RBI Governor Shaktikanta Das gets three years extension

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The Government has extended the term for Governor of Reserve Bank of India, Shaktikanta Das by three years. Now, his term will end in 2024.

He is 25th Governor. He was appointed on December 12, 2018 after sudden resignation of then Governor Urjit Patel.

“The Appointments Committee of the Cabinet has approved the reappointment of Shri Shaktikanta Das, lAS Retd. (TN:80) as Governor, Reserve Bank of India for a period of three years beyond 10.12.2021 or until further orders, whichever is earlier,” an order issued by Department of Personal and Training said.

Das is former Revenue Secretary and prior to his appointment in RBI, he was member of 15th Finance Commission and G20 Sherpa of India. He has vast experience in various areas of governance in the last 38 years. Shri Das has held important positions in the Central and State Governments in the areas of Finance, Taxation, Industries, and Infrastructure.

During his long tenure in the Finance Ministry, he was directly associated with the preparation of eight Union Budgets. He has also served as India’s Alternate Governor in the World Bank, Asian Development Bank (ADB), New Development Bank (NDB) and Asian Infrastructure Investment Bank (AIIB). He has represented India in international fora like the IMF, G20, BRICS, SAARC, etc.

Das is a postgraduate from St. Stephen’s College, Delhi University.

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Mobile payments growing faster than card payments

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Mobile payments in India are now growing faster than card payments as more consumers and businesses adopt digital payments amidst the pandemic, said the 2021 India Mobile Payments Market Report.

According to the report, payments made via apps that bypass credit card rails rose 67 per cent to $478 billion in 2020. They are clocking more than $1 trillion in annualised value in 2021.

“Payments handled by mobile devices are soaring in India, driven by the popularity of bank accounts as an in-app payment method,” said the report published by S&P Global Market Intelligence’s Financial Institutions Research team, adding that it expects mobile payments to continue to grow faster than cards due to growing consumer preference to use smartphones to pay.

By comparison, transactions completed using debit and credit cards, including online and in apps, fell 14 per cent to $170 billion in 2020. For banks, the ongoing pandemic shaved-off $524 million in credit card interchange revenue, as per its estimates, as consumers hunkered down amid lockdown measures.

“While most transactions handled by payment apps include peer-to-peer transactions, mobile payments are increasingly becoming a popular payment choice for retail transactions at the point of sale and online,” it further said.

It noted that demand for cash is slowing in the wake of rising mobile payment adoption. For each ATM withdrawal, Indians made 3.7 transactions using mobile phones in 2020. The report has also forecast that there continues to be room for rapid growth rates in digital payments in India in the next few years.

“Based on a review of instant payments in four large Asia-Pacific economies, India processed the highest number of real-time transactions in 2020,” it said, while noting that the country’s real-time transactions per capita of 16 in 2020 were the lowest in the group, which includes Australia, Thailand and Singapore.

Popular UPI apps

PhonePe and Google Pay continue to maintain their lead as the most popular UPI payment apps, with the two apps enjoying market shares of 44 per cent and 35 per cent, respectively, in the first six months of 2021, the report said. Together, the two apps handled more than 12 billion transactions worth $ 338 billion, it stated.

In contrast, Paytm and Amazon Pay accounted for just 14 per cent and 2 per cent, respectively, of UPI transactions. The report, however, said that it does not expect the dominance of PhonePe and Google Pay in UPI to last indefinitely. The National Payments Corporation of India has set a cap of 30 per cent on UPI volumes and PhonePe and Google Pay are the only apps that currently exceed the cap and have until 2022 to comply with the rules, it said.

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UCO Bank posts five-fold rise in Q2 profit to ₹205 crore

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UCO Bank, which recently came out of the Prompt Corrective Action (PCA) measure of Reserve Bank of India, registered over five-fold growth in net profit at ₹205 crore for the second quarter ended September 30, 2021, as compared with ₹30 crore same period last year.

According to Atul Kumar Goel, MD & CEO, UCO Bank, the growth in net profit was mainly on the back of a rise in net interest income and lower provisions.

Net interest income grew by 15 per cent to ₹1,598 crore during the quarter under review, as against ₹1,394 crore same period last year. Other income increased by 31 per cent to ₹936 crore (₹713 crore).

Provisions during the quarter came down by nearly 22 per cent to ₹1,019 crore (₹1,301 crore).

The bank came out of PCA in September this year following the compliance of norms by maintaining minimum regulatory capital, net NPA, and leverage ratio on an ongoing basis.

The operating profit increased by 24 per cent at ₹1,334 crore (₹1,076 crore).

Gross non-performing asset (NPA) as a percentage of total advances declined to 8.98 per cent (11.62 per cent). This is despite the fact that the bank recognised its exposure of close to ₹1,440 crore in three big accounts as NPA during the quarter under review. This includes around ₹1,000 crore in Srei Infrastructure and Srei Equipment Finance; around ₹190 crore in Delhi Metro and another ₹250 crore in a road project.

Net NPA came down to 3.37 per cent (3.63 per cent).

Provision coverage ratio (PCR) increased to 90.02 per cent as on September 30, 2021 from 89.82 per cent same period last year and from 88.53 per cent as on June 30, 2021.

RBI resolution framework

UCO Bank has restructured 2,067 accounts amounting to ₹1,356 crore under Resolution Framework 1.0 and another 51,512 accounts amounting to ₹2,705 crore under Resolution Framework 2.0 of RBI.

The bank’s domestic net interest margin improved marginally to 2.9 per cent (2.88 per cent) during the quarter under review. It expects NIM to further improve to around three per cent by the end of this fiscal.

UCO Bank, which grew its advances by around six per cent during the quarter under review, expects close to 10 per cent growth in loan book this fiscal aided by a steady pick up in demand.

“We are out of the Covid impact and there is good demand in retail, agriculture and corporate sectors. We are expecting 10 per cent growth in advances this fiscal,” Goel said.

The bank has also tied up with an NBFC in housing sector for co-lending model.

The bank’s scrip closed at ₹14.38, down by 2.04 per cent on the BSE on Thursday.

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RBL Bank Q2 net profit down 78.6%

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Private sector lender RBL Bank reported a 78.6 per cent drop in its standalone net profit for the second quarter of the fiscal on the back of higher provisions and lower interest income.

For the quarter ended September 30, 2021, the bank reported standalone net profit of ₹ 30.8 crore as against ₹144.16 crore in the same period last fiscal.

Its net interest income fell by two per cent on a year on year basis to ₹915 crore in the July to September 2021 quarter from ₹932 crore a year ago.

Net interest margin was also lower at 4.06 per cent as on September 30, 2021 from 4.34 per cent a year ago.

However, other income shot up by 42 per cent to ₹593 crore for the second quarter of the fiscal from ₹418 crore in the corresponding quarter last fiscal.

Provisions jumped up by 33.6 per cent to ₹651.49 crore in the second quarter of the fiscal versus ₹487.56 crore a year ago.

Asset quality deteriorated

The bank’s gross non performing assets rose to ₹3,130.93 crore or 5.4 per cent of gross advances as on September 30, 2021 from 3.34 per cent a year ago. Net NPAs also increased to 2.14 per cent of net advances from 1.38 per cent as on September 30, 2020.

“The economic environment is bouncing back strongly as the pace of vaccination quickens in the country. Our bank is also confident of reverting to normalised levels of business, growth and profitability from the current (third) quarter itself and are on track to exit this financial year with strong profitability ratios setting us up well for 2022-23,” said Vishwavir Ahuja, Managing Director and CEO, RBL Bank.

The bank had a provision coverage ratio, excluding technical write-offs, of 61.7 per cent.

It had an exposure of ₹846.61 crore to accounts where it implemented restructuring under the Reserve Bank of India’s Resolution Framework 1.0 and ₹645.47 crore under Resolution Framework 2.0.

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Indian Bank classifies 2 Srei grp a/cs as NPA, BFSI News, ET BFSI

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State-owned Indian Bank has classified two accounts of Srei Group, worth Rs 1,800 crore, as non-performing assets (NPAs) as on the September-ended quarter 2021. Its net profit has grown more than doubled at Rs 1,089 crore in the second quarter, as compared to Rs 412 crore in the same period last year.

Its MD & CEO Shanti Lal Jain said the profit was driven by growth in non-interest income, (other income), which grew by 26% YoY and 8% QoQ. “It stood at Rs 1,966 crore as against Rs 1,558 crore in the second quarter, on account of increase in recovery of bad debts and forex income,” Jain said.

However, the bank’s net interest income declined by 1% YoY and 2% QoQ to Rs 4,084 crore in the September quarter, 2021.

The public sector bank said we have recognized eight accounts as NPA (bad loans) worth Rs 1,900 crore, which are to be given to the National Asset Reconstruction Company (bad bank). He said “We have already made 50% of provisions for those eight accounts.”

Provisions and contingencies allocated to cover bad loans lowered to Rs 2,187 crore in this quarter, as against Rs 2,530 crore for the corresponding period last year, and Rs 2,234 crore sequentially.

Gross NPA ratio stood at 9.56% in September 2021, marginally lower from 9.89% in September, 2020. The net NPA ratio stood at 3.26%, higher from 2.96% in the same period.

The bank’s fresh slippages declined to Rs 3,952 crore compared to Rs 4,204 crore in the June quarter. Fresh slippage was high due to Corporate loans and crop loans.



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Uco Bank posts 7-fold jump in Q2 net, BFSI News, ET BFSI

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Public sector lender Uco Bank has reported a seven-fold jump in its net profit to Rs 205.3 crore for the second quarter this fiscal from Rs 30.1 crore for the same period last fiscal.

The city-based lender, which recently came out of the Prompt Corrective Action (PCA) measure of Reserve Bank of India, has witnessed a significant improvement in its asset quality during the second quarter despite the fact that it recognized its exposure of around Rs 1,000 crore in Srei Infrastructure Finance and Srei Equipment Finance as non-performing assets (NPAs).

The Kolkata bench of the National Company Law Tribunal (NCLT) earlier this month gave its approval to start insolvency proceedings against Srei Infrastructure Finance and its wholly-owned subsidiary Srei Equipment Finance after the Reserve Bank of India had filed insolvency applications against the two non-banking financial companies (NBFCs).

Uco Bank MD & CEO AK Goel, without mentioning the name of Srei, said, “It will be very premature to talk about the bad loan recovery from these two NBFCs. But we will remain optimistic that a good recovery should come (through insolvency resolution process).”

During the second quarter, the bank’s NPAs in absolute terms fell 3.6% quarter-on-quarter to Rs 10,909.7 crore from Rs 11,321.7 crore in the first quarter this fiscal. The Gross NPA ratio during the quarter under review declined 39 basis points sequentially at 8.9%.



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Banks make Rs 9,700 crore on hidden forex markups in 2020, BFSI News, ET BFSI

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Banks made Rs 9,700 crore in hidden exchange rate markups on currency conversions, payments and card sales and Rs 16,600 crore on forex transaction fees in 2020, according to a new study.

While the overall amount Indians have spent on transaction fees for sending money abroad has decreased over the past five years, the fees paid to exchange rate margins are growing. “This highlights lack of transparency in remittance fee structures, putting consumers at risk of hidden fees as they unknowingly pay more than advertised for the remittance service in the form of a marked up exchange rate,” said Wise, which released the study.

Undisclosed markup

The upfront fee can vary but would often not represent the total cost of the transaction as traditional banks and providers tend to add an undisclosed markup on the exchange rate, instead of using the fair, mid-market rate. The difference between the rates results in a hidden fee unnecessarily costs people a lot more when sending money abroad.

Fee reduction

Banks have been reducing the fees on foreign remittances and their income under this head fell from Rs 15,017 crore in 2016 to Rs 12,142 crore in 2019.

However, they have protected themselves by recovering Rs 4,422 crore through exchange mark-up in 2020, which was up from Rs 2,505 crore in 2016.

These figures were from independent research carried out by Capital Economics in August 2021, which aimed to estimate the scale of foreign exchange transaction fees in India.

Overseas workers lose

Overseas workers sending money to India are also losing money. Over the past five years, money lost to exchange rate margins on inward remittances has grown from Rs 4,200 crore to Rs 7,900 crore. Meanwhile, fees paid to transaction costs have grown from Rs 10,200 crore in 2016 to Rs 14,000 crore in 2020.

Banks make Rs 9,700 crore on hidden forex markups in 2020

Of total fees paid on inward remittances to India in 2020, Saudi Arabia ranked first at 24%, followed by the US (18%), the UK (15%), Qatar (8%), Canada (6%), Oman (5%), (5%), Kuwait (5%), and Australia (4%).

Indian consumers spending abroad paid Rs 1,441 crore as transactions fees, of which Rs 1,303 crore were hidden charges in the form of exchange mark-up.



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UCO Bank Q2 net soars nearly 7-fold, asset quality improves

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During a virtual press conference after declaring the results, Uco Bank MD & CEO AK Goel, without mentioning the name of Srei, said, “It will be very premature to talk about the bad loan recovery from the two NBFCs. But, we will remain optimistic that a good recovery should come (through insolvency resolution process).”

Buoyed by an increase in operating profit and a decrease in provisions, state-run Uco Bank on Thursday reported a nearly sevenfold year-on-year jump in its net profit to Rs 205.39 crore for the second quarter this fiscal from Rs 30.12 crore for the same period last fiscal.

The city-based lender, which recently came out of the Prompt Corrective Action (PCA) measure of Reserve Bank of India, showed a significant improvement in its asset quality during the second quarter despite the fact that it recognised its exposure of around Rs 1,000 crore in Srei Infrastructure Finance and Srei Equipment Finance as non-performing assets (NPAs).

The Kolkata bench of the National Company Law Tribunal (NCLT) earlier this month gave its approval to start insolvency proceedings against Srei Infrastructure Finance and its wholly-owned subsidiary Srei Equipment Finance after the RBI had filed insolvency applications against the two non-banking financial companies (NBFCs).

During a virtual press conference after declaring the results, Uco Bank MD & CEO AK Goel, without mentioning the name of Srei, said, “It will be very premature to talk about the bad loan recovery from the two NBFCs. But, we will remain optimistic that a good recovery should come (through insolvency resolution process).”

During the second quarter, the bank’s NPAs in absolute terms fell 3.64% quarter-on-quarter to Rs 10,909.79 crore from Rs 11,321.76 crore in the first quarter this fiscal. The Gross NPA ratio during the quarter under review declined 39 basis points sequentially at 8.98%.

Provision for NPAs declined 35.3% y-o-y to Rs 1,032.14 crore in Q2FY22 as against Rs 1,595.39 crore during Q2FY21.

Operating profit during the period grew 24% y-o-y to Rs 1,334.16 crore. Net interest income (NII) grew 14.68% y-o-y to Rs 1,597.73 crore, while non-interest income saw a 31.37% y-o-y growth at Rs 936.07 crore.

The lender’s domestic net interest margin (NIM) improved marginally to 2.9% from 2.88% during the corresponding quarter last fiscal. The bank expects its NIM to further improve to around 3% by the end of this fiscal.

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Will focus on retail, corporate sectors for credit growth: Shanti Lal Jain, MD & CEO, Indian Bank

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Currently, the bank has RAM-corporate split of 60:40, it may be go up or down 5%.

Indian Bank has more than doubled its net profit for the second quarter and said the focus areas would be improving CASA, quality advances, increasing fee-based income, improving collection efficiency, recovery of NPAs and digitisation. Shanti Lal Jain, MD & CEO, says the bank is adequately capitalised and does not need to raise any funds in near future. Excerpts from his virtual interaction with media.

How do you review Q2 in terms credit growth?

Gross credit of the bank has increased by 5%, led by the retail, agri and MSME (RAM) segment which constitutes 60% of the loan book. Our retail loan growth was around 14%, agri 16% and MSME 8%. RAM as a sector grew by 13%. There was a marginal decrease in corporate loan which was because of under-utilisation of limits being leveraged by the corporates.

Currently, our business growth is around 5% and we think that going forward, it should be between 8% and 10%. We will be looking for opportunities in both the RAM and corporate sectors for lending. Currently, the bank has RAM-corporate split of 60:40, it may be go up or down 5%.

What is your views on the trend on the slippages side? What are your targets on recovery this fiscal?

We have had slippages of Rs 3,952 crore in the second quarter, out of which around Rs 1,800 crore pertains to the NBFC which was recently in the news. If you exclude that, it is a tad above Rs 2,000 crore only. Our collection efficiency has been improving, and looking at the overall trend, we don’t have much worry about slippages. Recovery in the first half was to the tune of Rs 4,800 crore. In the remaining two quarters of FY 22, we are looking at recovering around Rs 4,000 crore. Put together, the recovery for FY22 should be around Rs 8,800 crore. We have Rs 22,000-crore exposure in NCLT and we expect good recovery from the tribunal.

What are your network expansion plans? Any capital raising in the offing?

The bank has rationalised around 250 branches as part of amalgamation of Allahabad Bank into itself. Currently, it has 5,759 domestic branches. We are planning to open about 100 branches in the current fiscal. Our capital adequacy ratio was at 15.88% in Q2 and we are adequately capitalised. In the current financial year, we don’t have any plans to raise capital. The government holding is around 80% and there is headroom for diluting the stake.

Bank has seen good traction in digital transactions. What are the plans on furthering it?

We have floated an RFP (request for proposal) with an objective of changing our operating models. We will be focusing on more digital transactions on both the liability and assets sides. The bank has seen 10% increase in digital transaction mainly due to mobile banking and UPI.

How many accounts will you be transferring to NARCL?

We have identified eight accounts to be transferred to the proposed bad bank, having exposure of close to Rs 1,900 crore. Indian Bank has invested Rs 20 crore in the bad bank.

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Indian Bank more than doubles net profit in Q2

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Public sector lender Indian Bank reported a notable performance across parameters — double-digit growth in operating profit, more than two-fold increase net profit, reduction in net NPA, growth in CASA (current account savings account) and rise in businesses of RAM (retail, agriculture and MSME) sector – for the quarter ended September 30.

The Chennai-headquartered bank, which is now an amalgamated entity of Indian Bank and Allahabad Bank, reported net profit of ₹1,089 crore for the second quarter of this fiscal compared to ₹412 crore in Q2 of the last fiscal, helped by higher operating profit, growth in non-interest income and lower provisions.

Across parameters

Operating profit of the company grew 11 per cent to ₹3,276 crore (₹2,942 crore), on the back of 26 per cent rise in non-interest income at ₹1,966 crore (₹1,558 crore), aided by higher recovery of bad debts and forex income. Its net interest income (NII) fell marginally to ₹4,084 crore (against ₹4,144 crore).

Also see: ‘RBI should allow the rupee to appreciate’

“The bank’s net and operating profits have increased, asset quality is under control, growth is happening in RAM sectors, CASA continues to increase and improvements across functions such as digital banking,” said Shanti Lal Jain, Managing Director & CEO of Indian Bank.

Strong recovery

Total provisions were lower by 14 per cent at ₹2,187 crore (₹2,530 crore in Q2FY21). Loan loss provisions were at ₹2,216 crore (₹1,880 crore).

Fresh slippages were higher at ₹3,952 crore (₹249 crore), mainly due to an NBFC account that accounted for ₹1,821 crore.

“Barring this, slippages of about ₹2,000 crore is just 0.5 per cent of the book. But, higher recovery helped us to maintain the asset quality,” Jain said.

Cash recovery was higher at ₹831 (₹795 crore) and total recovery stood at ₹3,426 crore against ₹1,168 crore. Domestic advances grew 5 per cent to ₹374,508 crore (₹356,627 crore). Retail, Agriculture and MSME loans grew by 14 per cent (₹73,376 crore), 16 per cent (₹82,857 crore) and 8 per cent (₹70,268 crore). The three segments accounted for 60 per cent of advances.

Also see: Mobile payments growing faster than card payments

Total deposits grew 10 per cent to ₹551,472 crore (₹501,956 crore). CASA was maintained at 41 per cent.

Lower NPAs

Gross NPAs was at 9.56 per cent compared to 9.89 per cent in the year-ago quarter and 9.69 per cent in the previous quarter. Net NPA was higher at 3.26 per cent when compared with 2.96 per cent a year ago, but down from 3.47 per cent in the preceding quarter.

“Our SMA1 and SMA2 are decreasing and collection efficiencies are improving. With this trend, we don’t have worries on the asset quality side. Our NII has grown sequentially and we have brought the cost of deposits to below 4 per cent. Therefore, when the economy gradually hits the growth path, our credit growth will also happen. As a result, our interest income will increase,” said Jain.

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