Tag: bank of india

IBA CEO, BFSI News, ET BFSI

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As the government enhanced the scope of the Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS), banks on Sunday said they have sanctioned Rs 2.54 lakh crore and have room to disburse another Rs 45,000 crore under the plan.

To support the businesses affected by the second wave of COVID-19, the Finance Ministry on Sunday enhanced the scope of ECLGS, including providing concessional loans to hospitals/nursing homes for setting up on-site oxygen generation plants.

The validity of the scheme is extended by a further three months to September 30 or till guarantees for an amount of Rs 3 lakh crore are issued, the ministry said in a statement.

“Of the total kitty (for ECLGS) available, Rs 2.54 lakh crore of loans have already been covered and there is a window available for roughly Rs 45,000 crore. Of the Rs 2.54 lakh crore, Rs 2.40 lakh crore has already been disbursed,” Indian Banks’ Association Chief Executive Officer (CEO) Sunil Mehta told reporters after the ministry’s announcement.

The ministry said, under the ECLGS 4.0, a 100 per cent guarantee cover to loans up to Rs 2 crore will be provided to hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants.

The interest rate on these loans has been capped at 7.5 per cent.

“Borrowers who are eligible for restructuring as per the RBI guidelines of May 5, 2021, and had availed loans under ECLGS 1.0 of overall tenure of four years comprising of repayment of interest only during the first 12 months with repayment of principal and interest in 36 months thereafter will now be able to avail a tenure of five years for their ECLGS loan i.e. repayment of interest only for the first 24 months with repayment of principal and interest in 36 months thereafter,” the ministry said.

Also, the new scheme has made a provision of additional ECLGS assistance of up to 10 per cent of the outstanding as of February 29, 2020, to borrowers covered under ECLGS 1.0, in tandem with restructuring as per the RBI guidelines of May 5, 2021.

The government has also removed the current ceiling of Rs 500 crore of loan outstanding for eligibility under ECLGS 3.0, subject to maximum additional ECLGS assistance to each borrower being limited to 40 per cent or Rs 200 crore, whichever is lower.

Loans to the civil aviation sector were also made eligible under ECLGS 3.0, the ministry said.

“We all are aware of the scenario which emerged post resurgence of COVID 2.0. It has actually led to a lot of disruption of economic activity.

“The most vulnerable among them, MSMEs, are in need of support, which has been extended in various forms, more so in the May 5 circular of Reserve Bank of India. Now, the government today announced the modification to the ECGL scheme,” State Bank of India Chairman Dinesh Khara said.

On ECLGS 4.0, Khara said his bank will be in a position to build a book size of about Rs 2,000 crore.

He said for the resolution framework 2.0, announced by the RBI on May 5, all public sector banks have come out with a formulated templated approach for restructuring of loans to individuals, small businesses, MSMEs up to Rs 25 crore.

“The idea behind this is that those who are involved in the implementation of the resolution framework, they should not have any hardship in terms of any implementation,” Khara added.

When asked about the size of the restructuring pool banks are expecting this time, IBA Chairman and Union Bank of India‘s Managing Director and Chief Executive Officer Rajkiran Rai G said it was too early to put a number for potential recasts, as banks are only sending messages to eligible borrowers.

“Last time also we saw that the number of customers opting for this (restructuring) was not that high. So, we need to get some feedback and it is difficult to crystallise a number at this point in time,” Rai said.

Khara said during the previous restructuring scheme, SBI had about 8.5 lakh SME customers who were eligible for restructuring but only 60,000 borrowers availed it.



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IBA reaches out to govt for refund of compound interest waiver by banks, BFSI News, ET BFSI

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The Indian Banks‘ Association (IBA) on behalf of lenders has approached the finance ministry to refund the burden fallen on their shoulders due to a recent Supreme Court judgment on the waiver of compound interest on all loan accounts which opted for moratorium during March-August 2020.

The March judgment of the apex court directed the banks to waive off compound interest on loans above Rs 2 crore availing moratorium as loans below this got blanket interest on interest waiver in November last year.

Compound interest support scheme for loan moratorium cost the government Rs 5,500 crore during 2020-21, and the scheme covered all borrowers including the prompt one who did not avail moratorium.

Various banks are at the different stages of executing the order.

Punjab & Sind Bank Managing Director S Krishnan said the burden on the bank due to waiver works out to be around Rs 30 crore.

The issue of reimbursement of the waiver amount by the government is being pursued by IBA on behalf of the banks, he said.

Asked if the finance ministry has responded to their request, he said, “So far, we have not heard anything positive on this.”

The apex court order this time is only limited to those who availed moratorium. So, the liability of the public sector bank should be less than Rs 2,000 crore as per rough calculations, sources had said.

The RBI on March 27 last year announced a loan moratorium on payment of instalments of term loans falling due between March 1 and May 31, 2020, due to the pandemic, later the same was extended to August 31.

The Supreme Court on March 23, 2021, directed that no compound or penal interest shall be charged from borrowers for the six-month loan moratorium period, which was announced last year amid the COVID-19 pandemic, and the amount already charged shall be refunded, credited or adjusted.

The apex court refused to interfere with the Centre and the Reserve Bank of India‘s (RBI) decision to not extend the loan moratorium beyond August 31 last year, saying it is a policy decision.

Rejecting pleas for a complete waiver on interest the court opined that such a move would have consequences on the economy. The bench also said that interest waiver would affect depositors. Along with this, the court also rejected pleas for further relief in the matter.

Soon after the order, the RBI asked banks and NBFCs to immediately put in place a board-approved policy to refund/ adjust the “interest on interest” charged to the borrowers during the six-month moratorium, in conformity with the Supreme Court judgment.

The central bank also asked lending institutions to disclose the aggregate amount to be refunded/ adjusted in respect of their borrowers based on the reliefs in their financial statements for the year ending March 31, 2021.



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Govt appoints Vandita Kaul as nominee director on board of Bank of India, BFSI News, ET BFSI

Banking & Finance

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State-owned Bank of India (BOI) on Friday said the government has appointed Vandita Kaul, additional secretary in the Finance Ministry, to its board as nominee director.

The bank said it has received the communication from the Finance Ministry about Kaul’s nomination on May 13, 2021.

The government has nominated Vandita Kaul, Additional Secretary, Ministry of Finance, Department of Financial Services as government nominee director on the board of directors of Bank of India with immediate effect, the lender said in a regulatory filing.

Bank of India has a total of eight members on its board, including the MD and CEO Atanu Kumar Das, its four executive directors, one nominee director each from the government and the RBI and one shareholder director.



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RTI reply, BFSI News, ET BFSI

Banking & Finance

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INDORE: As many as 2,118 branches of 10 public sector banks have either been closed or merged with other banks in the last fiscal, according to an RTI reply.

The highest number of 1,283 branches of Bank of Baroda were either closed or merged, according to information provided to an RTI query filed by Neemuch-based activist Chandrashekhar Gaud.

No branch of Bank of India and UCO bank was closed in the last fiscal. The government consolidated ten PSU banks into four in the last financial year, bringing the number of nationalised banks to 12.

All India Bank Employees Association general secretary CH Venkatachalam said a dip in the number of the public sector banks was not in the interest of the banking industry and domestic economy.

He said there was a need to expand the branches of the banks to cater to the vast population in the country.

Bringing down the number of bank branches has reduced employment opportunities in the banking sector following which the young people were frustrated, Venkatachalam added.



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To get RBI funds at 4%, can lend at up to 20%, BFSI News, ET BFSI

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Last year it was fintech firms that got a boost from the digitisation wave in banking, this time small finance banks (SFBs) are getting a push.

The Rs 10,000-crore support from the Reserve Bank of India (RBI) as part of its pandemic relief measures announced on Monday is set to make small finance banks more competitive. The SFBs would get such funds at 4% for three years, which is significantly lower than their average cost of lending. The new facility would help them to get about 1-1.5% positive carry on the borrowed funds, even after investing the same amount into government securities as mandated by the central bank.

This window is an opportunity for SFBs with surplus g-secs to turn competitive as the lenders can deploy the available fund at a higher spread. Small banks generally lend at rates in the range of 10-20% depending on borrowers’ profile.

The banking system including small finance banks is sitting on a cash surplus of Rs 7.12 lakh crore.

Banks carrying surplus short-term securities could liquidate it and deploy the funds for lending.

SLTRO boost

Reserve Bank of India (RBI) has announced a special long-term repo operation (SLTRO) for small finance banks, amid the second wave of Covid cases in the country. The central bank will conduct the special operation of Rs 10,000 crore at repo rate, Das said.

“Small finance banks (SFBs) have been playing a prominent role by acting as a conduit for the last-mile supply of credit to individuals and small businesses,” Das said during an unscheduled address.

“To provide further support to small business units, micro and small industries, and other unorganised sector entities adversely affected during the current wave of the pandemic, it has been decided to conduct special three-year long-term repo operations of Rs 10,000 crore at repo rate for the SFBs, to be deployed for fresh lending of up to Rs 10 lakh per borrower,” Das said, adding that the facility will remain open till October 31, 2021.

Priority loans

The RBI also has decided to allow the classification of priority sector lending for loans given by small finance banks (SFB) to micro-finance institutions (MFI) for on-lending to individuals.

The decision has been taken to address the liquidity issues of MFIs amid the severe Covid crisis.

RBI Governor Shaktikanta Das said: “In view of the fresh challenges brought on by the pandemic and to address the emergent liquidity position of smaller MFIs, SFBs are now being permitted to reckon fresh lending to smaller MFIs (with asset size of up to Rs 500 crore) for on-lending to individual borrowers as priority sector lending.” This facility will be available up to March 31, 2022.



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Nine ways banks will benefit from the RBI’s Covid rescue package, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India governor Shaktikanta Das has announced a slew of measures for the economy to fight Covid. These will help banks face pandemic distress better.

RBI has announced debt recast schemes to small businesses and MSMEs which had not participated in the resolution last year. This will enable banks to offer help to the sound borrowers who are facing trouble during the second Covid wave.

The new recast scheme offers more flexibility to banks as for a borrower whose debt was recast under the resolution framework last year, that moratorium period can be increased or the residual tenure can be stretched for up to two years.

Banks are also allowed to reassess the working capital limits for small units and MSMEs whose debt has been recast earlier, giving room to lenders to help borrowers.

RBI India has not announced a moratorium on loan and interest payments during the ongoing wave, giving much relief to banks. Moratoriums affect credit discipline, and with banks likely to take a hit on the ‘interest on interest’ burden for over Rs 2 crore loans offered during the last moratorium, they may be less inclined to fresh moratoriums.

Through the Rs 10,000 crore special three-year long-term repo operations, or SLTRO, Small Finance Banks can support small business units, micro as also other unorganised-sector ones, as it allows fresh credit of up to Rs 10 lakh per borrower. SFBs can also categorise fresh loans to smaller microfinance institutions that have assets of up to Rs 500 crore as priority sector loans.

The RBI has also extended the period for the relief given earlier this year, allowing banks relief from CRR on exposures of up to Rs 25 lakh to micro, small and medium enterprises.

The central bank has allowed lenders to use 100% of their floating and counter-cyclical provisions to make specific provisions for non-performing assets (NPAs). This will help them gear up for loan losses that may arise due to severe hit to several economic segments.

With banks reluctant to lend despite Rs 6 lakh crore surplus liquidity in the system, the RBI has incentivised banks by offering extra 60 basis points for surpluses parked in the reverse repo against the loans extended by banks. These loans will be classified as priority sector lending also and the banks need not take direct exposure but can pass on through another intermediary such as NBFC.

The RBI has relieved pressure on prices of bonds held by banks as it has announced another round of the GSAP-1 for Rs 35,000 crore. The central bank will buy back bonds from the market, leading to a rise in their demand and prices. This has led to a rally in bond prices with the benchmark yield slipping below 6%.



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Bank of India EGM next week to seek shareholders’ nod for preference shares to govt, BFSI News, ET BFSI

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New Delhi, Apr 30 () State-owned Bank of India (BOI) has convened extraordinary general meeting (EGM) of shareholders next week to seek approval for issuance of equity shares to government for capital infusion of Rs 3,000 crore. EGM of the shareholders of Bank of India will be held on Wednesday, May 5, 2021 through video conferencing and other audio visual means, the bank said in a regulatory filing.

The board will seek consent of shareholders of the bank to issue and allot up to 42,11,70,854 equity shares for cash at Rs 71.23 per equity share including premium of Rs 61.23 aggregating up to Rs 3,000 crore on preferential basis to government, the bank said in a regulatory filing.

The government in March had sanctioned to infuse the capital in BOI as part of equity during the financial year 2020-21.

Bank of India said it has been growing very diligently and cautiously for the last many years and there is a constant requirement to augment capital.

In order to meet this growing requirement, bank needs long term capital, it added.

The lender said it will utilise the funds to shore up the capital adequacy of the bank and to fund the general business needs of the bank.

After the preferential issue of shares, government’s shareholding in bank will go up to 90.34 per cent from 89.10 per cent now.

Stock of the bank closed at Rs 66.35 apiece on the BSE, down 1.63 per cent from the previous close. KPM MKJ



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Axis Bank board approves re-appointment of Amitabh Chaudhry as MD & CEO, BFSI News, ET BFSI

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Private sector lender Axis Bank on Thursday said its board has approved the re-appointment of Amitabh Chaudhry as its Managing Director and CEO for three years with effect from January 1, 2022.

“The board of directors of the bank.. considered and approved the proposal relating to re-appointment of Amitabh Chaudhry as the Managing Director and CEO of the bank, for a further period of 3 years, with effect from January 1, 2022 up to December 31, 2024,” Axis Bank said in a regulatory filing.

The appointment will be subject to the approval of the Reserve Bank of India (RBI) and shareholders of the bank, the filing added.

Chaudhry was appointed as Managing Director (MD) and CEO of Axis Bank for a period of three years, with effect from January 1, 2019 up to December 31, 2021.

Prior to joining Axis Bank, Chaudhry was MD and CEO of HDFC Standard Life Insurance Company.



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

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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.

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RBI, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India (RBI) announced that the RTGS (Real Time Gross Settlement) service for fund transfers will not be available for 14 hours on Sunday, April 18.

RBI stated, that after the close of business on April 17, 2021, a technological update to RTGS is planned, with the aim of improving the system’s resilience and Disaster Recovery Time. As a result, on Sunday, April 18, 2021, from 00:00 hrs to 14.00 hrs, RTGS service will be unavailable. However, The NEFT system will continue to be operational as usual during this period.

Central bank further added that, “Member banks may inform their customers to plan their payment operations accordingly. RTGS Members will continue to receive event updates through system broadcasts.”

Last week, the central bank had proposed to gradually extend RTGS and NEFT facilities to non-bank payment system firms. RTGS and NEFT were allowed only for banks and specialised entities like clearing corporations and select development financial institutions.

The move is intended to encourage non-bank participation across payment systems. RBI said. “This facility is expected to minimise settlement risk in the financial system and enhance the reach of digital financial services to all user segments.”



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