Category: Banking & Finance

The Reserve Bank of India (RBI) has imposed ₹2-crore monetary penalty on Deutsche Bank for non-compliance with certain provisions of directions relating to ‘Reserve Bank of India (Interest Rate on Deposits) Directions, 2016’.

The central bank, in a statement, said this action is based on the deficiencies in regulatory compliance, and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

“The penalty has been imposed in exercise of powers vested in RBI under the provisions of …the Banking Regulation Act, 1949,” the statement said.

The RBI observed that the statutory inspection of the bank with reference to its financial position as on March 31, 2019, and the Risk Assessment Report pertaining thereto revealed, inter-alia, non-compliance with above-mentioned directions issued by the RBI.

“In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for non-compliance with the directions.

“After considering the bank’s reply to the notice, oral submissions made in the personal hearing and examination of additional submissions, the RBI concluded that the charge of non-compliance with aforesaid RBI directions was substantiated and warranted imposition of monetary penalty,” the central bank said.

Concerned about the low recovery prospects, a large section of fixed deposit holders, especially those in the retail category, are likely to vote against the distribution mechanism in the resolution plans for Dewan Housing Finance Corporation Ltd (DHFL).

“We will vote against the plans and we hope that the stance helps to strengthen our case in the court,” said Vinay Kumar Mittal, a lead petitioner in the court on behalf of the FD holders of DHFL.

“We will not support the plan,” he further said.

FD holders are keen to be repaid in full for their investments in DHFL, while under the distribution mechanism, they will get much lesser, and for many, it would be a negligible amount.

FD holders have admitted claims of about ₹5,500 crore in DHFL.

Four categories

As part of the resolution on distribution mechanism for DHFL, FD holders and non-convertible debenture holders will be divided into four categories based on the value of their admitted claims.

The first category of up to ₹2 lakh will get 100 per cent repayment of the principal under the resolution mechanism.

The second category is between ₹2 lakh and ₹5 lakh, followed by the third category of ₹5 lakh to ₹10 lakh, and the fourth category would be of over ₹10 lakh.

According to Mittal, the recovery for the remaining three categories will be negligible.

Both Piramal and Oaktree have set aside funds for the FD holders in the resolution plans. Voting on the resolution plans is on till January 14.

While the voting share of FD holders, especially retail FD holders, is low in the resolution plan, Mittal is hopeful that it will strengthen their case in court.

The NCLT is hearing a petition of FD holders on DHFL dues and the next hearing is scheduled on January 20.

“We will continue our legal fight,” Mittal stressed.

FD holders are, however, unlikely to join NCD holders after 63 Moons Technologies invited them as well as other NCD holders to join with them in the NCLT Mumbai by filing separate applications for recovery from fraudulent transactions.

Karnataka Bank recorded a net profit of ₹135.38 crore in the third quarter of 2020-21 against a profit of ₹123.14 crore in the corresponding period of 2019-20, registering a growth of 9.94 per cent.

Speaking to BusinessLine after the meeting of the board of directors to consider the unaudited results of the bank for Q3 on Tuesday, Mahabaleshwara MS, Managing Director and Chief Executive Officer of the bank, said factors such as realignment of advances portfolio, growth in the net interest income, and reduction in expenses helped the bank register growth during the tough times affected by Covid pandemic.

The realignment of advances portfolio towards retail and mid-corporate segments – that is up to ₹5 crore and up to ₹100 crore – has helped it grow by 9.75 per cent during the quarter. Though there was a de-growth of around 40 per cent in the above ₹100-crore advances portfolio, the retail and mid-corporate showed a growth of 9.75 per cent. He said retail and the mid-corporate segment was where it got a better yield on advances.

Net interest income

Following this, net interest income (NII) recorded a growth of 20.94 per cent during the quarter. The NII of the bank stood at ₹614.05 crore during Q3 of 2020-21 against ₹507.75 crore in the corresponding period of 2019-20.

He said CASA (current account savings account) deposits of the bank reached 30.07 per cent during the quarter.

During Q3,the net interest margin of the bank stood at an all-time high of 3.26 per cent, and the provision coverage ratio at 80.51 per cent. He said the capital adequacy ratio was at an all-time high of 13.83 per cent during the quarter. The total expenses were reduced by 4.10 per cent during the period.

Terming it as an encouraging result, Mahabaleshwara said the bank has consistently delivered good result in spite of the tough times. The bank had taken some precautionary and corrective measures such as focussing on the bottom line, realignment of the advances portfolio, and cost reduction measures in March itself, he said.

The gross and net NPA (non-performing assets) of the bank stood at 3.16 per cent (4.99 per cent) and 1.74 per cent (3.75 per cent), respectively, during the quarter.

Stating that there has been good recovery in the technically written-off accounts also, he said the bank recorded a recovery of ₹26.86 crore in the technically written-off accounts during the Q3 of 2020-21 against ₹9.43 crore in the corresponding period of the previous fiscal.

Asked about the future outlook, he said the provision requirement would come down, going forward. “So, definitely we should be able to show a very consistent performance going forward,” he added.

On Tuesday, the scrip of Karnataka Bank closed at ₹67.70 on the BSE, up 5.62 per cent, against the previous close of ₹64.10.

FSS (Financial Software and Systems), an integrated payment solutions provider, on Tuesday, formally announced its partnership with India Post Payments Bank (IPPB) to promote financial inclusion among the underserved and unbanked segments.

As part of the collaboration, IPPB will use FSS’ Aadhaar-Enabled Payment System (AePS) services to deliver interoperable and affordable doorstep banking services to customers across India.

“In 2017, FSS got into a relationship with India Post when they set up IPPB. FSS’ AePS solution, combined with IPPB’s expansive last-mile distribution reach, will empower citizens of the country with a range of digital payment products and advance India’s vision towards a less-cash economy,” Krishnan Srinivasan, Global Chief Revenue Officer, FSS, told BusinessLine.

Payment partner

FSS is also IPPB’s preferred payment partner for Bill Payments, UPI, Card Management System, PoSability, Aadhaar Pay, Smart Recon and Switching systems.

Highlighting the benefit of AePS-based cash withdrawal solutions, FSS said in a press releasethat the average time to reach a banking access point in rural and peri-urban areas potentially ranges between 1.5 and 5 hours, compared to the average of 30 minutes in urban areas.

Using FSS’ AePS solution and leveraging its vast network of over 136,000 post offices and 300,000 postal workers, IPPB will serve the unbanked and underbanked population in the rural parts of the country, including nearly 410 million Jan Dhan account holders.

“Having launched AePS services, the bank has become the single-largest platform in the country for providing interoperable banking services to customers of any bank,” J Venkatramu, MD and CEO, India Post Payments Bank, was quoted in the statement.

“Right now, we are talking about cash-in and cash-out using AePS, but the same solution can be used to provide savings products, dispense micro credit, enable merchant payments, offer micro insurance, domestic remittances and other financial products,” said Srinivasan.

Cash withdrawals

He also added that IPPB has crossed the milestone of over ₹8,000 crore cash withdrawals using FSS’ AePS solution as on date since the lockdown.

“We saw a huge volume spike in AePS transactions during the Covid-led lockdown since people didn’t have access to ATMs or were apprehensive to use them,” said Srinivasan. He also added that AePS solutions can also be used by non-financial institutions, such as healthcare companies, to connect their solutions to the masses at the bottom of the pyramid.

FSS, which has 10 more customers in India using its AePS solutions, is looking to tap other countries in the Asia-Pacific region.

Shobha Roy

We entered the infrastructure space through equipment financing in 1989, and over the years, attained market leadership through a pan-India presence and 1,00,000 customers. Along the way, we also entered the project financing business and started offering structured loans, directly and through SPVs, which have supported infrastructure development in India. We have always believed in asset-backed lending; in project financing, too, our model has been to lend against assets/projects.

These are monitored on a continuous basis so that if the need arises, our teams can step in to address the underlying issues and recover the money. The NBFC model has allowed us that flexibility. However, over the last few years, since NBFCs were directed to follow guidelines on provisioning and certain other norms just like banks, we took a conscious decision to reduce our loan book, especially our project portfolio. The focus now is only on equipment financing, primarily through co-lending model.

In keeping with the times, we have also adapted to the digital era by becoming the first company to take our core business of equipment financing online and partnering with a digital platform in order to leverage the opportunities and efficiencies that technology can bring to our sector. So, our business model is to focus on our key area of expertise, while at the same time leverage technology to support and enhance it.

The slump exchange consummated effective October 1, 2019, with the intent to improve the group’s operational efficiency. The idea was to combine the loan book of Srei Infrastructure Finance, which includes structured infrastructure loans, with the loan portfolio of our equipment finance company and consolidate all our loan portfolios into one company.

We had gone through the entire process as per law, and had received approvals from our lead bankers, shareholders, bond holders and other creditors. Unfortunately, because of Covid-19 and the ensuing lockdown, there was a delay in getting approvals from some banks.

It is our misfortune that the Covid-19, which no one could have predicted, affected an orderly and smooth implementation of the slump exchange. However, we are working closely with the bankers and expect an orderly closure in the coming months.

The regulator in its authority can at any time conduct inspections/audits/special audits on any entity regulated by it. It may not be appropriate to assume that special audit would adversely affect the overall sentiment for NBFCs.

For NBFCs, money is the raw material. We are continuously exploring opportunities to strengthen our capital base and remain confident of raising resources. Given our track record and strong franchise, there are potential investors who can be tapped as soon as we are able to realign our repayments with our customers’ cash flows.

The RBI expects the bad loans levels in banks to touch 12.5 per cent under the baseline scenario by March 2021. This is definitely worrying for the NBFC sector as the supply of funds from banks will further dry up as they will continue to be risk-averse. Until and unless NBFCs are able to tie up alternative sources of funds, NBFCs will not be able to grow beyond a point.

The outbreak of Covid-19 created an unprecedented situation which no one could have anticipated. More than half of our borrowers have requested for one-time restructuring of their loans.

Our priority is to accelerate collections and monetise various arbitration awards. Despite the challenges, we expect that given the underlying assets against our loans, we will be in a position to recover our loans over a period of time.

Srei has a net debt of ₹28,000 crore, out of which net bank debt is ₹18,000 crore. In the last 31 years, we have paid more than ₹30,000 crore interest to banks and ₹20,000 crore as principal, and always on time. The pandemic has made things complicated. However, collaterals/securities against our loans, together with our receivables, are sufficient to repay all our liabilities in an orderly fashion.

While there are some greenshoots visible, so far, they have been restricted to only a few sectors. Our borrowers from the infrastructure, construction and mining sectors are still struggling, and the recovery in these segments will take more time. The government and the RBI have taken a number of steps to revive the economy. I hope the Budget will provide the much-needed push to the infrastructure sector which, in turn, will trigger demand at the grassroots.

We hope that 2021 will be a defining year ushering a fresh work culture where arbitration awards will be paid expeditiously, contractor payments get settled in time, and all infrastructure projects come with a ‘deemed clearance’ clause, whereby any approval or permission, if not provided within a deadline, are ‘deemed cleared’ so that no project is held up.

SSA Finserv, a non-banking financial company, has raised $3 million from Blue Ashva Sampada Fund to expand its lending operations. The company will use the funds to expand its presence to Tier-I and II cities and enhance the network.

“The MSME segment forms the mainstay of the economy. The exclusion of a sizeable number of MSMEs from formal lending ecosystems and the credit crunch in the sector has impacted their growth. The investment from Blue Ashva Capital will further reaffirm our commitment to become the preferred financial partner for MSMEs,” SSA Finserv Managing Director and CEO Vikas Agarwal said.

“The MSME sector in the country is instrumental in generating large-scale employment. We are proud to be associated with SSA Finserv in their mission to help MSMEs scale up their business,” said Satya Bansal, Founder, Blue Ashva Capital.

SSA Finserv was founded in June 2019 by Vikas Agarwal. The company offers an array of cashflow-based loan products such as collateral-free business loan, collateral-backed business loan, finance against a work order, sales bill discounting to plug the credit gap for businesses. The NBFC lends ₹10 lakh to ₹1 crore to businesses across manufacturing, service and trading segments with a turnover of ₹1 crore to ₹50 crore.