Category: Banking & Finance

Kotak Mahindra Bank launches home loans with interest rate starting 6.55%, BFSI News, ET BFSI

Banking & Finance

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Kotak Mahindra Bank today announced a new home loan interest rate of 6.55% p.a., which. The interest rate is valid from Tuesday to 10th December, both days inclusive, and is applicable for fresh loans and balance transfers.

It is available across all loan amounts and is linked to a borrower’s credit profile.

Further, applicants who have received a home loan sanction letter from the bank by today can lock in the earlier rate starting at 6.50% p.a. if the loan is disbursed in the next seven days i.e. by November 15.

Earlier in September, the bank had introduced home loan interest rates beginning 6.50% p.a. – a festive season offer that ends today.

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Credit Suisse’s Asia decision making to stay in the region after overhaul, BFSI News, ET BFSI

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Credit Suisse‘s key decision making power for Asia Pacific will stay in the region despite the previously separate division being integrated into the bank’s broader structure as part of its new strategy, its regional chief executive said.

The Swiss-based bank last week said Asia Pacific would no longer be a stand alone division and its wealth management and investment banking units would be absorbed into global divisions as part of a paring back of the bank .

The decision has stoked worries from local bankers who fear a loss of autonomy could contribute to the bank’s already declining market share in key investment banking divisions in Asia, two sources said.

“We have always worked together with our global colleagues, whether they are in Europe or the U.S., for example on deals that have required a global solution for clients, and the collaboration across APAC will also continue. Nothing will change on that front,” Helman Sitohang, Credit Suisse’s Asia Pacific chief executive told Reuters on Monday.

Sources said Credit Suisse’s standalone Asia private bank was a differentiator for both customers and bankers.

Under that structure, senior managers usually had leeway to take decisions such as balance sheet lending and staff promotions, unlike many private banks in the region that relied a lot on their headquarters for key approvals.

One source said that despite assurances by management, there were worries that risk taking would be curtailed and the speed of decision making might slow down.

“As a region, we continue to be empowered to make decisions such as those related to market presence, key clients and HR-related matters, and at the same time maintain our speed of decision-making and connectivity to the global infrastructure that certain deals require,” Sitohang said.

For years, Credit Suisse has been one of the most active investment banks in developing markets such as Indonesia and Vietnam, as it won mandates from entrepreneurs and business families, often backed by financing.

Asia Pacific contributes about 20% of Credit Suisse’s global revenue, according to its most recent financial results. Its investment banking market share in Asia Pacific, including Japan, has fallen so far in 2021, according to Refinitiv data.

The bank sits tenth on the announced mergers and acquisition league table with a market share of 3.1%, down from 4.9% for the full year in 2020.

In equity capital markets – a key driver of fee revenue in Asia – it has a 2% market share, down from 3.1%, the figures showed.

Sitohang said Credit Suisse’s Asian investment banking performance had been “difficult because of the various headwinds we have had as a firm globally”, pointing to scandals involving hedge fund Archegos and supply chain financier Greensill.

But he was confident the business could rebound.

“The intent is to come back strongly and regain our market position,” he said.



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HFCs’ AUM to grow 8-10 per cent in FY22 against 6 per cent in FY21: ICRA

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Housing Finance Companies’ (HFCs) growth is expected to pick up in the rest of FY2022 despite headwinds in the first quarter (Q1) of FY2022, but weak asset quality is likely to keep their profitability subdued, according to ICRA.

The credit rating agency estimated that HFCs’ portfolio is likely to grow by 8-10 per cent in FY2022 against 6 per cent in FY2021.

ICRA expects gross non-performing assets (GNPAs) to improve marginally from June 2021 level (of 3.6 per cent), but to stay elevated and higher by 40-70 basis points as on March 31, 2022, as compared to March 31, 2021 (of 2.9 per cent).

The agency opined that though the portfolio growth is expected to drive an improvement in revenue, the expected elevated credit costs are likely to keep the profitability subdued in FY2022.

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ICRA observed that healthy demand in the industry, increasing level of economic activity and increasing vaccination in the country are expected to result in a steady growth in disbursements and improvement in collection efficiency (CE) in FY2022.

Covid impact

Sachin Sachdeva, Vice-President and Sector Head, Financial Sector Ratings, ICRA, said: “Overall on-book portfolio of HFCs in India is estimated at ₹11.0 lakh crore as on June 30, 2021, with exposures across home loans (HLs), loan against property (LAP), construction finance (CF), and lease rental discounting (LRD).

“The Covid-19-induced disruptions moderated the portfolio growth to 6 per cent in FY2021. Nevertheless, despite nil sequential growth in Q1 FY2022, aforementioned favourable factors provide hope for better growth prospects in FY2022 with an estimated growth rate of 8-10 per cent.”

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The agency noted that HFCs’ asset quality metrics weakened quite sharply in Q1 FY2022 because of the localised lockdowns imposed by various States/Union Territories (UTs) on account of the second wave, which impacted the borrowers’ cash flows and hence the CE.

“The jump in overdues was the sharpest in the recent past, as borrower-level liquidity got stretched in the absence of loan moratorium. The marginal borrowers, therefore, slipped into the NPA (non-performing asset)/overdue category in Q1 FY2022,” ICRA said.

Consequently, the Gross NPAs increased to 3.6 per cent as on June 30, 2021, from 2.9 per cent as on March 31, 2021 (2.3 per cent as on March 31, 2020).

Per the agency’s assessment, though the asset quality deteriorated across segments, CF was worst hit followed by LAP and HL. Thus, entities with high exposure to CF witnessed a higher impact than the industry average.

The headline asset quality numbers are expected to moderate slightly from current level as the trend in the CE continues to remain encouraging.

Nevertheless, ICRA expects a 40-70 basis points (bps) increase (net of recoveries and write-offs) in GNPAs by March 31, 2022, from GNPAs as on March 31, 2021, assuming there are no further Covid-19 induced lockdowns. One basis point is equal to one-hundredth of a percentage point.

Sachdeva said the pre-tax return on average managed assets (profit before tax/PBT per cent) for FY2022 is likely to remain similar to FY2021 level (1.9-2.0 per cent). Optimistically, if the collection efficiency trends post a steady and healthy revival and if slippages remain contained, then PBT per cent may also benefit from reversals in provisions.

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Kotak Mahindra Bank announces new home loan interest rate at 6.55%

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Kotak Mahindra Bank on Monday announced a new home loan interest rate of 6.55 per cent per annum.

The new rate is valid from November 9 to December 10, it said in a statement, adding that it is applicable for both fresh home loans and balance transfers.

The lender had kick-started the festive season by introducing home loan interest rates beginning at 6.5 per cent per annum, which was a limited period festive season offer that ends on Monday.

“Further, applicants who have received a home loan sanction letter from Kotak Mahindra Bank by November 8 can lock in the earlier rate starting at 6.5 per cent per annum if the loan is disbursed in the next seven days – by November 15,” the bank further said.

Ambuj Chandna, President, Consumer Assets, Kotak Mahindra Bank said, “Our special 60-day festive season offer has been deeply appreciated by home buyers and we have seen very strong demand momentum – both in fresh cases and balance transfers. We are, hence, delighted to extend the good times for borrowers with a new home loan rate.”

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Credit card spends seen to be rising sharply in Oct, Nov

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Credit card spends are seen to have risen sharply in October and the first week of November on the back of festive spends.

“Credit card spends have grown 34 per cent quarter-on-quarter in the second quarter of 2021-22 and trends of October and November first week remain very strong,” said a report by ICICI Securities.

October 2021 is likely to be 15-18 per cent better than September 2021 and the run rate for the first week of November has been better than October 2021, it further said.

As per trends, credit card spends have seen a growth of 17 per cent in October and 11 per cent in November.

The traction in spends through credit cards is evident from absolute spends of ₹80,200 crore in September 2021 and the ratio of credit card to debit card spends which stands at 1.28x now, the report noted.

According to data with the Reserve Bank of India, there were 6.5 crore outstanding credit cards at the end of September 2021 compared to 6.39 crore in August.

Of this, HDFC Bank continued to have the largest number of credit cards at 1.49 crore in September compared to 1.47 crore in August.

Credit cards in force for State Bank of India rose to 1.25 crore in September from 1.24 crore in August.

ICICI Bank’s credit cards grew to 1.16 crore in September versus 1.14 crore in August.

Banks too have reported robust growth in credit card spends in the second quarter results and have been expecting increased transactions with the opening up of the economy.

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Towards a level playing field in ‘Business Correspondent’ model of banks

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The Reserve Bank of India (RBI) should rationalise the interchange fees for Aadhaar Enabled Payments System (AePS) transactions and also disincentivise Business Correspondents (BCs) for unfair business activities to generate commission, according to State Bank of India’s economic research report Ecowrap.

This can ensure a level playing field in the BC model followed by public sector banks (PSBs) and other banks.

AePS is a bank-led model that allows online interoperable financial inclusion transactions at point of sale/PoS (micro ATM) through the BC of any bank using Aadhaar authentication.

BCs are retail agents engaged by banks to provide banking services at locations other than a bank branch/ATM.

How to make BCs more viable

PSBs mostly follow ‘branch-led BC model’, while other banks follow ‘branch less/ micro ATM/kiosk application on mobile/corporate BC model’ for financial inclusion.

Three key facts

The report underscored three facts — more than 77 per cent Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts have been opened by PSBs; the number of BCs/customer service points (CSPs) of other banks largely outnumbered that of PSBs and, over the years, OFF-US transactions are increasing.

Data indicate that the share of AePS “OFF-US” transactions (where the card issuing bank and acquiring bank are different entities) in AePS increased from 4 per cent in September 2016 to 51 per cent in September 2021.

In AePS “ON-US” transaction, the card issuing bank and the acquiring bank are the same entity.

“Considering these facts, PSBs (that opened around 77 per cent of the PMJDY accounts) are now net payers of interchange fee. We estimate that the PSBs could be paying ₹600-700 crore per annum as interchange fee,” said Soumya Kanti Ghosh, Chief Economic Adviser, SBI.

He emphasised that since AePS works like a PoS, logically the ‘acquiring bank’ (the bank which has installed the PoS terminal at the merchant location) should pay the interchange fee to the ‘issuing bank’(the bank which has issued the card to the customer).

Alternatively, there could be rationalisation in interchange fee as there is no level playing field in infrastructure provided by all banks.

Holistic financial inclusion

With requisite savings, banks can further strengthen/upgrade their BC model and promote financial inclusion in a more holistic manner, the report said.

Currently, the account opening bank pays an interchange fee to the operator of the BC/ CSP when a customer makes a transaction at micro ATM that does not belong to the account opening bank (that is OFF-US transaction).

At present the interchange fee is 0.5 per cent of transaction amount (minimum ₹1 and maximum ₹15) for an OFF-US financial transaction and ₹5-7 for non-financial transaction.

The report noted that BCs convert AePS ON-US transactions of one set of bank customers to AePS OFF-US issuer transactions and also carry out multiple AePS ON-US and AePS OFF-US transactions on the primary bank application/software.

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SBI’s economic research department cautioned that the ‘micro ATM/kiosk application on mobile’ model might also lead to several frauds as the mobile BCs introduce themselves as government persons and need biometric authentication to provide different types of subsidy.

PSBs, who are active in financial inclusion activities, have opened a large number of PMJDY accounts (out of 44 crore accounts, PSBs opened 34 crore accounts and non-PSBs 1.3 crore, rest RRBs) with minimal balance and thus incur recurring expenditure by way of servicing such customers, including issuance of free RuPay debit card, besides monthly remuneration for BC operations.

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States with higher PMJDY a/c balances see significant fall in crime: SBI Ecowrap

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States with higher Pradhan Mantri Jan Dhan Yojana (PMJDY) account balances have seen a perceptible decline in crime, as per an assessment by the State Bank of India’s economic research department.

The department also observed that there is both statistically significant and economically meaningful drop in consumption of intoxicants such as alcohol and tobacco products in States where more PMJDY accounts are opened.

“This could be because of Jan Dhan-Aadhaar-Mobile (JAM) Trinity which has helped in better channelising of government subsidies and helped in curbing the unproductive expenditure such as alcohol and tobacco expenses in rural areas,” said Soumya Kanti Ghosh, Group Chief Economic Advisor, SBI, in the Bank’s economic research report “Ecowrap”.

Multiplier effect

The report emphasised that sound financial inclusion policies have a multiplier effect on economic growth, reducing poverty and income inequality, while also being conducive for financial stability.

“India has stolen a march in financial inclusion with the initiation of PMJDY accounts since 2014, enabled by a robust digital infrastructure and also careful recalibration of bank branches and thereby using the BC model judiciously for furthering financial inclusion,” the report said.

Such financial inclusion has also been enabled by use of digital payments as between 2015 and 2020, mobile and internet banking transactions per 1,000 adults have increased to 13,615 in 2019 from 183 in 2015.

The number of bank branches per one lakh adults rose to 14.7 in 2020 from 13.6 in 2015, which is higher than Germany, China and South Africa.

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HFCs’ portfolio to grow by 8-10% this fiscal: ICRA

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Housing finance companies are expected to register a growth of eight to 10 per cent in their portfolio this fiscal, ratings agency ICRA said on Monday.

Noting that the second wave of Covid-19 infections impacted business sentiments in the first quarter of the fiscal, ICRA said growth is expected to pick up in the rest of 2021-22.

“The healthy demand in the industry, increasing level of economic activity and increasing vaccination in the country are expected to result in a steady growth in disbursements and improvement in collection efficiency in 2021-22,” it said.

However, while the portfolio growth is expected to drive an improvement in revenue, the expected elevated credit costs are likely to keep the profitability subdued in the fiscal, it cautioned.

Asset quality metrics

Asset quality metrics weakened quite sharply in the first quarter of the fiscal but the headline asset quality numbers are expected to moderate slightly from current level as the trend in the collection efficiency continues to remain encouraging, the agency further said.

ICRA expects a 40to 70 basis points increase (net of recoveries and write-offs) in the gross non-performing assets (GNPAs) by March 31, 2022 from GNPAs as on March 31, 2021, assuming there are no further Covid-19 induced lockdowns.

“Overall, on-book portfolio of HFCs in India is estimated at ₹11 lakh crore as on June 30, 2021, with exposures across home loans, loan against property, construction finance, and lease rental discounting. The Covid-19-induced disruptions moderated the portfolio growth to 6 per cent in 2020-21,” noted Sachin Sachdeva, Vice-President and Sector Head, Financial Sector Ratings, ICRA.

The pre-tax return on average managed assets (PBT per cent) for the fiscal is likely to remain similar to levels of last fiscal at 1.9 to 2 per cent, he further said, adding that if the collection efficiency trends post a steady and healthy revival and if slippages remain contained, then PBT per cent may also benefit from reversals in provisions.

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SoftBank dragged into red by falling Vision Fund valuations, BFSI News, ET BFSI

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SoftBank Group Corp reported a 397 billion yen ($3.5 billion) net loss for the July-September quarter, dragged down by a $10 billion investment loss at its Vision Fund unit as tech valuations fell.

While CEO Masayoshi Son describes SoftBank as a goose laying “golden eggs”, referring to its stakes in startups that go to market, initial public offerings (IPOs) have dropped off and shares in many top assets like online retailer Coupang fell during the quarter.

“The strategy of let’s create the perception of enhanced value by taking things public hasn’t really worked this year,” Redex Research analyst Kirk Boodry said.

Depressed valuations in SoftBank’s China portfolio amid a regulatory crackdown continued to drag with its stake in ride-hailer Didi, acquired for $12 billion, currently valued at $7.5 billion.

The group’s largest asset, Chinese e-commerce firm Alibaba, fell by around a third in the second quarter.

SoftBank’s quarterly net loss compared with a profit of 628 billion yen in the same period a year earlier.

Bright spots for the Vision Fund include its India portfolio with ride-hailer Ola and logistics firm Delhivery targeting listings.

SoftBank has been trimming stakes following the expiry of lock-up periods, while focusing on investing through its second Vision Fund that has $40 billion in committed capital from SoftBank itself.

SoftBank shares, which have lost around a quarter this year, closed down 0.77% at 6,161 yen ahead of earnings on Monday.

($1 = 113.3500 yen)



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IndusInd Bank shares tank after report of loan evergreening allegation at unit, BFSI News, ET BFSI

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BENGALURU – Shares of IndusInd Bank slid as much as 11.45% on Monday after a report said whistleblowers had alleged loan evergreening at the private sector lender’s micro finance arm.

On Friday, the Economic Times reported that whistleblowers had alerted the Reserve Bank of India (RBI) and the IndusInd board that Bharat Financial Inclusion (BFIL) had evergreened some loans – a practice where new loans are given to stressed borrowers to enable them to repay existing loans.

IndusInd denied the allegation in an exchange filing on Nov. 6 and said the report was “grossly inaccurate and baseless”.

However, it said nearly 84,000 loans were disbursed in May without customer consent due to a technical glitch and that the issue was rectified expeditiously.

IndusInd did not immediately respond to a Reuters request for comment.

On Monday, shares of the private sector lender were the top percentage losers on the Nifty private bank index and on track for their worst session since April 2020.

Due to pandemic-related restrictions, some loans had to be disbursed via cash at BFIL, and as of September-end, only 26,073 clients out of 84,000 were active with loan outstanding at 340 million rupees ($4.58 million), IndusInd said.

In multiple emails to the RBI and the IndusInd board in October, a whistleblower group that included BFIL officials alleged that the unit had evergreened loans, inflated revenues and under-reported non-performing assets, the report said.

The report also cited two people familiar with the developments saying there was a separate whistleblower complaint from an outsider on Oct. 14 that suggestions to set up risk management and audit committees for BFIL were ignored.

In its exchange filing, IndusInd said an independent review had been initiated by the bank to see if there was any process lapse or accounting failure at BFIL.

($1 = 74.1900 Indian rupees)

(Reporting by Chandini Monnappa in Bengaluru; Editing by Subhranshu Sahu)



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