Category: Banking & Finance

The National Health Authority (NHA) has appointed RS Sharma as the new Chief Executive to head its health insurance scheme – Ayushman Bharat or Pradhan Mantri Jan Arogya Yojana – a flagship programme of the government.

He will be replacing Indu Bhushan whose three years terms comes to an end. Sharma, the former Chairman of Telecom Regulatory Authority of India (TRAI), also heads the Empowered Group on Technology and Data Management to combat Covid-19, and is a member, National Expert Group on Vaccine Administration of Covid-19.

Recently, in an interview with BusinessLine, he had said that the CoWIN app is necessary because you have to record a vaccination event and that includes robust authentication – verification, vaccine details and certificates.

The government can realise better value from the proposed disinvestment of its stake in IDBI Bank once the bank comes out of prompt corrective action (PCA), according to Rakesh Sharma, MD and CEO, IDBI Bank.

The Reserve Bank of India (RBI) placed IDBI Bank under PCA, entailing restriction on lending and expansion of operations, among others, about three years back, so that it takes remedial measures to regain health.

“The government should divest its stake in IDBI Bank after it comes out of prompt corrective action (PCA),” said Sharma, replying to a specific question on whether the government should divest its stake after the bank comes out of PCA.

The government has 45.48 per cent stake in IDBI Bank. Life Insurance Corporation of India (LIC) holds 49.24 per cent stake.

Ajay Sharma, ED and CFO, said: “On PCA, we have complied with most of the indicators…only on the profitability criteria, where RoA (return on asset) should be positive, we have to look at the year-end number.

“And, hopefully, when the bank will declare next quarter result, we should be compliant on that also. And we are looking forward to PCA exit sooner.”

The surge in cryptocurrencies, led by Bitcoin, is likely to continue with robust response from not only retail but also global institutional investors, believe players. However, regulatory uncertainties continue for the sector.

“The crypto ecosystem has also been growing largely due to institutional investors buying into crypto and large companies like PayPal offering it,” said Nischal Shetty, CEO of domestic cryptocurrency exchange WazirX, adding that 2021 is likely to be even better for the sector with more regulatory clarity coming in from countries like the United States.

Ashish Singhal, CEO and co-founder of cryptocurrency investment platform CoinSwitch Kuber, also noted that there has been consistent growth in the sector since March.

“Companies like PayPal are trying to adopt crypto, which is a positive sign for the global ecosystem of cryptocurrencies, which ultimately impacts the Indian sentiments and provide opportunity to Indian investors,” he said.

Prices fluctuate

Bitcoin had touched a record high of over $40,000 on January 8 this year, but its price has been fluctuating since then.

“After SC judgment and following Covid-19 trading, volumes in cryptocurrency have jumped by 85 per cent to 100 per cent. Average trading on Indian crypto exchange is roughly $20 million per day,” said a recent SBI Ecowrap report, adding that with overpriced equity and fragility in mutual funds, trends towards investment in cryptocurrency will only accelerate.

But despite strong response from retail investors to cryptocurrencies since the Supreme Court lifted the ban on trading in March last year, most banks remain cautious.

Bankers say cryptocurrencies are a grey area. “While the Supreme Court has lifted the ban, there is no regulatory clarity, and banks are not keen on encouraging customers on this front,” noted two bankers.

Significantly, the Reserve Bank of India in the ‘Booklet on Payment Systems’, which was released on January 25, said it is exploring the possibility as to whether there is a need for a digital version of fiat currency and, in case there is, how to go about operationalising it.

Noting that private digital currencies, virtual currencies and crypto currencies have gained popularity in recent years, it said: “In India, the regulators and governments have been sceptical about these currencies and are apprehensive about the associated risks.”

Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP, also said regulators and authorities are undecided and apprehensive about cryptocurrencies and their associated risks in India, while noting that the RBI has acknowledged the rising popularity of cryptocurrencies and proposed to explore the possibilities for the need and operationalising the digital fiat currency.

“Regulators and authorities are undecided and apprehensive about cryptocurrencies and their associated risks in India. Now is the time for India to break its wait and watch, approach and consider granting greater regulatory clarity to cryptocurrencies,” he said.

IDBI Bank reported a net profit of ₹378 crore in the third quarter ended December 31, 2020, against a net loss of ₹5,763 crore in the year-ago period.

The bottomline was buoyed by a 89 per cent year-on-year (y-o-y) decline in provisions for bad loans, ₹105 crore write-back in provisions for depreciation in investments, and ₹323-crore profit the bank booked by selling a portion of its stake in its life insurance joint venture.

Net interest income (difference between interest earned and interest expended) was up 18 per cent y-o-y at ₹1,810 crore (₹1,532 crore in the year-ago period).

Other income, including income from activities such as commission, fees, earnings from foreign exchange and derivative transactions, profit and loss from sale of investments and recoveries from written off accounts, increased 7 per cent yoy to ₹1,368 crore (₹1,279 crore).

Bad loans

Gross non-performing assets (GNPAs) declined ₹3,532 crore during the reporting quarter. Rakesh Sharma, MD and CEO, said recoveries have been good during the reporting quarter, with the with the bank being able to make recoveries of around ₹961 crore.

“Recovery (collection) ratio has been almost equal to pre-Covid level. Pre-Covid it was around 95 per cent. Now it is 94 per cent,” he added.

GNPAs declined to 23.52 per cent of gross advances as at December-end 2020 against 25.08 per cent as of September-end 2020.

Net NPAs declined to 1.94 per cent of net advances as of December-end 2020 against 2.67 per cent as of September-end 2020.

With proforma slippages (adjusted for the Supreme Court’s interim order), Gross and Net NPA ratio would have been 24.33 per cent and 2.75 per cent, respectively.

Sharma observed that if there was no stay on recognition of NPAs, the slippages would have been ₹1,294 crore, which is well within the limit.

Restructuring

The IDBI Bank chief said: “We had (earlier) indicated that restructuring will be around 5-6 per cent of our total standard advances.

“But the total restructuring in our case will not exceed 2.5 per cent. For this we have already made good Covid-related provisions.”

So far, the bank has completed Covid-19-related restructuring of loan accounts aggregating ₹704 crore, comprising mainly structured retail loans (₹675 crore, within this ₹574 crore is home loans) and the balance is MSME accounts.

Restructuring of accounts aggregating ₹2,256 crore is in the pipeline.

Provisions

A break-up of the provisions shows that provisions towards NPAs and bad debts written-off declined to ₹49 crore (₹440 crore) and ₹208 crore (₹332 crore), respectively.

However, provisions towards standard assets rose to ₹624 crore (₹68 crore).

In its notes to accounts, the bank said it has made additional provision of ₹941 crore over and above the IRAC/ income recognition and asset classification norms (includes shifting of ICA/ Inter-Creditor Agreement provision of ₹395 crore to IRAC provision) in respect of certain borrower accounts in view of the inherent risk and uncertainty of recovery in these identified accounts.

Global gross advances were down 7 per cent y-o-y to stand at ₹1,59,663 crore. This was mainly due to 18 per cent y-o-y decline in corporate advances. Retail advances edged up 1 per cent.

Total deposits increased about 3 per cent y-o-y to ₹2,24,399 crore. The share of low-cost of current account, savings account (CASA) in total deposits improved to 48.97 per cent from 47.65 per cent in the year ago quarter.

Punjab National Bank (PNB), the country’s second-largest public sector bank, plans to raise Additional Tier-1 (AT-1) capital of ₹2,500 crore via bond offering by March 15, said a top official.

This will be on top of the ₹495 crore that the state-owned lender raised via AT-1 (Basel III-compliant) capital bonds a few days back with a coupon of 8.6 per cent per annum on a private placement basis, SS Mallikarjuna Rao, Managing Director & CEO, PNB, told BusinessLine.

Including this, ₹495 crore, PNB has now raised ₹8,283 crore out of the ₹14,000-crore capital that it last year set out to raise from the market.

This ₹14,000 crore comprised Qualified Institutional Placement (QIP) of ₹ 7,000 crore; AT-1 capital of ₹3,000 crore and Tier-2 capital of ₹4,000 crore.

Already, PNB has raised from the market aggregate Tier-2 capital of ₹4,000 crore (in July, September and November 2020).

It maybe recalled that the bank had, in December 2020, raised ₹3,788 crore via QIP, which fell short of the announced targeted mop-up of ₹7,000 crore. The amount raised included ₹1,500 crore investment from LIC.

Asked if PNB will look to raise the remaining portion of QIP aim during the current fiscal, Rao said bank will look for an appropriate time for raising the gap of about ₹ 3,212 crore.

“Of the ₹14,000 crore, we have already raised from the market ₹8,283 crore. The additional Tier-1 capital of ₹2,500 crore also I am very confident of doing it by March 15. The only gap that will need to be filled is about ₹3,200 crore via QIP, which will also happen at an appropriate time,” said Rao.

Rao said he had earlier taken a bold call for aiming for ₹7,000 crore via QIP when the issue size was only ₹3,500 crore with a green shoe option of ₹3,500 crore. “We have to also look at the market appetite. It is not that we fell short. It’s just that my aim was bold and high at ₹7,000 crore. We had raised ₹3,788 crore via QIP,” he said.

Rao highlighted that PNB was comfortably placed on the capital front and had no constraints of capital for growth. “We are raising more capital from market so that we can focus on growth for the next few years. The growth we will look at comprises post-pandemic growth as well as growth flowing from synergies of the amalgamation. This was the objective for going for ₹14,000-crore capital raising from the market,” said Rao.

Three-way merger

On the three-way amalgamation with Oriental Bank of Commerce and United Bank of India, Rao said that IT system integration was complete and upgradation of surrounding technologies such as loan origination system and anti-money laundering system applications would be done by March 31 this year. Business synergies of the amalgamation should start flowing from April 1 this year, he added.

RBL Bank’s standalone net profit more than doubled in the third quarter of the fiscal year to ₹147.06 crore against ₹69.95 crore in the same period last fiscal.

For the quarter ended December 31, 2020, its net interest income, however, fell by two per cent to ₹908 crore against ₹923 crore a year ago.

Net interest margin also fell to 4.19 per cent at the end of the third quarter this fiscal from 4.57 per cent a year ago.

Other income surged by 19 per cent to ₹580 crore in the October to December 2020 quarter versus ₹487 crore a year ago.

“Our capital and liquidity levels continue to be robust. It has been heartening to see the growth in the deposit franchise, and we continue to grow granular deposits and reducing our funding and operating costs this financial year, making us more competitive as an institution,” said Vishwavir Ahuja, Managing Director and CEO, RBL Bank.

Provisions fell by two per cent to ₹609.76 crore in the third quarter this fiscal from ₹622.84 crore a year ago.

Gross non-performing assets (NPA) eased to ₹1,050.21 crore or 1.84 per cent as on December 31, 2020, against 3.33 per cent a year ago. Net NPAs stood at 0.71 per cent of net advances at the end of the third quarter this fiscal from 2.07 per cent a year ago.

Ahuja said proforma gross NPA was 4.57 per cent as on December 31, 2020, and proforma net NPA was 2.52 per cent.

Total restructuring amounts to ₹550 crore, which is primarily from retail customers.

Provision Coverage Ratio stands at 86.4 per cent in the third quarter against 58.1 per cent a year ago.

HDFC Bank and CSC e-Governance Services, on Thursday, announced the launch of EMI Collection Services for CSC-HDFC Bank’s business correspondents across the country.

“This will make payments convenient for customers, who can now visit their nearest CSC, to deposit overdues. The CSC-HDFC bank correspondent or village level entrepreneur (VLE) will match the loan account with the customers’ registered phone number to cross check the amount payable on the system,” said a statement.

The VLE will then provide a receipt for the amount collected and deposit the amount in the prescribed form to bank.

“Under the initiative, CSC and HDFC Bank will work towards utilising the services provided by the business correspondents for collecting regular EMIs and overdue amount on loans taken by customers. The business correspondents would act as deposit points for customers of HDFC Bank from segments such as auto loan, two-wheeler loan, personal loan, business loan and sustainable livelihood initiative,” said Dinesh Luthra, National Head, CSC Channel HDFC Bank.

The partnership of HDFC Bank with CSC aims to take banking and financial services to the doorsteps of people living in remote areas through the bank’s network of over one lakh VLEs.

“The VLEs will be supported by HDFC Bank’s branch distribution network, which is present in more than 30 States. The arrangement will provide access to formal banking to lakhs of people in rural India,” the statement said.