Tag: bank of india

Sidbi launches various MSME cluster development focused initiatives, BFSI News, ET BFSI

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NEW DELHI: Small Industries Development Bank of India (SIDBI) on Monday said it has launched various micro, small and medium enterprises (MSMEs) cluster development focussed initiatives.

SIDBI has been supporting MSMEs through its focused cluster development initiatives such as support for technology upgradation/modernisation, skilling/re-skilling/up-skilling and market linkages.

The cluster development strategy of SIDBI has gradually evolved over a period of time and it now caters to over 600 MSME clusters through its offices and supports the entire value chain (Micro Finance, Missing Middle and Small and Medium Enterprises), the financial institution said in a statement.

Some of the unique engagements in clusters include EU Switch Asia in 18 clusters of 9 states, cluster outreach programmes followed by setting up of Project Management Unit (PMU) in 11 states with thrust on clusters and state cooperation, State Rural Livelihood Missions (SRLM), Artisanal Cluster and Engagement in One District One Product (ODOP) districts of Uttar Pradesh, it said.

The principal financial institution engaged in the promotion, financing and development of MSMEs has been regularly bringing publication, policy papers etc on MSME development.

Financial Services Secretary Debasish Panda launched the first information series titled as ‘Diagnostic Mapping of Cluster- Charting the Path ahead through Intervention’. Additional Secretary in Department of Financial Services (DFS) Pankaj Jain and Joint Secretary in DFS Madnesh Kumar Mishra were also present on the occasion.

The book marks the commencement of focussed attention of SIDBI on clustering strategy aimed towards building and supporting sustainable growth of MSMEs. “It compiles the findings that emerged out of diagnostic studies in 30 clusters. It contains recommendations and action plan for financial and non-financial issues, interventions suggested at the policy, cluster and unit level,” it said.

SIDBI is geared up to undertake diagnostics of 100 clusters and plan engagement in 15 clusters. On this occasion, SIDBI Chairman and Managing Director S Ramann said, the financial institution has identified a multi-pronged strategy to impact local, regional, national and global value chain through MSE clusters.

“We are giving a thrust to hard infrastructure support to state governments. DFS and Reserve Bank of India have supported us in setting up the SIDBI Cluster Development Fund,” Ramann said.

The soft infrastructure engagement shall complement the hard infrastructure, he said. “In line with cluster experts we have initiated the mapping exercise of 100 clusters such that the implementation by SIDBI and other institutions can lead to sustainable growth of clusters,” he said.

Since the typology of cluster development generally involves hard and soft infrastructure aspects, to address the soft infrastructure aspects, SIDBI has launched the Business Development Services intervention programme in 5 Clusters (Tourism Cluster – Jammu & Kashmir; Delhi-NCR Innovation Cluster; Jodhpur Wood Furniture Cluster, Sambalpur Textile Cluster, Chennai Leather Cluster).

The holistic aim of the intervention is to strengthen Clusters to evolve as model Clusters and also to increase MSMEs’ access to services thus rising up the value chain.



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Bankers in talks as court rulings threaten over $6 billion in loans, BFSI News, ET BFSI

Banking & Finance

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Informal talks are taking place to deal with the fall-out from two rulings by Supreme Court that threaten the repayment of loans totalling nearly 500 billion rupees ($6.73 billion) to some of India’s largest banks, bankers close to the matter say.

Any failure to recoup the money adds to stress in the banking sector, which is already dealing with an increased level of bad loans and reduced profits because of the impact of the pandemic.

Last week, Supreme Court effectively blocked Future Group’s $3.4 billion sale of retail assets to Reliance Industries, jeopardising nearly $2.69 billion the retail conglomerate owes to Indian banks.

That ruling was delivered days after the Supreme Court rejected a petition to allow telecom companies to approach the Department of Telecommunications to renegotiate outstanding dues in a long-runinng dispute with Indian telecom players.

That raises concerns, bankers say, over whether Vodafone Idea will repay some 300 billion rupees ($4.04 billion) it owes to Indian banks and billions of dollars more in long-term dues to the government.

FUTURE OF FUTURE?

Two bankers, speaking on condition of anonymity said negotiations were taking place to try to limit potentially severe consequences.

Loans to Future worth nearly 200 billion rupees were restructured earlier this year, giving it more time to come up with repayments due over the next two years, but that was on the premise that Reliance would bail it out, the bankers said.

Future group did not immediately respond to a request for comment.

Should Future be taken to a bankruptcy court, bankers say they are concerned they will have to take haircuts on the loans of more than 75%.

“The immediate apprehension is that the restructuring deal will fall through for banks by December,” said a banker at a public sector bank that has lent money to Future.

Future’s leading financial creditors include India’s largest lender State Bank of India, along with smaller rivals Bank of Baroda and Bank of India.

Bank of India, the lead bank in consortium lending to Future, did not immediately respond to an emailed request for comment.

VODAFONE IDEA

Banks have also started discussing Vodafone’s debt to lenders of nearly 300 billion rupees. Top lenders to Vodafone include Yes Bank, IDFC First Bank and IndusInd Bank, as well as other private and state-owned lenders.

Vodafone, Yes Bank, IDFC First Bank and IndusInd did not immediately respond to a request seeking comment.

“Even though banks have the option of restructuring loans in case the company defaults, it will only make sense if there is clear cash flow visibility, which is not the case right now,” a senior banker at a public sector bank said on condition of anonymity.

Already, at the end of March, Indian banks had total non-performing assets of 8.34 trillion rupees ($112.48 billion), the government has said. It has yet to provide more updated figures.



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Bankers view on RBI’s policy, BFSI News, ET BFSI

Banking & Finance

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Dinesh Khara, Chairman, SBI said, “The RBI policy is pragmatic and strikes a fine balance between stance and strategy. While the policy stance continues to be accommodative to continuously support growth, a strategy of careful recalibration of liquidity management is clearly indicated with the roll out of VRRR.

Dinesh Khara

The policy has also nudged banks to shift to an alternate reference rate with the discontinuation of LIBOR. The extension of the on-tap TLTRO scheme and the deferral of the deadline for meeting the operational parameters for stressed entities will help corporates navigate through the pandemic with a degree of certainty.”

Rajni Thakur, Chief Economist, RBL Bank said, “MPC announcements were pretty much on expected lines with key rates held constant and upward revision of inflation forecasts for the current fiscal year.

Policy bias in favour of nurturing growth continues and there was a strong denial of any urgency to scale back monetary support on account of higher inflation or potential global normalisation.

While enhanced VRRR quantum and one voice of dissent can be seen by market as mildly dovish, in all likelihood, RBI has kept its options open to support growth should the third wave disrupt nascent momentum or to use monetary tools to begin normalisation if growth -inflation dynamics start to get complicated.”

Rajni Thakur
Rajni Thakur

On similar lines, Siddhartha Sanyal, Chief Economist and Head – Research, Bandhan Bank said, “While the status quo on rates with a 6-0 voting and continued “accommodative” stance were on expected lines, the split voting as regards the policy stance was a modest surprise. Still, the overall tone of policy continued to focus clearly on supporting growth recovery.”

“Given higher global commodity prices, sticky food inflation and rise in domestic fuel prices, inflation may stay higher than for the RBI’s comfort. However, with the tentative and uneven nature of recovery, one expects the MPC to continue prioritizing supporting growth in the coming months.”

Sidharth Sanyal
Sidharth Sanyal

Indranil Pan, Chief Economist – YES BANK said, “RBI has attempted and managed to balance the contradicting objectives of managing inflation expectations while also communicating the need for sustained policy accommodation.

Even as the inflation forecasts for the current FY have been raised, the communication continues to be that the hump in inflation is supply-led and thus ‘transitory’ wherein the demand side push for inflation is almost absent. This is the reason for RBI to have been able to see-through the current high inflation levels.

RBI continues to highlight that any pre-emptive tightening can kill the nascent and hesitant recovery that is taking shape. In cognizance with an extremely uncertain growth climate, we think that the RBI will maintain its accommodative policy and not move on any form of tightening – be it on the rates side or on the liquidity side – till the end of the current FY.”

Yes Bank
Yes Bank

While A. K. Das, Managing Director & CEO, Bank of India has a positive outlook. He said, “Continued accommodative stance of RBI is expected to catalyze growth in real segments in a strong, broad based and sustained manner”.



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As loan growth slows, other income comes to banks’ rescue, BFSI News, ET BFSI

Banking & Finance

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Other income has come to the rescue for banks even as they grapple with weak loan growth, in the first quarter of the fiscal year, bank results show.

All banks have seen a year on year growth in other income led by fees and recovery in large written off accounts like the defunct Kingfisher Airlines as a result of which the contribution of other income to total income has increased.

The trend is the same for both large and small banks. For example, State Bank of India (SBI) reported a 24% rise other income to Rs 11,803 crore led by a 21% rise in fees and a Rs 1,692 crore recovery from the written off Kingfisher Airlines’ account which has increased the proportion of other income to 15% of total income from 11% last year.

The story is similar in the large private sector bank’s as well which traditional have a larger proportion of fee income. HDFC Bank‘s other income grew 54% led by fees and commission and income from foreign exchange and derivative transactions, increasing the share of other income to total revenues to 17% from 12% a year earlier. HDFC’s peer ICICI Bank also reported a 53% rise in other income led by fees despite a fall in treasury income.

Analysts say higher proportion of other income though legitimate is driven mostly by lumpy income streams which are not sustainable. However, they expect banking core incomes to rise as loan growth picks up later this year.

“Other income has increased through two main heads namely income from treasury and income from written off accounts. Both of these are very volatile and depend on market conditions and can be called one offs. Banks are sitting on excess SLR and have booked profits this quarter which is reflected in treasury gains. Having said that they are both legitimate income streams and there need not be a concern though for the quality of earnings to be sustainable revival of credit growth is important,” said Asutosh Mishra, head of research at Ashika Stock Broking.

Other income has risen for even smaller lenders as banks dug deep for new income streams faced with twin challenges of depressed loans demand and slow recovery of loans in light of the second wave of the pandemic.

RBL Bank’s other income doubled to Rs 695 crore led by a 137% growth in retail fee income even as total advances fell marginally to Rs 56,527 crore from Rs 56,683 crore a year earlier. Even public sector Bank of India reported a 39% rise in other income due to recovery from a written off aviation account and foreign exchange income even as loan book fell 0.18%.

“This quarter there also has been a increase in forex trading income as forward premiums came down during the quarter, allowing banks to book profits.
Along with the repricing the bond investments this has helped other income,” said Anil Gupta, vice president financial ratings at ICRA.

Gupta expects credit growth to revive later this fiscal as corporate working capital requirements will increase due to higher commodity prices. “We expect credit growth of 8% next fiscal which will bring higher core income and also fees so there is no reason to worry on the outlook,” he said.



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ANZ Bank’s Mathur, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: The Governor of the Reserve Bank of India, Shaktikanta Das, said last year that the Covid-19 crisis is the sort of event that occurs once every 100 years. Policymakers from North Block to Mint Street have been attempting to find an adequate response to a crisis of this magnitude.

The Chief Economist, South East Asia and India at ANZ Bank, has a contrarian view.

In a chat with ETMarkets.com, Sanjay Mathur, a veteran economist, said the need of the hour is not capital spending that generates long-term gains. “Rather, what is important now and for years to come, is to lift people out of poverty, as that would have a larger impact on the economy,” he said.

“Let me take a controversial stand here. Our thinking on the fiscal has become somewhat stereotyped – capital spending is good and revenue spending is bad. And for FY22, the focus has been on capital spending. But the nature of the current crisis is different: it is a humanitarian crisis that calls for more massive welfare measures. A large section of our population has slipped into poverty, income and wealth disparities are rising,” Mathur said.

The government and RBI have unveiled various spending schemes since the pandemic struck last year; the flagship programme being the ‘Atmanirbhar Bharat’ scheme, which essentially prioritises import substitution.

However, out of the Rs 20 lakh crore announced by Prime Minister Narendra Modi, the actual fiscal outgo is very small. A bulk of the programmes are reflective of RBI’s liquidity infusion in the banking system, while the rest are mostly credit guarantees.

One cannot exactly blame the government, as its finances have been under strain since well before the pandemic.

In the last Budget, the government put aside the prescriptions of the Fiscal Responsibility and Budget Management Act and announced a fiscal deficit of 6.8 per cent of GDP for this financial year. The Centre had earlier set a target of 3.0 per cent fiscal deficit by 2017-18 (Apr-Mar).

However, it will not be accurate to say that the entire strain was on account of the pandemic. A year before Covid-19 wreaked havoc on the economy, the government had already skipped the targets it had set for itself under the FRBM Act, as tax collections fell short of targets.

Mathur said the government and the central bank together have done what they could within their constraints. “There was very little fiscal headroom to start with,” he said.

“So while I do acknowledge that asset creation has a larger multiplier on growth, this crisis is also unique and requires a different response,” he added.



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Bank of India Q1 net profit falls 15% on lower NII, higher provisions

Banking & Finance

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Deposits increased 6.7% y-o-y to Rs 5.52 lakh crore at the end of June 2020. The current account savings account (CASA) ratio stood at 43.22% at the end of Q1FY22, higher than 40.61% a year ago.

Public-sector lender Bank of India (BoI) on Tuesday reported a net profit of Rs 720 crore in the June quarter of FY22, down 14.7% year-on-year (y-o-y), owing to a 9.65% decline in net interest income (NII) on a y-o-y basis to Rs 3,145 crore. The bottomline was also hit by higher provisions, which rose 13% y-o-y to Rs 1,709 crore.

BoI’s domestic net interest margin (NIM), a key measure of profitability, rose 19 basis points (bps) sequentially to 2.35%. This was, nonetheless, lower than the 3%-plus levels seen a year ago.

The bank’s domestic advances as on June 30 were at Rs 3.66 lakh crore, up 1.65% on a y-o-y basis. AK Das, MD & CEO, BoI, said, “We expect a business growth of 6-7% in the current year with reorientation in liability and asset structure.” Along with this, better collection and recovery mechanisms will enable the bank to improve its NIM to about 2.5%, Das added.

Deposits increased 6.7% y-o-y to Rs 5.52 lakh crore at the end of June 2020. The current account savings account (CASA) ratio stood at 43.22% at the end of Q1FY22, higher than 40.61% a year ago.

The bank has restructured 19,077 accounts with an exposure of Rs 401.67 crore under resolution framework 2.0.BoI’s provision coverage ratio (PCR) fell to 86.17% from 86.24% at the end of March. Slippages fell to Rs 3,942 crore from Rs 7,368 crore in the previous quarter. The bank made recoveries worth Rs 851 crore in Q1FY22, down from 975 crore in Q4FY21.

The lender showed an improvement on the asset quality front in Q1, with the gross non performing asset (NPA) ratio falling 26 bps sequentially to 13.51%. The net NPA ratio remained flat sequentially at 3.35%.

The capital adequacy ratio of BoI as per Basel III, stood at 15.07% as on June 30, up from 12.76% a year ago, and its common equity tier-I (CET-I) ratio was at 11.52%, up from 9.46% a year ago. BoI’s shares ended 0.2% higher than their previous close at Rs 74.35 on the BSE on Tuesday.

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Bank of India net declines 15% YoY in Q1FY22 to ₹720 cr

Banking & Finance

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Bank of India (BoI) reported a 15 per cent year-on-year (YoY) decline in standalone net profit at ₹720 crore in the first quarter ended June 30, 2021, due to a decline in net interest income and a rise in provisions towards bad & doubtful and standard assets.

The public sector bank had reported a standalone net profit of ₹844 crore in the year-ago quarter. However, the net profit in the reporting quarter soared about three times vis-a-vis the fourth quarter’s ₹250 crore.

Net interest income (difference between interest earned and interest expended) declined about 10 per cent YoY to ₹3,144 crore (₹3,481 crore in the year-ago quarter).

Total non-interest income (comprising income from commission, exchange & brokerage, profit from the sale of investments, profit from exchange transactions, recovery in written-off accounts, and other non-interest income) rose 39 per cent YoY to ₹2,377 crore (₹1,707 crore).

Within total non-interest income, profit from exchange transactions jumped 126 per cent YoY to ₹754 crore (₹333 crore) and recovery in written-off accounts soared 477 per cent YoY to ₹173 crore (₹30 crore).

Fresh slippages at ₹3,942 crore during the reporting quarter were lower vis-a-vis ₹7,368 crore in the fourth quarter (Q4) FY21 but substantially higher than year ago quarter’s ₹402 crore.

Provisions towards bad, doubtful, and standard assets together were up 16 per cent YoY at ₹1,771 crore (₹1,526 crore).

Gross non-performing assets (GNPAs) level improved to 13.51 per cent of gross advances as of June-end 2021 against 13.91 per cent as of June-end 2020.

Net NPA level too improved to 3.35 per cent of net advances against 3.58 per cent.

Global deposits were up about 5 per cent YoY to ₹6,23,385 crore. Global advances declined a shade (about 0.18 per cent YoY) to ₹4,14,697 crore.

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Bank of India Q1 net profit falls 15 pc to Rs 720 cr, BFSI News, ET BFSI

Banking & Finance

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New Delhi: Bank of India on Tuesday reported a 14.7 per cent decline in net profit at Rs 720 crore for the June quarter. The bank had posted a net profit of Rs 843.60 crore in the year-ago period. However, the net profit was up sequentially from Rs 250.19 crore recorded in the three months ended March 2021.

In the first quarter of the current fiscal, the lender’s total income was down at Rs 11,698.13 crore. In the year-ago period, it stood at 11,941.52 crore, according to a regulatory filing.

The bank’s gross Non-Performing Assets (NPAs) fell marginally to 13.51 per cent of the gross advances at the end of June this year from 13.91 per cent in the same period a year ago.

Net NPAs or bad loans were down at 3.35 per cent in the latest June quarter compared to 3.58 per cent in the year-ago period. Provisions for bad loans and contingencies for the quarter under review were raised to Rs 1,709.12 crore. The same was at Rs 1,512.07 crore in the same period a year ago.

On a consolidated basis, the bank’s net profit was at Rs 735.37 crore in the 2021 June quarter. It was down by 13 per cent from Rs 845.78 crore in the year-ago period.

Shares of the bank was marginally up at Rs 74.60 apiece in afternoon trade on BSE.



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Banks’ use of FD-OD fix irks RBI, BFSI News, ET BFSI

Banking & Finance

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Banks are cutting new deals with corporates to dodge a recent Reserve Bank of India (RBI) rule. The tactic is not going down well with the regulator, which has got wind of it.

Loosely called the ‘FD-OD’ deal, it’s a simple arrangement where a company parks some funds as fixed deposits (FD) and the bank gives an overdraft (OD) to the client. The innocuous transaction is being used as a ploy to overcome the rule prohibiting a bank from having a current account of a company to which it has given little or no loans. According to the regulation, abank with less than 10% of total approved facilities — comprising loans, non-fund businesses such as guarantees and overdrafts —to a company cannot have its current accounts, which are sought after by lenders as zero-interest deposits lower cost of funds.

RBI had directed all banks to give up such current accounts by July 30. The regulator, according to media reports, had even frozen accounts after some banks failed to meet the deadline.

In the past few weeks, though, here’s what many companies and banks have done. Say, total facilities by the banking industry to a company is Rs 1,000 crore, while the bank that holds the company’s current accounts has only Rs 10 crore loan exposure to the entity. According to the RBI directive, it has to then surrender the current account. Now, to bypass this rule, the FD-OD arrangement is entered into. To maintain the current account with the same bank, the company makes an FD of Rs 105 crore with the bank, which, in turn, extends a ‘secured OD’ of Rs 100 crore. Since the bank’s exposure to the company (by virtue of the OD) is now 10% of the total facilities approved by the banking industry, the current accounts are retained by it without taking any extra risk.

“RBI has come to know of these back-to-back deals,” said a senior banker. “Senior supervisory managers (of RBI) assigned to various banks are enquiring with banks to check whether the regulation is being followed in letter and spirit. Deputy governor MK Jain is serious about the directive, even though it boils down to micromanagement by the central bank. Even if an RBI official thinks differently, he has to follow the instructions.” (Jain’s responsibilities include supervision and HR, among other things).

“Technically, banks are not breaking any rules. So, on what grounds would RBI stop ODs?” said the banker.

The regulation stems from RBI’s belief that errant corporate borrowers will find it tougher to divert funds if their current and collection accounts lie with lending banks. However, industry sources say that current accounts are often kept with non-lending banks due to genuine business reasons. Not all lending banks, say industry sources, have good cash-management practices that corporates require for vendor payments, escrow accounts, collection from sales etc.

TEMPORARY SOLUTION

Bankers, however, know that the FD-OD deal can only be a temporary solution, as companies may pull out FDs if there is a sudden fund crunch.



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Mastercard submits new audit to India after ban over data handling, BFSI News, ET BFSI

Banking & Finance

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Mastercard has submitted a new audit report to India’s central bank, it told Reuters, as it seeks to overturn a ban on card issuance linked to concerns over the U.S. giant’s handling of data processed abroad.

The Reserve Bank of India (RBI) on July 14 sent panic-waves through Indian banking partners by announcing a ban, effective from July 22, to prevent the U.S. giant from issuing new cards. It cited non-compliance with 2018 rules that required it to store payments data only in India.

The RBI imposed the ban after deciding a “system audit report” submitted by Mastercard’s auditor Deloitte in April was unsatisfactory, three sources familiar with its decision-making said, asking not to be named because of the sensitivity of the issue. Two of the sources said the RBI was reviewing the new report.

In a statement to Reuters, Mastercard said Deloitte performed a “supplemental audit” and a new report was submitted on July 20 to the RBI, six days after the ban was announced.

“We look forward to continuing our conversations with the RBI and reinforcing how seriously we take our obligations. We are hopeful that this latest filing provides the assurances required to address their concerns,” it said.

Deloitte declined to comment, citing confidentiality obligations. The RBI did not respond to a request for comment.

The sources said the RBI was concerned Deloitte’s audit did not clearly state how long Mastercard took to purge Indians’ card data that is processed abroad before being stored locally.

India’s 2018 rules do not restrict where the data is processed, but for “unfettered supervisory access”, the RBI mandates that within a day the data – including transaction details and amount – should be stored domestically.

Mastercard in 2018 said it had started storing data at a facility in India’s western city of Pune to comply. But it still processes a part of each Indian transaction through data centres abroad, and later transfers and stores that data in Pune, one of the sources said.

The RBI has given no details beyond a seven-line statement announcing the ban. The details of RBI’s concern with Deloitte’s submissions have not previously been reported.

American Express, whose Indian presence is much smaller than that of Mastercard and Visa, has also has been banned from issuing new cards since April for violating the 2018 rules.

A fourth person with direct knowledge of the matter said the RBI had given Mastercard multiple extensions to submit clarifications and RBI only issued the ban when Mastercard asked for more time when an extension to July 9 lapsed.

Mastercard did not comment on the extension and the situation in Pune.



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