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DCB Bank has reported a 13 per cent jump in its net profit for the quarter ended March 31, 2021 at ₹78 crore compared with ₹69 crore in the same period the previous fiscal.
For 2020-21, its net profit fell marginally to ₹336 crore compared with ₹338 crore in 2019-20.
The bank’s net interest income fell four per cent to ₹311 crore in the January to March 2021 quarter versus ₹324 crore a year ago.
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The European Investment Bank (EIB) and the State Bank of India (SBI) have agreed to back the new Neev Fund II, which will invest up to €100 million in Indian small and medium-sized enterprises (SMEs).
Neev II Fund, which is under the management of SBICap Ventures (a step-down subsidiary of SBI), will provide growth and expansion capital to companies offering solutions for clean energy, electric vehicles, efficient use of raw materials, and water and circular economy projects in the country.
“The fund will enable Indian innovative and emerging companies to fund their growth through equity or quasi-equity instruments,” according to a joint statement issued by EIB, SBI and the European Commission.
Also read: European Investment Bank’s €650-m fund for Kanpur Metro
EIB Vice-President and in charge of operations in India, Christian Kettel Thomsen said: “Innovative solutions often require innovative forms of financing, such as private equity funds. Our partnership with the State Bank of India will create a much-needed source of equity financing for climate action and environmental sustainability solutions offered by innovative SMEs.”
SBI Chairman Dinesh Khara observed that Neev Fund II will provide equity to SMEs focusing on mitigating climate risks, promoting social development, job creation and gender equality.
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Outstanding credit of all scheduled banks collectively declined by a lesser quantum in the reporting fortnight ended April 23, 2021 as compared to the corresponding fortnight year ago, according to Reserve Bank of India data.
The outstanding credit of all scheduled banks declined by ₹30,208 crore in the reporting fortnight against a ₹72,085 crore fall in the year go fortnight.
State Bank of India’s economic research report “Ecowrap” observed that the credit decline in April reduced in the last two years.
“It is well known that both deposits and credit of all the banks always decline in April, as banks mobilise/ disburse more in the last fortnight of the financial year to meet the year end targets
“…It seems the demand for credit has increased much more due to pandemic,” the report said.
Bank deposits in the reporting fortnight declined substantially (by ₹80,154 crore) against decline of only ₹732 crore in the year ago fortnight.
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The facility will be available till October 31, 2021.
In a statement, the Reserve Bank of India said it will conduct one auction for SLTRO each month.
“The first auction will be conducted on May 17, 2021, for Rs 10,000 crore. The unutilised portion of notified Rs 10,000 crore will be carried forward in each subsequent auction until fully utilised or till the last auction, whichever is earlier,” it said.
The SFBs participating in the scheme will have to ensure that the amount borrowed from the RBI should at all times be backed by lending to the specified segments till the maturity of the SLTRO.
Further, SFBs should endeavour to lend within 30 days from the date of availing the funds from the RBI.
In case of over-subscription of the notified amount, the allotment will be done on a pro-rata basis, the central bank said.
The minimum bid amount would be Rs one crore and multiples thereof.
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Under the scheme, banks can provide fresh lending support to a wide range of entities including vaccine manufacturers; importers/suppliers of vaccine and priority medical devices; hospitals and dispensaries; and pathology labs and diagnostic centres.
They will also provide finance to manufacturers and suppliers of oxygen and ventilators; importers of vaccines and COVID-related drugs; COVID-related logistics firms; and also patients for treatment.
The RBI said requests from banks desirous of availing funds from the central bank will be subject to availability of funds as on the date of application. Funds cannot be guaranteed in case the total amount of Rs 50,000 crore is already availed.
“Furthermore, banks should endeavour to lend within a reasonable period, i.e., not later than 30 days from the date of availing the funds from the RBI,” it said in a statement adding that there is no tenure restriction regarding lending by banks under the scheme.
However, the banks will have to ensure that the amount borrowed from the RBI should at all times be backed by lending to the specified segments till maturity of the scheme.
Banks are being incentivised for quick delivery of credit under the scheme through extension of priority sector lending (PSL) classification to such lending up to March 31, 2022. These loans will continue to be classified under PSL till repayment/maturity, whichever is earlier.
Banks can deliver these loans to borrowers directly or through intermediary financial entities regulated by the RBI.
“Under the scheme, banks are expected to create a COVID-19 loan book.
“By way of an additional incentive, such banks will be eligible to park their surplus liquidity up to the size of the COVID-19 loan book with the RBI under the reverse repo window at a rate which is 25 bps lower than the repo rate,” the RBI said.
Banks that want to deploy their own resources without availing funds from the RBI under the scheme for lending to the specified segments will also be eligible for the incentives.
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FPI holdings in Bandhan grew over 2.5 times to 34.91 per cent in March 2021 from 13.05 per cent in March 2020.
Bandhan Bank’s promoter company Bandhan Financial Holdings had to dilute a 21% stake to be compliant with RBI’s licensing condition. The promoters bought down their stake from 60.95 per cent in March 2020 to 40 per cent, which was mostly bought by the FPIs.
PSU and other lenders, led by State Bank of India, had bailed out YES Bank by buying its stake in early 2020. Many banks involved in the rescue act offloaded their part stake in Yes Bank via a follow-on public offer, which was bought by FPIs.
Yes Bank
The second-highest increase of FPI stake was in Yes Bank at 13.77 per cent in March 2021 (1.86 per cent).
According to experts, Yes Bank’s solution of legacy issues, known stress levels and non-performing assets, strong management give confidence to investors, who are expecting the lender to turn around in the medium term.
Also, equity mutual funds that have huge holdings in these banks offloaded their stakes due to redemption pressure, which were bought by FPIs.
Strong growth prospects, lower-than-expected NPAs, return ratios, operational efficiencies, decent earnings are attracting FPIs to private banks.
Among other private banks, FPIs increased stake in Axis Bank (5.94%), ICICI Bank (4.08%), Kotak Mahindra Bank (5.06%), RBL Bank (6.32 per cent), HDFC Bank (3.11 per cent), while they have cut stake in Federal Bank (-8.0 per cent), IndusIndBank (-2.67 per cent) and IDFC First Bank (-1.68 per cent).
PSU banks
However, FPI stakes in public sector banks were static during the last fiscal. The FPI stake in Bank of Baroda and Canara Bank rose 2.32 per cent and 1.28 per cent respectively, while it went up just 0.35% in State Bank of India, the country’s largest lender.
They have cut stake in Indian Overseas Bank (-0.11 per cent), Union Bank of India(-0.63 per cent) and Indian Bank (-1.33 per cent) while increased it by (0.76 per cent) in Punjab National Bank,
Experts say PSBs were hamstrung by wobbly balance sheets and inadequate capital. Also, the likely stress due to the pandemic is keeping foreign investor away.
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The cost to income ratio stood at 7.7%, compared to 9.0% in the same period last year.
Mortgage lender Housing Development Finance Corporation (HDFC) on Friday reported a 42% year-on-year (y-o-y) jump in its net profit to Rs 3,180 crore for the quarter ended March 2021 on the back of higher net interest income (NII).
The NII grew 14% y-o-y to Rs 4,065 crore. The bottom line grew despite a 19% y-o-y rise in provisions to Rs 13,025 crore. The lender has provided on a conservative basis against regulatory requirement to carry a total provision of Rs 5,491 crore during Q4FY21.
Keki Mistry, vice chairman and chief executive officer, said, “The second wave and partial lockdowns have brought new challenges, but given digitalisation of our operations as well as learnings from the past year we are confident that we are well equipped to face the year ahead.” The demand for home loans continued to remain strong owing to low interest rates, softer property prices, concessional stamp duty rates in certain states and continued fiscal incentives on home loans, Mistry said.
The net interest margin (NIM) for the quarter increased 10 basis points (bps) on a sequential as well as y-o-y basis to 3.5%. The spread on the individual loan book was 1.93% and on the non-individual book was 3.22%.
The collection efficiency for individual loans in March 2021 stood at 98.0% compared to 96.3% in September 2020.
The individual loan disbursements grew at 60% over the corresponding quarter of the previous year. March 2021 witnessed the highest levels in terms individual receipts, approvals and disbursements, according to the lender. Similarly, the growth in home loans was seen in both the affordable housing segment as well as high-end properties.
The asset quality saw some pressure during the March quarter. Gross non-performing loans ratio increased 7 bps to 1.98%, compared to gross non-performing loans of 1.91% in the December quarter on a proforma basis. Lenders had reported NPAs on a proforma basis during the December quarter due to a standstill from apex court on declaring NPAs.
The cost to income ratio stood at 7.7%, compared to 9.0% in the same period last year. “The reduction in the cost to income ratio during the year is attributed to Covid-19-induced lockdowns and restrictions, thus leading to lower expenses incurred on travel and conveyance, electricity charges and digitalisation initiatives have reduced expenses such as printing, stationary and postage charges,” HDFC said.
The capital adequacy ratio of the lender stood at 22.2% at the end of the March quarter, compared to the minimum regulatory requirement of 14%.
HDFC’s board approved dividend worth Rs 23/share with a face value of Rs 2. The board also approved fund-raising through non-convertible debentures (NCDs) or any hybrid instrument worth up to Rs 1.25 lakh crore on a private placement basis. Meanwhile, Keki Mistry, vice chairman and managing director of the home financier, was reappointed for another three years, subject to shareholders’ approval.
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The Reserve Bank of India’s Regulations Review Authority (RRA 2.0) has constituted a six-member Advisory Group headed by S Janakiraman, Managing Director, State Bank of India, to support it in reviewing the central bank’s regulations and compliance procedures with a view to streamlining/ rationalising them to make them more effective.
The Authority has been set up initially for a period of one year from May 1, 2021. M. Rajeshwar Rao, Deputy Governor, RBI was appointed as the Regulations Review Authority last month.
“The Group will assist the RRA by identifying areas/ regulations/ guidelines/ returns which can be rationalised and submit reports periodically to RRA containing the recommendations/ suggestions,” RBI said in a statement on Friday.
The other members of the Group are — TT Srinivasaraghavan, Former MD and Non-Executive Director, Sundaram Finance; Gautam Thakur, Chairman, Saraswat Co-operative Bank; Subir Saha, Group Chief Compliance Officer, ICICI Bank; Ravi Duvvuru, President and CCO, Jana Small Finance Bank; and Abadaan Viccaji, Chief Compliance Officer, HSBC India.
The Group has decided to invite feedback and suggestions from all regulated entities, industry bodies and other stakeholders. Suggestions and feedback can be e-mailed to the Group latest by June 15, 2021.
The terms of reference of RRA 2.0 include making regulatory and supervisory instructions more effective by removing redundancies and duplications, if any; and to obtain feedback from regulated entities on simplification of procedures and enhancement of ease of compliance. The authority will seek to reduce compliance burden on regulated entities by streamlining the reporting mechanism; revoking obsolete instructions if necessary and obviating paper-based submission of returns, wherever possible.
The RRA will examine and suggest the changes required in dissemination process of RBI circulars/ instructions.
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The RRA has formed an Advisory Group made up of representatives from regulatory entities, including compliance officers, to help the RRA achieve the objectives set out in RRA 2.0’s terms of reference. The Group will assist by finding areas/regulations/guidelines/returns that can be rationalised and submitting reports to RRA with recommendations/suggestions on a regular basis. The composition of the Group is as under:
| 1. | S. Janakiraman, Managing Director, State Bank of India | Chairman |
| 2. | T. T. Srinivasaraghavan, Former MD & Non-Executive Director, Sundaram Finance | Member |
| 3. | Gautam Thakur, Chairman, Saraswat Co-operative Bank Ltd. | Member |
| 4. | Subir Saha, Group Chief Compliance Officer, ICICI Bank Ltd | Member |
| 5. | Ravi Duvvuru, President & CCO, Jana Small Finance Bank | Member |
| 6. | Abadaan Viccaji, Chief Compliance Officer, HSBC India | Member |
The Group has decided to invite feedback and suggestions from all regulated entities, industry bodies, and other stakeholders to undertake its preparatory work. Suggestions and feedback should be emailed latest by June 15, 2021, with the subject line Suggestions to the Advisory Group of RRA.
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The Mangaluru-based Karnataka Bank navigated the challenges posed by the Covid pandemic last year, and earned a net profit of ₹451.20 crore in the first nine months of 2020-21 against the profit of ₹431.78 crore for the full year of 2019-20.
In an interview to BusinessLine, Mahabaleshwara MS, MD and CEO of the bank, highlighted the strategies that helped the bank to perform better, and its plans for the current financial year amidst the second Covid wave. Excerpts from interview:
India is witnessing the second wave of Covid. How is your bank planning to tackle this fresh challenge?
The first half of the last fiscal was spent in understanding and fighting the pandemic while the business was muted and there was no clear picture about the Covid pandemic. Our innovative business principle of ‘conserve, consolidate and emerge stronger’ immensely helped us to tide over the said crisis-like situation and be able to come out with satisfactory numbers. But now the situation is different. At least now, we have one year of experience in navigating through the pandemic and that is a huge advantage.
To overcome Covid wave 2.0, as in the previous fiscal, our bank will continue to practice the principle of ‘conserve, consolidate and emerge stronger’ along with the required cost cutting measures this year too. We will continue to be cautious and conservative. We will focus on developing a cost-light liability portfolio by concentrating more on CASA and low-cost retail term deposits besides developing a healthy asset portfolio which is largely protected against the ill effects of pandemic in the long run to tide over the economic challenges associated with the Covid wave 2.0.
Your recent letter to the shareholders mentioned that the bank is aiming at a ‘moderate’ growth of 12 per cent for 2021-22. What are the reasons for this moderate outlook?
Yes. The bank has set a moderate growth target of 12 per cent for business turnover for the current fiscal. Considering the Covid second wave that is sweeping the country with enormous impact on health and business in the short and medium term, we expect growth challenges in key sectors during the first half of the current year. Even though MSME and agriculture sectors are less impacted which are the main components of our retail loan book growth, the entire ecosystem of the economy already took a shock and it may need sufficient time to come out of this, if there are no more waves of Covid going forward.
We also expect the customers to be conservative in investing in new or big projects or expansion of business. Our focus will be to conserve, maintain the asset quality and grow steadily with quality during this fiscal. However, the bank will always be in a ‘ready mode’ to catch up business at any stage of economic rebound, beating our own guidance level. We have superior digital loan journey infrastructure and in a better position to encash such opportunities on the very first sight of economic turnaround.
Do you think the fresh Covid wave will lead to the increase in the NPAs in the coming days? If yes, how are you planning to handle that?
Even though the economic impact of the second wave of Covid pandemic and the related lockdowns ,etc have just started unfolding, no one can take it lightly and it may be too early to foresee the impact. The banking industry in India has fully exhibited its resilience and was able to face the challenges posed by the first wave of Covid, mainly because of the ‘economic vaccines’ in the form of regulatory packages such as moratorium, OTR / MSME restructuring, Emergency Credit Line Guarantee Scheme, charging of simple interest during moratorium, etc announced by the Government / Reserve Bank of India.
By opting for the said ‘economic vaccines’, the borrowers managed their cash flow with extended loan period. However, now the country is better placed with all its populace in the age group of 18 years and above are poised to get vaccines. Further, the borrowers have also remodelled their business and became more agile. However, it is also expected that revival and recovery may take more than the expected time. RBI has also recently announced a ‘booster dose’ with various relief measures both for the bankers as well as individual borrowers, small borrowers and MSMEs. This is expected to give the required impetus to the economy. Hence, the response for Covid 2.0 and going beyond, should be collective, comprehensive, decisive and long lasting besides forward looking.
Going by the current trend (until a major portion of India gets vaccinated), Covid waves are likely to recur at regular intervals. How is your bank planning to handle this?
The good news is that the Government has allowed vaccination for individuals aged 18 years and above. With vaccination initiatives and also with more awareness being created among the public about the this, it is hoped that maximum people would get vaccinated in about two-three months considering the current progress. It is expected that once the herd immunity is developed, the surge of Covid would also come down significantly. Like previous fiscal, our bank would continue to be cautious in lending and would ensure adding remunerative and quality assets besides focusing on a cost-light liability portfolio. Necessary steps will be taken at our disposal to protect the interest of all our stakeholders. With the strong fundamentals and improved capital adequacy ratio, we are confident of sailing smooth this year also in spite of unforeseen challenges.
Like earlier economic shocks such as the global recession, global financial crisis of 2007-08, this time too Indian banking sector, I am sure, will withstand the challenges and come out with flying colours. We will stand rock solid with the Government, RBI and the customers.
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