Tag: Asset

Crypto should be allowed only as an asset: IAMAI

Banking & Finance

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As uncertainty over the proposed crypto regulation bill over banning private cryptos continues, the Blockchain and Crypto Assets Council (BACC), of Internet and Mobile Association of India said in a statement on Thursday supported the use of cryptocurrencies only as an asset.

It added, however, that a blanket ban on cryptocurrencies will encourage non-state players thereby leading to more unlawful usage of such currencies. “The Council has always argued in favour of prohibiting the usage of private cryptocurrencies as a currency in India by law since usage as currency is likely to interfere with monetary policy and fiscal controls. On the other hand, the Council has advocated their use only as an asset. The Council believes that a smartly regulated crypto assets business will protect investors, help monitor Indian buyers and sellers, lead to better taxation of the industry, and limit illegal usage of cryptos,” BACC said.

Also read: Crypto currencies recover, back in the green on Indian exchanges

Negative outcomes of a ban

BACC added it had listed several negative outcomes of a ban such as zero accountability and traceability of the origin and end usage of the cryptocurrencies; besides a complete evasion of taxes. A ban will also adversely impact retail investors.

“Crypto exchanges based in India offer an effective instrument of monitoring and are dedicated to creating an ecosystem that guarantees investor protection besides bringing both the investors and exchanges under proper tax laws. The Council believes that the efforts of the exchanges should be supported by a law that should enable them to provide safer services to investors and fair taxes to the government,” it said.

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Securitisation pool collections improve as restrictions ease: Crisil Ratings

Banking & Finance

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With the gradual phasing out of social restrictions, there has been an improvement in the monthly collection ratios of securitised pools rated by Crisil Ratings.

These had declined between April and June 2021 following the second wave of the Covid-19 pandemic.

₹1 crore, minimum ticket size to issue securitisation notes: RBI

“The trend in improving collection efficiencies has been seen across asset classes and in a number of segments the levels are quite close to pre-pandemic levels.

Resilience across cycles

Collection ratios in mortgage-backed securitisation (MBS) pools have rebounded to near-100 per cent ― their pre-pandemic normal ― in the pay-out months of July and August 2021,” Crisil Ratings said on Monday.

Securitisation volume improves in Q3 on revival in economy: Crisil

MBS pools, with home-or property-backed loans as underlying, have shown extremely high resilience across economic cycles.

Says Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, Crisil Ratings, “In asset-backed securitisation (ABS) pools, collection ratios are set to reach January-March 2021 pay-out levels after dipping to 84 per cent in the first quarter this fiscal.”

Median collection ratios for vehicle loan pools for August pay-out reached 100 per cent, just a tad short of the March collection ratio of 101 per cent, he further said.

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Bajaj Finance acquires more customers after HDFC Bank’s halt on credit card, BFSI News, ET BFSI

Banking & Finance

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Bajaj Finance, the behemoth in consumer lending, posted a slight drop in new consumer loans at 5.5 million in January March quarter against 6 million a year ago. However, the company acquired 2.3 million new customers in Q4 FY21 as compared to 1.9 million in the fourth quarter of fiscal 2020.

As it kept the customer accretion rate healthy Bajaj Finance seems to have benefited from the setback to HDFC Bank, which was penalised by the Reserve Bank of India over digital lapses and has been unable to issue new credit cards.

According to analysts, the asset under management growth of Bajaj Finance exceeded expectations at 4% year on year and 6% sequentially as it acquired more customers.

Bajaj Finance’s Q4 performance

Bajaj Finance’s deposits rose 21% on year to Rs 25,800 crore as on March 31. The consolidated deposit book was at Rs 23,777 crore as on December 31. Assets increased by Rs 9,500 crore in the March quarter, taking the financier’s total assets under management to Rs 1.53 lakh crore as on March 31. The company’s customer franchise rose 14.1% on year to 48.6 million as on March 31.

The company is well capitalised and its liquidity position remains strong, as its consolidated liquidity surplus was Rs 16000 crore as on March 31. Bajaj Finance had a consolidated liquidity surplus of Rs 14347 crore as on December 31, representing 11.6% of its total borrowing. The capital adequacy ratio was 28.4% as of March 31, which is an improvement over 28.18% as on December 31, according to the provisional figures for the January March quarter.

Analysts expect the company to show healthy traction in consumer B2B (business to business) loans and commercial loans. They also see a gradual uptick in mortgage loans and consumer B2C (business to consumer).

Covid impact on Bajaj Finance.

However, with the surge in Covid cases, asset quality remains a worry as they may increase provisioning and credit costs for Bajaj Finance in upcoming quarters. In the third quarter, the company provided Rs 1,352 crore for loan losses and provisions, which was significantly higher than Rs 831 crore it provided in the same quarter last year. During the third quarter, the company has done a one-time write-off of principal outstanding amount of Rs 1,970 crore and interest outstanding of Rs 365 crore on account of Covid-19 related stress.

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ARCs may be allowed to tie up with AIFs for asset turnaround, BFSI News, ET BFSI

Personal Finance

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After proposing to set up a bad bank, the government is looking to give more leeway to asset reconstruction companies (ARCs) in buying NPAs and reconstruction.

The government is looking into proposals to allow ARCs to team up with private equity and venture capital funds to recapitalise and ensure the turnaround of a defaulting company.

The Reserve Bank of India (RBI) may also set up a task force comprising industry veterans and experts to review the regulations governing.

If an ARC, ties up with an alternative investment fund (AIFs) such PE or VCs to arrange finance for reviving a company through equity infusion, or acts as a sponsor in an AIF, then its investment commitment would be lower than 15% cash as required under the current rules. That could help in more loan sale transactions between banks and ARCs.

According to the rules, an ARC must pay a minimum 15% of the deal value in cash and the balance as ‘security receipts’ (SRs) which are similar to seven-year bonds.

What ails ARCs

The cash proportion of 15% has pushed the ARCs to raise their returns through securitisation and asset reconstruction

Unless the ARC recovers 130% of the acquisition value, it will not make its return. Even at 100%, ARC will make a loss because the management fee of 1-2% doesn’t make any ARR for ARC. Recovery should be over 130% so that 100% of security rights will be redeemed.

Provisioning impediment

Also, in September 2016, the Reserve Bank of India introduced new regulatory guidelines regarding provisioning. From April 2018 banks have to sell at 90% cash and 10% SRs. If a bank holds more than 10% SR, it had to continue provisioning for the loan which is not even on their books. So there is no incentive for them to transfer to ARCs. Now no banks transfer on 15:85 and all deals are in cash.

Cash deals

At such high levels of cash, the market becomes unviable for all but a few. Some ARCs such as Edelweiss, JM Financial that have raised money from Alternative Investment Funds (AIFs) do transactions on a cash basis, but other ARCs have deployed whatever capital they had, and now have none.

The holdings of such AIFs which have the capital to invest in newly-issued security receipts have risen sharply. These funds hunt for viable assets. Vulture funds and AIFs look for 25% plus returns while the ARCs look at 18-20%.



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