The Enforcement Directorate (ED) on Tuesday questioned former MP and Shiv Sena leader Anandrao Adsul for two hours in connection with the alleged misappropriation of funds and bad loans in City Cooperative Bank. Adsul is the chairman of the bank.
It is alleged that the Adsul-controlled bank had arbitrarily distributed loans, thereby causing a fraud of Rs 900 crore. As a result, in April 2018, theReserve Bank of Inida restricted the nearly one lakh account-holders from withdrawing their money and banned the bank from granting loans, making investments, borrowing funds and accepting deposits.
Sources said that the ED will soon question Adsul in alleged Punjab and Maharashtra Cooperative Bank fraud case too.
Recenetly, City Cooperative Bank initiated the merger process with State Cooperative Bank, but in January, depositors put up banners in many parts of the city demanding action and inquiry against Adsul for “causing loss to the bank”.
PNB, the promoter of the mortgage lender, had sought the regulator’s approval about seven months’ back. RBI’s decision is still awaited, delaying PNB Housing Finance’s capital raising plan.
PNB’s chief executive SS Mallikarjuna Rao is expecting a positive note from RBI soon. “It’s not that the issue is stalled or there is no communication. The regulator was seeking details on the bank’s capital position and capital raising plans,” he said.
PNB, with a 32.65% ownership, proposed to infuse equity capital in PNB Housing through rights or preferential issue of shares. The bank augmented its capital by Rs 3,788 crore in December in qualified institutional placement even as it was looking to raise Rs 7,000 crore.
On August 19, 2020, the PNB Housing Finance board had approved Rs 1,800 crore capital raising through rights and preferential issue of shares. “Before that the PNB had approached the Reserve Bank of India for permission to infuse equity into the company. Since they had actually asked that the equity infusion can take place either through rights issue or preferential, we were awaiting permission from the Reserve Bank of India,” PNB Housing Finance chief executive Hardayal Prasad told analysts after the company’s third quarter results.
With the delay in getting the regulator’s nod, PNB Housing board last month approved share sales to other institutional investors as the lender needs capital for its medium-term growth plans.
“We are hopeful that PNB would be able to get its approval. Once that approval comes, we still can issue the rights or the preferential,” Prasad said.
Meanwhile, PNB is planning to go to investors again to raise Rs 3,200 crore from share sales. It would also look to issue additional tier-1 bonds (AT-1 bonds) worth Rs 2500 crore before March 31.
The lender has garnered Rs 4,000 crore in tier-II bonds and Rs 495 crore in AT-1 bonds in the last few months.
HDFC Bank has outdone State Bank of India (SBI) in disbursements under the Emergency Credit Line Guarantee Scheme (ECLGS) introduced by the government as a part of the Covid relief package. The scheme involved a government guarantee for additional loans, up to Rs 3 lakh crore, extended to businesses facing stress due to the Covid pandemic.
Of the total loans of Rs 1.4 lakh crore extended by banks up to January 25, 2021, HDFC Bank has disbursed Rs 23,504. This is nearly 17% of the loans sanctioned. SBI, with disbursals of Rs 18,700, has a market share of 13.3%. According to banking analysts, this demonstrates HDFC Bank’s capabilities in lending to small businesses.
The ECLGS came in two phases. The first ECLGS-1 was for only small businesses and, in the second ECLGS-2 round, it was extended to large industries that were part of the 26 stressed sectors. HDFC Bank’s performance has enabled private sector banks outdo public sector banks (PSBs) in funding for the micro, small and medium enterprises (MSME) sector.
In response to a query in Lok Sabha, minister of state for finance Anurag Thakur said that the total amount of loans sanctioned and disbursed by the banking sector was just a shade under Rs 2 lakh crore and Rs 1.4 lakh crore, respectively. Of this, the sanctions and disbursements by public sector banks were Rs 83,162 crore and Rs 61,226 crore. In the case of private banks, the sanction and disbursement numbers were Rs 1.15 lakh crore and Rs 80,227 crore.
In the public sector, after State Bank of India (SBI) the second-highest disbursements are by Punjab National Bank (PNB). In the private sector, ICICI Bank with Rs 12,982 crore is the second-largest lender, followed by Axis Bank with Rs 8,099 crore.
PSBs have traditionally been the dominant lenders to the MSME sector. But the typical trend for last few years is that private banks and non-banking finance companies (NBFCs) have strongly competed with PSBs in gaining a larger share of the MSME sector.
However, that trend changed after the nationwide lockdown. As of June 20, NBFCs had a share of 9.7% of MSME lending — down from 13% in March, followed by private banks with 38.7% share in loans and PSBs with 51.6% marketshare, according TransUnion Cibil. The state-run lenders still account for over 60% of the banking business in the country.
SBI, in an investor call on February 4, had said that the bank had sanctioned Rs 26,000 crore (cumulative) under the ECLGS. Of this, Rs 23,000 crore has been disbursed cumulatively. The bank also said that only Rs 488 crore was disbursed under ECLGS-2 and the rest was in ECLGS-1.
In the call, the bank’s chairman Dinesh Khara said that although the window for restructuring for medium and small business enterprises is available up to March 31, the additions would not be substantial. He said that the ECLGS disbursements were lower in the latest quarter because the bank had picked up SME growth in segments other than the ECLGS scheme.
If you have an account with a public sector bank, then avoid scheduling your banking activities between March 13 and March 16.
Around 55,000 public sector bank employees from 18,000 branches from across Gujarat are planning to participate in the nationwide bank strike on March 15 and 16, according to the MahaGujarat Bank Employees’ Association.
With March 13 being a second Saturday and March 14 being a Sunday, banks are expected to remain shut over the weekend.
The United Forum of Bank Unions, an umbrella body of nine unions, has given a call for the two-day strike against the proposed privatization of two-state owned lenders.
In an UFBU meeting held in Hyderabad on Tuesday, various announcements made in the union budget regarding reform measures like privatization of IDBI Bank and two public sector banks, setting up a bad bank, disinvestment in LIC, privatization of one general insurance company, allowing FDI in insurance sector up to 74%, aggressive disinvestment and sale of public sector undertakings.
On February 19, a day-long dharna will be held by bank employees in all state capitals whereas relay demonstrations will be held from February 20 to March 10 across various towns and districts of Gujarat. According to bankers, the strike will bring transactions worth at least Rs 60,000 crore to a standstill.
The COVID-19 pandemic has required industries across sectors re-evaluate and re-imagine their day-to-day operations, and the banking industry is no exception. From temporarily shutting down bank branches to redeploying the staff and provisionally suspending certain services to customers, banks have had to fast track digitisation and were under tremendous pressure to move services online and embrace digital transformation even in rural / semi-rural areas. In this time, with rapid changes in technology advancement and security needs, it is vital for sectors to keep updated on the latest and upcoming technologies to create the best and secured offerings. Innovations amidst protection and safety can lead us towards new revolutions, thereby helping us explore new tech integrations and cross-platform functionalities.
The proliferation of digital access has made the world more connected than ever before. Having flexibility to interface on their own terms anyplace, anytime is possible with the availability of technology at fingertip devices and global access points. As today’s complex digital environment continues to evolve at break-neck speed, privacy and security have become key concerns. It is often said that fraudsters are sometimes multiple steps ahead of service providers! When dealing with hard earned money, needless to add, the demands on privacy and security get heightened. Therein comes the role of safe, secure and convenient authentication.
Both banks and customers benefit as fingerprint, iris and facial recognition technologies become more mainstream in financial services. Stronger customer authentication, the ones including biometric technologies are rapidly becoming a part of the daily life of people around the world. In fact, one of the key reasons why biometrics made it to the top of mobile banking technology trends this year is that other security measures are losing their popularity among customers. Through integration with mobile devices, many interact with some form of biometric authentication daily. Interestingly, a lot has happened in the last couple of years to pique consumers’ interest in biometrics for payments. This has helped to not just familiarise consumers with biometrics but also encouraged them to favor biometrics over more traditional password or pattern recognition authentication techniques.
With multiple options available for biometric identification, banks should choose to mimic multi-factor authentication that requires users to provide a combination of biometric identifiers to reduce the chances of frauds even further. As popularly said, “One biometric doesn’t fit every situation”. For example, if at times while working in the kitchen or driving a car, finger authentication would be impossible, voice or face could easily and safely step in to enable convenience in banking transactions. The prevalence of digital banking and remote banking requires new and convenient ways to authenticate customer identity. Even though bank customers agree with the need for security, they do not want to undergo excessive authentication before they can accomplish the simplest transactions in their own account. With that kind of innovative, customer-focused thinking taking place at institutions across the country, it is clear that mobile banking is entering a new era of security and convenience.
Biometrics offer many advantages to both the financial institution and the consumer; some of them include, lower operational costs, avoidance of complex passwords and PINs, duplicate authentication, no possibility to exploit stolen information obtained from a malicious data breach etc. With multiple, distinctive, and measurable human characteristics that uniquely identify an individual, there is very little or no room for error in protecting this customer data and preventing it from becoming compromised or lost. It is in best interest of the banking and financial institutions to partner with market leaders in biometric technologies and security to ensure that biometrics in banking can achieve its potential and lead to a fraud-proof future.
In today’s digital world, biometric identification technologies are advancing quickly that it has become challenging to predict what they will look like in a few years. However, one thing that can be assumed quite confidently is passwords that were tricky to use, change, and remember will be a thing of the past. After a year of revving and redefining the engines, 2021 will be the year when biometrics in payments steps up a gear. It does have the potential to mitigate several concerns and challenges facing the payments world today.
The future of biometric security will lie in simplicity, universality, cost effectiveness and convenience.
DISCLAIMER: The views expressed are solely of the author and ETBFSI.com does not necessarily subscribe to it. ETBFSI.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.
Muthoot Finance on Tuesday reported a consolidated net profit of Rs 1,006.6 crore in the third quarter.
NBFC Muthoot Finance on Tuesday reported a 17% year-on-year increase in its third quarter consolidated net profits to Rs 1006.6 crore with its gold loan portfolio growing robustly.
The Kerala-based lender said its consolidated loan assets under management (AUM) increased 28 % year on year to touch Rs55,800 crore during the quarter.
The finance company, which also operates home loan, microfinance and insurance broking subsidiaries, said net profit of the gold loan division, Muthoot Finance (MFIN), increased 22 % YoY to touch Rs 991 crore.
Managing director George Alexander Muthoot said, “We had a remarkable third quarter with several achievements. Our standalone loan assets of Muthoot Finance have crossed the landmark of Rs 50,000 crore. Our active customers presently having a loan account also crossed the landmark of 50 lakh. We have achieved 22% growth in gold loan portfolio during the nine months of the current year and likely to end the year with at least 25% growth as against previous year growth of 22%.”
“During the quarter, gold loan portfolio of Muthoot Finance increased by Rs 3,389 crore to Rs 49,622 crore, quarter-to- quarter growth of 7%. Our disbursements for the quarter were focused on new customer additions, fresh loans to active and inactive customers and top-up loans to existing customers. We disbursed fresh loans to 3.88 lakh new customers amounting to Rs 2,976 crore and to 4.38 lakh inactive customers amounting to Rs 2,960 crore,” he added.
Subsidiaries followed a cautious approach towards lending. Share of the subsidiaries constitutes 10% of the consolidated loan portfolio.
IOB, which was under Prompt Corrective Action (PCA), said it has been posting profits for four consecutive quarters and almost fulfilled all the requirements to come out of the PCA.
Chennai-based public sector lender Indian Overseas Bank (IOB) on Tuesday reported a net profit of Rs 212.87 crore for the third quarter of FY21 as compared to a net loss of Rs 6,075 crore in the corresponding quarter of the previous financial year.
The bank has recorded an increase of 11.3% in its total income to Rs 5,786.54 crore as against Rs 5,197.94 crore. IOB, which was under Prompt Corrective Action (PCA), said it has been posting profits for four consecutive quarters and almost fulfilled all the requirements to come out of the PCA.
Speaking to media persons after releasing the earning performance, through virtual mode, Partha Pratim Sengupta, MD & CEO, IOB, said the bank plans to come out of PCA by focusing on recovery, low-cost deposits and less capital consuming advances.
“For the last four quarters, we have been making profit consistently. When compared with Q3 performance of FY20, there was a marked improvement in all key parameters. It is a matter of time for us to exit PCA and is up to the regulator to decide,” he said.
IOB had received a capital infusion of over Rs 8,000 crore in two tranches during the last two quarters of the last financial year, which helped the loss-making bank restart the business with a clean slate. Coupled with recovery and asset-light advances, the bank could achieve profits during the last four quarters.
The MD said there has been perceptible change in NPA levels achieved through recovery measures.
“Currently, the bank has a carry forward loss of Rs 17,500 crore. Our aim is to recover at least Rs 1,000 crore per quarter. In the first quarter of FY21, we recovered about Rs 200 crore due to lockdown, followed by Rs.760 crore and Rs 1,055 crore, respectively. Going forward, the focus will be on recovery in excess of Rs 1,000 crore and it will add to our bottom line,” he said.
According to him, IOB has evolved a policy of not taking fresh exposures in stressed sectors while the bank had exited from accounts in the stressed sectors, wherever feasible.
During the quarter, gross non-performing assets (GNPAs) reduced to Rs 16,753 crore from Rs 23734 crore and stood at 12.19% as against 17.12% and net NPA was contained at Rs 3,905 crore, as compared to 7,087 crore, which was 3.13% as against 5.81%. The provision coverage ratio improved to 91.91% from 86.20%.
While interest income contracted to Rs 4,244 crore from Rs 4,352 crore, other income rose 82.36 % to Rs 1,542.82 crore. Net interest margin stood at 2.45%.
He said around Rs 18,000 crore worth NPAs are awaiting NCLT’s resolution, while Rs 3,000 crore assets was expected to be restructured.
IOB had board’s approval to raise up to Rs 5,500 crore capital. He said the bank needed only Rs3,000 crore and the timing of the issue will be decided at a later date.
His comments in relation to governance in banks also add weight given that Subramanian has also previously served as a member of the P J Nayak Committee on governance of banks for RBI and the Uday Kotak Corporate Governance Committee of SEBI.
It was a memorial lecture in honour of a legendary banker remembered for his practices guided by ethical behaviour and Krishnamurthy V Subramanian, the chief economic adviser, government of India, left no stone unturned to drive home the importance of abiding by core values of staying highly principled. He was delivering the 11th R K Talwar memorial lecture organised by the Indian Institute of Banking and Finance. Raj Kumar Talwar headed the State Bank of India (SBI) between 1969 and 1976 and continues to be regarded as a highly principled banker.
Responding to a question on what bankers need to learn of governance given the current challenges in the banking sector with reports of bank failures and banks constrained by rising non-performing assets, he urged bankers to be guided by their dharma. Pointing to the latest economic survey, he said, it has a chapter of regulatory forebearance. As a result of the forebearance, he said, not only did the zombie lending happen in the banking sector but also there was the labelling of non-performing assets as restructured assets adding to the problems.
Referring to R K Talwar and his principles and stature, he said, were Talwar to be heading any of the banks today, it would have done none of this and stuck to right conduct and would have had the moral courage to lend right and paint a true picture of the balance sheet and be very transparent when it came to making disclosures on bank performance.“Such people (like Talwar) don’t need incentives and just do the right thing because that is what their dharma demands and their karma is driven by their dharma,” he said.
His comments in relation to governance in banks also add weight given that Subramanian has also previously served as a member of the P J Nayak Committee on governance of banks for the Reserve Bank of India and the Uday Kotak Corporate Governance Committee of Securities and Exchange Board of India. The latest Economic Survey that he referred to talks in detail about the P. J. Nayak Committee (2014), constituted by RBI, and says it “highlighted in its report submitted in May 2014 the twin concerns stemming from the forbearance regime: ever-greening of loans by classifying NPAs as restructured assets and the resultant undercapitalization of banks.” It also goes on to say that “once the forbearance policy was discontinued in 2015, RBI conducted an Asset Quality Review to know the exact amount of bad loans present in the banking system. As a result, banks’ disclosed NPAs increased significantly from 2014-15 to 2015-16. In the absence of forbearance, banks preferred disclosing NPAs to the restructuring of loans.”
Similarly, among the PSBs, State Bank of India reported highest pro forma NPAs of over Rs 16,000 crore.
By Ankur Mishra
Seventeen banks are likely to have ratcheted up bad loans to the tune of Rs 7 lakh crore on a pro forma basis during the December quarter (Q3FY21). These 17 lenders had disclosed pro forma gross non-performing assets (GNPAs) this quarter due to the Supreme Court’s (SC’s) interim direction for standstill on fresh NPAs. Of Rs 7 lakh crore, these lenders have reported GNPAs of Rs 5.95 lakh crore in the current quarter without counting any fresh slippages. This implies Rs 1.04 lakh crore of bad loans in the system, which is yet to be recognised by the banks. The apex court had earlier directed lenders not to classify fresh non-performing loans from August 31, 2020, till further orders.
While the top six public sector lenders have reported the majority of pro forma NPAs at Rs 5.12 lakh crore, the 11 private lenders have reported pro forma bad loans at Rs 1.88 lakh crore, with Yes Bank reporting the highest among private sector lenders at over Rs 8,000 crore. Similarly, among the PSBs, State Bank of India reported highest pro forma NPAs of over Rs 16,000 crore.
Anil Gupta- sector head, Financial Sector Ratings, Icra, said the asset quality pressures for banks were likely to continue over the next few quarters as the impact of various measures such as emergency credit line guarantee scheme (ECLGS) and the six-month moratorium wanes. “The performance of loans where disbursements have been done under ECLGS will be monitorable apart from the exposures towards working capital borrowings where the funded interest is required to be repaid by March 31, 2021,” he said. The Reserve Bank of India had earlier granted moratorium of six months to borrowers from March 1, 2020. The banking regulator had also permitted lending institutions to convert the accumulated interest on working capital facilities over the total deferment period of six months into a funded interest term loan, which can be fully repaid during the course of the financial year 2021 (FY21).
Care Ratings senior director Sanjay Agarwal said, “We may see some increase in the gross NPA figures of banks in the next quarter, but overall it is likely to be lower than our estimate of 11-11.5% by the end of FY21.” It also depends on the path economy is going to take now, he added.
Last week, RBI had projected India’s gross domestic product (GDP) to contract by 7.7% in the current fiscal (FY21), but expects it to rebound at 10.5% in FY22. Veena Sivaramakrishnan, partner, Shardul Amarchand Mangaldas, said, “The worst in terms of Covid-19 impact is hopefully behind all of us. But the asset quality problem is not the one of pandemic alone.” For the asset quality to improve, there needs to be discipline among the corporates and tightening of lending practices, both of which are changing the ‘set in stone practices’ to a great extent, she added.
Yield on the benchmark 10-year Government Security (G-Sec) hardened about 2 basis points on Tuesday as the government announced that it will mobilise resources via a special auction a day ahead of the scheduled auction on Friday.
The government’s announcement to raise resources via two back-to-back auctions on Thursday and Friday seems to have nullified the Reserve Bank of India’s (RBI) move to purchase of G-Secs via open market operation to check the rising yields in the secondary G-Sec market.
The government plans to raise up to ₹26,000 crore (notified amount: ₹22,000 crore plus additional subscription option: ₹4,000 crore) by selling two G-Secs (re-issue) via a special auction on Thursday. On Friday, it will mobiliise ₹26,000 crore via the scheduled auction of via four securities.
Yield on the 10-year benchmark G-Sec, carrying a coupon rate of 5.77 per centhardened about 2 basis points to close at 6.1105 per cent against the previous close of 6.0870 per cent. The price of this security declined about 17 paise to close to ₹97.5750.
Bond yields and price are inversely related, with the two moving opposite directions
In a report ‘Bond Fatigue, Dwindling Options’, Crisil observed that as economic recovery is gaining momentum, there will be a pick-up in credit growth and banks will now have more options than the government to lend to. This could put some pressure on G-sec yields.
The Centre has budgeted to borrow ₹12.1-lakh crore next fiscal, only a shade less than the ₹12.8-lakh crore in fiscal 2021 (revised estimate) and much higher than the ₹7.1-lakh crore in fiscal 2020. Stressed state finances means supply of state development loans could be copious as well, the credit rating agency said.
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