Category: Banking & Finance

The Centre is considering United India Insurance as one of the state-run insurers for privatisation. The other public sector insurers, which could be taken up for privatisation include National Insurance or Oriental Insurance, according to sources close to the development.

“United India Insurance is one of the top choices for privatisation. Discussions are on, with the other options being National Insurance or Oriental Insurance,” said a person familiar with the development.

However, any move towards privatisation and divestment of public sector insurers is likely only in the second half of the fiscal, the person added, noting that the process will take some time, including legislative amendments.

Finance Minister Nirmala Sitharaman had, in the Union Budget 2021-22, announced that other than IDBI Bank, the government would take up the privatisation of two PSBs and one general insurance company in the year 2021-22.

Listed entities

Sources said New India Assurance and state run re-insurer General Insurance Corporation of India, which are both listed entities, are unlikely to be taken up for privatisation.

“The idea is to take up one of the insurers, which are not doing well, but are still attractive enough for investors,” said the source.

According to IRDAI data, Chennai-based United India Insurance registered a 4.59 per cent de-growth in gross direct premium under-written in 2020-21 at ₹16,710.94 crore. Oriental Insurance witnessed an 8.93 per cent drop in gross direct premium under-written in 2020-21 at ₹12,452.11 crore, while National Insurance saw a 7.08 per cent drop at ₹14,180.98 crore last fiscal.

The Centre was earlier working on a proposal to merge these three public sector insurers.

However, it later decided not to go ahead with the plan. Instead, the Union Cabinet approved capital infusion of ₹12,450 crore (including ₹2,500 crore infused in 2019-20) in these three insurers – Oriental, National and United India Insurance. It also approved an increase in authorised share capital of NICL to ₹7,500 crore and that of United India and Oriental to ₹5,000 crore, respectively, to give effect to the capital infusion.

Our Bureau

The second wave of coronavirus infections poses credit-negative threat to India’s economic recovery, according to Moody’s Investors Service.

Referring to Indiarecording its highest daily surge on April 11 since the start of the pandemic, pushing its active case load further past 10 lakh, Moody’s observed that the announced countermeasures to combat the second wave – some of which are due to remain in place at least until the end of April – risk weakening the economic recovery.

However, the targeted nature of containment measures and rapid progress on vaccinating the population will mitigate the credit-negative impact, it added.

Growth forecast

Moody’s observed that the second wave of infections presents a risk to its growth forecast (baseline forecast is for real GDP to grow 12 per cent in yearly terms in 2021) as the reimposition of virus management measures will curb economic activity and could dampen market and consumer sentiment.

“Retail and recreation activity across India had dropped by 25 per cent as of April 7 compared with February 24, according to Google mobility data. This was mirrored in the Reserve Bank of India’s March consumer confidence survey, which showed a deterioration in perceptions of the economic situation and expectations of decreased spending on nonessential items,” the agency said.

However, given the focus on micro-containment zones to deal with the current wave of infections, as opposed to a nationwide lockdown, Moody’s expects that the impact on economic activity will be less severe than that what was seen in 2020.

The agency emphasised: “India’s very low coronavirus death count (only about 170,179 deaths have been recorded as of 12 April) and relatively very young population also help mitigate risks. GDP is still likely to grow in the double-digits in 2021, given the low level of activity in 2020.”

Moody’s said vaccination will be a key element in managing the second wave as the authorities balance virus management against maintaining economic activity.

Bandhan Bank on Monday said that it has registered an overall collection efficiency of 96 per cent for March 2021.

While the collection efficiency of micro loan portfolio stood at around 95 per cent, the non-micro loan book saw a collection efficiency of around 98 per cent, the bank said in its initial provisional disclosures of Q4 FY21 to the exchanges on Monday.

Total advances grew by 21 per cent at ₹87,054 crore for the quarter ended March 31, 2021, as compared to ₹71,846 crore same period last year. Deposits grew by 37 per cent at ₹77,972 crore (₹57,082 crore). CASA deposits increased by 61 per cent at ₹33,827 crore (₹21,028 crore).

The liquidity coverage ratio as on March 31, 2021 was at around 122 per cent.

The Covid-19 pandemic took a toll on credit growth of all scheduled banks in FY21. These banks reported slower 5.54 per cent year-on-year (yoy) growth against 6.55 per cent growth in FY20, as per Reserve Bank of India’s (RBI) latest Scheduled Banks’ Statement of Position in India.

The banks, however, saw copious deposit inflows despite interest rate cuts. Deposit growth of the aforementioned banks jumped 11.19 per cent yoy in FY21 against 8.32 per cent yoy in FY20.

With muted credit offtake, strong deposit growth and increased government market borrowings, banks augmented their Statutory Liquidity Ratio investments (in Government Securities/ G-Secs and State Development Loans/ SDLs), according to RBI’s latest monetary policy report (MPR). Banks’ investments in G-Secs and SDLs rose 19.24 per cent yoy in FY21 against 11.04 per cent in FY20, as per Scheduled Banks’ Statement of Position in India. The MPR said excess SLR holdings increased to 11.4 per cent of net demand and time liabilities (NDTL) on February 26, 2021 from 8.2 per cent at end-March 2020.

As per the Median Projections of Professional Forecasters in MPR, credit growth of scheduled commercial banks is expected to grow at 8 per cent in FY22 on the back of projected real GDP growth of 11 per cent