Category: Banking & Finance

SBI hikes home loan rate to 6.95%

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Country’s largest lender State Bank of India (SBI) has revised its home loan rate to 6.95 per cent effective April 1.

With the revision, the lowest rate of 6.70 per cent regime for limited period ended in March 31.

During the limited period, the bank offered home loan starting from 6.70 per cent for loans up to ₹75 lakh and 6.75 per cent for loans in the range of ₹75 lakh-₹5 crore.

As per information posted on its website, the new rate effective April 1 is 6.95 per cent.

Compared to teaser rate for the limited period, the new rate is 25 basis points higher at 6.95 per cent.

The hike in minimum home loan rate by SBI is likely to prompt other lenders to follow suit.

The bank will also levy a consolidated processing fee on home loans. This will be 0.40 per cent of the loan amount and goods and services tax (GST) subject to a minimum of ₹10,000 and maximum of ₹30,000 plus GST.

Last month, SBI had in waived off home loan processing fees till March 31 to cash in on festive fervour.

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Experts believe prepacks will expedite insolvency resolution as govt readies move, BFSI News, ET BFSI

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The government is finalising a pre-packaged insolvency resolution process in anticipation of the rise in bankruptcies due to the pandemic.

According to reports, the government is likely to start with micro, small and medium enterprises as it sees a rise in bad loan cases with the lifting of suspension on insolvency proceedings against Covid-related defaults last month.

“Govt is working with regulators to bring out pre-pack and other resolutions of MSME and other sectors. A lot of work in progress has been already achieved, it is only when some part of implementation issues has been watched closely, so once the whole mechanism is in the market, it is well accepted by the market, Pawan Kumar, Deputy MD, IIFCL, said.

As bad loans are feared to top 13.5% of total advances due to the pandemic such a move has become urgent, experts said.

Under the pre-packaged process, main stakeholders like creditors, shareholders and the existing management or promoter can come together to identify a prospective buyer and negotiate terms of a resolution plan, before submitting it to NCLT for formal approval.

In the Budget for 2021-22, Finance Minister Nirmala Sitharaman said the government will introduce alternative methods of debt resolution and a special framework for micro, small and medium enterprises.

What experts say

Experts say it will help expedite the resolution process for stressed assets as well as reduce the number of insolvency-related cases before the National Company Law Tribunal (NCLT).

“It’s time for the prepack. Prepack is the way to go if you want to preserve the asset (value). If you want to create a very effective remedy outside NCLT…,” Nishant Singh, Partner at Indus Law, said.

Pre-pack has to be at the forefront and also with some other mechanism on the forefront of the resolution of the insolvency and bankruptcy cases, said Ashok Haldia, Chairman, Governing Board Indian Institute of Insolvency Professional of ICAI.

“IBC has been the main law for the resolution of insolvency. Any forward-looking economy, any forward-looking industry or business scenario would see IBC is a matter of last resort, rather than the first legislator or framework to address there has to be an alternative mechanism rather than what we have been discussing all along be pre-pack as an alternative mechanism,” he said.

Lack of buyers

Nishant Singh of Indus Law said that the availability of resolution buyers could be a challenge in today’s stressed market situation, emphasising that the government needs to further encourage foreign players in view of their participation.

“Right now they (foreign players) have limited access through ARC (Asset Reconstruction Company) or FPI (Foreign portfolio investment) to actually participate…We have a massive debt which is under default or going to be the default and foreign investors are not able to participate (much), we are blocking massive liquidity coming into the Indian market which can really help to resolve these assets,” Singh said.

NCLT Infrastructure

Another challenge for the resolution under the IBC framework could be the lack of infrastructure, Singh said. Already, India is witnessing a pile of litigation cases at its courts, he said, adding “The courts will need to figure out how they will increase the capacity in the stipulated amount of time.”

“There has to be a process to make sure when there is a flood of these cases then we should prioritise the admission process so that the corporate debtor who needs immediate protection, gets that protection and the process gets jump-started,” he said.



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IndusInd Bank Q4 deposits up 27 per cent, net advances rise 3 per cent

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Private sector lender IndusInd Bank reported a 3 per cent increase in net advances and 27 per cent rise in deposits as on March 31, 2021, compared to a year ago.

According to a regulatory filing by the bank on Monday, its net advances increased to ₹2.13 lakh crore as on March 31, 2021, versus ₹2.06 lakh crore a year ago. Even sequentially, net advances increased by 3 per cent from ₹2.07 lakh crore as on December 31, 2020.

Deposits increased to ₹2.56 lakh crore as on March 31, 2021, compared to ₹2.02 lakh crore a year ago.

Moody’s affirms IndusInd Bank’s ratings, revises outlook to ‘stable’

“Retail deposits and deposits from small business customers amounted to ₹95,811 crore as of March 31, 2021, as compared to ₹85,914 crore as of December 31, 2020,” IndusInd Bank said.

On a sequential basis, deposits increased 7 per cent in the fourth quarter of last fiscal from ₹2.39 lakh crore as on December 31, 2020.

Why IndusInd Bank FD is an attractive short-term choice

The bank’s CASA ratio was at 41.8 per cent as on March 31, 2020, from 40.4 per cent a year ago.

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HDFC Bank Q4 advances up 14%, deposits grow 16%

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Private sector lender HDFC Bank reported a 13.9 per cent growth in advances as on March 31, 2021 compared to a year ago and 16.3 per cent increase in deposits in the same period.

In a regulatory filing on Monday, the bank said its advances rose to ₹11.32 lakh crore as of March 31,2021 compared to ₹9.93 lakh crore in the same period a year ago. On a quarter on quarter basis, advances grew by 4.6 per cent over ₹10.82 lakh crore as of December 31, 2020.

“As per regulatory (Basel 2) segment classification, domestic retail loans as of March 31, 2021 grew by around 7.5 per cent over March 31, 2020 and around 5 per cent over December 31, 2020; domestic wholesale loans as of March 31, 2021 grew by around 21 per cent over March 31, 2020 and around 4.5 per cent over December 31, 2020,” HDFC Bank said.

Its deposits grew to about ₹13.35 lakh crore as of March 31, 2021 versus ₹11.47 lakh crore a year ago. It amounted to a grow of about five per cent on a quarterly basis compared to ₹12.71lakh crore as of December 31, 2020.

CASA deposits of the bank grew by 27 per cent to about ₹6.15 lakh crore as of March 31, 2020 compared to ₹4.84 lakh crore in the same period last fiscal.

HDFC Bank said its CASA ratio stood at around 46 per cent as of March 31, 2021 compared to 42.2 per cent a year ago.

During the quarter ended March 31, 2021, the Bank purchased loans aggregating ₹7,503 crore through the direct assignment route under the home loan arrangement with Housing Development Finance Corporation Limited.

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Capital infusion won’t raise tangible equity of privatisation bound banks, BFSI News, ET BFSI

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The government’s recent proposal to infuse capital in four state-owned banks through non-interest-bearing (zero coupon) bonds will improve the lenders’ capital levels, but not their tangible equity to a large extent.

The government notified that it has infused Rs 14,500 crore into four banks – Bank of India, Indian Overseas Bank, Central Bank of India and UCO Bank.

Indian Overseas Bank and Central Bank of India are reportedly among the four PSBs that are proposed to be privatised this year.

Zero-coupon bonds

A zero-coupon bond is a bond that pays no interest and trades at a discount to its face value.

Issued at a deep discount to the face value, these bonds are non-interest bearing, which means it is an investment that does not earn any returns, but depreciates in value over the years.

As these special bonds are non-interest bearing and issued at par to a bank, it would be an investment, which would not earn any return but rather depreciate with each passing year.

The bonds–with a tenure of 10-15 years–can be held by banks in the held-to-maturity category, insulating them from the impact of marked-to-market valuations.

Weak buffers

The agency said these long-tenure securities would be factored at par value rather than the discounted value in the banks’ balance sheet.

According to the agency, the four lenders have weak tangible buffers or a weaker ability to build and maintain capital buffers.

“Ind-Ra believes the intrinsic net worth of these instruments could be lower by more than 50% at the outset than similar maturity government papers in the market. The illiquid, non-trading nature of these securities could add to the discount,” it said in a release.

Tangible common equity is a measure of physical capital, used to evaluate banks’ ability to deal with losses. The long-tenor securities would be factored in at the face value and not the discounted value in the banks’ balance sheet.

Equity level

It said the proposed quantum of capital infusion varies between 11 per cent and 44 per cent of the tier-I capital of the respective PSBs as of the third quarter of the financial year 2020-21.

Equity level is an important factor in the banks’ ability to service Basel-III additional tier-I and tier-II bonds, it said.

“While the quantum of these instruments is limited in the total equity profile of most of these PSBs, the notching down for their tier-II bonds and additional tier-I bonds from the long-term issuer ratings and the standalone rating, respectively, could widen,” it said.

The first capital infusion through non-interest-bearing bonds was in Punjab and Sindh Bank (P&SB) in the third quarter of the financial year 2020-21.

The government has already allocated Rs 20,000 crore for equity infusion into PSBs in their Union Budget 2021-22.

The agency said it will continue to closely track these infusions and their impact on the banks’ franchise, adjusted networth and book value, it said.

The capital infusion

On Wednesday, the government infused Rs 4,800 crore into Central Bank of India, Rs 4,100 crore into Indian Overseas Bank, Rs 3,0000 crore into Bank of India, and Rs 2,600 crore into UCO Bank. The first such infusion was of Rs 5,500 crore in Punjab & Sind Bank in December.



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SBI Card sees over 50 percent of its transaction from online payments, says CEO, BFSI News, ET BFSI

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SBI Cards and Payment Services (SBI Card) has been seeing over 50 per cent of its transactions via online payments such as on groceries, utility bills, insurance premium, and hopes the trend to go up further as point of sale purchases are yet to pick up, top company executive said. Keeping a watch on the recent coronavirus resurgence in the country across some key locations, SBI Card MD and CEO Rama Mohan Rao Amara said it would be too early to say whether it will have any bearing on people’s purchasing behaviour.

However, online payments is a trend which is going to go up further, he added.

“Particularly within SBI Card, now, more than 53 per cent of the spends actually come from online payments which used to be around 44 per cent earlier. Almost 9 percentage points improvement is there mainly in terms of the categories like for groceries, apparel, utility bill payment, insurance premium, online education,” Amara told in an interview.

He added that for these kind of categories, suddenly the company has seen kind of an increase in spends online. “We believe (it) will remain online because once people get used to the comfort of it, they will continue with that. So, COVID or no-COVID, it will not impact that.”

However, he said the point of sale (PoS) locations have not opened that well, as and when the footfall increases, there will be a pick-up there also.

The pure-play card company is also seeing an emerging trend of securing more customers from non-metro locations. It is also banking on its parent company SBI’s huge customer base to expand further.

Maybe till 5-6 years ago, tier-I locations were contributing majorly to the credit card industry growth.

“But, if you look at our recent performance, around 58 per cent of our incremental sourcing is actually coming from non-tier cities that is tier II, III and IV.

“These are contributing more to our new credit card acquisitions, that is basically we have a piggyback of our parent bank (SBI) customer base,” he added.

The company’s card-in-force grew 15 per cent to 1.15 crore in the third quarter of the fiscal ended March 2021, against one crore in the year ago same period. The spends were higher by 8 per cent to Rs 37,797 crore from Rs 35,135 crore.

And, the new accounts volume increased 8 per cent to 9,18,000 accounts in the third quarter of 2020-21, compared with 8,48,000 in the third quarter of 2019-20.

Under the company’s pre-approved programme, wherein it looks towards the customer base of the parent bank and the cardable population, it has helped SBI Card immensely in terms of adding to the new card base, Amara added.

“It started around 2017, it has now reached a good volume. It contributes well but if you look at our disclosures, more than 50 per cent is coming from our bank channel which you essentially call kind of a SBI sourcing,” Rao said further.

He added that particularly, during the first and second quarters of FY21, when open market locations were closed and when sourcing were limited, the company’s banking channel helped it in terms of ramping up. “We were able to come back to almost 10,000 accounts per day, that was the usual run rate in best of the best times. So, we were able to get back to that trend by Q3.”

And, majorly, this growth has come from tier-II, -III and -IV cities, he added.

Amara also said the company will continue to work with its parent bank.

“If you look at the customer base of our parent bank, it is more than 400 million. We have hardly explored the base of around 20-22 per cent. So, there is a plenty of runway left,” Rao said.

However, he said the company will always look forward to forge new tie-ups and recently joined hands with Jio Payments also.

On the company’s tie-up with various airline companies, which were hit the most during the lockdown period and are running below the capacity off-take of passengers, Amara said the business has been impacted on that front, but exuded confidence that it will be back to track once things normalise.

In the nine-months ended December 2021, SBI Card witnessed a flat growth in its income at Rs 7,245 crore. And, the net profit was down by 30 per cent to Rs 809 crore during the April-December period of 2020-21.

Rao said the company had already reached to the pre-COVID-19 level business by third quarter and expects to post decent numbers for the overall fiscal.

The company is expected to declare the financial results for the fourth quarter of 2020-21 within the end of this month.



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Year-end pressure hits fund transfers via IMPS, UPI in millions, BFSI News, ET BFSI

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Several customers could not transfer funds instantly in the first two days of the new financial year as the core banking systems at some banks failed to process IMPS (Immediate Payment Service) or UPI (Unified Payment Interface) transactions.

Bank systems were clogged due to year-end system maintenance. Transactions were delayed for more than 24 hours, which otherwise would have been possible in a few seconds. Customers of top banks with large retail interfaces are said to have suffered the most.

This triggered a flood of complaints on Twitter even as National Payments Corporation of India (NPCI), an umbrella organisation of retail payments and settlements, issued a clarification. The latest outage was restricted to a few large banks and highlights the risks of 24×7 payments systems with more transactions moving online. An estimated 4.5 lakh transactions have been affected, say market experts.

“For both IMPS and UPI to function well, availability of the banks’ Core Banking Systems is mandatory,” said Dillip Asbe, MD and CEO at NPCI. “However, they were not functioning in full strength due to the financial year-end processing, which is carried out on April 1 every year. We acknowledged that on social media.”

On April 1, IMPS and UPI are estimated to have reported about 9.7 and 76 million transactions. The very next day, those numbers inched up to 10.8 million and 90 million. In those two days, volumes were broadly 5-15 percent lower than then an average usual day.

The financial year end closing had led to some UPI and IMPS transaction failures at a few banks,” NPCI tweeted on April 2 post noon. “We have observed that most of these bank systems are back to normal since last evening. Customers may avail uninterrupted IMPS and UPI services.”

Bankers said that the failure rate for transactions was much higher than normal on April 1 as the down time for core banking systems for some banks extended as they updated for the new financial year.

“It impacted some banks for a long period. If the core banking for bank ‘A’ does not respond it means transactions to and from that bank do not go through,” said a senior bank executive.

It seems there were more than one bank which was impacted but it was not a widespread systemic issue,” said the person.

To be sure, the estimated failure of transactions at 4.5 lakh were less than 4.5% of the average 10 to 12 million daily transactions managed by the NPCI. However, it is much higher than the less than 0.50% failure rates the system faces in normal courses.

“But don’t forget UPI and IMPS are 24×7 systems; so these issues can occur sometimes,” said another senior bank executive.



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Banks sanctions Rs 25,586 cr to 1.14 lakh Stand-Up India accounts in 5 years, BFSI News, ET BFSI

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The Finance Ministry on Sunday said banks have sanctioned Rs 25,586 crore to about 1,14,322 beneficiaries under the Stand Up India Scheme in the last five years for promoting entrepreneurship among women and SC & STs. The objective of Stand-Up India is to promote entrepreneurship amongst women, Scheduled Castes (SC) & Scheduled Tribes (ST) categories, to help them in starting a greenfield enterprise in trading, manufacturing and services sector, by both ready and trainee borrowers, the Finance Ministry said in a statement.

Under the scheme, bank loans between Rs 10 lakh and Rs 1 crore are provided to at least one Scheduled Caste/ Scheduled Tribe borrower and at least one woman borrower per bank branch of Scheduled Commercial Banks.

Started in April 5, 2016, the scheme has benefited 93,094 women entrepreneurs with outstanding loan of Rs 21,200 crore as of March 23.

This scheme, which has been extended up to 2025, covers SC/ST and/or women entrepreneurs, above 18 years of age, it said.

In case of non-individual enterprises, 51 per cent of the shareholding and controlling stake should be held by either SC/ST and/or Women Entrepreneur and borrowers should not be in default to any bank/financial institution, it said.



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Reliance Capital defaults on interest payments on HDFC, Axis Bank term loans

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Reliance Capital has defaulted on interest payments of ₹5.48 crore on term loans of HDFC and Axis Bank.

The interest payment due for HDFC was ₹4.77 crore and for Axis Bank ₹0.71 crore.

The principal amount for HDFC was ₹523.98 crore while for Axis Bank it was ₹100.63 crore, Reliance Capital said in a regulatory filing. The date of default was March 31, 2021.

Reliance Capital said the total amount of outstanding borrowings from banks and financial institutions is ₹716.65 crore and includes accrued interest up to March 31, 2021.

Total financial indebtedness of the company, including short- term and long-term debt, stood at ₹20,785.04 crore. The troubled company had, last week, failed to make interest payments for NCDs due on March 28 and 29.

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RBI seen leaving repo rate unchanged in first review of FY22

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The Monetary Policy Committee (MPC) is likely to leave the signal repo rate unchanged in the first bi-monthly Monetary Policy Review of 2021-22 as economic recovery is still tentative and retail inflation, though within the tolerance band, surged in February.

The six-member MPC has kept the repo rate (the interest at which the Reserve Bank of India provides liquidity to banks to overcome short-term mismatches) steady at 4 per cent in the last four bi-monthly Monetary Policy Reviews.

The last time the repo rate was changed was in May 2020, when it was cut from 4.40 per cent to 4 per cent. Then the reverse repo rate (the interest rate banks earn for parking surplus liquidity with the RBI) was also cut from 3.75 per cent to 3.35 per cent.

The second Covid-19 wave and its impact on the economy is expected to figure prominently in MPC’s deliberations that will start on Monday and go on till Wednesday. The committee is expected to persist with the accommodative monetary policy stance.

The meeting is also taking place in the backdrop of the February reading of the output of eight core infrastructure sectors showing a 4.6 per cent (year-on-year) contraction and retail inflation (consumer price index — CPI) rising nearly one percentage point to 5.03 per cent, from 4.06 per cent in January.

Edelweiss Securities expects the RBI to leave rates unchanged and stick to its accommodative stance. “Economic recovery is still uneven and the pace of improvement has slowed of late after a sharp rebound from lows (IIP has averaged just about 0.6 per cent YoY in the past five months). Further, the recent rebound in Covid cases poses a fresh challenge. Thus, continued policy accommodation is very much warranted,” it said in a report.

Rahul Bajoria, Chief India Economist, Barclays Securities (India) Pvt Ltd, and Shreya Sodhani, Research Analyst, Barclays Investment Bank, Singapore, in a report, said:“We believe the RBI can maintain its monetary accommodation for a while to enable the recovery to become entrenched.”

The Barclays report observed that transmission still has room to improve, and the RBI can play its part by holding steadfast to its commitment to maintain surplus liquidity and keep policy rates low to allow the prior cuts to percolate fully to lending and deposit rates.

“Indeed, of the 250 basis points of repo rate cuts (during the easing cycle from February 2019 till February 2021), only about 93 basis points have been transmitted to lending rates, while deposit rates are down by 145 basis points,” said Bajoria and Sodhani.

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