Category: Banking & Finance

Will try to keep soft interest rate regime as long as possible: SBI chief

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State Bank of India will try to keep the interest rates benign as long as possible with a view to supporting the economic growth, its chairman Dinesh Kumar Khara has said.

On the impact of the second wave of Covid-19 on non-performing assets of the bank, the SBI chief said that as the lockdown was not pan-India, one will have to wait and watch to assess its impact on the banking sector.

Impact of local restrictions

Observing that multiple variables including inflation have a bearing on the interest rates, he said, “our effort is to support the growth initiatives. To really ensure that happens, we will try to keep the soft interest rate regime for as long as possible.” In an interview to PTI, Khara said it is too early to give any colour to likely scenario of NPAs because of local restrictions.

Also read: SBI’s Business Activity Index dips to a new low

The impact of lockdown differ from State to State as it is not uniform, he said, adding, “so, probably we can wait and watch for some more time before making any comment on impact on economy and NPA situation.” Speaking about various initiatives of the country’s largest lender, Khara said, SBI has decided to set up makeshift hospitals with ICU facilities for Covid-19 patients in some of the worst affected States.

Fighting the pandemic

The bank has already earmarked ₹30 crore and is engaging with non-governmental organisations (NGOs) and hospital management for setting up medical facilities on an emergency basis for the treatment of Covid-19 patients.

He said the bank intends to put in place 1,000 beds with 50 ICU facilities in the States that are the worst affected.

SBI is also collaborating with hospitals and NGOs to provide oxygen concentrators for patients.

“We have put in place an action plan. We have earmarked ₹70 crore-plus out of which we are giving ₹21 crore to 17 circles for Covid-19 related initiatives,” he said.

For the safety of employees and their families, he said, the bank has tied up with hospitals across the country to facilitate treatment of those who have fallen sick on a priority basis.

Also read: Banks roll out special schemes to protect, treat employees amidst Covid surge

About 70,000 employees out of 2.5 lakh strong staff strength have already got vaccinated. The bank has decided to bear the cost of vaccination for its employees and their dependent family members.

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Government names T Rabi Sankar as Deputy Governor of RBI, BFSI News, ET BFSI

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North Block appointed T Rabi Sankar, executive director of the Reserve Bank of India as the fourth deputy governor of the central bank, said a government source with knowledge of the matter.

“The Appointments Committee of the Cabinet has approved the appointment of Shri T. Rabi Sankar, Executive Director, Reserve Bank of India to the post of Deputy Governor, Reserve Bank of India for a period of three years from the date of joining the post or until further orders, whichever is earlier,” the government said in an internal circular.

Sankar will succeed incumbent BP Kanungo, who retired last month after completing one year extension period. Rabi Sankar’s portfolio includes fintech, information technology, payments system and risk monitoring at the RBI. He had joined the central bank as a research officer way back in September 1990, show a LinkedIn profile.

Sankar has a Master’s degree in Science and Statistics from Banaras Hindu University. He earned his diploma in Development Planning from the Institute of Economic Growth. The other three deputy governors are Mahesh Kumar Jain, Michael Patra and Rajeshwar Rao. Last year Sankar also became the Chairman of Indian Financial Technology & Allied Services (IFTAS), a wholly-owned subsidiary of RBI.

More than a decade ago, Sanker had worked with the International Monetary Fund (IMF) on bond market development for the government and central bank of Bangladesh. He was also associated with the Bank of International Settlement on capital market activities.



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T Rabi Sankar appointed RBI Deputy Governor

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The Appointments Committee of the Cabinet has approved the appointment of T Rabi Sankar, Executive Director, RBI, as Deputy Governor of Reserve Bank of India (RBI) for a period of three years.

He succeeds B P Kanungo, who retired on April 2.

A monetary policy for the pandemic times

Currently, Rabi Sankar is in charge of Fintech, department of IT, RTI, risk monitoring, department of payment and settlement systems. The RBI has in all four Deputy Governors.

The other three serving Deputy Governors are Mahesh Kumar Jain, Michael Patra and M Rajeshwar Rao.

Expect RBI to go in for policy normalisation in second half of FY’22: UBS Securities

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Reflecting the wide spread of Covid, insurers report a surge in claims from rural regions, too

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Health insurers are reporting a flood of Covid-related claims from across the country, including rural regions, reflecting the spread of the pandemic.

Rapid rise

Till last month, Covid claims had been mainly from urban areas of Delhi, Maharashtra, Uttar Pradhesh, Chhattisgarh, and Bihar as also some from Tamil Nadu and Karnataka.

“However, we now see a surge in claims from rural areas, too, in line with the rapid surge of the Covid-19 pandemic across regions,” Sanjay Datta, Chief-Underwriting, Claims and Reinsurance, ICICI Lombard GIC, told BusinessLine.

Health insurers have been seeing a jump in the cashless treatment claims relating to Covid-19 cases, Datta said. The government and the Insurance Regulatory and Development Authority of India recently told all hospitals not to deny cashless treatment for those eligible under their insurance plan. “Going by the current trend of rising cases, we need to wait and see how the claims scenario will be during this fiscal,” Datta said.

“We have paid Covid-19 claims to 14,500 customers. In 2020, it was around 10,000 in eight months, whereas in 2021, we have witnessed 4,500 claims in just three months,” said Bhabatosh Mishra, Director Underwriting, Products and Claims, Max Bupa.

The average claim size is at about ₹1.4 lakh but there are instances of claims going as high as ₹30 lakh depending on the insurance policy. The industry estimates the total Covid-19 claims payout from the start of the pandemic at ₹15,000 crore.

Demand for cover up

The demand for health insurance, in general, and Covid-cover, in particular, has been going up again. “The second wave of Covid is spreading at a faster rate, which has led to a significant increase in the demand for health insurance policies,” said the top executive of a private health insurer.

According to Datta, many of those who had taken Covid-specific standard cover under ‘Corona Kavach’ have been renewing it, even as fresh demand from new customers is emerging. The Insurance Regulatory and Development Authority of India recently extended the deadline for sale/renewal of standard Covid-specific policies by six more months in view of the resurgence of the pandemic.

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BBB recommends Harsha Bangari for MD post at Exim Bank

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The Banks Board Bureau (BBB) has recommended Harsha Bangari to the position of Managing Director in Export-Import Bank of India. Currently, Bangari is Deputy Managing Director (DMD) in Exim Bank.

The Board also recommended the name of Samuel Joseph Jebaraj, DMD, IDBI Bank, as the candidate on the Reserve List for the vacancy of MD in Exim Bank.

The Government had appointed the incumbent MD David Rasquinha for five years on July 20, 2014.

Bangari joined Exim Bank in 1995. Before her elevation as DMD, she was the Chief General Manager and Chief Financial Officer of Exim Bank.

Samuel Joseph’s was appointed as DMD of IDBI Bank for three years with effect from September 19, 2019. Prior to joining IDBI Bank, he was Chief General Manager with Exim Bank.

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Yes Bank turns focus to lending after winning back depositors

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Yes Bank Ltd., the target of India’s biggest financial bailout, will focus on boosting lending to businesses this year after winning back depositors, Chief Executive Officer Prashant Kumar said.

Regaining depositors and raising capital were the first order of business for Kumar, who took over the reins of Yes Bank in March 2020 after regulators seized the lender to prevent its imminent collapse. A year later, its deposits have grown nearly 55% as opposed to losing 40% of the total before the bailout.

“We have achieved our target for derisking our corporate book,” Kumar said in an interview to Bloomberg News on Saturday. “Getting back on the front-foot of lending and accelerating our bad loan recoveries will be the key focus areas this year.”

Yes had shrunk its exposure to businesses to de-risk its balance sheet after a history of lending to weak companies under former co-founder and ousted CEO Rana Kapoor. Piling bad loans, poor capital ratios and flight of depositors led to the bank’s downfall, leading to its seizure and transfer of control to a group of lenders led by State Bank of India.

The bank will aim to grow its corporate loan book by 10% now, Kumar said, versus a 11.7% contraction last financial year. The focus will also be on expanding the less-risky retail and small businesses lending by 20%, he said.

Virus Impact

Kumar is confident of recovering at least ₹5,000 crore of soured debt in the current financial year even as activity curbs to stem a second coronavirus wave in India adds to the economy’s pain and threatens to push up banks’ bad loans going ahead.

“Last year, it was a complete lockdown,” Kumar said. “Economic activity is much better now. Also, this time we have vaccinations. We are quite optimistic.”

 

The bank incurred a loss of ₹3,790 crore ($512 million) in the quarter ended March as it stepped up bad loan buffers. Its gross bad loan ratio was 15.4% as of end of March, an improvement from 20% level in the three months prior.

Kumar has reasons to believe the worst is over and says the bank will not need to significantly step up its provisions that have acted as a big drag on its profitability so far. Yes Bank expects less than ₹5,000 of slippages with most of it likely from its ₹13,700 crore of stressed book, he said.

The lender has approval to raise up to ₹10,000 of capital, but it might not need to do so this year unless there is a massive lending opportunity. It had raised $2 billion last July.

“Life is always full of challenges and especially if you are running a bank which was almost about to collapse just a year back,” Kumar said. “This journey will definitely be challenging.”

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Digital payments see muted growth in April

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The growth of digital transactions eased in April at a time of localised lockdowns in several states amidst surging Covid-19 cases. The volume and value of transactions however, remained higher than that in February.

According to data released by the National Payments Corporation of India on Saturday, transactions on the Unified Payments Interface (UPI) in April scaled down from the ₹5 lakh crore peak it had touched in March.

As many as 264 crore transactions worth ₹4.93 lakh crore were processed on UPI in April 2021 versus 273 crore payments amounting to ₹5.04 lakh crore in March this year.

Similarly, the Immediate Payment Service (IMPS) processed 32.29 crore transactions worth ₹2.99 lakh crore in April. In contrast, there were 36.31 crore transactions of ₹3.27 lakh crore on the IMPS platform in March.

The transaction value on Bharat BillPay increased in April even though the volume fell marginally compared to March. It processed 3.51 crore transactions worth ₹5,201.92 crore in April as against 3.52 crore payments amounting to ₹5,195.76 crore in March.

Transactions through NETC FASTags saw a sharp decline in last month indicating lower movement of people and goods on highways. It processed 16.43 crore transactions worth ₹2,776.9 crore in April. In March, it had processed 19.32 crore transactions amounting to ₹3,086.32 crore.

Even the Aadhaar enabled Payment System registered muted transactions in April. It processed 7.42 crore transactions valued at ₹22,139.05 crore last month as against 7.78 crore payments worth ₹22,697.82 crore in March.

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SBI cuts minimum interest rate on home loans up to ₹30 lakh to 6.70 per cent

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State Bank of India (SBI) has cut the minimum interest rate at which its home loans up to ₹30 lakh will start from 6.95 per cent to 6.70 per cent.

The new interest rate is effective from May 1, 2021.

The home loan rate cut comes exactly a month after the bank hiked the minimum interest rate on home loans by 25 basis points (bps) from 6.70 per cent to 6.95 per cent.

For home loans above ₹30 lakh and up to ₹75 lakh, the interest rate will start at 6.95 per cent. For big-ticket home loans above ₹75 lakh, the interest rate will be 7.05 per cent, India’s largest bank said in a statement.

SBI said women borrowers will get a special concession of 5 basis points (bps). Further, a 5 bps concession is being offered as a digital incentive to customers applying for home loans via YONO digital banking platform. One basis point is equal to one-hundredth of a percentage point.

CS Setty, MD (Retail & Digital Banking) said, “The affordability for the consumer increases immensely with the present home loan interest rate offerings, which reduce the EMI (equated monthly installment) amounts substantially. I am sure these measures will give a fillip to the real estate industry too.”

SBI had hiked the minimum interest rate on home loans by 25 basis points (bps) from 6.70 per cent to 6.95 per cent with effect from April 1, 2021.

After SBI upped the minimum interest rate at which it will offer home loans last month, Kotak Mahindra Bank, in a statement issued on April 12, 2021, said it will continue its special interest rate on home loans of 6.65 per cent per annum.

“In the interest of consumers and on the back of strong demand trends, Kotak continues to offer possibly the lowest home loan interest rate in the market,” it said the statement, adding that the rate is applicable across all loan amounts.

“Both fresh home loan applicants and balance transfer cases are eligible for interest rates beginning at 6.65 per cent per annum. Interest rates are linked to borrowers’ credit score and the Loan to Value ratio,” Kotak Mahindra Bank further said.

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Banks provide for ‘interest on interest’ in Q4 after no signal from govt, BFSI News, ET BFSI

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After waiting for the government to burden the compound interest on loan waivers, top banks have provided for payment in the fourth-quarter results.

HDFC Bank has provided Rs 500 crore for interest on interest while ICICI Bank said it has kept Rs 175 crore aside for it, according to the Q4 results announced by these banks. Axis Bank has provided Rs 160 crore while Mahindra Finance has made a provision of Rs 32 crore.

Interest on interest waiver

Waiving compound interest on loans above Rs 2 crore could cost nearly Rs 4,000 crore to public sector banks, Rs 2,500 crore to private banks and another Rs 1,000 crore to non-bank lenders.

While ICICI Securities had put the total compound interest burden on loans above Rs 2 crore at Rs 11,700 crore, other analysts have put it between Rs 7,000 crore and Rs 10,000 crore. As per rating firm ICRA, compound interest for six months of moratorium across all lenders is estimated at Rs 13,500-14,000 crore.

The Indian Bank Association has recently finalised a methodology for the calculation of the interest on interest component.

Under the norms, borrower accounts which were standard as on February 29, 2020, including SMA­0, SMA­1 and SMA­2 will be eligible for the refund. All loans, working capital, trade products, outstanding during the moratorium period shall be considered for the compound interest waiver.

The government stand

The government has already reimbursed banks for forgoing compound interest, or interest on interest, on loans up to Rs 2 crore outstanding during March-August last year, when borrowers had the option to seek a moratorium on repayments.

Lenders have been charging compound interest on larger amounts, but the Supreme Court order means they must now refund it to borrowers. Banks were hoping that the government will take on the burden by enhancing the scope of the ex-gratia scheme to cover the additional refund after the apex court order.

The Supreme Court order

The Supreme Court in its order last month had directed the government and the RBI to waive penal interest charges on all loans, while rejecting the demand of borrowers to extend the repayment moratorium beyond August 31 and for a complete interest waiver. The loan moratorium scheme was aimed at giving temporary relief to borrowers.

In November last, the government decided to waive interest-on-interest for borrowers below loan exposure of Rs 2 crore. It paid nearly Rs 6,000 crore to lenders to compensate them for the income loss.



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HDFC Bank rejigs management for next growth phase, BFSI News, ET BFSI

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HDFC Bank has unveiled organizational changes under its Project Future – Ready to power its next phase of growth.

The bank has reorganized itself into three key pillars – Business Verticals, Delivery Channels and Technology/Digital to build its execution muscle. The business vertical and delivery channels will enable it to capitalise on the opportunities across different segments.

The bank will double down its efforts in business verticals like Corporate banking, retail banking, private banking, government and institutional banking, retail assets and payments.

It is increasing its focus on Commercial Banking (MSME vertical), the backbone of Indian economy enabling the bank to bring its product and digital might to the entire Commercial Banking (MSME community) in a much more holistic and focused manner across Bharat & India.

The strategy is split into four broad delivery channels: Branch, Tele-services, sales channels with business verticals and digital marketing. All the businesses and delivery channels will be backed by Technology & Digital as the core backbone. The outlined its Technology transformation agenda and it will synergise and integrate its technology / Digital functions and invest aggressively to both Run and Build the Bank.

Sashi Jagdishan, MD, HDFC Bank said, “We are creating engines of growth with top tier talent backed by technology and digital transformation to capitalise on opportunities that will accrue in the coming time. They are in our mind Future – Ready teams. I am sure this structure will create the necessary strategic and execution agility that we need to serve our customers across India & Bharat, Retail, Commercial (MSME) and Corporate segments.”

Kaizad Bharucha, Executive Director, will continue to drive the Wholesale Bank including Corporate Banking Group, Capital and Commodities Markets group and Financial Institutions.

Rahul Shyam Shukla, Group Head, will now be responsible to drive the Commercial Banking (MSME) and rural vertical, a big future growth engine for both India and the Bank.

Smita Bhagat, Group Head – Government and Institutional Business (GIB) and Start-ups will continue to drive the Govt / Institutional Banking. She will also drive the expansion of our rural presence leveraging our partnership with CSC and also the start-up sector.

Arvind Kapil, Group Head – Retail Assets and SLI, will continue to drive the Retail Assets Portfolio. The growth potential, we believe, is immense in retail assets in the context of credit under penetration in the country.

Rakesh Singh, Group Head – Investment Banking and Private Banking will also be responsible for Marketing, Retail Liability Products and Managed Programmes.

Ravi Santhanam, CMO, will now be also responsible for driving Digital Marketing as a stand-alone delivery channel. He will also be additionally responsible for the Retail Liability Products and Managed Programmes.

Sampath Kumar, Group Head – NRI will now be in charge of all tele-service relationships, including VRM delivery channel of the Bank. The mandate is to combine the power of human touch and digital to deliver a differentiated customer experience.

Arvind Vohra, Group Head – Retail Branch Banking, Retail Trade & Forex will continue to drive the efforts to expand the Bank’s reach across India through branch banking.

Parag Rao, Group Head – Payments Business, will now drive the technology transformation and digital agenda. He will continue to be responsible for the Payments vertical. Mr Ramesh Lakshminarayanan, Chief Information Officer and Mr Anjani Rathor, Chief Digital Officer will report to Parag.

Ashish Parthasarathy- Group Head, Treasury and GIB would also provide the leadership for the tele-service / sales / relationship channel.

Bhavesh Zaveri, Group Head – Operations, will continue to handle the entire operations of the Bank. He will also be additionally responsible for the entire ATM channel operations across the country.

The bank said the role of credit, risk, control and enabling functions continue to be critical as it scales up further in size and reach to realise its vision of Project Future Ready.



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