Dhanlaxmi Bank Q2 net declines 74pc at Rs 3.66cr on soaring bad assets, BFSI News, ET BFSI

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Dhanlaxmi Bank on Friday reported a nearly 74 per cent plunge in its net profit to Rs 3.66 crore in quarter ended in September 2021 as provisions rose due to a spike in bad loans. The private sector bank had posted a net profit of Rs 14.01 crore in the corresponding period a year ago.

Total income of the bank during the July-September period of 2021-22, however, grew to Rs 266.59 crore from Rs 249.66 crore in the same period of 2020-21, Dhanlaxmi Bank said in a regulatory filing.

Interest income was down at Rs 229 crore in Q2FY22 from Rs 243.97 crore in Q1FY21, even as the other income was higher at Rs 37.58 crore, as against Rs 5.69 crore.

Provisions for the bad loans and contingencies for the reported quarter rose to Rs 22.40 crore from Rs 4.29 crore in September 2020.

The bank’s gross non-performing assets (NPAs) rose to 8.67 per cent of the gross advances as of September 30, 2021, from 6.36 per cent in the year-ago same period.

However, sequentially from gross NPAs were down compared to 9.27 per cent in June 2021 quarter. Value-wise, the gross NPAs were worth Rs 604.15 crore, up from Rs 448.72 crore.

Net NPAs too rose to 4.92 per cent (Rs 329.55 crore) from 1.66 per cent (Rs 111.45 crore).

“During the quarter ended September 30, 2021, NPA for which provision had already been made amounting to Rs 7,786 lakh has been technically written off,” the bank said.

Provision coverage ratio (including technical write off) as of September 30, 2021 is 74.18 per cent, it added.



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Paytm signs up over 100 institutional investors for IPO

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Ant Group-backed fintech firm Paytm said it has allocated shares worth ₹82.35 billion ($1.11 billion) to more than 100 institutional investors,including the government of Singapore, ahead of what is expected to be India’s largest stock market listing.

Paytm’s offer of up to ₹183 billion, which was increased last month from ₹166 billion, garnered interest from 122 institutional investors who bought more than 38.3 million shares for ₹2,150 apiece, according to a regulatory document dated November 3.

BlackRock Global Funds, Canada Pension Plan Investment Board and Abu Dhabi Investment Authority were among the investors.

Launched a decade ago as a platform for mobile recharging, Paytm grew quickly after ride-hailing firm Uber listed it as a quick payment option. Its use swelled further in 2016 when a ban on high-value currency bank notes in India boosted digital payments.

Also read: We have priced the IPO rationally, says Paytm chief

Paytm has since branched out into services including insurance and gold sales, movie and flight ticketing, and bank deposits and remittances.

The company’s offering will open on Monday and top investor Ant Financial, with a 27.9% stake in Paytm, plans to sell shares worth ₹47.04 billion.

Several companies including Paytm have tapped capital markets this year in a fund-raising frenzy on the back of record highs hit by the Indian stock market, which has outperformed Asian peers so far this year.

In India, 157 companies including TPG-backed Nykaa, Oyo Hotels and Rooms and online insurance aggregator Policybazaar have raised $17.22 billion via IPOs this year as of October 31,compared with $8.54 billion raised by 49 companies in the same period last year, according to Refinitiv data.

Paytm’s IPO is likely to be the biggest in the country’s corporate history, breaking a record held by Coal India Ltd, which raised ₹150 billion more than a decade earlier

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Whistleblowers raise loan evergreening issue at IndusInd arm, BFSI News, ET BFSI

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Acting as whistleblowers, several people, including a group of senior employees of the IndusInd Bank arm, Bharat Financial Inclusion (BFIL), have alerted the Reserve Bank of India (RBI) and the board of the private sector lender about lapses in governance and accounting norms to allegedly ‘evergreen’ loans running into thousands of crores since the outbreak of Covid-19.

According to them, if the IndusInd management is unable to quickly correct the practice of “adjusting new loan money with overdues from earlier loans”, the subsidiary BFIL would eat into the financials of the parent. These alleged transactions to dress-up the books have damaged the micro-lending business built over the years and could even trigger political backlash, the group warned in at least two emails to IndusInd’s Bank CEO Sumant Kathpalia, some independent directors and RBI officials between October 17 and 24.

IndusInd took over the micro-finance lender BFIL – formerly SKS Microfinance – in a stock deal in March 2019.

Kathpalia did not respond to queries from ET. An official of a PR agency hired by the bank said, “The bank has received complaint from anonymous person(s). The bank has a well established policy to deal with such matters and the veracity of the allegations/complaints are being assessed. While management review is in progress, the bank has yet not come across any material findings that warrant immediate action on any count (sic).”

Two persons familiar with the developments said that on October 14, there was a separate whistleblower complaint from an ‘outsider’ to RBI, saying that suggestions to set up risk management and audit committees for BFIL were ignored as the unlisted micro-lending subsidiary of IndusInd was not required to meet Clause 49 conditions of the listing agreement. It also talked about “process lapses” in extension of loan contracts, cash disbursement and accounting practices.

BFIL’s Former Non-Exec Chair Raised Red Flags
Micro-lending companies disburse loans through banking channels but collect cash while recovering loans. Cash collection for most micro-finance companies dropped due to the pandemic, particularly during the second wave.

Significantly, a month before the October 14th whistleblower complaint, non-executive chairman of BFIL M R Rao stepped down. In his September 15th resignation letter to board members, Rao, who had been the CEO of BFIL (SKS), said, “…I am aware that RBI has raised issues with respect to BFIL particularly the 80,000 loans given in May 2021, without customer consent. This is a point on which I expressed deep concern in the board and in fact demanded a third-party audit too. To me it appears to be not a process lapse but a deliberate act to shore up repayment rates. I had warned the board too about the serious consequences…”

Rao did not respond to ET’s queries and declined to confirm whether he was among the whistleblowers. S Dilliraj, former president of the company who has worked with Rao for years, also declined to comment. Rao has asked the board to cancel the non-compete agreement he has with the company.

A person who identifies and declares himself as a ‘whistleblower’ before RBI expects a degree of legal protection. Also, the regulator does not disclose the identity of the whistleblower.

While an IndusInd Bank official said that the bank had stepped up provisioning on its portfolio of micro loans, one of the whistleblower emails alleged that two senior officials of BFIL, who were primarily responsible for hiding non-performing loans, have been threatening employees and tracking their call records to restrain them from talking about the matter. Another email said that the government’s ECLGS scheme, which was intended to provide emergency line of credit in the wake of the pandemic, was used to “adjust arrears instead of giving credit to customers.”



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SBI expects uptick in capacity utilisation; steel and Iron to contribute more, BFSI News, ET BFSI

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SBI Chairman Dinesh Kumar Khara sees significant improvement in India Inc’s capacity utilisation by the next quarter saying that major additions are expected in sectors like iron, steel, oil and metals.

“There is a clear availability of demand. Demand (is) coming in and capacity augmentation is happening. And I hope by the end of the current quarter or next quarter, there should be significant improvement in capacity utilisation…The major (capacity addition) is in the iron and steel sector. Oil companies might also start availing working capital limits, and the metal sector is also seeing an uptick, so capacity addition is expected in that sector,” said Dinesh Khara, Chairman SBI in a virtual press conference following SBI’s Q2 financial results.

Khara shared that the lender has currently unutilised term loans to the corporate to the extent of 27 per cent,and while working capital limits in large corporates is unutilised to the extent of 50 per cent. Khara said it is not possible to articulate when corporate book growth will come back but he added he expects unutilised capacity to reduce to roughly 30 per cent in the subsequent quarters.

SBI Chairman also said the lender is not losing any such business to mutual funds due to prevailing excess liquidity in the system, indicating corporates in the present low interest rate environment would prefer banks when scaling up their investments.



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SBI chief, BFSI News, ET BFSI

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Mumbai: SBI chairman Dinesh Khara has said that the bank has full confidence in the judiciary and that former SBI chairman Pratip Chaudhury would be released unconditionally soon. He also said that the banking community, through the Indian Banks’ Association, has taken up the matter with the government.

“The arrest of Mr Chaudhury is extremely unfortunate. There have been several reactions in the public space of the banking community as well as previous chairmen. It appears that an opportunity was not given to him to be heard before the arrest. We have utmost faith in the country’s judicial system and are confident that he will be released unconditionally at the earliest,” Khara told reporters here on Wednesday.

Banking sources said that the complainant in the same case had filed a false FIR against the resolution professional (RP) who had been appointed to take charge at the defaulting company. This had resulted in a landmark judgment that said a case against the RP can be filed only with the Insolvency and Bankruptcy Board of India (IBBI).

Khara denied that there were any irregularities in the sale of the loan by SBI. “As far as SBI is concerned, we adhere to the best practices in corporate governance and there has been no irregularities in the instant case and the prescribed rules and process were followed by the bank in dealing with this account.” Khara indicated that the decision on the sale of the NPA was unlikely to have been taken by Chaudhury. “Issues of this magnitude are invariably dealt with at a local level and the top management of the bank, including the chairman, are not involved in decision making. We have got the structure in place and we are confident that people across the hierarchy can take decisions in such matters,” Khara said.

Banking sources said that the complainant in this case was politically connected. They said that it appeared to be a premeditated case as most of the higher courts are on vacation for Diwali.

Meanwhile, SBI sources said that the valuations mentioned in the order are irrelevant as the properties were not sold by the bank. They said that the bank had sanctioned a term loan of Rs 24 crore and a cash credit limit of Rs 1 crore was sanctioned in 2008 and the loan had to be restructured within a year itself. Despite restructuring, the loan turned into a non-performing asset in 2010. This prompted the bank to send a recall notice for Rs 34 crore in 2012 and a suit was filed in the debt recovery tribunal in 2013 for Rs 40 crore.

As the bank was not successful in attaching the property under the Securitisation Act, the loan was sold to Alchemist Asset Reconstruction Company (ARC) for Rs 25 crore in 2014. The ARC too could not recover the loan and finally invoked the IBC.

The promoters had filed an FIR against the RP, who was arrested. It was in this case that the landmark order was passed requiring complaints against the RP to be filed only with the IBBI. Banking sources said that both NCLAT and the Supreme Court have passed strictures against the promoters.



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Former SBI chairman hospitalised after spending a day in jail, BFSI News, ET BFSI

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Jaipur, Former SBI chairman Pratip Chaudhary, jailed in the loan scam, has been admitted to Jawahar Hospital after he complained of restlessness, officials said on Thursday morning.

“He was brought to Jawahar Hospital on Wednesday evening after he complained of restlessness and hypertension in jail,” they added.

Chaudhary was jailed on Monday evening after the CJM Court of Jaisalmer ordered him to be sent to judicial custody for 14 days in the loan scam case.

Jawahar Hospital’s Principal Medical Officer JR Panwar said that Chaudhary is suffering from hypertension and undergoing treatment.

The former SBI chairman has been accused of misusing his position to sell Jaisalmer’s Hotel Fort Rajwada against the rules.

The CJM Court of Jaisalmer issued an arrest warrant against him.

On Sunday, the Jaisalmer Police nabbed him from Delhi and brought him to Jaisalmer.

The following day, the court ordered to send him to judicial custody for 14 days.

–IANS

arc/shb



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H1FY22 report: Poor corporate loan growth, thin margins hit big banks’ NIIs

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The PNB management attributed the drop in NII to the one-off impact of a judicial embargo on bad-loan recognition during the September quarter of FY21.

As loan growth in the corporate segment slowed and low interest rates put a lid on margins, most large banks saw their net interest incomes (NII) growing slower during the first half of FY22. Some public sector banks (PSBs) even saw their NIIs fall on a year-on-year (y-o-y) basis during Q2FY22.

Deposit rate cuts have been less frequent so far this year and with lending rates continuing to trend down, NIIs have come under pressure, bankers said.

Punjab National Bank (PNB), Yes Bank, Indian Bank and Canara Bank were among the lenders who saw their NIIs fall during the September quarter. PNB’s NII was down 25% y-o-y, with the net interest margin (NIM) falling 30 basis points (bps) sequentially and 80 bps y-o-y.

The PNB management attributed the drop in NII to the one-off impact of a judicial embargo on bad-loan recognition during the September quarter of FY21.
Also, the Delhi-based bank said it had to price loans in the corporate and micro, small and medium enterprises (MSME) segments downwards.

SS Mallikarjuna Rao, MD & CEO, PNB, told investors that the lender has reduced the pricing in the MSME segment aggressively from August onwards. “So two months of an impact was roughly around Rs 150 crore in action. Then there was an aggressive repricing in the short-term corporate book where people take WCDL (working capital demand loans). So that book is more than `50,000 crore, where repricing aggressively has taken place,” Rao said.

Private banks put up a relatively better show on the core income front without bucking the overall downward trend. Axis Bank’s NII grew 7.8% y-o-y in Q2FY22, as against 20% in Q2FY21 and 11% in Q1FY22.

HDFC Bank, which saw its NII growth improve to 12% y-o-y in Q2FY22 from 9% in the previous quarter, still undershot its year-ago growth rate of nearly 17%. The largest private lender’s management said the change in its loan mix in favour of a larger wholesale book was responsible for the muted NII growth.

Srinivasan Vaidyanathan, chief financial officer and group head – finance, HDFC Bank, said that certain segments where the bank grew over the last 18 months were low-risk segments. “That means with a lower price that comes with it,” he said, adding that the contribution of retail loans is now on the rise. “…even in this quarter while we have had the retail growth coming up, …[it] will take a couple of quarters for the average to catch up with the overall base,” he said.

Kotak Mahindra Bank registered an NII growth of 3.2%, slower than 5.8% a quarter ago and 16.8% a year ago, as the lender saw loan growth picking up only around the end of the July-September quarter. “While at the period-end, you see the loan growth happening, a large part of it is seen around the end of the quarter. So it doesn’t really bring me NIIs for this period,” said Jaimin Bhatt, president & group CFO, Kotak Mahindra Bank.

Moreover, a lot of the incremental credit growth during the last year has happened in home loans and other secured loan segments, where yields are lower. “If you look at the higher-yielding loans, like unsecured personal loans or credit cards or some of the agri loans, they’ve actually de-grown. So some of the mix change has also impacted the NII,” Bhatt said.

As the busy season progresses in the second half of FY22, banks expect their core earnings to improve. Both PNB and Kotak Mahindra Bank said that their NII performance will be better in the next quarter as earnings from festive-season business start to flow in. The central bank’s liquidity withdrawal exercise could also help banks price credit better.

“I’m expecting improvement in the next quarter because … as the liquidity is slowly being removed by the RBI and I’m expecting them to bring it down from Rs nine lakh crore to Rs 2.5 lakh crore by December second week,” PNB’s Rao said. “So our pricing will be moving in a better manner in Q3 and Q4,” he added.

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‘Continuing with monetary stimulus likely to be riskier for economy’

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Amandeep Singh Chopra, group president, UTI AMC

By Malini Bhupta

It’s time to pull back on the stimulus unleashed by the Reserve Bank of India at the start of the pandemic. In an interview with Malini Bhupta, UTI Asset Management Company’s Group President and Head of Fixed Income, Amandeep Singh Chopra, said that most of the benefits of monetary stimulus have played out and continuing with it could be riskier for the economy. Edited excerpts:

The central bank has done a lot to support the economy by keeping rates low and pumping in enough liquidity in the system. Do you believe that it is time to reverse the policy stance as spillover effects could lead to problems?
Growth is now well-entrenched and even the impact of the second wave on the economy is milder. A large part of the benefits which one saw from monetary stimulus played out during the worst phase of the pandemic in 2020 and first half of 2021. Continuing with it at the present stage could be riskier for the economy. One could argue that there could be another wave, but given the vaccination drive so far, the impact may be much milder on the economy. We have seen negative real interest rates when growth was affected, so interest rates were kept low. But we cannot run sustained negative real interest rates, particularly when growth is looking up. India will show one of the highest year-on-year growths into FY23. With so much liquidity and low rates along with a surge in demand, [it] can spill over into significant inflation concern. And this concern is taking centre-stage for the markets … There is a strong argument that the present policy has to reverse…

Do you expect RBI to change stance in December?
It seems there may be additional elements of normalisation in December. The central bank began reversing its easing cycle in the same sequence in reverse, as it gave the stimulus. They are already implementing strategies to reduce the liquidity in the banking system and gradually move the overnight rate up. There’s a possibility that RBI could start narrowing the policy corridor from the current 65 basis points in the next stage. I don’t expect a change of accommodative stance yet and maybe they may want to see two-three quarters of sustained growth.

Inflation is expected to be persistent. Do you feel that loose global monetary policy will result in risks and spillover effects?
We have seen unprecedented expansion of central bank balance sheets. It is not sustainable and risks do build up. The Fed has expanded its balance sheet more than what was done after the global financial crisis. Domestic liquidity is even higher than the post-demonetisation period. These are significant data points, and withdrawing excess liquidity is not easy without affecting asset prices and creating volatility. This risk is accentuated if you see a concerted global liquidity withdrawal by most central banks as they follow similar strategies; the cumulative impact will be large.

A lot has happened in the debt segment from the point of view of investors. How has it impacted investor sentiment?
We had good growth for 10 years when it came to debt funds. Every market goes through its own cycles. In 2018-19, there was an unprecedented credit down cycle, which impacted a certain segment of funds and led to change of investor preferences. Additionally, a fair amount of regulatory changes have taken place. Looking ahead, the industry is in a better position and if adequate diversification is followed by investors, the net impact of one product category not doing well is somewhat offset by others. I believe investors need to look at debt funds from a longer perspective and should be patient through such cycles; the returns from a 5-10 year holding period can be quite attractive.

Do you see corporates coming to debt markets?
Due to the pandemic-led economic slowdown, corporates focused on deleveraging and refinancing at lower rates. There has been a very conservative capital expansion behaviour by the corporate sector. Banks are flush with liquidity and they have been able to meet the reduced funding requirement of corporates at competitive rates. So the supply of bonds has been limited and easy liquidity saw compression in spreads. Going ahead, this could change when the corporate sector begins expansion and gets into a capex cycle. That could increase the supply of bonds, which we expect as economic growth sustains its momentum.

Do you expect the government to meet its fiscal deficit target or could it do better than the projection?
There was a concern on a possible slippage, but the government’s revenue mobilisation has been ahead of estimates, which gives the government leeway to definitely meet the 6.8% (BE) fiscal deficit number and maybe lower it. If the non-tax revenues meet the estimated target then the number could be even better. This could be positive news for bond markets on the fiscal side.

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Credit offtake pickes up over the last two fortnights

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Credit offtake picked up steam in the last two fortnights ending October 22 with Reserve Bank of India (RBI) data showing a growth of ₹94,773.53 crore. This comes in the backdrop of the ongoing festive season.

In the latest fortnight ended October 22, 2021, banks saw credit offtake of ₹34,345.49 crore. In the preceding fortnight ended October 8, 2021, credit offtake was ₹60,428.04 crore, as per RBI’s data on sectoral deployment of credit.

Economic activities rise

Dinesh Kumar Khara, Chairman, State Bank of India, said, “Credit demand appears to be on the rise with increasing economic activities across India.”

“Corporates too have started planning for future investments which will create demand for credit going forward,” he said, adding that SBI will see an overall credit growth of 9–10 per cent in FY22.

Also see: RBI to identify vulnerabilities in business models of supervised entities’

Khara underscored that the bank could disburse home loans aggregating ₹17,000 crore last month despite SBI’s home loan rate not being the lowest in the industry.

Deposit growth varies

When it comes to deposit growth, there was a divergent trend in the banking system in the two reporting fortnights.

While deposits in the latest reporting fortnight declined by ₹38,554.31 crore, the preceding fortnight saw a robust accretion of ₹1,54,515.33 crore.

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Infibeam’s CCAvenue brings TokenPay for RBI-compliant ‘saved card transactions’

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Infibeam Avenues Ltd’s digital payments platform, CCAvenue has launched an interoperable solution ‘TokenPay’ for businesses/merchants to comply with Reserve Bank of India’s (RBI) data security norms.

As the “saved cards transactions” are taking a hit, due to RBI directive prohibiting merchants, businesses, payment aggregators, and acquiring banks from storing customers’ credit/ debit /prepaid card information, IAL’s CCAvenue has developed a multi-network tokenisation solution to work across all major card networks.

CCAvenue’s ‘TokenPay’ solution works across all major card networks, including MasterCard, RuPay, and Visa.

Also it would help merchants enable their end-customer to continue experiencing the saved card transactions with enhanced security and allow merchants to remain RBI guideline compliant with its online data storage norms.

Tokens

Network tokenisation is the process of substituting the 16-digit static card number with a string of randomly generated numbers called ‘token’, which is virtually impossible to decrypt.

Also, since the framework ensures that a customer’s card information rests only with the customer, the card network, and the issuing bank, it minimises the risk of card data leaks and fraudulent activities significantly.

“In the absence of tokenisation, customers will have to enter their card information manually every time they transact online. This can increase the probability of manual error leading to transaction failures and a bad customer experience. Using CCAvenue’s TokenPay, businesses can generate, process and manage tokens with customers’ consent and continue offering a secure and frictionless online transaction experience,” said Vishwas Patel, Executive Director, Infibeam Avenues and Founder of CCAvenue.

As per the new RBI recommended framework, only card networks and card issuers are permitted to store customer card information. “Thus, the new system authorises businesses/merchants to use only ‘tokens’ to continue offering the saved card experience during online payments. All stakeholders are required to be fully compliant with the tokenisation framework by December 31, 2021,” a company statement said.

Merchants using other payment gateways can also tokenize cards through CCAvenue and continue using their preferred gateways to process token-based transactions, the statement added.

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