Tag: Axis

Corporate exclusion from banking shrinks buyer pool for PSBs, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India’s decision to keep corporates away from bank licences will help the government sidestep allegations that it is selling banks to big business. However, the number of prospective buyers for public sector banks (PSBs) will shrink.

In the absence of any deep-pocketed corporate house, the bidders for PSU banks would have to be either private or multinational banks, or private equity investors who would be in a position to come up with a couple of billion dollars to buy a bank. The challenge in the case of private equity investors is that they would look for an exit after a few years, while multinational banks are increasingly reducing their retail exposure as retail banking is becoming a domestic activity because of compliance costs.

Private players like HDFC Bank, Kotak, ICICI and Axis have the equity-raising capacity, but the pension liabilities would be a deterrent. In March this year, finance minister Nirmala Sitharaman had said that the salary and pension of bank employees will be protected in the case of privatisation. “The deal-breaker would be the pension liabilities of these banks,” said a private banker. The fact that the pension is inflation-linked makes it worse for any buyer.

The source added that this is the reason why the banks are trading at low valuations despite having cleaned up their loan books.

For private banks, a bank licence or a branch network does have the same appeal that it would have for a corporate house. More so given the disruption that digital is causing. “Unlike in the past when a domestic bank licence would draw a lot of interest, there was only one serious bidder for Lakshmi Vilas Bank — DBS. When the RBI was looking for someone to take over PMC Bank, despite the lure of a licence of a Mumbai-headquartered bank, there was again only one bidder,” pointed out a banker.

While the PSBs are in better financial shape, a buyer would need to put in more capital and probably see a hike in the cost of funds as the government ownership, which provides a cushion to depositors, will no longer be there. Since liberalisation, the central bank has taken the safe route of issuing bank licences to financial institutions. The first round of banks that got their licence was largely sponsored by financial institutions, including HDFC, ICICI, UTI, IDBI and some non-banking finance companies such as Centurion, Kotak Mahindra and Bandhan. The experience in granting licences to professionals has not been good (Global Trust Bank and Yes Bank). The absence of private non-bank financial institutions makes the divestment more challenging.



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Banks geared for card tokenisation

Banking & Finance

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Banks indicate they are well prepared for the card tokenisation system and emphasise it will not impact customers. While lenders expect it to be a smooth transition, there could be some initial friction as consumers and merchants adapt to the new system.

“This move by the Reserve Bank of India will enhance card security framework for digital transactions. With tokenisation, a card specific token is generated. Going forward that token can be used for all online transactions. This will ensure enhanced security. In case of any data breach or hacking attempt at the merchant’s end, the customer’s card details will still be protected,” said Sanjeev Moghe, EVP and Head-Cards and Payments, Axis Bank, adding that the lender is prepared for tokenisation.

RBI clarifies

The Reserve Bank of India has (RBI) said that contrary to some concerns, there would be no requirement to input card details for every transaction under the tokenisation arrangement.

“HDFC Bank, ICICI Bank and SBI Cards already have the card tokenisation system in place for online transactions, while few players have device-based tokenisation (SBI Cards with Samsung) for contactless NFC payments,” said a recent statement by Emkay Global.

HSBC India, in April, had announced that it has collaborated with Google Pay and VISA to enable secured tokenisation on its credit cards.

“The RBI has addressed all concerns. With the growing popularity of e-commerce, this step is welcome,” said another banker, adding that there could be some amount of adaptation required for customers. “Customers will not have to tap in their 16 digit card number every time they make a purchase,” he said.

Mandar Agashe, Founder, Managing Director and Vice-Chairman, Sarvatra Technologies also said the current situation is similar to when PIN was introduced for every transaction. It took a lot of effort but we have the lowest PIN-based frauds in the world, he pointed out.

“Merchants have to be ready to purge all the customer card data and get the token from the individual banks. Banks are also getting ready. There will be some level of friction at the back end if some bank is not ready. So, those customers may face inconvenience if the issuing bank doesn’t give the token to the merchant on time; then, the customer has to enter the card data every time,” he said.

Emkay Global stated the mandatory tokenisation of cards and resultant customer inconvenience in the initial phase may deter cardholders from making low-value online card payments and may push them to other payment modes such as UPI and wallets.

“However, it would alleviate security concerns in online transactions; thus, it will be a long-term positive for the card industry,” it said.

The RBI, in March 2020, had stipulated that authorised payment aggregators and the merchants onboarded by them should not store actual card data. The deadline is set for January 1, 2022, post which no entity in the card transaction or payment chain, other than the card issuers and/or card networks, shall store the actual card data.

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Max Financial Services net profit falls 80 pc to Rs 36 crore in Jun qtr, BFSI News, ET BFSI

Personal Finance

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Max Financial Services on Tuesday reported an 80 per cent decline in its consolidated net profit to Rs 35.81 crore for the first quarter ended June 30, mainly on higher expenses. The company had posted a net profit of Rs 181.53 crore in the quarter ended June 2020.

The total income during the quarter was Rs 5,943 crore as against Rs 5,517 crore in the year-ago period, the company said in a regulatory filing.

Sequentially, it was down from Rs 9,760 crore in the March 2021 quarter.

The company’s total expenses during the period stood at Rs 5,859 crore, compared to Rs 5,367 crore a year ago. However, it came down from Rs 9,693 crore in the March quarter.

The company’s subsidiary Max Life reported a 32 per cent jump in new business premium during the quarter at Rs 875 crore, as against Rs 661 crore in the year-ago period.

The renewal premium income (including group) rose 21 per cent to Rs 2,244 crore, taking the gross written premium to Rs 3,484 crore, a spurt of 27 per cent over the first quarter of the previous fiscal, the company said.

“This was despite a nearly 3-4x more severe impact of the second wave of COVID-19 compared with the first wave. Claim experiences were higher than expected across all lines of businesses with significantly higher variance for protection and group businesses.”

The partnership with Axis Bank and the longstanding bancassurance with Yes Bank helped partnership channels grow 52 per cent in the first quarter of FY22, Mohit Talwar, Managing Director, Max Financial Services, said.

In April this year, Axis Bank alongside its two entities, became a co-promoter of Max Life by picking up a 12.99 per cent stake in the insurer.

The Axis entities have a right to acquire an additional stake of up to 7 per cent in Max Life in one or more tranches.

Shares of Max Financial closed at Rs 1,026.55 apiece on BSE, down 3.73 per cent from the previous close. PTI KPM BAL



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Police, BFSI News, ET BFSI

Banking & Finance

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Palghar (Maharashtra), Former Manager of Axis Bank, Anil Dubey – who looted the ICICI Bank and killed a woman Deputy Manager on Thursday – has now been charged with allegedly cheating his immediate previous employer of Rs 26.84 lakh (Rs 2.68 mn), police said here on Saturday.

The huge amount was found missing during a recent audit of the cash reserves at the Axis Bank’s Naigaon Branch where Dubey was the manager before he was abruptly sacked on Friday, hours after the sensational ICICI Bank Virar East Branch heist and murderous attacks on two women staffers inside the bank premises.

The Waliv Police Station has registered a complaint of the missing amount under various sections of the Indian Penal Code and investigations are currently on, said an official.

“The discrepancy was found during the routine monthly tally of accounts and reported to the top authorities. Thereafter, an internal investigation has been launched and we have also lodged an FIR with the police,” an official of Axis Bank told IANS, requesting anonymity.

Simultaneously, the bank is attempting to confirm whether Dubey – who had joined Axis Bank in August 2020 – had cheated its customers or indulged in any other scams or misappropriation of public money.

Apprehending action from the Axis Bank or the police after his misdeeds were discovered in the past few days, he had skipped office during the week, but by the weekend masterminded the ICICI Bank heist to clear off his outstanding dues at one go.

Officials reveal that since he had served ICICI Bank for 15 months, he was on good terms with the staffers there, well acquainted with the bank’s routine activities.

These and other details may have helped him commit the daring – but unsuccessful – loot attempt on Thursday (July 29) night as the bank would be closed for the weekend after the July month-end accounts tally.

As his escape attempt was foiled by the local people, the Virar Police recovered the booty comprising cash and gold totally valued at around Rs 3.38 crore, said Senior Police Inspector Suresh Warade.

Dubey was produced before a Vasai Magistrate Court which remanded him to police custody till August 6, under charges of dacoity, attempt to murder, murder, theft, etc.

Meanwhile, the condition of the injured cashier Shraddha Devrukhkar – who was attacked by Dubey with a cut-throat razor, remains worrisome and she has been shifted to Lilavati Hospital in Mumbai.

“She is still in deep shock due to the bloody assault on her and also her senior colleague and close friend, Yogita Vartak Choudhary, who succumbed on Thursday,” said another staffer.

Owing to the serious injuries on her neck, shoulder and other parts, Devrukhkar, 32, is communicating through signs with her family, police and bank colleagues.

Dubey, 38, with over 15 years of experience in the banking sector, had piled up huge debts through a lavish lifestyle, expensive tastes, certain investments in lucrative residential/commercial properties, etc, though the sources of his finance are still not clear.



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Axis Bank stake in Max Life likely to rise to 20 per cent in 12-18 months, BFSI News, ET BFSI

Banking & Finance

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In line with the proposed deal, Axis Bank is likely to raise its stake in Max Life Insurance to about 20 per cent over the next 12-18 months, said the insurance company’s CEO Prashant Tripathy said. Currently, Axis Bank and its two subsidiaries — Axis Capital Ltd and Axis Securities Ltd — collectively own 12.99 per cent in Max Life Insurance post approval of the deal in April this year.

With this, Axis entities have now become co-promoters of Max Life with three board seats.

“Axis Bank is to increase to 19.99 per cent in tranches. Thirteen per cent is already done over the next two quarters, we will seek approval for the balance seven per cent. So, it will reach about 20 per cent and that will be the ownership of Axis Bank,” Tripathy told.

When asked about the timeline for the completion of the remaining stake transfer, he said: “It should happen in the next 12 to 18 months.”

Under the deal, the Axis entities also have the right to acquire an additional stake of up to seven per cent in Max Life, in one or more tranches, subject to regulatory approvals.

Tripathy said there is no change in brand but the tagline will have the name of Axis Bank as the joint venture partner.

Talking about synergy, he said, “We are coming up with a new strategy for future growth. We are working together as a common team to ensure that Max Insurance life grows faster than the industry. We are working together to look at product mix to drive Axis channel so outcome is favourable for both customers and the company.”

Besides, he said working on analytics areas to leverage on each other’s capabilities.

He said the company launched 14 products or product variants last year and increased the margin by 3.60 per cent in 2020-21.

Max Life Insurance recorded a 22 per cent rise in its total new business premium (individual and group) to Rs 6,826 crore in the financial year ended March 2021.

The renewal premium income of the insurer rose 15 per cent to Rs 12,192 crore, taking the gross premium to Rs 19,018 crore, up by 18 per cent from a year ago.

In terms of individual APE (adjusted premium equivalent), the company witnessed a growth of 19 per cent to Rs 4,907 crore.

Max Life’s post-tax shareholders’ profit fell six per cent to Rs 523 crore in 2020-21 as compared to Rs 539 crore in the previous year.



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Banks gear up for asset quality deterioration as stricter lockdowns loom, BFSI News, ET BFSI

Banking & Finance

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As India stares at lockdowns and curbs for the entire May, banks and NBFCs are Lenders are bracing for a further deterioration in asset quality metrics, cheque-bounce rates and collection ratios.

Collection levels had already dropped to 10% for lenders and cheque-bounce rates had increased in segments like small and medium enterprises, commercial vehicles and microfinance.

Analysts see cheque bounce levels rise by another 3-4% while collection ratios dropping by nearly 5% in May alone

Cheque bounces are back to January 2021 levels after improving in March with Maharashtra, Madhya Pradesh, Punjab, and Telangana are seeing higher check bounce rates, HDFC Bank said in its Q4 results.

Dishonoured cheques in April (half-way through the month) have risen slightly, possibly due to some panic caused by worsening medical conditions,” HDFC said after its Q4 results.

Till the first week of April, the worst affected state was Maharashtra but now many states have been severely impacted by the fresh pandemic surge. NBFCs and small finance banks face a bigger hit.

Axis Bank too has said collections are likely to get impacted in the coming weeks and it was watching the situation closely.

No cover this time

Banks, which got protection and support by a swift moratorium on loans when the pandemic first struck, have no such cover this time.

As the second wave intensifies, most of the relief measures and schemes announced by the government and Reserve Bank of India have expired. On top of it, the central bank is non-committal on moratoriums.

In today’s conditions, there is no need for a moratorium,” RBI governor Shaktikanta Das said after the central bank’s monetary policy review. However, that statement was before the second Covid wave worsened.

RBI stress test

Bank NPAs may rise to 13.5% under the baseline stress test scenario by September, the highest in more than 22 years, according to the RBI’ financial stability report in January this year.

The gross bad loan ratio of banks which stood at 7.5% as of 30 September, could almost double to 14.8% under a severe stress scenario, RBI warned. Under the severe stress scenario, RBI has assumed a 7.6% economic contraction in the six months to 31 March and a tepid 3.8% growth in the first half of the next fiscal. However, uncertainty over vaccines and the severity of the Covid wave hobbles the 3.8% growth projection.

The last time banks saw such stress was in 1996-97 when the bad loan ratio rose to 15.7%.



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Axis Bank to sell UK arm to tech platform, BFSI News, ET BFSI

Banking & Finance

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Axis Bank informed the bourses that it will be selling its UK subsidiary to OpenPayd Holdings.

The bank’s filing shows the UK arm contributed Rs 206 crore total income in FY20 and a networth of Rs 765 crore as of March 2020 which happens to be almost 1% of the bank’s net worth.

The date for the completion of sale has been set at September 30, 2021 subject to approval from the UK financial regulator and and the prudential regulation authority. The UK subsidiary is being hived off at net asset value and fixed premium of $5.5 million.

OpenPayd Holdings is a tech-led platform bringing together experts from banking, payments and fintech sector to disrupt corproate banking and payments.

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HDFC Bank signals IT issues may not be fixed by March, BFSI News, ET BFSI

Banking & Finance

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HDFC Bank has indicated in its conference call with analysts that the lender might not complete fixing its back-end IT issues during the current fiscal. The bank said that its action plan relating to disaster recovery would take 12-18 months, while its immediate plans would take 10-12 weeks.

The country’s largest private bank had reported its Q3 results on Saturday — the first after the RBI pulled up the lender for repeated problems faced by customers in accessing digital banking.

The bank had reported an 18% year-on-year growth in earnings. The bank’s share price rose by over 1% after the results on a day the sensex fell by nearly 1% after its record profit of Rs 8,758 crore.

According to Macquarie research analyst Suresh Ganapathy, the tech resolution will take time and could spill over to end of June 2021.

“They want to be very sure everything is in place, ramp up capacity and then call the RBI for due diligence … As of now, inability to give credit cards has not affected account openings … But if this continues beyond June, we can see some impact coming in the near term… Meanwhile, for others like ICICI and Axis, this is an opportunity to ramp up their credit card base,” said Ganapathy.

The RBI has barred the bank from launching digital initiatives and issuing credit cards until it fixes issues with its IT system and ensures that multiple outages of online services that happened in the past do not repeat.

According to analysts, though it would take time to fix the issues, the bank was optimistic of getting permission from the RBI for a digital lending platform for auto loans.

According to Siji Philip of Axis Securities, the bank has made a representation to the regulator for digital lending for four-wheelers and two-wheeler loans.

“On the restrictions imposed by the RBI on December 2, the bank has made progress according to the plan provided to the regulator. The bank expects to complete the process in 10–12 weeks, which will then be subject to RBI inspection,” a note by Edelweiss said. It added that the bank aims to introduce a digital platform for auto loans in 90 days.

ICICI Securities said that the bank’s credit card portfolio was up 9% quarter-on-quarter despite the ban on acquiring new customers coming into effect from mid-December.



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