Category: Banking & Finance

The insurance regulator has modified the existing guidelines on product filing in health insurance business. As per the file and use guidelines of the Insurance Regulatory and Development Authority of India (IRDAI) July 2020, general and health insurers are not allowed to modify the existing benefits and add new benefits in the existing products which lead to an increase in premium.

“However, it is clarified that insurers are permitted to effect minor modifications as stipulated consolidated guidelines on product filing in health insurance business. Addition of new benefits, upgradation of existing benefits may be offered as an add-on covers,” said DVS Ramesh, General Manager (Health), IRDAI, in a circular.

In addition, the regulator had also spelt out detailed norms on the presentation format of policy contract, which insurers need to follow for all health insurance products with effect from October 1, 2021.

Commenting on the modifications, Tapan Singhel, MD and CEO, Bajaj Allianz General Insurance, said: “This will lead to further simplification and better understanding of the policy for customers as the same format will be used across all insurers using plain and simple language.”

The IRDAI has been working towards simplifying insurance offerings and bringing in transparency in order to encourage more people to opt for insurance.

“The modified guidelines on product filing in the health insurance business are a step in that direction,” Singhel added.

Nearly 68 per cent of respondent bankers expect non-performing asset (NPA) levels to be above 10 per cent in first half of 2021, as per the 12th round of the FICCI-IBA Banker’s survey.

The current round of survey reveals that there has been a significant increase in the requests for restructuring of advances. An overwhelming 85 per cent of the respondent bankers have cited an increase in requests for restructuring of advances against 39 per cent in the last round.

In this backdrop, bankers want extension of the Emergency Credit Line Guarantee Scheme (ECLGS) to business enterprises/ MSMEs till Q1 (April-June) FY22 and relaxing the NPA classification norms to 180 days.

According to the survey, which was carried out between July and December, 2020, 37 per cent of respondents in-fact expect NPA levels to be upwards of 12 per cent.

Macro-stress tests for credit risk, conducted by the Reserve Bank of India (RBI), show that scheduled commercial banks’ gross NPA ratio may increase from 7.5 per cent in September 2020 to 13.5 per cent by September 2021 under the baseline scenario.

If the macroeconomic environment deteriorates, the ratio may escalate to 14.8 per cent under the severe stress scenario.

Some of the high NPA risk sectors identified by majority of the respondents in the current round of survey include tourism and hospitality, micro, small and medium enterprise (MSME), aviation and restaurants.

Fifty-five per cent of the respondents believe NPAs will rise substantially in tourism and hospitality sector, while another 45 per cent see NPAs increasing moderately in this sector.

Another high NPA risk sector reported in current round of survey is the MSME sector, with 84 per cent respondents expecting an increase in NPAs in this sector.

Almost 89 per cent respondents also expect restaurants to see an increase in NPAs, though only 26 per cent expect NPAs to increase substantially in this segment.

NPAs in H2 2020 improve

NPA levels for second half (H2) of 2020 have seen an improvement, with 50 per cent of the respondent banks reporting a decline in NPAs during current round of survey. Bank-wise analysis reveals that major improvement in NPAs has come from the Public Sector Banks (PSBs).

“About 78 per cent of participating PSBs cited a reduction in NPA levels. This can be attributed to an improvement in asset quality, especially with improved recoveries and higher write-offs by several banks.

“Moreover, due to Covid-19 pandemic, the Supreme Court had ordered all banks not to classify Covid-19-related defaults as NPAs,” the survey said.

Among the sectors that continue to show high level of NPAs, most of the participating bankers identified sectors such as infrastructure, metals, iron & steel, real estate and engineering goods, it added.

Infrastructure and pharmaceuticals are expected to see an increase in long-term credit even in the first half of 2021, as reported by 68 per cent and 58 per cent of respondents, respectively. Other sectors expected to see rise in long-term credit include metals, iron and steel, automobiles, real estate and NBFCs.

“Even the number of banks reporting tightening of credit standards during second half of 2020 has come down…The reasons cited for easing of credit standards are expectations of better growth going forward, reduction in their cost of funds and the need for providing Covid-19 relief to borrower.

“The credit standards are likely to remain unchanged in the first half of 2021, as reported by a large majority of respondent bankers,” the survey said.