Category: Banking & Finance

RBI panel favours sale of stressed assets by lenders at early stage

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A committee appointed by the Reserve Bank of India has proposed that sale of stressed assets by lenders must be done at an early stage to allow for optimal recovery by asset reconstruction companies.

The committee also recommended that if 66 per cent of lenders by value decide to accept an offer made by an asset reconstruction company (ARC), it should be binding on the remaining lenders and it must be implemented within 60 days of approval.

“Data shows that the performance of the ARCs has been lacklustre, both in terms of ensuring recovery and revival of businesses. Banks and other investors could recover only about 14.29 per cent of the amount owed by borrowers in respect of stressed assets sold to ARCs during the FY 2004-FY 2013 period. Similarly, data shows that approximately 80 per cent of the recovery made by ARCs has come through deployment of measures of reconstruction that do not necessarily lead to revival of businesses,” the committee said.

Online platform mooted

Recognising the need for transparency and uniformity of processes in sale of stressed assets to ARCs, the Committee feels that an online platform may be created for sale of stressed assets. Infrastructure created by the Secondary Loan Market Association (SLMA) may be utilised for this purpose.

Further, considering the critical role played by the reserve price in ensuring true price discovery in auctions conducted for sale of stressed assets, the Committee recommends that for all accounts above ₹500 crore, two bank-approved external valuers should carry out a valuation to determine the liquidation value and fair market value and for accounts between ₹100 crore and ₹500 crore, one valuer may be engaged.

The panel has suggest that the SARFAESI Act may be expanded to allow ARCs to acquire ‘financial assets’ not only from banks and ‘financial institutions’ but also from such entities as may be notified by the Reserve Bank.

“Under these proposed powers, Reserve Bank may consider permitting ARCs to acquire financial assets from all regulated entities, including AIFs, FPIs, AMCs making investment on behalf of MFs and all NBFCs (including HFCs) irrespective of asset size and from retail investors,” it added.

The committee recommended that ARCs should be allowed to sponsor SEBI-registered AIFs with the objective of using these entities as an additional vehicle for facilitating restructuring of the debt acquired by them.

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Banks need to design appropriate governance standards and implement internal controls: Deputy Governor, RBI

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Banks, as repositories of public resources, need to design appropriate governance standards and implement internal controls to be worthy of the public trust, according to MK Jain, Deputy Governor, Reserve Bank of India.

“It is also well-acknowledged that shareholders are driven by maximisation of the returns on their capital. But in banks, this objective is realised largely through the resources raised from depositors.

“…Being highly leveraged entities and with their inter-connectedness, there must be separation between ownership and management so that they operate on professional lines,” Jain said at an event organised by a financial daily.

He emphasised that banks enjoy the privilege of mobilising uncollateralised public deposits and operating with high levels of leverage.

“The negative externalities of banks and NBFCs are also much higher than those for any non-financial entity due to their inter-connectedness. That’s why, globally, banks are regulated and supervised very closely,” Jain said.

Tools for proactive off-site and on-site supervision

For continuous engagement with supervised entities (SEs), a web-based and an end-to-end workflow automation system will be launched shortly, the Deputy Governor said.

This has various functionalities including inspection, compliance and incident reporting for cyber security, etc. with a built-in remediation workflow, time tracking, notifications and alerts, Management Information System (MIS) reports and dashboards.

Data capabilities

Jain underscored that the data capabilities of the RBI are in the process of being further upgraded through the revamped data warehouse – the Centralised Information Management System (CIMS). This is in addition to Central Repository of Information on large Credits (CRILC) and Central Fraud Registry (CFR).

The data capabilities will encompass tools and applications for AI-ML, data visualisation and big data analytics.

As part of the forward-looking assessment of stress, the Deputy Governor noted that various supervisory tools have been designed to identify vulnerable borrowers who have less ‘distance to default’ as well as vulnerable banks based on various parameters. Early warning systems and supervisory stress testing have been made an integral part of prudential supervision.

“Many thematic assessments are also being regularly carried out to identify system-wide issues and assess ‘conduct’ practices for taking corrective actions. Data dump analysis is also much more extensively used as part of our transaction testing exercise,” he said.

Jain felt that agile and creative thinking is going to be essential in staying ahead of the digital curve when it comes to the evolution of financial services.

The Deputy Governor said, “Financial institutions would need to experiment with new technologies and tailor their products and services in alignment with business strategy and competitive considerations as well as in compliance with existing laws and regulations.”

“Leveraging on technology will also require enhanced financial investments, building expertise and capacities, proper resource allocation and further strengthening of the operational capabilities.”

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Union Bank of India Q2 profit surges 195%

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Union Bank of India’s second quarter standalone net profit soared 195 per cent year-on-year (y-o-y) to ₹1,526 crore against ₹517 crore, supported by healthy growth in non-interest income.

During the reporting quarter, the bank recovered ₹1,650 crore from the resolution of the DHFL account.

The public sector bank made 65 per cent provision towards its ₹2,558 crore exposure to the SREI group.

Net interest income was up 8.52 per cent y-o-y to ₹6,829 crore (₹6,293 crore in the year-ago period).

Non-interest income, comprising core fee-based income, treasury income and recovery in written-off accounts, jumped about 65 per cent y-o-y to ₹3,978 crore (₹2,406 crore).

Credit growth

Rajkiran Rai G, MD & CEO, emphasised that the bank will end FY22 with a credit growth of 6-8 per cent as demand is expected to pick up in the second half of the year.

The bank has about ₹50,000 crore of corporate loan sanctions and unutilised limits, he said.

Domestic advances declined about 2 per cent y-o-y to ₹6,19,137 crore. Overseas advances were down about 18 per cent y-o-y to ₹15,446 crore.

Rai said the bank has upped the NPA recovery target to ₹16,000 crore from ₹13,000 crore as recoveries in the first half of FY22 had already crossed ₹10,000 crore.

GNPA position improved to 12.64 per cent of gross advances as of September-end 2021 against 13.60 per cent in the preceding quarter.

Net NPAs position, too, improved a shade to 4.61 per cent of net advances vis-a-vis 4.69 per cent in the preceding quarter.

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Shiba Inu, Dogecoin most-traded cryptos in India

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Meme coins ruled the roost when it comes to the most-traded cryptocurrencies on Indian crypto exchanges over the past six months. Elon Musk-backed Dogecoin and its trending rival Shiba Inu surpassed the likes of Bitcoin, Ethereum and MATIC, in terms of trading volume in India between April and October.

Overall trading volume

CoinSwitch Kuber told BusinessLine that over the past six months, Dogecoin contributed 13.76 per cent to its overall trading volume, followed by Ethereum at 6.06 per cent, Bitcoin at 6.04 per cent, Internet Computer at 5.08 per cent and Polygon’s MATIC at 4.52 per cent.

The cryptocurrency exchange has not listed Shiba Inu yet.

‘Most-popular coin’

Sharan Nair, Chief Business Officer, CoinSwitch Kuber, told BusinessLine: “Interestingly, Dogecoin, a popular cryptocurrency born out of a meme, has been on an uptrend, rallying in the last six months, even surpassing widely used cryptos, Bitcoin and Ethereum.

“A flurry of tweets by global leaders, including Elon Musk, have helped strengthen Doge’s popularity. People are now starting to look at real-world utility of Dogecoin, leading to it becoming the most-popular coin in the last few months.”

Another top cryptocurrency exchange, WazirX, saw nearly 50 per cent of its trading volume coming in from ‘Dogecoin Killer’ Shiba Inu over the past one week.

On a Change.org petition demanding Shiba Inu to get listed on Robinhood, the cryptocurrency rallied on WazirX, clocking in transactions worth over $320 million over the last few days.

The meme coin founded in August 2020 by pseudonymous Ryoshi started seeing an uptick in global trading volumes when Ethereum co-founder Vitalik Buterin burned nearly 90 per cent of his Shiba Inu holding worth over $6 billion, creating a dearth of supply in May. Apart from this, the other highest traded cryptocurrencies on WazirX included Bitcoin, Dogecoin, WRX (WazirX’s own token), MATIC and Ethereum. Between April and October, WazirX reported $27.12 billion worth of transactions. Shiba Inu started gaining momentum only in the past three to four months.

‘Great investment option’

Speaking on the popularity of Ethereum and Bitcoins, Nair added: “Along with hosting the Ether token, Ethereum is also leading innovation by being a foundation for a variety of applications such as decentralised finance (DeFi) and non-fungible tokens (NFTs), making it a great investment.

“Third in this list is Bitcoin, which, of course, continues to witness high volumes from investors due to it being the biggest and the most trusted crypto asset. Ethereum and Bitcoin’s technological superiority has been a key driver in its ever-growing popularity.”

Nischal Shetty, founder and CEO, WazirX, said: “The growth of Shiba Inu shows the power of being a community-driven project. In recent months, SHIB has been in the news for being listed on more exchanges, thereby increasing liquidity and access to the token.

“Adding to it, Vitalik Buterin also burned over $6 billion worth of SHIB tokens. Even though SHIB has been rallying for the past month, it has reached a new all-time-high price. On WazirX, SHIB has overtaken Bitcoin’s position as the top-traded token in the Indian rupee market this week. In the past 24 hours, over $320 million worth of SHIB has been traded on WazirX. This market movement has also caused WazirX to record an all-time-high 24-hour trading volume of over $560 million.”

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Bank of India standalone net profit almost doubles to ₹1,051 cr in Q2

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Bank of India’s standalone net profit almost doubled to ₹1,051 crore in the second quarter against ₹526 crore in the year ago period on the back of robust growth in other income and a steep decline in loan loss provisions.

During the reporting quarter, there was a reduction in gross non-performing assets (GNPAs) aggregating ₹5,771.50 crore.

NPA position of Indian Banks indicates gradual improvement: CARE Ratings

The Mumbai-headquartered public sector bank’s net interest income (difference between interest earned and interest expended) declined 14 per cent year-on-year (yoy) to ₹3,523 crore (₹4,113 crore in the year ago quarter).

Other income, including profit/loss on sale of assets, profit/loss on revaluation of investments (net), earnings from foreign exchange and derivative transactions, recoveries from accounts previously written off, dividend income, etc., jumped 59 per cent yoy to ₹2,136 crore (₹1,346 crore).

To ease lending, FinMin moves to boost bankers’ morale, growth

GNPA position improved to 12 per cent of gross advances as at September-end 2021 against 13.51 per cent in the preceding quarter.

NPA position

Net NPAs position too improved to 2.79 per cent of net advances against 3.35 per cent in the preceding quarter.

Total deposits edged up by about one per cent yoy to ₹6,12,961 crore. Total advances were up about 5 per cent yoy to ₹3,78,727 crore.

On a consolidated basis, including the results of four domestic subsidiaries, four overseas subsidiaries, one joint venture and six associates, BoI reported a 97 per cent jump in net profit at ₹1,073 crore (₹543 crore).

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New management of IL&FS addresses ₹52,200 cr of debt

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The new board and management of Infrastructure Leasing and Financial Services (IL&FS) has addressed debt of ₹52,200 crore, and has maintained its earlier estimate of resolving debt of ₹61,000 crore.

This will represent resolution of 62 per cent of the overall fund-based and non-fund based debt of over ₹99,000 crore as of October 2018.

“The debt of ₹52,200 crore addressed till date represents 86 per cent of the overall estimated resolution value of ₹61,000 crore and 53 per cent of total debt,” it said on Tuesday.

It expects to resolve around ₹57,000 crore debt by March 2022, it further said.

Available cash balance

Uday Kotak, Chairman of the board of IL&FS, said that of the ₹52,200 crore debt addressed, ₹14,100 crore has been discharged and there is an available cash balance of ₹16,700 crore. “In addition to that, we have completed sale and purchase agreements in many cases and have filed applications with the NCLT. These are in stages of completion of transactions and are pending court approval. That amount is ₹21,000 crore,” he told reporters, adding that the balance ₹4,000 crore will be the long tail, including refunds and small matters across the whole host of companies.

He said that there are multiple options for the resolution of the long tail, such as liquidation, fire sale or the current approach of hard work.

He, however, indicated that this would be decided in due course. Kotak also highlighted the high recovery from IL&FS, and noted that it is much higher than the average recovery observed under the Insolvency and Bankruptcy Code, which is around 38 per cent to 39 per cent. “Group resolution is always a big challenge in terms of recovery in IBC cases. Many cases have had very low recovery numbers. This (IL&FS) reinforces the belief that fair amount of money can be recovered even from the most distressing and complex situations,” he said.

Further, of the 347 entities under IL&FS Group as of October 2018, a total of 235 entities stand resolved till date, including resolution applications filed with courts, and applications for additional 15 entities are expected to be filed with courts by March 2022.

“Since the last update in July 2021, the group has addressed additional debt of ₹8,500 crore from monetisation initiatives, including InvIT Phase 1; Terracis Technology (erstwhile IL&FS Technologies); ONGC Tripura Gas based power project; Warora Chandrapur Road project; and IL&FS Prime Terminals Fujai,” said an IL&FS statement.

Transfer of road projects

Additionally, the group has also submitted an application with the NCLT for approval of the transfer of five road projects, with approximate resolution value of ₹4,000 crore, under Phase 2 of the InvIT.

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Finzy raises $2 mn bridge to Series A

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Finzy, a P2P lending platform, has raised $2 million as a bridge to $10 million Series A round.

The company will use the funding to strengthen its technology and enhance product offerings for its lenders and borrowers. Finzy was launched in June 2017 and offers personal unsecured loans with interest rates starting at 7.99 per cent per annum.

Commenting on the development, Amit More, CEO and Founder, Finzy said “We have raised this bridge round from our existing investors. We are in the documentation stage with a Silicon Valley-based technology fund and expect our Series A to close within a couple of months. To save excessive dilution at an early stage, we would limit our Series A raise to $10 million though we have demand for a much higher investment number.”

Finzy claims to have more than 1 lakh customers and the largest outstanding loan book amongst all P2P platforms in India. In 2018, the company has raised $2.3 million pre-series A funding from a clutch of senior professionals from the BFSI industry.

Some of the existing players in the P2P lending space include Faircent, LenDenClub, Paisa Dukan, and RupeeCircle, among others. Fintech unicorns like BharatPe and Cred have also recently entered the P2P lending space in India by launching ‘12% Club’ and ‘Cred Mint’, respectively.

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Sundaram Finance Holdings seeks to consolidate foundry business

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Sundaram Finance Holdings Ltd (SF Holdings) said it has taken steps to consolidate investments in the foundry business.

Increased shareholding

The company has increased its shareholding in Flometallic India. Flometallic has, in turn, filed a scheme of arrangement with the NCLT to merge its operations with those of Brakes India. Along with Dunes Oman (a subsidiary of Brakes India), the merger will create a combined foundry capacity of 1,75,000 tonnes operating at four locations — Sholingur, Naidupeta, Jagadia and the Sultanate of Oman.

“This will create one of the largest ferrous casting businesses in the country and will increase the competitiveness of the foundry business as a whole,” according to a statement.

Portfolio investment

SF Holdings will also make an additional investment of up to €2 million in its portfolio company, Italy-based Mind S.r.l, which focuses on carbon fiber components for the automotive industry in Europe. A year-ago, SF Holdings had invested about ₹24 crore in the company for a 40.6 per cent stake.

The additional investment is to augment working capital needs and invest in further growth, it added.

Profits rise

SF Holdings reported a standalone net profit of ₹11.09 crore for the quarter ended September 30 compared to ₹3.78 crore for the corresponding period of the previous year.

SF Holdings is engaged in the business of making investments — primarily companies in the automotive space — many of them co-promoted with the TVS group. It holds significant investments in companies such as Sundaram Clayton, Wheels India and IMPAL (all listed), and Brakes India and Turbo Energy (both unlisted).

Also see: Sundaram Finance Holdings: Why you should accumulate this oft-ignored small-cap stock

As a result, dividends from portfolio companies form a substantial part of the financial results, according to a statement.

For the half year ended September 30, consolidated net profit was ₹50.86 crore compared to ₹9.41 crore in the year-ago period.

Automotive holdings

Supported by a strong recovery in the automobile sector, the dividend received from portfolio companies was at ₹29.13 crore for the half-year period, already exceeding the full year’s dividend received for FY21 (₹14.13 crore).

“We continue to use the automotive industry down-turn to consolidate our portfolio, investing further into our companies and undertaking business restructuring to unlock synergies in our foundry business,” said Harsha Viji, Director, SF Holdings.

The company’s performance is also an extension of its long-term strategy of consolidating its automotive holdings.

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BSE joins hand with HDFC Bank to promote startup, SME listing, BFSI News, ET BFSI

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New Delhi, Leading stock exchange BSE on Tuesday said it has collaborated with private sector lender HDFC Bank to further encourage and promote the listing of startups and small and medium enterprises (SMEs) across India. Through this pact, HDFC Bank and BSE will evaluate banking and lending solutions for startups, undergoing listing process on startups and SME platform, the exchange said in a statement.

HDFC Bank will identify potential startups as well as SMEs and help them to partner with intermediaries like merchant bankers, chartered accountants and lawyers to list on BSE.

Both the parties have agreed to conduct and participate in joint outreach activities and contribute to each other’s publications on the startup ecosystem in India.

“Through this MoU (Memorandum of Understanding), we aim to resolve funding constraints for startups and SMEs in India. BSE along with HDFC Bank shall work together to create a sustainable ecosystem for startups and SMEs,” Ajay Thakur, Head, BSE SME and startups, said.

“Startups are reimagining and reshaping the world we live in. At HDFC Bank, we are committed to developing, strengthening and collaborating with the startup community and ecosystem in the country,” said Iqbal Singh Guilani, SVP, Retail Branch Banking, HDFC Bank.

BSE became the first stock exchange to get approval from markets regulator Sebi and had launched its SME platform in March 2012.

So far, 353 companies listed on the BSE SME Platform have raised Rs 3,732 crore from the market, and the total market capitalisation of such firms stood at Rs 38,538 crore. Out of 353 companies, 117 have migrated to BSE Main Board.

BSE is the market leader in this segment, with a market share of 61 per cent.



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Finacle’s digital banking solution suite to be available on Red Hat OpenShift and IBM Cloud

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Infosys’s Finacle division and IBM have announced that Finacle’s digital banking solution suite will be available on Red Hat OpenShift and IBM Cloud for financial services. This collaboration will help banks scale business transformation, become more agile, and power their growth with an on-demand portfolio of products and services, the companies said. It will also help banks achieve seamless ecosystem connectivity and provide a world-class banking experience for their customers, and enable them to meet required compliance and security requirements, they stated in a press release.

Easy customer onboarding

The Finacle solution suite deployment with fully managed Red Hat OpenShift on IBM Cloud for financial services is designed to provide several benefits, including, a significant reduction in the total infrastructure readiness timelines, resulting in a shorter time period for customer onboarding, it added.

Stating that banks can leverage the elastic infrastructure of the cloud deployment for Finacle applications to scale on-demand – significantly improving provisioning efficiency – it claimed that the operations teams’ dependencies on the need for special skills will reduce due to the unified container and cloud management capabilities.

Venkatramana Gosavi, Senior Vice-President and Global Head of Sales and Alliances, Infosys Finacle, said, “The Cloud has evolved from a technical transformation enabler to a business transformation enabler that provides an agile, resilient, and scalable platform for innovation and growth. Given the benefits, cloud adoption is a necessity for financial institutions that aspire to lead the digital transformation race and achieve significant business performance improvements.”

Gaurav Sharma, Vice-President, IBM Cloud and Cognitive Software, said, “At IBM, our mission is to de-risk the financial services industry. With more mission-critical workloads moving to the cloud, the IBM Cloud for Financial Services is designed to help institutions accelerate hybrid cloud adoption and drive revenue growth while addressing the need for security, open innovation, and compliance. With this collaboration, Infosys Finacle joins a growing ecosystem of more than 100 Independent Software Vendors (ISVs), SaaS providers, Global Systems Integrators (GSIs), and Fintechs leveraging the IBM Cloud for financial services.”

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