Bajaj Finserv has reported a consolidated net profit of ₹979.06 crore for the quarter ended March 31, compared to ₹194.43 crore in the same period in 2019-20.
“As on March 31, 2021, BSE Sensex has rebounded by over 68 per cent from March 31, 2020 levels, resulting in higher than normal mark-to-market gain on investments of insurance subsidiaries during 2020-21. This has resulted in an increase in consolidated profit after tax of ₹892 crore for 2020-21 compared to decrease of ₹451 crore in the fourth quarter and 2019-20,” Bajaj Finserv said in a statement on Wednesday, noting that the consolidated profit figures for the current quarter and year ended may not be directly comparable with those of the corresponding previous periods.
Further, it also holds management overlay off ₹840 crore in provisions.
For 2020-21, Bajaj Finserv’s consolidated net profit soared 32.7 per cent to ₹4,470.46 crore, against ₹3,369.1 crore in 2019-20.
For the quarter ended March 31, 2021, its consolidated income rose 15.7 per cent to ₹15,387 crore from ₹13,294 crore a year ago.
In 2020-21, it made loan loss provisions including expected losses of ₹5,969 crore as compared to ₹3,929 crore, Bajaj Finserv said.
Its subsidiary, Bajaj Allianz General Insurance reported a 10.2 per cent decline in its net profit to ₹273 crore in the fourth quarter of 2020-21 from ₹304 crore a year ago.
In the case of Bajaj Allianz Life Insurance, shareholders’ profit after tax in the fourth quarter last fiscal rose to ₹234 crore from Rs 38 crore a year ago, largely due to higher capital gains.
A dividend of ₹3 per share of face value of ₹5 each on equity shares of the company has been recommended by the board of directors today for 2020-21.
Bajaj Finance Ltd today posted a 30.2% on-year rise in its net profit for Jan-Mar to Rs 1,161 crore as it inched closer to pre-pandemic levels.
New loans booked during Q4 FY21 fell to 54.7 lakh (5.47 million) as against 60.3 lakh (6.03 million) in the same quarter a year ago, which shows that the consumer lending business is yet to pick up full steam.
Net interest income during the quarter dipped 1 per cent to Rs 4,659 crore from Rs 4,684 crore in Q4 FY20, it said.
Total income fell by 5 per cent to Rs 6,855 crore from Rs 7,231 crore earlier.
“4QFY21 was a healthy quarter for Bajaj Finance. Disbursements have exceeded 90% of YoY levels across most segments. The initial asset quality performance of incremental disbursements is in line with or marginally better than pre-Covid levels. This bodes well for asset quality in the medium term. In the near term, we do not foresee any major asset quality disruption, unless the impact of the second wave is worse than expected,” Motilal Oswal Securities wrote in a note, while upgrading the stock to ‘Buy’. Assets under management
On a consolidated basis, the company’s assets under management as of March 31, 2021, increased by 4 per cent to Rs 1.52 lakh crore as against Rs 1.47 lakh crore. However, this growth came mainly due to a 19% jump in mortgages of subsidiary Bajaj Housing Finance.
However, the company said that despite the Covid disruptions, it would be able to grow back to pre-pandemic levels.
In the last 7–10 days, the company has continued to originate 50–55% of daily volumes in the B2B business, 80–85% in the B2C and SME businesses, and 40–50% in Mortgages. However, the company has said that barring a national lockdown, three-four large GDP-contributing states going into simultaneous lockdown for three-five weeks and another moratorium on loan repayment, it is confident of delivering its long-term guidance metrics in FY22.
Despite significant disruptions, Bajaj Finance remains open for business across geographies, in line with local administration advisories.
New loan originations, barring auto finance, are back at pre-Covid levels. The wallet loans business (paused) and retail EMI business have moderated and is doing 50K/month instead of a 150K/month run-rate. Non-performing assets
The gross and net non-performing assets (NPAs) stood at 1.79 per cent and 0.75 per cent respectively by end of March 2021, as against 1.61 per cent and 0.65 per cent earlier.
The company has a provisioning coverage ratio of 58 per cent on stage 3 assets (NPAs) and 181 basis points on stage 1 and 2 assets as of March 31, 2021.
“Loan losses and provisions for FY21 was Rs 5,969 crore as against Rs 3,929 crore in FY20. During the year, the company has done accelerated write-offs of Rs 3,500 crore of principal outstanding on account of Covid-19 related stress and advancement of its write off policy.
“The company holds a management overlay and macro provision of Rs 840 crore as of March 31, 2021,” it added.
Bajaj Finance said its board of directors has recommended a dividend of Rs 10 per equity share for FY21.
We will also have more opportunities to lend at a lower rate in terms of government-sponsored schemes and availability of refinance.
Shivalik Small Finance Bank (SFB), the first lender to transition to the model from a cooperative bank, expects to grow its business book by about 49% over the next 12 months to Rs 3,050 crore, MD & CEO Suveer Kumar Gupta told Shritama Bose. The bank’s collections have so far been unaffected by the Covid surge, but it will watch how things evolve from here, he added.Edited excerpts:
As you make the transition from an urban cooperative bank to an SFB, what are your immediate priorities?
We have already begun operations as an SFB. Our immediate priorities relate to certain aspects of banking that are different for a cooperative bank and a commercial bank, foremost among them being compliances. Our first priority is to stabilise them. As far as the customer-facing aspects are concerned, there’s not much of a change from how we delivered services as a cooperative bank. We have ensured that all our operations are handled seamlessly and the customer does not face any issues because of this transition. The second focus is on the digital side. We are a very digitally focused bank and we plan to acquire digital-only customers. This is especially for millennials and young people who are more comfortable doing things digitally. We are also developing tech, which will help us deliver services to the underbanked, especially in rural areas. We are coming up with an app designed with the rural masses in mind, which will be in Hindi. Physically, we would like to expand in areas where our presence is already high — in the states of Uttar Pradesh, Uttarakhand, Madhya Pradesh, Rajasthan, Haryana, Punjab and Himachal Pradesh. We would also like to expand pan-India digitally by means of video KYC.
Will you be adding more products to your platform?
As of now, we offer a complete bouquet of retail banking products, both on the deposit side as well as the lending side. Our products are specially suited to our target customer base, which is the MSME (micro, small and medium enterprises) sector — small businesses and industries as well as local kirana shops. Becoming an SFB opens up more areas of banking to us. On the deposits side, we would be coming up with tax-saver FDs (fixed deposits) for senior citizens, and specialised deposits for millennials and women. We would be soliciting government and institutional business for deposits. On the lending side, apart from offering all our loan products digitally, we would expand on the agri side and do lending against e-warehouse receipts and also finance allied activities, such as dairy farming. As a commercial bank, we can also make use of refinance schemes. Our microfinance book is now at 10%, which we would like to grow to 15-20%. We’d also like to offer loans against FDs and insurance policies, both of which can be done digitally. We already have a few fintech partnerships for loan sourcing and we will be looking for more of those as well as work with business correspondents.
What is your cost of funds right now and how do you expect it to change?
At the moment our cost of funds is between 6 and 6.5% and we expect it to fall as more CASA (current account savings account) becomes available to the bank in terms of government and institutional deposits. We will also have more opportunities to lend at a lower rate in terms of government-sponsored schemes and availability of refinance.
What kind of growth in loans do you expect over a one-year period?
We are currently at a business book size of about Rs 2,050 crore and we are targeting to grow it to Rs 6,000 crore in the next four years. In the next one year, the book will grow by Rs 1,000 crore. We are planning to add 40 additional customer touch points, which will include branches, ATMs and business correspondents.
Given the current Covid surge, how much of a problem are you facing in terms of repayments?
Last year, we had offered the moratorium to all our customers. Our approach was to engage with customers and help ensure good credit behaviour. Where required, we also offered top-up loans to help them tide through temporary difficulties. By the time it got lifted, 80% of our customers had started to repay. By March, our collections were almost back to pre-Covid levels. But the second wave has hit us in April and it’s a little early now to say how things will turn out. At the moment our collection rates are fine, but it’s hard to say where things will go from here.
It’s not just Kotak Mahindra Bank that has to do succession planning after the RBI capped the tenure of private bank CEOs at 15 years.
DCB Bank, RBL Bank and Federal Bank will have to look for new CEOs after the term of current ones ends in the next three years.
DCB Bank CEO Murali Natrajan has completed 12 years in the job and got a year’s extension this month.
Federal Bank CEO Shyam Srinivasan will complete 11 years in September when his second consecutive one-year extension ends.
RBL’s Vishwavir Ahuja also completes 11 years in June and is awaiting the RBI nod for another three-year term after the bank’s board approved such a proposal in January. Federal Bank and RBL boards have sought three-year terms for their CEOs. It remains to be seen whether the RBI will give this extension, which is within the 15-year limit. Why the move?
The regulator’s directions on limiting CEO tenures come after the publication last summer of a discussion paper that had sought a review of the governance framework at commercial banks. A bank CEO who is also a promoter or major shareholder cannot hold these posts for more than 12 years, the revised RBI rules said.
Experts say governance lapses at Yes Bank also prompted the move by the central bank.
The new norms do not apply to bank CEOs whose tenures have already been approved by RBI.
“Banks with MDs & CEOs or whole-time directors (WTD) who have already completed 12 or 15 years as MD & CEO or WTD, on the date these instructions come into effect, shall be allowed to complete their current term as already approved by the Reserve Bank.”The banking regulator said
The impact
Bankers said the central bank’s move could hurt stability at small and medium private sector banks that require strong leadership and an understanding of the business to stand out in a competitive lending business. In a related move, the RBI has directed that half the directors in banks be independent ones. It has also put an annual Rs 20-lakh ceiling on fees to be paid to independent directors. It also said that independent directors have to chair bank boards.
The Reserve Bank of India has flagged risks of excessive reliance on banks by the ARC industry.
An RBI paper, published in the central bank’s monthly bulletin for April, said banks supply non performing assets (NPAs) to the ARCs, hold shareholding in these entities and also lend to them, which makes it necessary to monitor if there is a “circuitous movement of funds between banks and these institutions (ARCs)”.
“Considering that banks are not just the major shareholders of and lenders to ARCs but also sellers of NPAs to ARCs, it may be necessary to monitor if there is a circuitous movement of funds between banks and these institutions. A movement of this kind can have implications for the genuine sale of NPAs and the overall growth of the ARC industry,” the article titled ‘ARCs in India: A Study of their Business Operations and Role in NPA Resolution’ said. ARC versus IBC
It advocated for a strong a strong asset reconstruction sector, which complements the Insolvency & Bankruptcy Code mechanism, to better deal with non-performing assets and ensure higher recovery and resolution. Asset reconstruction companies recovered 29.7% of dues in 2019-20, while for IBC, this number was much higher at 45.5%, it said. Highlighting that there has been a declining trend in recovery over the years, the article said that even post IBC, their recovery amounts to 25-35% of dues, and they also account for 30% of total amount recovered through all channels.
Bad bank
The RBI article sees a greater role for asset reconstruction companies, including the bad bank announced in the budget.
“Going forward, the introduction of a new asset reconstruction company for addressing the NPAs of public sector banks may also shape the operations of the existing ARCs,” the RBI paper said. It added that there is a definite scope for the entry of a “well-capitalised and well-designed entity” in the Indian ARC industry and such a body will strengthen the asset resolution mechanism further.
It cited global experiences to lay down the necessary features of the new ARC announced by the government.
The paper advocated that the new ARC or the bad bank should have a narrow mandate such as resolving NPAs with clearly defined goals, a sunset clause defining their lifespan, supportive legal infrastructure involving bankruptcy and private property laws, backing of a strong political will to recognise problem loans, and a commercial focus including in governance, transparency, and disclosure requirements. Capital constraints
The paper highlights the capital constraints of the ARC indsutry saying it has had an impact on the ability of their to ensure resolution and recovery. In terms of capital base of the industry, 62% was held by the top three asset recast companies and 67% for top five, which the authors argue shows how the business remains highly concentrated. As per the article, of the total assets under management, about 62% and 76% were held by the top three and top five asset reconstruction companies in March 2020, respectively.
Security receipts
About 42 per cent of the outstanding SRs (security receipts) as on March 2020 were more than five years of age and would have to be redeemed over the next four years to avoid write-offs,” the paper said, pointing out at the difficulties being faced by the current set of ARCs in resolving the stress.
While resolving a case, ARCs pay a minor portion in cash to the selling bank while the rest is SRs to be paid over a time.
Security receipts are issued as an instrument to enable offloading of stressed assets, and to encourage recovery and resolution of dues.
It said due to capital constraints, there was a high dependence on bank funding for such asset reconstruction companies, with banks selling bad loans continuing to hold security receipts, despite regulatory disincentives. In March 2020, just two asset reconstruction companies held about 62% of the total security receipts issued. The paper said that banks holding such a large volume of security receipts limits secondary trading and effectively market-based price discovery.
Mumbai, Apr 27 () The RBI has imposed a penalty of Rs 40 lakh on Himachal Pradesh State Cooperative Bank, Shimla, for non-compliance with certain regulatory directions issued by NABARD. The penalty has been imposed for non-compliance with regulatory directions issued by NABARD contained in ‘Review of Frauds – Guidelines on Monitoring and Reporting System’, the Reserve Bank of India said on Tuesday.
Giving details, it said the statutory inspection of the bank conducted by the National Bank for Agriculture and Rural Development (NABARD) with reference to the bank’s financial position as on March 31, 2019 and the Inspection Report (IR) pertaining thereto, and examination of all related correspondence regarding reporting of frauds, revealed, inter alia, non-compliance of the directions.
A notice was issued to the Himachal Pradesh State Co-operative Bank. After considering the bank’s reply to the notice and oral submissions made in the personal hearing, the RBI said it came to the conclusion that the charge was substantiated and warranted imposition of monetary penalty.
The RBI, however, added penalty has been imposed on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers. NKD MR MR
“While the existing allocation for other sectors may continue at their prescribed limits, the additional Rs. 25,000 crore may be made available exclusively to medium and small NBFCs, through SIDBI for period of three years,” FIDC said.
As the impact of the latest wave of Covid infections starts to play out, non-banking financial companies (NBFCs) have asked the central bank to allow a fresh round of loan restructuring for businesses and consumers undergoing stress. In a letter to the Reserve Bank of India (RBI), industry association Finance Industry Development Council (FIDC) has also sought liquidity support for on-lending to small businesses.
“It is feared that this second wave of Covid will peak sometimes in May and then possibly start climbing down in June. It will not be long before the NBFC industry starts reeling under pressure of increased NPAs (non-performing assets) and at the same time, handling demand of moratorium and/or restructuring from its existing and deserving customers,” FIDC said in its representation. It explained that a large number of borrowers in the NBFC segment are truck or taxi owners/drivers, machine operators, marginal farmers, small shopkeepers, stockists, local contractors and workshop owners. These categories of professionals are being hit by localised and state-wide lockdowns mandated in parts of the country, FIDC said.
The industry has requested that borrower accounts be allowed to undergo restructuring without any downgrade in asset classification, irrespective of whether they had been restructured on any earlier occasion as long as they were standard accounts as on March 31, 2021. It also suggested that the RBI could look to prescribe broad parameters for credit assessment of such accounts on the lines of recommendations made by the KV Kamath committee. This would help standardise the approach followed by lenders. They have also sought a standstill on asset classification of restructured accounts in Q1FY22.
The other requests are to ask banks and financial institutions to allow a one-time restructuring of loans given by them to NBFCs with a total asset size of under Rs 500 crore, and to increase the overall support outlay to all India financial institutions (AIFIs) to at least Rs 75,000 crore from Rs 50,000 crore. “While the existing allocation for other sectors may continue at their prescribed limits, the additional Rs. 25,000 crore may be made available exclusively to medium and small NBFCs, through SIDBI for period of three years,” FIDC said.
Lockdowns and other restrictions on mobility have already begun to hurt NBFCs’ collections. The microfinance sector’s collection efficiency has stalled at 90-94% in the past few months compared with the pre-pandemic level of 98-99%, Crisil Ratings said in a report earlier this month. Lenders are also likely to turn cautious again as during the first wave, particularly in the personal loan and business loan segments, analysts said. “As far as the SME business is concerned, it remains lackluster as lenders are shying away from new customers, while existing customers have already been extended the ECLGS (emergency credit line guarantee scheme) benefit, leaving no further scope to lend to existing customers,” Emkay Global Financial Services said in a recent report.
This is despite the bank making additional provision aggregating Rs8.0bn on accounting change in provisioning rates on loans to commercial banking segment.
Private lender Axis Bank on Tuesday reported a net profit of Rs 2,677 crore for the March quarter compared to a loss of Rs 1,388 crore in Q4FY20. The lender was back in the black thanks to an 11% year-on-year (y-o-y) growth in its net interest income (NII) to Rs 7,555 crore.
The lender’s operating profit increased 17% y-o-y and 13% quarter-on-quarter (q-o-q) to Rs 6,865 crore. The bottom-line also got a support from reduced provisioning by the lender. Provisions declined 57% y-o-y and 28% q-o-q to Rs 3,295 crore. However, the bank holds provisions of Rs 5,012 crore as on March 31, 2021 against the potential impact of Covid-19.
Amitabh Chaudhry, MD and CEO of the bank, said, “There will be economic impact of the second wave of Covid-19 but we are hopeful that it will be short-lived. We have transformed ourselves in line with the evolving business scenario to become more agile, more relevant and totally dedicated to the needs of millions of customers,” he added.
The net interest margins (NIM) of the lender declined 3 basis point (bps) sequentially to 3.56%, but showed a growth of 1 bps on a y-o-y basis. The asset quality of the lender improved during the March quarter. Gross non-performing assets (NPAs) ratio of the lender declined 85 bps to 3.7% from 4.55% in the December 2020 quarter. Similarly, the net NPAs ratio declined 14 bps to 1.19% from 0.74% in the December quarter. “Gross slippages during the quarter were Rs 5,285 crore, compared to Rs 7,993 crore during Q3FY21 and Rs 3,920 crore in Q4FY20,” Chaudhry said. “Recoveries and upgrades from NPAs during the quarter remained at Rs 3,462 crore, while write-offs were Rs 5,553 crore,” he added.
The provisioning coverage ratio (PCR) improved to 72% in the fourth quarter, compared to 69% in the same quarter last year. “On an aggregated basis, our provision coverage ratio stands at 120% gross NPAs,” the bank said.
Credit costs for the lender more than halved at 1.21% during the March quarter from 2.77% during Q4FY20.
The fee income during the March quarter stood at Rs 3,376 crore, up 15% y-o-y and 16% q-o-q. Retail fees grew 16% y-o-y and 17% q-o-q and constituted 64% of the bank’s total fee income. The trading profits and miscellaneous income for the quarter stood at Rs 789 crore and Rs 503 crore respectively. Overall, non-interest income for Q4FY21 grew 17% y-o-y to Rs 4,668 crore.
Advances grew 9% y-o-y and 7% q-o-q to Rs 6.23 lakh crore. Retail disbursements for the quarter were at new all-time highs as per lender. Disbursements in the consumer segment were up 45% y-o-y and 44% q-o-q. Similarly, rural disbursements grew 47% on a y-o-y as well as sequential basis.
The total deposits grew by 10% y-o-y to Rs 7.07 lakh crore. On a quarterly average basis (QAB) , savings account deposits grew 17% y-o-y and 6% q-o-q. Retail savings deposits grew 20% y-o-y, current account deposits grew 18% y-o-y and 10% sequentially.
The capital adequacy ratio (CAR) including profit for FY21 stood at 19.12% with CET 1 ratio of 15.4% at the end of March, 2021.
The board has authorised the bank to raise funds up to Rs 35,000 crore. The funds can be raised in Indian or foreign currency by issue of debt instruments including but not limited to long-term bonds, non-convertible debentures, perpetual debt instruments, additional tier 1 (AT 1) bonds, infrastructure bonds and tier II capital bonds.
Tamilnad Mercantile Bank (TMB) has reported an impressive performance on many parameters in FY21 that include strong growth in net profit, good asset quality and higher business.
The Tuticorin-based bank’s net profit grew 48 per cent at ₹603 crore in 2020-21 as compared to ₹408 crore in 2019-20.
“While higher net interest income and other income, and lower provisions are major factors for profit growth, this performance is truly on account of the efforts of branches. Our strength lies in relationship banking and today if at all we are cut above the rest, it is because of field level staff and their connect with the customers,” said KV Rama Moorthy, Managing Director & CEO, TMB told Businessline.
Operating profit
The operating profit of the company grew 21 per cent at ₹1,202 crore in FY21 when compared with ₹995 crore in previous fiscal, on the back of 17 per cent growth in net interest income that stood at ₹1,538 crore as against ₹1,320 crore. The interest expenditure decreased to ₹2,072 crore from ₹2,147 crore.
TMB had a gross NPA of ₹1,085 crore as of March 31, 2021, up from ₹1,021 crore a year ago. Its gross NPA as a percentage of total advances reduced to 3.44 per cent in FY21 from 3.62 per cent in FY20. Net NPA was marginally up to 1.98 per cent from 1.80 per cent. NPA and restructured advances of the bank is only 3.93 per cent.
The bank has made additional Standard Asset Provision of ₹50 crore for the pandemic. Total advances grew 12 per cent to ₹31,541 crore from ₹28,236 crore. Total deposits stood at ₹40,970 crore from ₹36,825 crore. The company achieved its total business target of ₹72,500 crore at ₹72,511 crore, up 11 per cent from ₹65,061 crore in FY20.
Credit to MSME sector grew 18 per cent to ₹12,036 crore (₹10,170 crore in FY20).
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