Category: Banking & Finance

The Centre will hold at least 75 per cent stake in state-owned Life Insurance Corporation of India for the next five years and will continue to hold at least 51 per cent in the life insurer after that period.

The Amendments to the Life Insurance Act, 1956, which was tabled along with the Finance Bill, also proposes to increase the authorised share capital of the corporation to ₹25,000 crore divided into 2,500 crore shares of ₹10 each.

Finance Minister Nirmala Sitharaman had, in the Budget, said that the government would like to take ahead the initial public offering of LIC in the coming fiscal.

“In 2021-22 we would also bring the IPO of LIC, for which I am bringing the requisite amendments in this Session itself,” she had said as part of the Budget speech.

The other amendments to the Life Insurance Act include introduction of provisions on corporate governance in line with SEBI norms to enable listing of LIC on stock exchanges.

“It is further proposed to substitute section 4 of the LIC Act to provide for the vesting of the general superintendence and direction of the affairs and business of the LIC in its Board of Directors…,” said the Notes on Clauses of the Finance Bill.

Other amendments propose to include new sections for constitution and composition of an executive committee to provide for an annual general meeting, appointment of auditors and declaration of dividend.

A key amendment is also regarding the utilisation of surplus from life insurance business under which it pays 5 per cent of the surplus to the government.

The government will also likely to continue with its guarantee on LIC policies.

The amendments further propose to enable issue of shares to the Central Government against paid-up capital invested by it in LIC as well as issue of bonus shares to it, which could be offered for sale by way by IPO, with resultant receipt of money into the Consolidated Fund of India.

Stiff opposition

LIC’s employees unions are, however, not happy with the move to go ahead with the IPO and are planning to oppose it.

“Over the course of the next few days, employees will be deciding on their strategy to oppose it,” said a union leader.

In a statement, the Bhartiya Mazdoor Sangh had also said that aggressive disinvestment programme and bringing IPO of LIC will reduce the charm of Atmanirbhar Bharath and benefits of some good proposals in the Budget.

Tamilnad Mercantile Bank (TMB) has reported an impressive performance for the December 2020 quarter with a significant growth in net profit and better asset quality parameters.

For the quarter ended December 31, 2020, the Tuticorin-based bank’s net profit grew 96 per cent to ₹181 crore, compared to ₹92 crore in the year-ago quarter.

The operating profit of the company grew 37 per cent at ₹350 crore compared to ₹256 crore in Q3 of the previous fiscal, on the back of strong growth in net interest income that stood at ₹429 crore against ₹339 crore, an increase of 27 per cent. Total income grew by eight per cent at ₹1083 crore (₹999 crore).

Higher net interest income and lower provisions aided the strong growth in bottomline, said KV Rama Moorthy, Managing Director and CEO, TMB.

He said about 90 per cent of the customers in MSME segment saw business returning to pre-Covid levels, while several MSMEs in the agri-segment were doing much better than the pre-Covid period.

Gross NPAs

TMB had a gross NPA of ₹978 crore as of December 31, 2020. Its Gross NPA, as a percentage of total advances, dropped to 3.24 per cent as of December 2020 quarter from 5.16 per cent in December 2019 quarter. Net NPA reduced to 0.92 per cent (₹270 crore from 2.13 per cent (₹564 crore).

The bank has an additional Standard Assets Provision of ₹150 crore plus ₹3.80 crore for 90 DPD accounts in respect of Covid-stressed accounts, in line with the Supreme Court directives for standstill clause.

“Covid is still not over. While it has created a lot of challenges, the pandemic has also thrown up new opportunities. For instance, we never did anything in healthcare and pharma sectors. With stronger focus from the government, we may look at this segment going forward,” said Moorthy.

For nine-month period ended December 2020, the net profit of the bank grew to ₹422 crore against ₹243 in the year-ago period, an increase of 73 per cent. Operating profit grew 34 per cent at ₹932 crore (₹695 crore).

Total deposits

Total advances grew 10 per cent to ₹30,212 crore from ₹27,369 crore. Total deposits stood at ₹37,889 crore (₹35,174 crore). Provision coverage ratio of the bank grew to 89.31 per cent (78.57 per cent). Its net worth stood at ₹4404 crore (₹3817 crore).

Moorthy said TMB is hopeful achieving its targets for FY21 – net profit of ₹480 crore and total business of ₹72,500 crore (₹32,000 crore of advances and ₹40,500 crore of deposits).

Our Bureau

Housing Development Finance Corporation Ltd (HDFC) reported a 65.05 per cent drop in standalone net profit for the third quarter of the fiscal at ₹2,925.83 crore against ₹8,372.49 crore in the same period last fiscal.

“The profit numbers for the quarter ended December 31, 2020, are not directly comparable…To facilitate a like-for-like comparison, after adjusting for the above, the adjusted profit before tax for the quarter ended December 31, 2020, is ₹3,694 crore, compared to ₹ 2,908 crore in the previous year, reflecting a growth of 27 per cent,” said HDFC in a statement on Tuesday.

The profit numbers are not comparable due to fair value gain consequent to the merger of GRUH with Bandhan Bank of ₹9,020 crore.

For the quarter ended December 31, 2020, HDFC reported a 26 per cent growth in net interest income at ₹4,068 crore, compared to ₹ 3,240 crore in the previous year. Net interest margin for the nine months ended December 31, 2020, stood at 3.4 per cent.

As of December 31, 2020, the individual loan book on an assets under management (AUM) basis grew 10 per cent and the non-individual loan book grew by 7 per cent. The growth in the total AUM was 9 per cent.

HDFC said December 2020 witnessed the highest ever levels in terms of receipts, approvals and disbursements.

During the quarter ended December 31, 2020, individual loan disbursements grew at 26 per cent over a year ago. Growth in home loans was seen in bothaffordable housing segment and high-end properties, it said.

“We continue to see strong growth in demand for housing loans. We grew perhaps better than what we expected in October when we were fairly optimistic,” said Keki Mistry, Vice-Chairman and CEO, HDFC.

The mortgage financier also reported an improvement in overall collection efficiency ratios for individual loans, which are now nearing pre-Covid levels. The collection efficiency for individual loans in December 2020 stood at 97.6 per cent, compared to 96.3 per cent in the month of September.

The gross non-performing loans as of December 31, 2020, stood at ₹8,012 crore. This is equivalent to 1.67 per cent of the loan portfolio.

If the Supreme Court order of maintaining the classification of accounts as status quo till further orders were not to be considered, NPLs would be at 1.91 per cent of the loan portfolio, with individual NPLs at 0.98 per cent and non individuals NPLs at 4.35 per cent.

Provisions as of December 31, 2020, stood at ₹12,342 crore.

The Reserve Bank of India has appointed an external IT firm for carrying out a special audit of the IT infrastructure of HDFC Bank, which has faced a number of outages in digital banking services.

“The RBI has appointed an external professional IT firm for carrying out a special audit of the entire IT infrastructure of the bank under Section 30 (1‐B) of the Banking Regulation Act, 1949 (the Act), at the cost of the bank under Section 30 (1‐C) of the Act,” said HDFC Bank in a regulatory filing on Tuesday.

The bank shall, accordingly, extend its cooperation to the external professional IT firm so appointed by the RBI for conducting the special IT audit, it further said.

The RBI had, on December 2 last year, directed HDFC Bank to temporarily halt the sourcing of new credit card customers as well as launches of digital business generating activities planned under its proposed programme, Digital 2.0.

The directive had come after a sudden outage at one of HDFC Bank’s data centres impacted its digital and mobile banking and ATM and payment services on November 21, 2020, and a similar outage in December 2019.

In an analyst call after its third quarter results, HDFC Bank had said it had submitted a blueprint to the RBI on how to address these digital outages. The bank had said the action plan will take 10-12 weeks for implementation, and further time frame will depend on the RBI’s inspection.

Market sources said the move is in the right direction and is going as per the process.

Credit card business is a key focus area of HDFC Bank, which had 1.53 crore outstanding credit cards at the end of November 2020. According to its Annual Report 2019-20, it has over 5.6 crore customers and digital transactions accounted for 95.1 per cent of all retail transactions.

On Tuesday, HDFC Bank scrip touched a high of ₹1,578 apiece on the BSE before closing the day 5.63 per cent higher at ₹1,560.4 apiece.

LIC Housing Finance Ltd (LICHFL), on Tuesday, said Y Viswanatha Gowd has been appointed as the Managing Director & Chief Executive Officer of the company with effect from February 1. Gowd’s appointment as MD and CEO of LICHFL follows the resignation of Siddhartha Mohanty with effect from February 1.

Mohanty has taken charge as Managing Director of Life Insurance Corporation of India (LIC). LIC has 40.31 per cent stake in LICHFL.