Category: Banking & Finance

L&T Finance Holdings’ Q2 net profit down 15.5%

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L&T Finance Holdings reported a 15.5 per cent drop in its consolidated net profit for the second quarter of the fiscal.

Its net profit stood at ₹224.03 crore for the quarter-ended September 30, 2021 as against ₹265.12 crore in the same period last fiscal. However, on a sequential basis, it posted a 26.5 per cent jump from its net profit of ₹177.02 crore in the June 2021 quarter.

Its total revenue from operations increased by 10.5 per cent to ₹3,051.82 crore in the second quarter of the fiscal from ₹3,408.1 crore a year ago. However, other income declined by 18 per cent on a year-on-year basis to ₹82.64 crore in the July to September 2021 quarter.

“In the second quarter of the fiscal, all L&T Finance Holdings businesses witnessed robust disbursement momentum,” it said in a statement on Wednesday.

Rural finance

Its rural finance business saw the highest ever second quarter disbursement at ₹4,987 crore, up 51 per cent quarter-on-quarter. The total disbursements in the quarter stood at ₹7,339 crore for the focused businesses.

“Disbursement momentum will continue to further pick-up, backed by the company’s established ability to scale up product offerings in retail by harnessing our digital and analytics strengths. LTFH is well provisioned for any short-term Covid 2.0 led disruptions,” said Dinanath Dubhashi, Managing Director and CEO, L&T Finance Holdings.

However, its total lending book fell by 12 per cent to ₹86,936 crore in the second quarter of the fiscal as against ₹98,823 crore a year ago.

It is carrying additional provisions and one-time restructuring provisions of ₹1,747 crore or 2.22 per cent of the standard book in the second quarter of the fiscal.

The Gross Stage 3 assets in absolute terms stood at ₹4,796 crore in the second quarter of the fiscal, as against ₹4,881 crore in the first quarter and ₹4,921 crore in the second quarter of 2020-21.

In percentage terms, the GS3 and NS3 assets of the company stood at 5.74 per cent and 2.81 per cent respectively with PCR on Stage 3 assets at 52 per cent.

The company said collections have normalised across businesses in the second quarter of the fiscal led by smart data analytics, concerted field efforts and gradual unlocking of the economy

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‘Reserve managers should look beyond the traditional approaches to maintain and enhance returns’

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Reserve managers can deal with the low yield environment by increasing the duration of their portfolios, investing in new asset classes, new markets and more active management of their gold stocks, as per the recommendations in an article in the Reserve Bank of India’s latest monthly bulletin.

In light of the likely persistence of various structural reasons for low yields, it is imperative that reserve managers look beyond the traditional approaches for the management of reserves to maintain and enhance returns, emphasised RBI officials Ashish Saurabh and Nitin Madan in the article.

The authors observed that the first and foremost way to tackle the low yielding environment to increase return would be to increase duration of the portfolio.

“The countries with adequate reserves have sufficient cushion to take on more duration risk. Increasing duration of the portfolio is the easiest and immediate step that can be taken to enhance return by some basis points,” they said, adding, this should be combined with increasing investments in longer maturities.

Investment in new products/asset classes

The officials suggested investment in new asset classes entailing investing in products beyond the traditional investment avenues. They noted that certain products may be novel in nature as surveys and anecdotal evidence do not suggest usage of these products by the reserve managers.

In this regard, the authors referred to the usage of investment products/ asset classes such as foreign exchange (FX) swaps; Repo transactions; dual currency deposits; equity index funds; and increase credit risk of the portfolio.

Active management of gold

The authors opined that active management of gold can yield a decent return to the Central banks beyond capital gains. Some of the avenues for active management of gold include gold deposits, gold swaps and gold Exchange Traded Funds (ETFs).

Central banks own almost 35,000 tonnes of gold (World Gold Council estimate) which is around 17 per cent of worldwide available above-ground stocks.

Investment in new markets

The RBI officials underscored that there are some countries which are relatively stable financially, are highly rated and offer better yields than some of the G7 countries. While these countries do not have very deep sovereign bond markets, they felt that a reserve manager could invest a small portion of their reserves in these markets and generate that extra yield.

Another way to generate higher return is lowering the credit rating requirement and investing in emerging markets which provide higher yield.

“This, however, entails a higher exposure to currency risk as their currencies can be volatile. To mitigate that, the reserve managers could explore investing in US/Euro denominated debt of these countries,” said Saurabh and Madan.

The various options through which a reserve manager could invest in these markets are direct investment; passive funds; ETFs; Separately Managed funds/Customised funds/ETFs; and Total Return Swaps.

The authors observed that the choice of investment strategy, however, would require to be tailored to suit the risk appetite, investment priorities, skill sets and operational capabilities of individual institutions.

The Reserve Bank of India Act, 1934 provides the overarching legal framework for deployment of reserves in different foreign currency assets and gold within the broad parameters of currencies, instruments, issuers and counterparties.

Currently, the law broadly permits deployment of reserves in investment categories such as deposits with other Central banks and the BIS; deposits with commercial banks overseas; debt instruments representing sovereign/sovereign-guaranteed liability with residual maturity for the debt papers not exceeding 10 years; other instruments / institutions as approved by the Central Board of RBI; and dealing in certain types of derivatives.

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CoinDCX launches crypto trading facility for institutional investors

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Crypto exchange CoinDCX launched its over-the-counter (OTC) Desk facility on Wednesday aimed at letting institutional investors trade in cryptocurrencies. Through the OTC Desk facility, institutional clients will be able to execute bulk orders for crypto assets like Bitcoin (BTC) and other popular cryptocurrencies seamlessly.

The facility also offers these clients to purchase or sell their holdings at a particular price without worrying about price volatility caused by market fluctuations.

Sumit Gupta Co-Founder at CoinDCX, said, “The average ticket size for such services start at above INR 30 Lakh plus investments. With this our target audience lies with an entity/person who trades in and out of crypto for large quantities. This segment is more concerned about price certainty and wants to minimize slippages.”

He added, “Corporations wanting to allocate some amount of balance to crypto assets have shown interest. Newly funded startups and their founders too are showing interest in broadening their portfolio by allocating some serious amount into this asset class. Among others we have also seen, small proprietary firms or individuals to make money trading across exchanges utilising price differential to make arbitrage profits.”

The facility supplements CoinDCX’s existing trading platforms, CoinDCX and CoinDCX Pro. With the dual benefit of ample liquidity and ability to place limit orders for large trading volumes, CoinDCX is poised to make inroads into this relatively untapped market and further expand its trading footprint, the company said.

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SoftBank, Amazon, Accel invest $108 mln in banking platform Pismo, BFSI News, ET BFSI

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SAO PAULO, – Brazilian banking and payments tech platform Pismo raised $108 million in an investment round led by Japan’s SoftBank Group Corp, Amazon.com Inc and global venture capital firm Accel, it announced on Tuesday.

According to Pismo, which was founded in 2016, its second funding round is aimed at fueling the company’s global expansion and accelerating the development of banking technologies.

Brazilian stock exchange operator B3, Falabella Ventures, PruVen and existing investors Redpoint eventures and Headline also joined the round, Pismo said, without disclosing its valuation.

“Pismo is now ready for a new phase of growth. On the back of this funding round, we will build further on the momentum and scale we already have in Latin America, and accelerate international expansion,” Pismo Chief Executive and co-founder Ricardo Josua said in a statement.

Pismo said its cloud-native platform for financial institutions hosts more than 25 million accounts and transacts more than $3 billion a month, adding that firms like Brazilian banks Itau Unibanco Holding SA and Banco BTG Pactual SA are among its customers.

The company expects to launch offices in Austin, Texas, Bristol, England, and Singapore following the funding round.

“(Pismo is) uniquely positioned to reinvent the technology behind banking, payments, fintech, and commercial transactions. The founders have great ambitions to make Pismo a truly global company,” SoftBank’s head of Brazil and operating partner Alex Szapiro said. (Reporting by Gabriel Araujo; Editing by Sandra Maler)



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Crypto users see the light at the end of the tunnel

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Banking troubles for crypto enthusiasts and investors in the country seem to have abated to some extent with at least a handful of banks permitting such transactions.

According to cryptocurrency exchange owners, there has been some easing in the stance by banks towards crypto transactions in the last three to four months. Smaller private sector banks as well as a few public sector banks are understood to be now permitting these transactions.

“Till three to four months ago, there were problems but the situation in terms of banking is now under control. All options are fully functional and one can do INR deposits through bank accounts,” said Sumit Gupta, co-founder and CEO, CoinDCX.

Also see: Millennials pull crypto out of the shadows

In an interaction with BusinessLine, he said that members of CoinDCX are not facing any banking related problems.

“Banks also have a reasonable understanding of cryptocurrency now. The progress on bank front is very encouraging. Smaller banks are opening up to crypto to get a larger market share,” Gupta said.

Relaxed positions

Another crypto exchange owner said that the position varies from bank to bank but it has significantly relaxed from the blanket ban towards cryptocurrency transactions that was seen earlier in the year.

Also see: Bitcoin hovers near 6-month high on ETF hopes, inflation worries

“It is not as if the industry doesn’t have any problem with banks. In most cases users are not facing the kind of problems they had earlier when they wanted to transact for crypto investments,” he said, adding that banks are no longer blocking accounts of crypto investors or warning of action.

Payment gateways

Apart from banks, crypto investors also have the option to use payment gateways and UPI, both of which are working well, industry experts said.

“Payment gateways are largely used by investors. Multiple payment gateways are working and plan to continue working with crypto,” Gupta said.

Regulatory uncertainty

The lack of regulatory certainty continues to be a challenge to some extent but there is now more of an understanding towards the sector.

With growing investor interest in cryptocurrency, a number of banks had earlier this year warned users about virtual currency transactions, citing the Reserve Bank of India’s 2018 circular.

However, the RBI had on May 31 asked regulated entities to not cite its April 2018 circular on “Prohibition on dealing in Virtual Currencies” as it is no longer valid following the Supreme Court ruling.

Also see: More than 2 lakh crypto accounts blocked in India over 6 months

It had also asked them to continue to carry out customer due diligence processes in line with regulations governing standards for Know Your Customer, Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT) and obligations of regulated entities under Prevention of Money Laundering Act, 2002.

However, a banker noted that it still depends on the judgment of individual banks and how they wish to proceed on the issue.

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Radia, others asked to join probe in ₹300 crore alleged bank loan embezzlement case

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The Delhi Police’s Economic Offences Wing has served a notice to Niira Radia and other promoters and directors of Nayati Healthcare and Research NCR to join investigation in connection with alleged embezzlement of over ₹300 crore of bank loan, officials said on Tuesday.

The notice was served on Monday, they said.

Radia and the others have been asked to appear before police next week, a senior police officer said.

Three persons identified as Yateesh Wahaal, Satish Kumar Narula and Rahul Singh Yadav were arrested on Thursday for misappropriation of crores of rupees, according to police.

They said a complaint was filed by orthopaedic surgeon Rajeev Kumar Sharma against Naarayani Investment, the holding company of Nayati Healthcare and Research NCR and its promotors and directors Radia, her sister Karuna Menon, Narula, Wahaal and others.

Case details

“We categorically deny any wrongdoing on our part. The complainant Dr Rajeev Kumar Sharma; after having been an integral part of the company is seeking to foist false cases in an attempt to extort money. We repose complete faith in the process of investigation and the judicial system. We believe that truth will triumph,” Radia, the chairperson of Nayati Healthcare, said in a statement.

A senior police officer said in a release that it has been stated that Sharma is the vice-chairman and executive director of Naarayani Investment. The company was incorporated with a view to build and run a hospital in Gurgaon and the complainant was having 49 per cent shares whereas remaining 51 per cent shares were held by other two directors of the company Chandan Mishra and Charchit Mishra.

The complainant was also promised a remuneration of ₹30 lakh per month as professional fees for his services. It is further stated that during the construction of Gurgaon Hospital, OSL Healthcare faced certain financial problem and majority shareholders/directors sold their shares (51 per cent) to Naarayani Investment at the consideration of ₹99 crore, police said.

Misappropriating funds

Once the alleged persons or company entered into the shoes of majority shareholder, they took all the major decisions. It is alleged that the company took a loan of ₹312 crore from YES Bank for development of Gurgaon Hospital, but the money was not used for the said purpose and misappropriated by the alleged persons, the officer said.

It is further alleged that they had not paid the complainant his professional fees worth ₹15.28 crore and brought down his shareholding deceitfully from 49 per cent to 6.3 per cent, police said.

During investigation, it was found that Naarayani Investment having 93 per cent of shareholding and Radia is the main promotor of the company. After receiving a loan amount of ₹312 crore from YES Bank by the alleged company, a sum of Rs 208 crore was transferred to a bank account in the name of Ahluwalia Construction.

On verification of the account, it was found that the account was opened by one Rahul Singh Yadav only with a view to divert or siphon off the loan amount as it was a dummy account, police said.

They also said the transfer of ₹208 crore was authorised by Wahaal and Narula, being director and authorised signatory of the loan account of the alleged company.

Police conducted raids at various places in Delhi and NCR and apprehended all three accused persons. After interrogation, all were arrested, Additional Commissioner of Police (EOW) R K Singh said.

Other directors and promoters are being examined to ascertain their role and involvement in the whole incident. It is further found that money transferred to the account of Ahluwalia Construction was further transferred to several other beneficiaries, which are being verified during investigation, Singh said.

On stories in a section of the media claiming that Radia has fled to London, she in the statement said, “Some completely unfounded comments and allegations have been made that I have left India for London. Nothing could be further from the truth. I am very much in Delhi and am currently managing the day to day operations of the hospital group. I have always cooperated fully with investigating agencies and I shall continue to do so.” “I have every faith in investigating agencies and the judicial process. These articles are scurrilous attempts to damage my reputation made at the behest of a former shareholder and director,” Radia said.

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NPCI launches NTS platform for card tokenisation

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National Payments Corporation of India (NPCI) on Wednesday announced the launch of NPCI Tokenization system (NTS) to support tokenisation of cards as an alternate to storing card details with merchants.

“The NPCI Tokenization System (NTS) will support the tokenisation of RuPay cards to further enhance the safety of customers and provide a seamless shopping experience to consumers,” it said in a statement.

Also see: Visa launches CoF tokenisation service for Grofers, BigBasket and MakeMyTrip

With NTS, acquiring banks, aggregators, merchants and others can get themselves certified with NPCI and can play the role of Token Requestor to help save the token reference number (Token Reference On File or TROF) against all card numbers saved, it further said.

“All these businesses can maintain their RuPay consumer base utilising TROF for future transactions initiated by their respective RuPay consumers,” it said.

Tokenisation guidelines have to be met by January 1, 2022.

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Banks flag concerns over US rules on consumer data, seek govt guidance, BFSI News, ET BFSI

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India’s banks have approached the government with their concerns over the mandatory sharing of customer details with US authorities under that country’s expanded National Defense Authorization Act (NDAA), which took effect on January 1.

A government official confirmed that the Indian Banks’ Association (IBA) has sought government intervention and guidance on the issue. Banks have pointed out that the provision will raise costs and any compliance shortfall can have serious implications.

The NDAA incorporates parts of the Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2019, significantly enhancing the reach of authorities over foreign banks if they have a correspondent account with an American financial institution.

It allows the Department of Justice and the Department of Treasury to subpoena records of such a foreign bank. Importantly, this provision can be invoked without regard to whether the correspondent account was used for potential violation of US law or not.

Application will be Selective, Feel Bankers
The correspondent bank accounts of US financial institutions first came under watch through the US Patriot Act of 2001 to prevent money laundering and terror financing. “The banks have raised some concerns which are being looked at. The issues will also be discussed with the Reserve Bank of India and accordingly any decision will be taken,” said the official cited above.

Although Indian banks are compliant with the Foreign Account Tax Compliance Act (Fatca), Indian regulators should guide banks on the provisions of the NDAA that apply to them, experts said.

  • Banks raise concerns about customer confidentiality, data privacy and national security
  • Reach out to the govt through IBA
  • Banks already compliant with Fatca regulation
  • Govt to engage with regulator RBI on issue
  • Regulations allow US govt to subpoena foreign-located bank data if foreign bank has a US correspondent account

“This amendment will result in additional overheads on foreign banks that have correspondent accounts in the US for responding to any subpoenas with the risk of noncompliance being both financial penalty as well termination of correspondent relationships that essentially may cause loss of business share,” said Jaikrishnan G, partner, financial services consulting, Grant Thornton Bharat.According to Jaikrishnan, Indian banks that have correspondent accounts with banks in the US will need to consolidate and limit such accounts within the US to balance business volumes with compliance costs and legal exposure. “Banks will need to strengthen transaction scrutiny on such correspondent accounts to safeguard themselves against potential involvement in such investigations,” he said.

Bankers are of the view that the application of this amended provision will be selective and only relevant in cases where there is court intervention. “But clarity is needed and that is why we have approached the government,” said a bank executive aware of the developments.



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Moody’s revises Indian banks’ outlook to stable from negative, BFSI News, ET BFSI

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Moody’s Investors Service has revised the outlook for the Indian banking system to stable from negative. The credit rating agency expects the operating environment to be stable as the economy gradually recovers from pandemic. “We expect India’s economy to continue to recover in the next 12-18 months, with GDP growing 9.3% in the fiscal year ending March 2022 and 7.9% in the following year. The pickup in economic activity will drive credit growth, which we expect to be 10%-13% annually,” said Moody’s in a report.

Moody’s said that weak corporate financials and funding constraints at finance companies have been key negative factors for banks but now these risks have receded.

Moody’s expects asset quality to remain stable. In a report Moody’s said, “The deterioration of asset quality since the onset of the pandemic has been more moderate than we expected despite relatively limited regulatory support for borrowers. The quality of retail loans has deteriorated, but to a limited degree because large-scale job losses have not occurred. We expect asset quality will further improve, leading to decline in credit costs, as economic activity normalizes”.

In the report titled ” Banking system outlook – India : stabilizing asset quality and improved capital drive outlook change to stable” Moody’s said, “Capital ratios have risen across rated banks in the past year because most have issued new shares. Public sector banks’ ability to raise equity capital from the market is particularly credit positive because it reduces their dependence on the government for capital. However, further increases in capital will be limited because banks will use most of retained earnings to support an acceleration of loan growth”.



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Meet festive demand, lend liberally, PSBs told

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The finance ministry believes that various sectors of the economy – including exports and the sunrise ones – need credit support and banks need to satiate this appetite

The finance ministry has advised state-run banks to start a nationwide loan outreach programme soon and take advantage of a potential rise in credit demand in the build-up to Diwali and thereafter, as the economy is on a path of “sustained recovery”, sources told FE.

The banks have been asked to set targets of loans to be sanctioned during the district-wise outreach programme and join hands with fintech firms and non-banking financial companies to step up disbursement to even small borrowers.

The move follows finance minister Nirmala Sitharaman’s instruction in August to state-run lenders to initiate the outreach programme, as the government sought to stir economic growth through sustained credit push, amid fears that bankers were increasingly turning risk-averse. Lenders had disbursed loans of as much as Rs 4.94 lakh crore through a similar outreach programme in various districts between October 2019 and March 2021, the minister had said.

Having remained muted for months together, non-food loan flow witnessed an uptick of late. Growth in non-food bank credit improved to 6.7% in August from 5.5% a year earlier. Loans to industry grew 2.3% from 0.4% but still remained low. That’s despite the fact that daily surplus liquidity in the banking system averaged as much as Rs 6 lakh crore in July and August, according to CARE Ratings.

The finance ministry has also asked ministries of agriculture, labour, housing, health and rural development to help bolster the number of beneficiaries for insurance as well as pension outreach as well.

The finance ministry believes that various sectors of the economy – including exports and the sunrise ones – need credit support and banks need to satiate this appetite. State-run banks have been asked to hold talks with exporters and various associations to support their loan requirements. This is also expected to provide a leg-up to the one-district-one-product export theme mooted by the Prime Minister.

The weekly average (net) liquidity surplus in the banking system, prevalent since June 2019, has jumped from Rs 4.5 lakh crore as of end-June 2021 to over Rs 7.5 lakh crore by October 5, according to CARE Ratings. “The increase in surplus can primarily be put down to the sustained lower credit disbursement from banks due to weak demand for credit as well as wariness of banks to lend,” it said in a report last week.

Similarly, public-sector banks (PSBs) were directed by the minister to firm up specific plans for each of the north-eastern states to boost credit flow there. Some of the eastern states, such as Odisha, Bihar, Jharkhand and even West Bengal, account for a sizeable chunk of PSBs’ CASA deposits but credit expansion for businesses development there remains muted. This needs to be addressed, the minister said.

State-run banks have turned the corner, with profits of Rs 31,820 crore in FY21, the highest in five years. The net bad loans of state-run banks dropped to 3.1% in FY21 from as much as 7.97% three years earlier, and their capital adequacy (CRAR) was about 14%, against the requirement of 10.875%. The improved financials have improved their ability to lend adequately, the finance ministry believes.

Already, to boost credit flow to Covid-hit businesses and professionals, the government last year introduced the Emergency Credit Line Guarantee Scheme (ECLGS). As of September 24, loans sanctioned under various avatars of the scheme (ECLGS 1.0, 2.0 and 3.0) stood at Rs 2.86 lakh crore.

Similarly, its Rs 7,500-crore credit guarantee scheme, announced on June 28, to facilitate concessional loans to an estimated 25 lakh small borrowers through micro-finance institutions was fully utilised within 75 days.

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