Category: Banking & Finance

R Sivaraman

The Chinese gang that was involved in operating online loan apps had also procured 2,000 SIM cards using fake Indian identity papers, sources said.

The sleuths of Central Crime Branch, Greater Chennai City Police, intensified its probe into alleged links of arrested Chinese nationals with Indians. After searching for the suspects for nearly 20 days, the special team busted clandestine operations of a call centre, which was run by two Indian nationals in Bengaluru, who claimed to be directors of the firm.

Subsequently, police arrested two Chinese nationals who were behind them, and unearthed the further involvement of Chinese nationals in operating illegal online loan apps that offered cheaper loans and later harassed debtors demanding payment of exorbitant rates of interest. The prime accused Hong was operating from China, while the other two, Xioa Yamao and Wu Yuanlun, were staying in Haralur, Bengaluru. Frequent instructions were passed on from China.

Pandemic a setback

Sources said the prime accused Hong and others came down in January before the onset of the pandemic. They had suffered a setback due to the pandemic situation. They were operating the call centres, engaging locals as telecallers. The call centres were found registered as non-banking finance firms, which are permitted to work in the micro financing sector. The directors of the firms are Indians, but the operations were entirely controlled by these Chinese nationals. The directors were paid by them and telecallers were engaged by the directors. The telecallers were given the target – they should get at least 10 customers; if they fail to do so, they would be sacked by that month-end.

A senior police officer said: “One of the accused had been admitted in a hospital for treatment of Covid-19. We are investigating his whereabouts. So far we seized two laptops, six mobile phones, two Chinese passports, ATM cards and incriminating documents. Further investigation is on to identify their Indian contacts and foreign links. In the course of our investigation, we also learnt that the gang had procured over 2000 SIM cards for illegal operation – that could be based on Indian identities through a call centre in the city.”

“On analysis of various electronic records, we found that they had cheated and harassed more than 25,000 victims. The estimated value of the moneythey swindled is ₹300 crore. Two bank accounts were frozen and further investigation is on to the destination of money proceeds and links. After establishing the role of accused, we may take the next course of action to pursue the accused who were behind this by sending a letter rogatory. The case will likely be investigated by central agencies such as the Enforcement Directorate or others since it has international ramifications,” said sources.

With the clock ticking on the resolution of debt-ridden Dewan Housing Finance Corporation Ltd (DHFL), Kapil Wadhawan, former promoter, reiterated his offer of 100 per cent principal repayment (or ₹91,158 crores) to all lenders as opposed to the next highest bid of ₹38,250 crore.

This offer comes even as lenders are currently in the midst of a voting exercise to decide who among the four bidders – Oaktree Capital Management, Piramal Capital and Housing Finance Ltd (PCHFL), Adani Group and SC Lowy – gets to acquire DHFL.

The erstwhile promoter of DHFL wondered why key stakeholders involved in DHFL’s resolution process were giving preference to proposals entailing 70 per cent haircut to the lenders vis-a-vis his settlement proposal that provides for 100 per cent repayment to all the lenders.

Wadhawan claims he will repay ₹65,000 crores within 7 years as opposed to ₹38,000 crores reportedly payable (by other bidders) in 10 years.

He also offered to convert a part of the debt into equity, thus making the creditors, including FD holders and retail NCD holders, majority shareholders of DHFL, to ensure that not only are they repaid full principal amount, but are also entitled to the equity upside once the company revives and continues business as usual.

A clutch of small finance banks, which are preparing to launch their initial public offerings (IPOs), are hoping to get an extension in their listing deadline.

Sources close to the development said that at least some small finance banks have approached the Reserve Bank of India on the issue.

“The Covid-19 pandemic and lockdown disrupted a lot of plans, and almost everyone has been working for the last few months to get business back on track. SFBs are working on their listing plans, but are hoping that the RBI may extend the deadline for them,” said a person familiar with the development.

RBI guidelines

The Reserve Bank of India (RBI) guidelines require small finance banks to list within three years of their net worth reaching ₹500 crore.

Of the 10 entities that had started SFB operations, only three, including AU,Ujjivan and Equitas, have been listed so far.

Others like Suryoday SFB, Jana SFB and ESAF SFB are working on their IPO plans.

Suryoday SFB recently received SEBI approval to float an IPO.

Similarly, Ajay Kanwal, Managing Director and CEO, Jana SFB, had recently said that the lender was working on plans to list. The IPO could be targeted for March 2021.

“The banks, which have fleshed out their IPO plans, are likely to go ahead with it, while others are hoping to get an extension,” said another source, pointing out that this is a regulatory compliance that must be met by all small finance banks.

Another expert noted that the recent report of the Internal Working Group of the Reserve Bank of India to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks had also highlighted the issue.

IWG recommendations

The IWG, in its recommendations, had said that SFBs and payments banks may be listed within ‘six years from the date of reaching net worth equivalent to prevalent entry capital requirement prescribed for universal banks’ or ‘10 years from the date of commencement of operations’, whichever is earlier.

“The RBI has sought comments of stakeholders and members of the public by January 15, and it is hoped that they would review the deadlines,” said the source.

Our Bureau

The trajectory of total infrastructure credit in India (banks and infrastructure finance non-bank companies) slowed to 1 per cent sequential growth in H1 (April-September) FY21 in the backdrop of Covid-induced disruption, according to credit rating agency ICRA.

While the infrastructure credit grew 7 per cent in FY20 (19 per cent in FY19) to ₹22.5-lakh crore as on March 31, 2020, it increased marginally to ₹22.6-lakh crore as on September 30, 2020, as per the agency’s study.

Manushree Saggar, Vice-President and Head – Financial Sector Ratings, ICRA, said: “The tepidness in infrastructure credit in H1 FY21 was primarily due to the sequential de-growth (10 per cent) in banking sector credit to the infrastructure segment, though NBFC-IFCs continued to grow at a modest sequential pace of 12 per cent in this period.

“However, the growth was majorly led by disbursements related to liquidity package announced by the government for cash-strapped discoms.”

As per the study, the share of NBFC-IFCs (non-banking finance company – infrastructure finance company) in infrastructure credit has increased to 53 per cent as of September 30, 2020, from about 38 per cent five years ago.

The decline in share of banks during past few years was largely attributable to the conversion of their exposures to state distribution companies into bonds and subdued lending amid asset quality issues and capital constraints, it added.

At the same time, portfolio for NBFC-IFCs continued to grow though largely at the back of growth in the public sector NBFC-IFCs.

Asset quality

As for asset quality, ICRA assessed that the NBFC-IFCs witnessed a deterioration during FY16-FY18, on the back of severe stress in the thermal power sector.

However, the trend over past three years suggested receding asset quality pressures, particularly up to onset of Covid-induced disruption.

The agency said the gross stage 3 (credit impaired financial assets) percentage had eased to 5.7 per cent as on March 31, 2020, from 7.3 per cent as on March 31, 2018, supported by controlled fresh slippages and some resolution in legacy stressed assets.

The gross stage 3 percentage for NBFC-IFCs eased further to four-year low of 5 per cent as on September 30, 2020, partly aided by limited forward bucket movement amid the prolonged moratorium period.

Further, while more clarity on the impact of Covid-induced disruption on asset quality trajectory will emerge over the coming quarters, most infrastructure sub-sectors remained relatively resilient from debt servicing perspective in lockdown conditions supported by factors such as must-run status of renewable energy projects, healthy recovery in toll collections, liquidity support to discoms etc.

Incremental stress limited

ICRA noted that most freight indicators have reverted to pre-Covid levels as economy revived, road traffic and toll collections have registered marked growth for three consecutive months on year-on-year (y-o-y) basis, electricity and fuel consumption is reverting to y-o-y growth trend, and construction activity has picked up in recent months.

Hence, the incremental stress in infrastructure sector due to Covid-induced disruption is expected to be limited, and the proportion of portfolio of IFCs likely to be restructured is expected to be in low single digits.

Nonetheless, any stress build-up in the near to medium term from spillovers due to the region-specific headwinds faced by the renewable energy sector remains a monitorable, the agency said.