Category: Banking & Finance

CSB Bank reported an 89 per cent jump in third quarter net profit at ₹53 crore against ₹28 crore in the year-ago quarter on the back of a robust increase in net interest income and non-interest income.

The increase in net profit came despite total provisions, including towards standard advances, shooting up 304 per cent year-on-year (y-o-y) and operating expenses, including staff expenses, increasing by 36.5 per cent y-o-y.

Net interest income (difference between interest earned and interest expended) rose 62 per cent to ₹251 crore (₹155 crore in the year-ago period).

Total non-interest income, including fee-based income, trading income and other income, shot up 130 per cent to ₹117 crore (₹51 crore).

Advances grew 22 per cent y-o-y to stand at ₹13,137 crore as of December-end 2020. This was mainly contributed by 61 per cent rise in gold loans. Gold loans account for 43 per cent of the total advances.

Emphasising that gold loan is the bank’s DNA, BK Divakara, CFO, observed that though the Reserve Bank of India (RBI) allows banks’ LTV (loan to value) ratio of 90 per cent for gold loans, the overall LTV of CSB Bank’s gold loan portfolio is lower 75 per cent.

New retail vertical

CVR Rajendran, Managing Director & CEO, said the new retail vertical with complete product suite and revamped policies will be established shortly. The new SME leadership is also working on volume growth by way of improved sourcing strategy, leveraging of` the branch network and customised product delivery.

“We look forward to building a sustainable business model by focusing more on these two segments apart from the gold loan portfolio,” he added.

Referring to the provisions for standard advances jumping to ₹89.2 crore (against a write-back of ₹1 crore in the year-ago quarter), Rajendran said: “In the context of the withdrawal of the moratorium benefits by the regulator, we decided to be prudent by holding provisions in excess of the regulatory provisions on the stressed assets…We made provisions for unknown knowns.”

Total deposits were up 16.5 per cent y-o-y to ₹17,753 crore as of December-end 2020. The proportion of low-cost current account, savings account deposits increased to 30.4 per cent of total deposits against 28.6 per cent as of December-end 2019.

Net interest margin (net interest income divided by average interest earning assets) improved to 5.17 per cent in the reporting quarter against 3.92 per cent in the year-ago quarter.

Gross non-performing assets (NPAs) as a percentage of advances improved to 1.77 per cent as on December-end 2020 against 3.04 per cent as on September-end 2020.

Net NPA as percentage of advances decreased to 0.68 per cent against 1.30 per cent in the preceding quarter.

Bank of Maharashtra (BoM) reported a 14 per cent increase in net profit at ₹154 crore in the third quarter ended December 31, 2020, against ₹135 crore in the year-ago quarter.

This came on the back of a healthy increase in non-interest income and reduced loan-loss provision burden.

Net interest income (difference between interest earned and interest expended) increased by 10 per cent to ₹1,306 crore (₹1,186 crore in the year-ago period).

Total non-interest income, including fee-based income, trading income and other income, was up 29 per cent to ₹570 crore (₹442 crore).

Gross non-performing assets (NPAs) declined to 7.69 per cent of gross advances as at December-end 2020 vis-a-vis 8.81 per cent as of September-end 2020.

In absolute terms, GNPAs declined by₹1,033 crore in the reporting quarter.

Loan-loss provisions came down 51 per cent year-on-year to ₹386 crore (₹794 crore in the year ago-quarter).

NPA position

Net NPA position improved to 2.59 per cent of net advances as of December-end 2020 vis-a-vis 3.30 per cent as of September-end 2020.

The Pune-headquartered public sector bank saw a 54 per cent quarter-on-quarter (q-o-q) increase in the number of accounts moving to the “special mention account (SMA) 2” category (principal or interest payment overdue between 61-90 days) to 14,022, with the outstanding amount rising 106 per cent q-o-q to ₹1,419 crore.

AS Rajeev, MD & CEO, BoM, said of the aforementioned outstanding amount, ₹1,000 crore is due to accounts that were under pandemic-related moratorium and they will be restructured in the current quarter. The bank has already made a provision of ₹110 crore towards these accounts.

The bank is expecting a recovery of about ₹750 crore in the fourth quarter, he added.

BoM’s net interest margin/NIM (net interest income divided by average interest earning assets) improved to 3.06 per cent against 2.86 per cent in the December 2019 quarter.

Rajeev said this is the first time in the last 3-4 years years that NIM has crossed the 3 per cent level.

Provision coverage ratio improved to 90 per cent as on December-end 2020 against 87 per cent as on September-end 2020.

Retail, MSME advances

Advances increased by 12 per cent year-on-year to ₹1,04,904 crore as of December-end 2020. Within advances, retail advances and MSME advances were up 29 per cent and 26 per cent, respectively.

Agriculture advances increased about 6 per cent. Advances to ‘corporate and others’ declined a tad.

Total deposits increased by 14 per cent to ₹1,61,971 crore. The share of low-cost current account, savings account (CASA) deposits improved to 50.91 per cent of total deposits from 50.51 per cent in the preceding quarter.

SunTec, a leading relationship-based pricing and billing company based here, has said that Oman’s Ahlibank has become its 50th customer for its indirect taxation solution. Ahlibank has partnered with SunTec for the latter’s GCC (Gulf Cooperation Council) VAT (value-added tax) compliance solution.

VAT is likely to be introduced in Oman in early 2021 and Ahlibank has taken the proactive step of adopting a VAT compliance solution to ensure operational efficiency, enhance revenue, and augment customer experience, a SunTec spokesman said here.

Indirect taxation solution

The SunTec solution is designed to meet the needs of banks and financial services firms and can easily integrate with existing IT systems. It is designed to also process all taxable transactions across business lines and applications with reduced cost of compliance, and helps mitigate potential risks of compliance violations, penalties, and loss of reputation.

The SunTec indirect taxation solution is widely used by banks and financial services providers in GCC and India for GST or VAT compliance. Nearly three billion transactions are processed every year through its GCC VAT/GST compliance solution. With Ahlibank, SunTec now has 26 customers in the GCC region alone and 24 in India, including prominent financial institutions such as Kotak Mahindra Bank, for its indirect taxation solution.

Amit Dua, President, Client Facing Groups at SunTec, said that the tie-up with Ahlibank comes at a crucial time of the latter’s journey towards ensuring full GCC VAT compliance. With SunTec’s Xelerate Platform and GCC VAT compliance solution, Ahlibank can digitise the entire VAT compliance process with absolute minimal number of changes to their existing technology infrastructure.

The SunTec solution will enable Ahlibank to smoothly comply with regulations and manage potential regulatory changes with ease. The end-to-end solution is based on SunTec’s Xelerate platform, and helps automate the entire VAT compliance process, including centralised rule-based tax determination, input tax recovery, tax invoice, reconciliation, corrections, adjustments, statements, and regulatory reporting.

Complex transition phase

Transitioning towards a VAT/GST regime is complex, and it is imperative for banks and financial institutions to have a robust, scalable and agile solution to fully accommodate their local or region-wide needs, says Dua. “In the GCC region, for example, the VAT landscape is rapidly evolving and needs an agile solution to respond to changing regulatory requirements,” he added.

Abdullah Al Hatmi, CEO at Ahlibank, said that it is extremely crucial for the bank to be ready for VAT compliance. “We are very happy to partner with SunTec, and will now have a single solution in place covering all aspects of VAT compliance. We will be future-proofed given that any future regulatory changes will be handled by the solution with ease.”

Chetan Desai from Kotak Mahindra Bank recalled that when GST was introduced in India, IT systems were required to be more robust to solve the complexity related to indirect tax compliance while managing high volumes.

“SunTec’s indirect taxation solution has made our compliance adherence seamless. We are glad to have partnered with an extremely credible organisation and congratulate SunTec on their 50th customer win. This is a noteworthy acquisition establishing SunTec as a truly global company.”

Potential investors in the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank have been allowed time till February 1, 2021 for submission of their final offer.

The potential investors include the Centrum Group-BharatPe combine and the UK-based Liberty Group. These investors had submitted their Expression of Interest (EoI) last month.

The bank’s Administrator AK Dixit, in a letter to customers and stakeholders, said: “As you are aware, the bank had issued EoI on November 3, 2020, inviting investors for revival/ reconstruction of PMC Bank.

Also read: RBI extends restrictions on PMC Bank to March

“Initially, four investors had shown their interest. Further process has been undertaken by three of them.”

The Administrator observed that the investors need to have a full understanding of the financial position of the bank before giving their final offer. Accordingly, they are at various stages of conducting detailed due diligence.

PMC Bank was placed under Directions by the Reserve Bank of India (RBI) with effect from the close of business on September 23, 2019 due to its poor financial position and negative net worth.

The Directions were necessitated as RBI came across a nexus between borrowers (promoters of a real estate group) and some bank officials, with the alleged fraud/ financial irregularities pegged at about ₹4,355 crore.

The EoI was floated to identify a suitable equity investor/ group of investors willing to take over management control so as to revive PMC Bank and commence regular day-to-day operations.

As per the EoI, subsequent to commencement of the normal day-to-day operations, it will be open for the investor(s) to convert the bank into a Small Finance Bank by making an application to RBI.

“The investor(s) should ideally bring in the capital required for enabling the bank to achieve the minimum required capital to risk weighted assets ratio (CRAR) of 9 per cent.

“However, the investors may explore the option of restructuring a part of deposit liabilities into capital/capital instruments,” the EoI said.

Also read: Road ahead for co-operative banks

The bank may also approach DICGC for its support for payment up to ₹5 lakh (insured deposits) to depositors under the provisions of the DICGC Act, 1961, it added.

According to the EoI, PMC Bank had total deposits of ₹10,727.12 crore, total advances of ₹4,472.78 crore and gross non-performing assets (NPAs) of ₹3,518.89 crore as on March 31, 2020.

Further, the share capital of the bank was ₹292.94 crore. However, the bank registered a net loss of ₹6,835 crore during 2019-20 and has a negative net worth of ₹5,850.61 crore, as per the EoI.