Tag: bad bank

IBA CEO, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


National Asset Reconstruction Company Ltd (NARCL), the name coined for the bad bank announced in the Budget 2021-22, is expected to be operational in June.

Bad bank refers to a financial institution that takes over bad assets of lenders and undertakes resolution.

The new entity is being created in collaboration with both public and private sector banks, Indian Banks’ Association Chief Executive Officer (CEO) Sunil Mehta said.

“Various preparatory work is going on and we hope that it should be operational next month. The biggest advantage of NARCL would be aggregation of identified NPAs (non-performing assets).

“This is expected to be more efficient in recovery as it will step into the shoes of multiple lenders who currently have different compulsions when it comes to resolving a bad loan,” he said.

NARCL will take over identified bad loans of lenders, Mehta said. He added that the lead bank with offer in hand of NARCL will go for a ‘Swiss Challenge’, where other asset reconstruction players will be invited to better the offer made by a chosen bidder for finding higher valuation of an NPA on sale.

The company will pick up those assets that are 100 per cent provided for by the lenders, he added.

Finance Minister Nirmala Sitharaman in Budget 2021-22 announced that the high level of provisioning by public sector banks of their stressed assets calls for measures to clean up the bank books.

“An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt,” she had said in the Budget speech. It will then manage and dispose of the assets to alternate investment funds and other potential investors for eventual value realisation, she added.

Last year, IBA had made a proposal for creation of a bad bank for swift resolution of non-performing assets (NPAs). The government accepted the proposal and decided to go for asset reconstruction company (ARC) and asset management company (AMC) model for this.

Mehta further said NARCL will pay up to 15 per cent of the agreed value for the loans in cash and the remaining 85 per cent would be government-guaranteed security receipts.

The government guarantee would be invoked if there is loss against the threshold value, he added.

The Reserve Bank of India (RBI) has said that loans classified as fraud cannot be sold to NARCL. As per the annual report of the RBI, about 1.9 lakh crore of loans have been classified as fraud as on March 2020.

To facilitate smooth functioning of asset reconstruction companies, the RBI last month decided to set up a panel to undertake a comprehensive review of the working of such institutions.

After enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act in 2002, regulatory guidelines for ARCs were issued in 2003 to enable development of this sector and to facilitate smooth functioning of these companies.

Since then, while ARCs have grown in number and size, their potential for resolving stressed assets is yet to be realised fully.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

SBI MD, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


State-run lenders will take a lead in creation of the bad bank, but the sick asset resolution platform needs the support of private banks and other lenders to be successful, State Bank of India Managing Director Swaminathan J said on Thursday. If all lenders come on board, the National Asset Reconstruction Company (NARC) announced in the budget will be able to aggregate 100 per cent of a sick company’s outstanding loans, which shall ultimately lead to better resolution of the asset quality stress for all.

The government is yet to announce the specific contours of the NARC or the bad bank and has also only said that it is willing to provide some sovereign guarantee to help the platform.

“For this model to succeed, it cannot just be mostly for public sector banks. Yes, they will take a lead role in this but as we understand at this point of time, NARC will be all encompassing. It will take into account PSBs, private sector banks and for that matter any financial institution which has an exposure to the identified account,” Swaminathan said, speaking at an online seminar.

The present set of over two dozen ARCs have not been able to achieve decent numbers on debt aggregation and get stuck under 40 per cent in many cases, which has a bearing on the final resolution as well, he said.

“This ARC (the bad bank), since it is mandated and backed by the government, it is going to be a smoother affair in terms of all the banks deciding together to transfer the entire asset. Which means that the aggregation is going to be near 100 pc and there is going to be an AMC structure. So, together, we expect this to be a winning formula,” the confident SBI executive said.

“We are ‘very close’ for the bad bank to be a reality” and added that the dual structure of being both an asset reconstruction company as well as an asset management company will be of help, he said.

At present, financial industry stakeholders are being reached out to gauge their interest and one of the entities will take the lead once the potential shareholders are in place.

The lead bank or financier will have a stake of over 100 per cent, and apply to the RBI for licence to operate as an ARC, he said, stressing that funding or capital is not a problem for the bad bank.

The bad bank will operate on the prevalent 15:85 structure, where only 15 per cent will be paid as cash and the rest would be security receipts, he said, adding that this model will ensure that the fund initial fund requirements are not very high.

He said there is a group within the country’s largest lender working out a slew of modalities, including the potential assets which can be transferred to the NARC, capital required etc.

One of the unanswered aspects which will eventually get solved is the ways to put a value to the government guarantee which will ride alongside the security receipts.

Explaining the ways of working, he said NARC will offer a specific price for an asset to the banks and await the nod from the joint lenders forum to go ahead with a resolution. Once the amount is quoted, the lenders can reach out to other ARCs in the system and NARC will have the opportunity to revise its bid as well, he said, adding that there is a scope for price discovery.

A majority of lenders will have to be on board before the asset is transferred to NARC, he said, adding that the definition of ‘majority’ is likely to be the one as done by the Insolvency and Bankruptcy Code.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,

Lenders to approve the transfer of 30-40 loans by next week, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The Indian Banks’ Association (IBA) has identified 102 corporate bad loans, totalling to Rs 2 lakh crore, where the amount outstanding in each is over Rs 500 crore that can be transferred to the proposed National Asset Reconstruction company (NARC) or bad bank.

It has asked its member banks asked members to identify large loans where they are lead bankers and get approval from co-lenders so that these loans can be sold to a National Asset Reconstruction company.

The loans identified by IBA include NPAs in a variety of industries — including oil, steel, cement and roads, with many admitted under the insolvency process. These loans are almost fully provided for over the years and they exclude the ones where there is fraud involved or those currently under liquidation. About 75% of the lenders by value need to approve to transfer the loans to an ARC.

The process

In the first phase, lenders are expected to approve the transfer of 30-40 loans by next week for transferring the loans from the books of banks is already in place.

Once the lenders decide on selling the loan, the NARC will make them an offer based on the scope of recovery. With the NARC’s offer on hand, the lenders will hold a ‘Swiss Challenge’, where rivals are allowed to better the offer made by a chosen bidder.

While rival in the private sector will be given an option to bid, it is unlikely they will succeed. This is because the security receipts issued by the NARC for 85% of the value of the loans would be guaranteed by the government. Since private companies do not have a government guarantee, they can only hope to win if they can provide cash. The Swiss Challenge will enable the public sector banks to comply with RBI’s norms that require banks to sell loans through a price-discovery process rather than doing a one-to-one deal.

The NARC will pay up to 15% of the agreed value for the loans in cash. The bad bank is also expected to do a good job in recovery as it will create a trust that will assign the task to an asset management company (AMC) in the private sector.

Each corporate nonperforming asset (NPA) will be converted into a special purpose vehicle, which will be sold by the AMC.

The bad bank

Nine banks and two non-bank lenders, including the State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB), are coming together to jointly invest Rs 7,000 crore of initial capital in a proposed bad bank that aims to help extract funds stuck in bad loans. Two other state-run financiers of power projects will also own stock in the bad bank.

Canara Bank, Union Bank of India and Bank of India will join their larger state-run peers as investors in the bad bank. ICICI Bank, Axis Bank and Life Insurance Corp of India-owned IDBI Bank are also among the shareholders. State-owned Power Finance Corp and Rural Electrification Corp will also be equal shareholders in the new company.

Subscribe to ETBFSI Daily Newsletter and stay updated.
https://bfsi.economictimes.indiatimes.com/etnewsletter.php



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

RBI paper, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Introduction of a bad bank may help “shape the operations” of the existing asset reconstruction companies (ARCs), an RBI paper said on Monday, noting that a sizable bulk of assets bought by such entities have not been resolved for a long time. The paper, published in the central bank’s monthly bulletin for April, also flagged risks of an excessive reliance on banks by the ARC industry.

It said banks supply non performing assets (NPAs) to the ARCs, hold shareholding in these entities and also lend to them, which makes it necessary to monitor if there is a “circuitous movement of funds between banks and these institutions (ARCs)”.

In her Budget speech for FY22, Finance Minister Nirmala Sitharaman had declared that a new ARC will be created to hold the sour assets of the state-run lenders and resolve such assets professionally.

“About 42 per cent of the outstanding SRs (security receipts) as on March 2020 were more than five years of age and would have to be redeemed over the next four years to avoid write-offs,” the paper said, pointing out at the difficulties being faced by the current set of ARCs in resolving the stress.

While resolving a case, ARCs pay a minor portion in cash to the selling bank while the rest is SRs to be paid over a time.

“Going forward, the introduction of a new asset reconstruction company for addressing the NPAs of public sector banks may also shape the operations of the existing ARCs,” the RBI paper said.

It added that there is a definite scope for the entry of a “well-capitalised and well-designed entity” in the Indian ARC industry and such a body will strengthen the asset resolution mechanism further.

It cited global experiences to lay down the necessary features of the new ARC announced by the government.

It advocated that the new ARC or the bad bank should have a narrow mandate such as resolving NPAs with clearly defined goals, a sunset clause defining their lifespan, supportive legal infrastructure involving bankruptcy and private property laws, backing of a strong political will to recognise problem loans, and a commercial focus including in governance, transparency, and disclosure requirements.

The paper said while proactive asset recognition is important for a correct assessment of the health of the banking system, it needs to be followed by effective asset resolution and recovery by banks.

The absence of an effective resolution and recovery mechanism can discourage recognition of NPAs by banks in the first place. The lack of recourse to timely recovery can also deteriorate the economic value of assets adding to the losses incurred by banks over time, it said.

The regulatory changes by the Reserve Bank have been broadly geared towards strengthening the ARC industry, ensuring genuine sale of NPAs by banks, enhancing the involvement of ARCs in the process of resolution and deepening the market for SRs, it said.

However, it noted that there has been a concentration in the industry in terms of AUM and SRs issued, and net owned funds.

Secondly, despite the regulatory push to broaden, and thereby enhance, the capital base of these companies, they have remained reliant primarily on domestic sources of capital, particularly banks.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

IBC is less of resolution and more of liquidation, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Bankers feel that they are not getting a good price under the Insolvency and Bankruptcy Code, which has seen dismal recoveries in many cases.

“IBC is not the right solution. It is a resolution tool. If there is no resolution, automatically it goes to liquidation. That is a big problem. Resolution can be made if the underlying business is robust, says Siby Antony, chairman of the ARC Association of India.

He says banks feel that they are not getting the right price in IBC.

“Alok Industries was thought to be a very good asset but went for 17%. Binani Cement, Essar Steel were robust businesses and saw interest from strategic investors. But there are hundreds of assets where there is no interest from investors. These are smaller assets,” he said.

The status of IBC cases

Out of the total 3,774 cases or corporate insolvency resolution processes (CIRPs) filed since the Insolvency and Bankruptcy Code (IBC) came into existence in 2016, 1,604 cases, or 43 percent have closed, by way of resolution, liquidation or other means. The rest 57 percent are ongoing with many overshooting the 330-day maximum time limit.

Of the 1,604 closed cases, only 14 percent have found a resolution, whereas 57 percent have ended in the liquidation of the companies.

Interestingly, the 72% cases of CIRPs ending in liquidation were already defunct and under the Board for Industrial and Financial Reconstruction.

About 312 cases have been closed on appeal or review or settled, 157 have been withdrawn; 914 ordered for liquidation and 221, saw approval of resolution plans.

The recovery rate for resolved cases under IBC is 44% with Rs 1.84 lakh crore recovered so far of the Rs 4.13 lakh crore admitted claims.

In case of the 12 large defaulters identified by RBI, the creditors recovered Rs 1.36 lakh crore from eight cases that have been resolved so far, with recoveries ranging from as low as 17 percent of claims in the case of Alok Industries, to almost 100 percent for Jaypee Infratech.

N Kamakodi, MD & CEO of Citi Union Bank said he preferred the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (SARFESI) over IBC.

“Since our focus is more on SME lending, we have control over the assets of the borrower. Hence, most of our resolution plans are through SARFAESI action more than the IBC.”

He added, “What is more important is whether the borrower has the skin in the game. When you want to sell it as a going concern and when there is a sufficient value, then IBC is preferable. But if the borrowers’ skin in the game is less, then the SARFAESI is a better option.”

The delays in NCLT

The 221 CIRPs that saw resolutions took an average of 375 days for the conclusion, exceeding the maximum 330 days permitted. The 914 cases under liquidation took on an average 309 days for the conclusion.

As on September 30, 2021, out of the 1,942 ongoing insolvency resolution cases, as many as 1,442 have been stretched beyond 270 days, while 349 such cases have been pending for periods of more than 180 days but less than 270 days.
As on September 30, 2021, out of the 1,942 ongoing insolvency resolution cases, as many as 1,442 have been stretched beyond 270 days, while 349 such cases have been pending for periods of more than 180 days but less than 270 days.

As on September 30, 2021, out of the 1,942 ongoing insolvency resolution cases, as many as 1,442 have been stretched beyond 270 days, while 349 such cases have been pending for periods of more than 180 days but less than 270 days.

Recently, the National Company Law Appellate Tribunal (NCLAT) directed to initiate the liquidation process of edible oil company K S Oils Ltd and set aside an NCLT order passed against it. Terming it “unfortunate”, the appellate tribunal observed that even after the lapse of 981 days and repeated compliance by the Resolution Professional to initiate the liquidation process, the NCLT had not considered it.

Leading bank State Bank of India, one of the Committee of Credit (CoC) Member, on behalf of joint lenders forum who collectively holds 76.53 per cent had moved NCLAT based on which the appellate tribunal had on November 18, 2019, directed lenders to consider revised plans if any within two weeks and directed NCLT to pass appropriate order in accordance with the law.

Bad bank challenge

The government is planning to set up a bad bank and an asset management company (AMC). Loans greater than Rs 500 crore which have not been declared fraudulent will be transferred to the bad bank. It is likely that the assets would not be subjected to IBC in the first instance, and the AMC will first try and revive these companies or package the loans to an investor.

Bad Bank
Bad Bank

Also, creditors of several companies had signed the Inter Creditor Agreements (ICA) and may continue negotiation under the framework roping in distressed asset investors. Also, most of the ICA cases will have loans greater than Rs 500 crore, which will be transferred to the bad bank. MSME will be outside the scope of IBC pending notification of the designated framework.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,

Transfer assets at book value, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


A parliamentary panel has recommended the transfer of stressed loans of banks to the proposed bad bank at book value amid the calls for an asset quality review.

The panel feels that the more time such assets are left on the lenders’ balance sheet the more is the chances of their value eroding.

“RBI can play an instrumental role in the success of Bad Bank if they issue an order or notification which makes the entire process crystal clear, defining each step of the procedure, thus removing any ambiguity or discretion from the bank’s side,” said the Parliamentary Standing Committee on Finance.

The move will help in saving time and avoiding delays in resolving soured loans through consolidated decision making, the panel said

It also asked the Reserve Bank of India to clearly define every step of the procedure to remove any ambiguity or discretion from the banks’ side. “The RBI needs to demonstrate why their proposed rules for loss transfer to the ARC-AMC is in fact the best approach,” the panel said, adding that their rules should reflect both administrative clarity as well as economic logic,..

The RBI should intervene as soon as possible to unlock value from non-performing assets, it said.

Economic survey

Earlier, the Economic Survey 2021 had called for another round of asset quality review when the Covid related forbearance is lifted, the latest edition of the economic survey argued. The survey stated that it was important for the Reserve Bank of India to do a complete clean-up exercise of bank balance sheets after granting every regulatory forbearance.

Information asymmetry

“A clean-up of bank balance sheets is necessary when the forbearance is discontinued,” the economic survey suggested. “Note that while the 2016 AQR exacerbated the problems in the banking sector, the lesson from the same is not that an AQR should not be conducted. Given the problem of asymmetric information between the regulator and the banks, which gets accentuated during the forbearance regime, an AQR exercise must be conducted immediately after the forbearance is withdrawn.”

The survey had also suggested that the banking regulator should strengthen its early warning signal systems to figure out cracks in bank balance sheets early on. “The asset quality review must account for all the creative ways in which banks can evergreen their loans,” the economic survey noted.

“In this context, it must be emphasized that advance warning signals that do not serve their purpose of ageing concerns may create a false sense of security. The banking regulator needs to be more equipped in the early detection of fault lines and must expand the toolkit of ex-ante remedial measures.”

Why fresh AQR?

After the debt binge of 2008-10, the banks had piled up huge NPAs but were not revealing them while resorting to ever-greening of loans. This led to the RBI ordering an AQR in 2015, which brought out the massive pile of bad loans. This time too due to moratorium and subsequent SC order to not tag bad loans as NPAs has led to a situation that banks may be hiding similar stress in the book.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

How the proposed bad bank will impact IBC?, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


After experimenting with debt recovery tribunals, SARFAESI and IBC, the government is setting up a bad bank.

The Union Budget 2021-22 has proposed the setting up of an asset reconstruction company a bad bank and an asset management company, which will rival the current Insolvency and Bankruptcy Code mechanism for large corporate loans.

Experts say loans greater than Rs 500 crore that have not been declared fraudulent will be transferred to the bad bank, statement of several senior officials in the government as well as Indian Banks Association have indicated.

Currently, all insolvency resolution cases are dealt by the IBC, which has been under suspension till March 24, 2021.

It is highly likely that the underlying companies would not be subjected to IBC in the first instance, rather the AMC will try and either revive these companies or package the loans to an investor, they say.

This is despite ARC is the last resort for bankers as the recovery rate is very low. However, in the case of the IBC, the rate has also been dismal.

Also, creditors of several companies had signed the Inter Creditor Agreement (ICA), pre-suspension and some of these corporates will continue negotiation under the framework roping in distressed asset investors.

IBC performance

The total number of corporate insolvency resolution process (CIRP) cases admitted under IBC till the second quarter of 2021 stood at 4,008, of which 277 ended in resolution, or firms getting new promoters, and 1,025 in orders for liquidation.

The total claims were Rs 10.48 lakh crore (Rs 4.34 lakh crore Gross NPAs plus Rs 6.14 lakh crore Net NPAs) and the realisable” amount Rs 2.2 lakh crore. This amounted to the total haircut at Rs 8.3 lakh crore, or debt recovery working out to be 79%

This dismal debt recovery rate is far lower than the earlier debt resolution processes when the recovery was 25%. Also, most of the debt claims — Rs 6.8 lakh crore or 59% of the total ended in liquidation.

Challenges

Experts say IBC faces new challenges including two-year loan restructuring the RBI allowed in August 2020 due to pandemic disruptions, the Supreme Court‘s September 2020 interim order to banks not to classify loans as NPAs until further orders and dilution of the IBC itself.

After resigning as the RBI Governor in December 2018, Urjit Patel wrote in his book “Overdraft: Saving the Indian Saver” that the government had diluted the IBC and weakened the RBI’s regulatory powers to resolve stressed assets after it issued a “revised framework” on February 12, 2018, asking banks to start resolution process after a day’s default.

The bad bank

Nine banks and two non-bank lenders, including the State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda

(BoB), are coming together to jointly invest Rs 7,000 crore of initial capital in a proposed bad bank that aims to help extract funds stuck in bad loans. Two other state-run financiers of power projects will also own stock in the bad bank.

Canara Bank, Union Bank of India and Bank of India will join their larger state-run peers as investors in the bad bank. ICICI Bank, Axis Bank and Life Insurance Corp of India-owned IDBI Bank are also among the shareholders. State-owned Power Finance Corp and Rural Electrification Corp will also be equal shareholders in the new company.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , ,

Bad bank can be only a warehouse of bad assets, says Siby Antony, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Antony has been working in the ARC sector for the last two decades. He was heading Edelweiss ARC and now is the Chairman, ARC Association of India. In an interview with ETBFSI he explained different aspects of the bad bank…

He believes “Bad bank will be a warehouse of bad assets. If the objective of a bad bank will be to aggregate the debt and hand it over to ARC and AIF it will work. Because debt aggregating is still a problem in ARC the reasons being different banks have different provision coverage and many more such issues.” he said.

Antony also narrated the crux of the issues pertaining to asset reconstruction companies (ARCs). Such as why are banks unable to find resolution despite there being 28 ARCs? What are the major challenges that ARCs face? What has the Association of ARCs asked the RBI?

Antony also sees a surge in cases in the National Company Law Tribunals after March once the Insolvency and Bankruptcy Code suspension is revoked.

Also read: Raghuram Rajan’s formula has led to over 50% recovery for ARCs

Follow and connect with us on , Facebook, Linkedin



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

Bad bank may be led by private lenders for greater flexibility, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Private sector banks and entities are being tipped for taking 51% stake in the proposed bad bank with public sector lenders taking the rest, according to reports.

However, the lenders with links with bad assets housed in the bad bank will not be allowed to invest in it.

How will a private sector-led bad bank help?

With the majority ownership vested in the private sector, it would lead to flexibility in decision making.

The chief economic advisor had pitched for a private sector-led bad bank earlier.

“The bad bank will certainly help in consolidating some of the non-performing assets. It’s important to also think about implementing the bad bank in the private sector that enables (faster) decision making,” he had said.

The move would keep the organisation out of the purview of government scrutiny of Central Central Bureau of Investigation (CBI), Comptroller and Auditor General of India (CAG), Central Vigilance Commission (CVC).

How does the private sector benefit?

There are about Rs 2 lakh crore of toxic assets that can come under the bad bank which the private sector can manage for fees.

The current plan

Nine banks including the State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) and two non-bank lenders are likely to put in Rs 7,000 crore jointly as initial capital in the proposed bad bank that aims to help extract funds stuck in non-performing loans.

Canara Bank, Union Bank of India and Bank of India will join their larger state-run peers as investors in the bad bank along with two state-run financiers of power projects-Power Finance Corp (PFC) and Rural Electrification Corp (REC). All these 11 entities will own an equal stake in the proposed bad bank with little over 9% equity each.

ICICI Bank, Axis Bank and Life Insurance Corp of India (LIC)-owned IDBI Bank are also among the shareholders.

Assets

Lenders have identified about Rs 2 lakh crore of bad loans for which they expect Rs 40,000-50,000 crore. These assets will be transferred to the new ARC at 15% upfront cash, about the level of capital being infused into the company.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,

Bank lending activity now stronger than last year; credit growth at 6.6% in February

Banking & Finance

[ad_1]

Read More/Less


The credit growth of banks ranged between 6.5% to 7.2% in April 2020.

Banks gave out credit at a faster rate during the fortnight ending February 12, as compared to the same period last year, helped by an increase in retail loans. The bank credit growth was recorded at 6.6%, marginally higher from the 6.4% recorded last year, a report by CARE Ratings showed. With this, the credit growth is back in the range that was last seen during the early months of the pandemic. The credit growth of banks ranged between 6.5% to 7.2% in April 2020.

Bank credit growth strong

Bank credit during the fortnight ended February 12 stood at Rs 107 lakh crore, up from Rs 105 lakh crore at the end of December 2021 but at par with the previous fortnight ending January 29. “The retail, agriculture and allied segment have driven overall credit growth in January 2021 growing by 6.7% and 9.5% respectively,” the report showed. The retail segment accounted for 29% of the total credit, against the 28.1% share recorded in the year-ago period. Industrial segment, however, had the largest piece of the pie accounting for 29.6% of the total credit. The services sector accounted for 28% of the total.

“Trade and tourism, hotels and restaurant segment registered a (credit) growth of 15.7% and 8.9% respectively,” the report said. The professional services segment registered a de-growth of 25%, computer software segment too registered de-growth, making them the only two segment to slip.

Mutual fund redemptions aid deposit growth

Deposits with banks have also increased during the period under review. “Deposit growth increased during the fortnight ended February 12, 2021, compared with 11.1% growth registered during the fortnight ended January 29, 2021, and also as compared with the previous year,” CARE Ratings said. The report further added that the outflows in debt mutual fund and equity mutual fund could support the rise in bank deposits. Of these deposits, time deposits grew at 89% while demand deposits account for the remaining 11%.

With deposit growth outpacing credit growth in the banking system, liquidity remained in a surplus position. “The outstanding liquidity in the banking system as of February 26 aggregated Rs 6 lakh crore, higher than a month ago level of Rs 5.76 lakh crore,” the report said.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , , , , ,
1 2 3 4 5