks and areas of operations.

Online frauds rise

The number of frauds in the online space shot up 34.6% at the end of March 2021. About 99% of the total frauds reported in the fiscal year gone by were from the advances category in value terms. However, the value of frauds in the advances category remained almost the same as compared to the last year and the incidence of frauds in the advance category have come down over the previous year.

In value terms, private banks reported a rise of 35% y-o-y in frauds during FY21, and PSBs have reported a decline of 45%.

The average time lag between the date of occurrence of frauds and the date of detection was 23 months for the frauds reported in 2020-21. However, in respect of large frauds of Rs 100 crore and above, the average lag was 57 months for the same period. In terms of area of operations, frauds have been occurring predominantly in the loan portfolio (advances category), both in terms of number and value, RBI said.

Reducing frauds

In the current fiscal, the central bank is looking at enhancing the fraud risk management system, including improving the efficacy of early warning signal (EWS) framework, fraud governance and response system. This includes augmenting the data analysis for monitoring of transactions, introduction of dedicated market intelligence (MI) unit for frauds and implementation of automated unique system generated number for each fraud.

For an account declared fraud, banks have to make 100% provisioning of the outstanding loans, spread over up to four quarters.



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Paytm Visa physical debit cards soon; Paytm Payments Bank eyes 45 lakh cards in FY22

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Paytm Payments Bank has enhanced the debit card experience with this offering by making the entire process digital.

Paytm Payments Bank will launch physical debit cards issued by Visa. Currently, it offers physical debit cards by Rupay, and virtual debit cards by Visa to customers. Paytm said that Visa physical debit cards will allow customers to use these at over 50 lakh Visa acceptance points and will allow them to tap and pay for contactless transactions. Paytm Payments Bank has already issued over 45 lakh virtual debit cards. It has now set a target to issue over 10 lakh physical debit cards by the end of this fiscal. Paytm is among largest issuer of RuPay Debit Cards in the country, which can be used by customers at all the major online merchants which accept Rupay cards

How to apply for physical debit cards by Visa?

Through the Paytm Payments Bank section on the Paytm app, customers can apply for a physical card. They can set the PIN once they receive the card. This debit card will let customers avail Visa offers, along with features such as international payments and ‘tap-and-pay’ transactions. According to the company’s management, this is another step to democratise the digital financial ecosystem in the country. “Physical cards will help more people have another payment method to rely on whenever they are out buying services or shopping. This partnership will allow millions of our customers to avail the benefits of Visa debit cards along with the power to make international transactions,” Satish Kumar Gupta, CEO & Managing Director, Paytm Payments Bank Ltd, said.

Paytm IPO on cards

Paytm is planning to come out with an initial public offer worth $3 billion later this year, PTI reported citing sources as saying. Upon successful launch of IPO, Paytm would be the largest such offer. Coal India’s Rs 15,200 crore-IPO launched in 2010 is the country’s largest public issue till date. The SoftBank and Alibaba-backed company is looking at raising around $3 billion (over Rs 21,700 crore) at a valuation of well over $25 billion, the sources privy to the development said.

Paytm registers 97.5 crore digital transactions in Mar’21

Last year, Payments Bank had enabled banking services through Aadhar authentication by integrating the Aadhaar enabled Payment System (AePS). It also launched the Direct Benefits Transfer (DBT) facility, enabling customers to receive the benefits of over 400 government subsidies directly into their Paytm Payments Bank Savings Account. Paytm registered over 97.5 crore digital transactions in March 2021, led by the transactions on Paytm Wallet, Paytm FASTag, Paytm UPI, and internet banking over the last several quarters.

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BFSI firms reshaping customer service with chatbots and robotics, BFSI News, ET BFSI

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There is no dearth of chatbots when it comes to the BFSI industry, more and more organizations are leveraging it to reduce cost and serve increasingly tech-savvy customers, most basic tasks are being handled by chatbots allowing customer representatives to handle complex issues leading to a more positive banking experience.

In the 2nd ETBFSI Virtual Summit, Bankers discussed and shared their experience on how they’ve been deploying chatbots and robotics to service customers, cut costs and free up resources for customer representatives to handle complex queries.

Dheemant Thacker, Head – Digital Banking, Ujjivan Small Finance Bank said, “Chatbots have evolved from structured responses to unstructured responses from text to voices, from single language to multilingual. Chatbot is like a new born baby, as we feed a lot of structured information the bot learns itself through self-learning algorithms to get the right response for unstructured information.”

Thacker also believes that the text to voice evolution is happening in a phenomenal way and a lot of voice based chatbots are being used in contact centres where customers are now able to be serviced round the clock with higher accuracy and in case the chatbot fails then humans can take over.

Patanjali Somayaji, CTO, Capital Float echoes the same thought.

According to Somayaji, Chatbot straddles between a manual and automated experience and can be leveraged on respective platforms depending on the customer journey and platform the customer opts for. He also believes that the use of chatbots has not only evolved from a customer or user experience perspective and in-fact it started right from the product building perspective too.

Haresh Hiranandani, Sr VP at Kotak Mahindra Bank says, “Chatbots have brought in a common AI layer which can go across digital channels. Today a customer journey can be started and closed on a chatbot and it also brings intelligence on the platform.”
Hiranandani adds, “Chatbots are getting intelligent on the common AI layer and building more intelligence is the way forward.”



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Bernstein, BFSI News, ET BFSI

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New Delhi, Paytm is on track to break even in 12-18 months with increased financial discipline and targeted strategic investments, investment research firm Bernstein said in a pre-IPO primer.

According to reports, Paytm is aiming to raise about $3 billion in an initial public offering (IPO) late this year, which could be the country’s largest debut ever.

The startup, backed by investors including Berkshire Hathway, Softbank and Ant Group, plans to list in India in November around Diwali.

Paytm, formally called One 97 Communications, is targeting a valuation of around $25 billion to $30 billion, as per reports.

“Paytm has come a long way from a simple digital wallet business to an integrated payments ecosystem. We believe the next stage of growth will be led by financial services, particularly delivering seamless credit tech products to consumers and merchants.

“With increased financial discipline (rare in the hyper-competitive payments space), Paytm is on track to break even in 12-18 months. We expect Paytm to continue being the largest payments and fintech ecosystem in India,” Bernstein said in its report.

Paytm has realigned its payments strategy around merchant payments leadership. Paytm’s beneficiary UPI market share (a proxy for merchant receipts) is rising month-on-month and was 16 per cent in April, the report said.

“Combine that with its digital wallet, merchant acquiring and online merchant payments, Paytm has a total throughput of $52 billion in FY21, up 33 per cent year on year,” it added.

Paytm’s credit tech vertical is likely to lead the next wave of revenue growth.

“We expect Paytm’s revenue base to double by FY23 to $1 billion with non-payments revenue contributing 33 per cent,” Bernstein said.

Paytm has crossed the proof of concept stage on consumer credit tech and merchant credit tech. Early disbursal numbers have been strong, rising month-on-month with strong bank and NBFC funding partners. Broking business with Paytm Money has also got off to a strong start, the report said.



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RBI Annual Report: Asset quality of banks needs to be closely monitored, warns RBI

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RBI also said that the waiver of compound interest on all loan accounts which opted for moratorium during March-August 2020 may also put stress on banks’ financial health.

The Reserve Bank of India (RBI) on Thursday said that asset quality of the banks would need close monitoring along with their preparedness for higher provisioning in coming quarters.

In its semi-annual financial stability report, RBI had earlier said that the bad loan ratio of banks could rise to 13.5% under the baseline stress scenario by September 2021. The regulator has cautioned banks as lenders will have to show true picture of bad loans after Supreme Court lifted interim stay on classifying non-performing assets (NPA) in March 2021. RBI also said that the waiver of compound interest on all loan accounts which opted for moratorium during March-August 2020 may also put stress on banks’ financial health.

Last year, RBI had announced a six-month moratorium for all term loan borrowers in the wake of Covid impact on borrowers. The Supreme Court had directed lenders to waive compound interest of the borrowers during the moratorium period. The regulator is of the view that banks are better positioned than before in managing stress in their balance sheets thanks to higher capital buffers, improvement in recoveries and a return to profitability. “Stress tests indicate that Indian banks have sufficient capital at the aggregate level even in a severe stress scenario. Bank-wise as well as system-wide supervisory stress testing provide clues for a forward-looking identification of vulnerable areas,” RBI said in its annual report 2020-21 released on Thursday.

The report, however, highlighted that gross NPA ratio of banks decreased to 6.8% by December 2020 from 8.2% in March 2020. Prudent provisioning by banks, even over and above regulatory prescriptions for accounts availing moratorium and undergoing restructuring, resulted in an improvement in the provision coverage ratio (PCR) of banks. Provision coverage ratio has improved to 75.5% at December-end 2020 from 66.6% in March 2020. Adjusting for write offs, the PCR was 88%, up from 81.3% in March 2020.

The capital to risk-weighted assets ratio (CRAR) of banks rose to 15.9% by end-December 2020 from 14.8% at end-March 2020. The capital adequacy ratio of banks was aided by capital raising from the market by public and private sector banks, and retention of profits.

The report also said that gross NPA ratio for non-banking financial institutions (NBFCs) improved to 5.7% in December 2020 from 6.8% in March 2020. Similarly, the capital adequacy ratio of NBFCs marginally improved to 24.8% in December 2020 from 23.7% during the same period last year.

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RBI Annual Report: Worst seems to be over for loan growth

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As per RBI’s annual report, banks’ credit-deposit ratio moderated to 72.4% in 2020-21 from 76.4% a year ago, largely reflecting the subdued credit demand conditions in the economy.

After hitting a three-year low of 5.1% in the first half of FY21, the credit growth gained pace from November 2020 as the economy started opening up after pandemic-triggered lockdowns. In its annual report for the nine-months ended March 2021, the Reserve Bank of India (RBI) said the worst was over for the credit growth.

The positive momentum in credit offtake since November 2020 reflected recovery in economic activity, which was further supported by the cumulative reduction in the policy repo rate. Loan growth of banks was impacted during the first half of the fiscal 2021 (H1FY21) and remained at three-year low of 5.1% till October, 2020, but it improved to 5.6% on a year-on-year (y-o-y) basis till March 2021.

“A gradual pick-up in the economic activity during the second half of 2020-21 pulled up credit growth,” the RBI said on Thursday. Going forward, accommodative liquidity conditions and interest rates, several growth enhancing measures announced by the government and commencement of the mass vaccination drive are likely to nurture the recovery, which, in turn, is expected to have a favourable bearing on credit demand and supply, the report said.

Among bank groups, public sector banks registered a non-food credit growth of 3.1% in March 2021, compared to 3.4% a year ago. However, the credit extended by private sector banks grew by 9.6%, compared to 13.9% a year ago.

In line with RBI’s view, many lenders are expecting better credit growth in the current financial year (FY22) on the back of economic recovery forecasts. For instance, State Bank of India (SBI) hopes to grow its loan book by 10% in FY22, despite less than 5% credit growth in FY21. After declaring March quarter earnings, chairman Dinesh Kumar Khara said, “The bank may register a credit growth of around 10% in FY22 as the bank’s credit growth is normally 1% above India’s GDP.”

As per RBI’s annual report, banks’ credit-deposit ratio moderated to 72.4% in 2020-21 from 76.4% a year ago, largely reflecting the subdued credit demand conditions in the economy.

During FY21, the slowdown in banks’ credit growth was broad-based across all major sectors, except agriculture. According to data on the sectoral deployment of bank credit, the loan growth to agriculture and allied activities accelerated to 12.3% in March 2021, compared to 4.2% a year ago. Credit to industry decelerated marginally to 0.4%,compared to 0.7% a year ago.

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First tranche of 2015 Sovereign Gold Bonds to be redeemed at ₹4,837 per unit against ₹2,684 issue price

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Investors in Sovereign Gold Bonds (SGB) 2015-16 Tranche I will get bumper returns, going by the redemption price set by the Reserve Bank of India.

The central bank on Thursday said the redemption price for the early redemption of SGB Tranche I, issued in November 2015, will be ₹4,837 per unit of SGB.

This translates into an appreciation of about 80 per cent over the issue price of ₹2,684 per unit of SGB.

The Centre had come up with the SGB scheme in 2015. It issued a Gazette Notification on it on October 30, 2015.

The RBI, in a statement, said the redemption price for the early redemption due on May 30 shall be ₹4,837 per unit of SGB and payable on May 29.

As per the terms and conditions of the issuance of Sovereign Gold Bonds, 2015-16, the bonds shall be repayable on the expiration of eight years from the date of issue.

Pre-mature redemption of the bond is allowed from fifth year of the date of issue on the interest payment dates.

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Suryoday Small Finance Bank Q4 net loss widens to ₹43 crore

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Suryoday Small Finance Bank’s (SSFB) net loss widened to ₹43 crore in the fourth quarter ended March 31, 2021 against ₹15.5 crore in the year ago period.

Interest reversal on account of gross non-performing assets (GNPAs) and higher one-time floating provision are among the reasons for the widening of the loss.

Net interest income of the bank, which got listed on the NSE and BSE on March 26, 2021, was down 56 per cent year-on-year at ₹57 crore (₹130 crore in the year ago period).

However, other income jumped 46 per cent yoy to ₹35 crore (₹24 crore).

R Baskar Babu, MD & CEO, said: “We had interest reversal because of GNPAs. As an abundant caution, we maintained substantially higher liquidity.

“There is a negative carry on account of this excess liquidity. And we continue to maintain conservative provisions.”

Babu emphasised that post the end of the first wave of pandemic, business activity across states started moving towards normalcy, which is reflected in the bank’s highest ever quarterly disbursement of ₹1,058 crore in the reporting quarter.

“However, with the advent of the second wave of Covid, towards the fag end of the quarter and imposition of the lockdowns across multiple states, the business activity again came to halt in a very short span of time.

“With the pause on business activity across States, we expect the collection efficiency to remain volatile in the near term,” the SSFB chief said.

With the lifting of the interim stay on asset classification standstill by the Supreme Court, GNPAs jumped to 9.4 per cent of gross advances (₹394 crore in absolute terms) as at March-end 2021 against 2.79 per cent as at March-end 2020.

Net NPAs rose to 4.70 per cent of net advances against 0.57 per cent.

The bank restructured portfolio aggregating ₹136.2 crore in the year ended 31 March 2021, representing 3.3 per cent of advances.

Deposits were up 14 per cent yoy and stood at ₹3,256 crore as at March-end 2021. Gross Loan Portfolio increased 13 per cent yoy to ₹4,206 crore.

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