Category: Banking & Finance

RBI imposes ₹25.50 lakh penalty on Jaipur-based Jumbo Finvest (India) Ltd

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The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹25.50 lakh on Jumbo Finvest (India) Ltd, Jaipur, for non-compliance with provisions of two of its directions.

RBI, in a statement, said the monetary penalty has been imposed for non-compliance with certain provisions of its directions contained in ‘Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016’ and ‘Reserve Bank of India, Know Your Customer (KYC) Directions, 2016’.

“This penalty has been imposed in exercise of powers vested in RBI under the provisions of…the Reserve Bank of India Act, 1934, taking into account the failure of the company to adhere to the aforesaid directions issued by RBI,” the statement said.

The action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the company with its customers, it added.

The central bank observed that the statutory inspection of Jumbo Finvest (India) with reference to its financial position as on March 31, 2019, revealed, inter alia, non-compliance with above mentioned directions issued by RBI.

In furtherance to the same, RBI said a notice was issued to the company advising it to show cause as to why penalty should not be imposed for failure to comply with the directions issued by RBI.

“After considering the company’s reply to the notice, RBI came to the conclusion that the charge of non-compliance with aforesaid RBI directions was substantiated and warranted imposition of monetary penalty,” the central bank added.

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Banks demand deadline extension for Covid packages

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Our Bureau

Banks have petitioned the Reserve Bank of India (RBI) that the 180-day timeline for implementing resolution plans for borrower accounts under the August 6, 2020 circular on “Resolution Framework for Covid-19-related Stress” should be extended as few of them are facing headwinds due to second pandemic wave.

As per the circular, resolution of exposures (other than personal loans) must be implemented within 180 days from the date of invocation (not later than December 31, 2020). So, the resolution plan has to be implemented by June-end 2021. But in view of the adverse impact of Covid-19, banks want leeway of 90 more days in implementing the resolution plan.

Loan moratorium

Banks also want RBI to consider a three month loan moratorium for retail and micro, small and medium enterprise (MSME) borrowers so that they can weather the Covid challenge without worrying about servicing loans.

Banks have also requested the Government to extend the emergency credit line guarantee scheme (ECLGS) for Business Enterprises/ MSMEs beyond the June 30, 2021 deadline. This scheme is aimed at helping Business Enterprises/ MSMEs meet their working capital needs. A banker observed that RBI is examining lenders’ pleas and is likely take a call by May-end.

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FPIs bet big on private insurers

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Foreign portfolio investors (FPIs) are going strong on the Indian insurance sector. Bolstered by a strong growth in new business premium and profitability besides sensing a huge scope for insurance penetration, FPIs have been substantially increasing their stake in listed private insurers over the last 2-3 years.

Between FY19 and FY21, FPIs pumped in ₹52,527 crore into the sector.

Explosive growth

“Insurance industry in India is on the cusp of explosive growth. Even now insurance penetration (insurance premia as percentage of GDP) in India is abysmally low at 3.72 percent,” VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said. “The upcoming five years are expected to witness 13-15 percent growth of the industry. Eying this opportunity, all investors – FIIs, DIIs, HNIs – have been scaling up investments in the sector,” he added.

Of the record FPI inflows worth ₹2.74-lakh crore in FY21, insurance attracted the second largest chunk after the private sector banks, Vijayakumar noted.

Prayesh Jain, Lead Analyst – Institutional Equities at YES Securities said that both life and general insurance are highly under-penetrated in India and have the potential to see a 15-18 per cent growth in premium CAGR over the next few years.

“Unlike other countries where insurers went bankrupt due to default in their investment papers, Indian insurers did not face any such situation due to strong regulations; their underwriting and claim settlement are quite impressive. All these factors make Indian insurance space more attractive for the foreign investors,” Jain added.

FPI holdings

Among private insurers, FPI holding in SBI Life more than doubled to 30.51 per cent as of FY21 from 14.06 per cent in FY19.

Similarly, foreign investors’ holding in HDFC Life jumped to 25.67 per cent (10.52 per cent) while their holding in ICICI Prudential Life went up to 16.51 per cent (10.08 per cent) during this period.

Stake dilution by promoters in these companies over the last two years to meet the regulatory guidelines have also helped FPIs to lap up their stocks in these companies.

“SBI Life has seen amongst the highest increase in APE market share for private players from 9 per cent to 11 per cent over the last one year. New Business Premium market share for the company has also improved more than 100bps to 7.4 per cent,” said Siji Philip, Senior Research Analyst at Axis Securities.

He also added that while HDFC Life had a commendable improvement in APE market share over the last one year from 6 per cent to 8 per cent, ICICI Prudential’s market share was largely flattish at 5.9 per cent.

“Overall, the industry performance is expected to improve in FY22 driven by a revival in ULIPs, improvement in non-par pension, annuity products, and demand pick-up which generally happens post a pandemic, besides the benefit of the low-base effect,” Philip added.

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RBL Bank Q4 net profit down 34%

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Private sector lender RBL Bank reported a 34 per cent drop in its net profit to ₹75 crore for the quarter-ended March 31, 2021 led by a sharp rise in provisions and lower interest income. Its net profit stood at ₹114 crore in the fourth quarter of 2019-20.

The bank’s net profit for fiscal year 2020-21 increased marginally to ₹508 crore from ₹506 crore in 2019-20.

“Net profit at ₹508 crore for 2020-21, similar to 2019-20, is down quarter-on-quarter due to accelerated/additional prudential provisioning,” RBL Bank said.

For the fourth quarter, net interest income declined by 11 per cent to ₹906 crore as against ₹1,021 crore in the same period in FY20. Net interest margin also fell to 4.17 per cent in the fourth quarter last fiscal as against 4.93 per cent a year ago.

However, other income grew by a robust 38 per cent to ₹688 crore in the fourth quarter in 2020-21 versus ₹501 crore a year ago. Provisions surged by 25.6 per cent to ₹766 crore in the fourth quarter last fiscal as against ₹610 crore a year ago.

Provision coverage ratio was at 72 per cent in the fourth quarter as against 68.8 per cent in the third quarter and 64 per cent in the fourth quarter in 2019-20.

NPAs rise

Gross non performing assets stood at 4.34 per cent of gross advances as on March 31, 2021 as against 3.62 per cent as on March 31, 2020. Net NPAs stood at 2.12 per cent of net advances as on March 31, 2021 versus 2.05 per cent a year ago.

Vishwavir Ahuja, Managing Director and CEO, RBL Bank said “We have dealt with the impact of the Covid pandemic fairly satisfactorily in as much as we have taken several steps to strengthen the franchise, by building strong capital buffers, deepening and expanding the deposit base, granularising and improving the quality of the balance sheet, maintaining net NPAs at satisfactory levels, similar to last year, while maintaining overall profitability.”

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Interest on interest: IBA sends representation to Finmin

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The Indian Banks’ Association (IBA) has sent a representation to the Finance Ministry to enhance the scope of its previous ex-gratia scheme to cover the refund/adjust the ‘interest-on-interest’ charged to the borrowers during the Covid-19 related moratorium period — March 1, 2020 to August 31, 2020.

As per the Supreme Court’s judgment (in the matter of Small Scale Industrial Manufacturers Association vs Union of India & Others and other connected matters) on March 23, 2021, all borrowers (including those having loan exposure of above ₹2 crore) will be eligible for waiver of interest on interest in respect of the pandemic-related loan moratorium.

Banking sources said the payment of the interest-on-interest component by banks will set a precedent. So, IBA has suggested that they should be compensated by the government.

The government had picked up the tab towards waiver of interest on interest for loans up to ₹2 crore, irrespective of whether moratorium was availed or not, following the top court’s order in October 2020. This cost the exchequer about ₹6,500 crore.

Clamour for moratorium

“There is an additional load on banks due to the interest-on-interest provision. Now the issue is not about the amount but of setting a precedent, especially when we are in the midst of the second-wave of Covid-19 pandemic and there is once again the growing clamour for loan moratorium. We are still waiting for some more clarification; maybe we will get some reversal benefit on the interest-on-interest provision,” said a bank executive, who did not wish to be named.

While, the Centre had earlier picked up the tab for waiver of interest on interest on loans up to ₹2 crore, this time around, lenders have to bear the cost.

Most banks and NBFCs have already made provisions for the interest-on-interest payment in the fourth quarter of 2020-21 but are likely to implement it this quarter after the completion of the statutory audit.

Ex-gratia payment under the October 2020 Scheme covered borrowers (micro, small and medium enterprise, education, housing, consumer durables, credit card dues, automobile, personal loans to professionals and consumption loans) having sanctioned limits and outstanding amount of up to ₹2 crore (aggregate of all facilities with lending institutions) as on February 29, 2020.

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Ramya Muraledharan joins Brickwork Ratings

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Ramya A Muraledharan, has joined Brickwork Ratings (BWR) as Director, Ratings.

She will be overseeing the banking, NBFC and securitisation ratings portfolio at BWR.

Ramya has a rich experience of 13 years with leading private sector banks working in areas such as credit appraisal, credit policy and processes, relationship management, early warning systems, stress testing, etc. She has handled diverse sectors such as non-banking financial services (NBFCs), telecom, ports and airports.

Prior to this appointment, Ramya was overseeing the credit portfolio pertaining to NBFCs and microfinance institutions at HDFC Bank as a vice-president. She was also associated with Axis Bank for over 8 years.

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Pine Labs appoints Marc Mathenz as CFO, BFSI News, ET BFSI

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Pine Labs has appointed Marc Mathenz as the Chief Financial Officer.

Marc is known for scaling and growing international businesses with an entrepreneurial and transformation mindset. He’s known for expanding Fiserv and First Data businesses in the APAC region with strategic M&A, skillful integration. Marc was former MD & CEO of both Fiserv and First Data in APAC and was regional CFO at First Data earlier.

B Amrish Rau, CEO, Pine Labs said, “In this key phase of growth for Pine Labs, I am delighted to welcome Marc Mathenz as the next CFO. Marc takes over the reins from Sameer who has done a great job as CFO and now moves to a new role in Capital Markets for the organisation. Marc is a multidimensional leader with deep financial expertise and will help steer the Pine Labs battleship, which is poised for bigger and better milestones in its journey ahead.”

Rau said, “A great addition to our leadership team as we scale new frontiers in the times ahead. On a lighter note, I knew we had the right fit when Marc picked Moneyball as his favourite movie ever; a willingness to succeed against all odds, that’s a winner’s trait. I wish Marc the best.”

Marc Mathenz, CFO, Pine Labs, said, “I am very excited to be joining Pine Labs at this pivotal point in its journey. As the company sets out to become a merchant and consumer focused payments and fintech market leader across Asia Pacific, I hope that my experience in managing and scaling multi-country and multi-cultural businesses will help Pine Labs accelerate its already steep growth trajectory.”



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Get vaccinated, get a discount, offers Reliance General Insurance

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In a bid to encourage Covid-19 vaccination, Reliance General Insurance has announced that it would offer additional discount to customers who are either purchasing or renewing the Health Infinity cover.

“The company aims to provide additional ease to its customers who are in the process to either buy or renew their Health Infinity insurance policy with Reliance General Insurance, by offering an additional one-time 5 per cent discount to customers who have taken the Covid-19 vaccination,” the private sector insurer said in a statement on Tuesday.

Strong winds of change set to sweep health insurance sector

Eligible if first dose taken

The additional discount will be over and above the other discounts applicable at the time of buying the policy, it further said, adding that customers who have taken the first dose of the vaccine would also be eligible for the benefit.

Health insurance premium may not rise this year

“By the means of this incentive, we want to encourage individuals to prioritise their health at this critical hour and get themselves vaccinated at the earliest,” said Rakesh Jain, CEO, Reliance General Insurance.

While vaccination was available for all citizens above 45 years of age, from May 1, anyone above 18 years of age is eligible for vaccination.

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Uday Kotak wants RBI to expand balance-sheet as Covid intensifies, BFSI News, ET BFSI

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Veteran banker Uday Kotak has called on the RBI to expand its balance sheet to mitigate the economic impact of the Covid wave.

Such an expansion is a serious option when the country is trying to save lives and livelihoods, said Kotak, the promoter and chief executive officer of Kotak Mahindra Bank.

“We have come to a time when we will have to be much more open to expand the balance sheet of the central bank and I think the RBI has given the signal through the G-SAP programme,” Kotak said,

The RBI had already lent its balance sheet by announcing a buy-back programme for government securities, however, more could be done given the circumstances.

He also asked companies to bear the cost of not sending employees out and said that there was a need to plan for a third wave.

“In spite of all efforts, the overall numbers continue to rise. The healthcare system and medical personnel are stretched to the limit and exhausted. Measures to break the chain of transmission are of paramount importance to mitigate human tragedy and loss of lives, alongside augmenting health infrastructure and medical supplies”, said Kotak.

The GSAP programme

Along with the OMOs and direct intervention in the secondary market, the government has announced G-SAP, a definite calendar for open market purchases of bonds. Under G-SAP, the RBI has committed to Rs 1 lakh crore bond buys this quarter and said it will buy more.

The RBI programme is a variant of the Quantitative Easing (QE) policy followed by central banks in advanced economies to tide over the global financial crisis of 2008.

Under QE, central banks conduct large-scale purchases of assets, including treasury bills and private sector bonds, to directly influence rates and risk premiums on private debt.

However, the RBI is committing to buy only government securities.

G-SAP provides certainty to bond investors that the RBI will step in to buy bonds, infuse liquidity and bring down yields.

Galvanising India Inc

Uday Kotak called on the industry to take voluntary measures to break the chain of transmission of the virus.

Reiterating ‘safeguarding lives’ as the highest collective national priority amidst the second wave of Covid that is ravaging India, Kotak urged the industry “to curtail all non-essential economic activity requiring physical presence of employees at the workplace, for the next two week.”

The industry should review operations and minimise the use of in-person manpower, limiting it to only critical operations or activities required by law, Kotak said.



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Finance ministry advises PSU banks to hold promotions, transfers, BFSI News, ET BFSI

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The annual promotions and transfers at banks that kick off in April will have to wait.

Due to the Covid pandemic, the finance ministry has asked public sector banks (PSBs) to consider postponing the annual exercise of promoting and transferring their employees.

The Department of Financial Services (DFS) in an advisory has asked all public sector financial intermediaries to take cognisance of the prevailing Covid-19 pandemic situation and take appropriate steps to ensure that the promotion process factors in the constraints likely to be faced by their officers and staff.

Rising hospitalisations

It said the promotion process has coincided with a spike in Covid-19 cases across the country along with localised lockdowns and an increase in micro-containment zones. As there are cases of bank employees or their family members being hospitalised due to Covid-19, bank, insurance companies and financial institutions must take cognizance of the issue, it said.

Promotions and transfers take place in the summer months just before schools open for the new academic session.

The situation was similar last year too, and the staff transferred joined new positions only after the Covid situation eased. While banks have completed the promotion process, they have kept transfers on hold.

Unions want restrictions

With Cpvid cases surging across the country, bank unions have requested industry body IBA for restriction in services and reduction in public dealing time to around 3 hours per day till the situation improves to protect bank employees from the coronavirus infection.

The United Forum of Bank Unions (UFBU), an umbrella body of nine unions, in a representation to Indian Banks’ Association (IBA) said branches with continued footfalls and across-the-counter connect with customers are potential hubs of infections. ‘We are deeply distressed to constantly receive news about infections, hospitalizations and deaths of bank employees round the clock every day,’ it said.

In the light of the grim situation, this is an urgent appeal on behalf of the entire banking fraternity to take up the issue immediately, it said.

The unions have demanded the restriction of services only to basic, essential banking till improvement of the situation and realignment of banking hours to 3-4 hours a day.

Cluster banking

UFBU also made a case for the introduction of cluster or hub banking, identifying few branches of each bank in each locality so as to enable bank employees to work on rotation.

‘We are sure that the above measures will reduce the exposure faced by employees and break the chain of infections to a great extent.

‘We are continuously getting information from the grass-root level about the non-availability of beds/ infrastructure in hospital, dearth of life-saving drugs, oxygen which has triggered panic across the nation,’ it said.



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