Tag: bank of maharashtra

Central Bank, IOB may be taken up for privatisation, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: The Centre may sell its stake in Central Bank of India and Indian Overseas Bank (IOB) as part of its mega privatisation initiative unveiled in the Union Budget in February.

While the two banks have been recommended for disinvestment by government think tank NITI Aayog, Bank of India (BoI) may be a potential candidate for sale, sources familiar with the deliberations told TOI.

The proposal from the government think tank is being vetted by the disinvestment and financial services departments, ministry sources said. The exercise is part of a multi-stage process for finalising entities that are to be taken up for privatisation.

While NITI Aayog has been tasked with recommending the names, it is then reviewed by the inter-ministerial group of officers and subsequently by a group of ministers, before the Union Cabinet puts its seal of approval.

Sources in the department of investment and public asset management (Dipam), which handles the government’s asset sales programme, said it will examine the proposal with the department of financial services and discuss the legislative changes needed for the privatisation of the state-run banks. “The timeline will depend on the legislative changes required,” the sources added.

Besides, the issue will have to be discussed in detail with the RBI as the law and regulations provide a special dispensation for state-run entities in several areas.

The Cabinet recently cleared the decks for the sale of government stake in IDBI Bank, but sale of the Centre’s holding in the two staterun entities will break new ground as the Narendra Modi administration has embarked on an ambitious privatisation drive, which for the first time includes the financial services space.

The government is hoping to conclude the sale of IDBI Bank stake during the current financial year.

Among the dozen staterun lenders, NITI Aayog had set its eyes on the six entities that were not part of the merger initiative a few years ago and included Bank of Maharashtra, Punjab & Sind Bank and UCO Bank in addition to BoI, IOB and Central Bank.

It, however, was of the view that the better off entities would attract greater interest, resulting in the shortlisting of IOB and Central Bank. Based on the current share price, the two entities are together valued at around Rs 44,000 crore with IOB’s market cap estimated at Rs 31,641 crore.



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Public sector banks list Rs 82,500 crore NPAs for bad bank, BFSI News, ET BFSI

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Public sector banks have shortlisted 28 loan accounts to be transferred to the National Asset Reconstruction Company (NARCL). Of these, lead banks have completed the process of obtaining approval from co-lenders in 22 accounts with Rs 82,500 crore of loans due. Within this amount, borrowers such as VOVL, Amtek Auto, Reliance Naval, Jaypee Infratech, Castex Technologies, GTL, Visa Steel and Wind World account for 80%.

Other large companies that are to be sold to the NARCL include Lavasa Corporation, Ruchi Worldwide, Consolidated Construction and a few toll projects.

According to banking sources, work is progressing on multiple fronts to ensure that the bad bank starts operations as soon as possible. On Wednesday, bankers met to finalise the capital structure of the bad bank (NARCL). Sources said that the company would need at least Rs 6,000-crore capital of equity and debt to start operations. In terms of Reserve Bank of India (RBI) regulations, asset reconstruction companies (ARCs) must pay 15% of the purchase consideration in cash upfront. Even if these 22 non-performing assets (NPAs) were valued at 50% of the loan amount, the ARCs would have to pay over Rs 12,000 crore to banks. The NARCL can, however, raise money on its own.

Since all these 28 loans have been fully provided for, any consideration that the banks receive will go into their bottom line as profit. Once the capital structure is finalised, the promoters will seek a licence from the RBI. Lenders have decided to ask power finance companies to be the promoters as most other large lenders have a stake in existing ARCs. While all banks will hold just below 10% stake, Canara Bank and Bank of Maharashtra will hold just over 10% and may be given promoter status. Most other large banks will contribute to the ARCs’ equity. The articles of association of the NARC have already been finalised. Simultaneously, lenders are also discussing the setup of the asset management company that will do the recovery work. Lenders are hopeful of completing the loan transfer to the NARCL in July.

Finance minister Nirmala Sitharaman had announced in the Budget the setting up of a bad bank (NARCL) to acquire the NPAs from banks. The NARCL was to be in the public sector so that lenders do not have any problems in selling their bad loans. The NARCL would pay 15% in cash and the balance in security receipts, which are similar to units in a mutual fund with the consolidated bad loan being the underlying asset. The government would provide a guarantee to the security receipts issued by the bad bank, which would improve their valuation.

Besides the loans having been fully provided for, the other requirement was that each loan should be above Rs 500 crore. Also, loans that were classified as fraud or were in the midst of a liquidation process were not eligible. Many of these large accounts are undergoing recovery proceedings by banks and buyers have shown interest in these companies. The consolidation of loans will enable faster decision-making by the NARCL.



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Bank employees hard work during Covid rewarded as performance incentives roll out, BFSI News, ET BFSI

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The risk and hard work of bank employees during the Covid pandemic are being rewarded, though it is a small gain.

Employees of PSU banks which have posted profits are set to get a performance-linked component in the wage agreement signed with the Indian Banks’ Association (IBA) in November 2020.

Canara Bank this week paid out a performance-linked incentive to its employees, equivalent to 15 days’ pay. The bank has reported a net profit of Rs 2,557 crore for FY21 as compared to a Rs 5,838-crore loss in the preceding year.

Bank of Maharashtra has distributed a performance-linked incentive to its employees after posting a 187% increase in its fourth-quarter net profit to Rs 165 crore.

How much would SBI employees get

State Bank of India is also expected to announce an improvement in profits. In terms of the wage agreement, its 2.5 lakh employees would get an incentive of five days’ salary if the bank reported an increase in operating profit of between 5% and 10%, and 10 days’ if the increase is between 10% and 15%, and 15 days for any increase above 15%.

Performance-linked incentive plan

IBA had said that to inculcate a sense of competition and also to reward the performance, the concept of the performance-linked incentive (PLI) scheme has been introduced for the first time. The scheme will be effective from the current financial year.

The scheme in public sector banks is based on the operating profit or net profit of the individual bank. It is optional for private and foreign banks. As per the agreement, the PLI would be payable to all employees annually over and above the normal salary payable.

Unions opposition

The bank employees unions had opposed any move to introduce a performance-linked incentive for public sector banks proposed by Banks Board Bureau. They had said it would be a prelude to introducing differential pay as also the concept of Cost to Company at a later stage

Setting performance parameters at various levels of banking functions does not fit well into the banking environment as there are multiple functions for a few and specialist functions for another lot, they had said.

Such parameters may not work well with the functionaries in controlling offices who undertake jobs of evolving and implementing policies and guidelines at the back office. The introduction of such practices are aimed at bypassing the bipartite machinery and casting employees against their own colleagues, they had said.

Unions had also strongly opposed linking their salaries to the performance of the bank, arguing that the financial performance depends on the government policies over which they have no control. Also, most of the losses were on account of large corporate loans which are decided at the top level.

However, the IBA had insisted on the clause to reward better-performing banks and to inculcate a sense of competition among employees of public sector banks.

Improved performance

Despite the pandemic, most public sector banks are expected to improve their performance over the previous year. This is because by the time they finalised their results for FY20, the entire nation was in a lockdown and many banks made significant provisions for Covid impact. The four acquiring banks last year made significant fair value provisioning in the 10-bank mega-merger. As a result, most public sector banks are expected to report a profit during the current fiscal.



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How the second wave of Covid will play out is a challenge: BoM chief

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Bank of Maharashtra (BoM) could figure among the top three public sector banks (PSBs) in terms of efficiency parameters and asset quality if its current performance continues for the next couple of years, according to MD and CEO AS Rajeev.

The bank, which posted net profit for nine quarters on the trot up to the fourth quarter of FY21, has adequate capital to ensure a 20-22 per cent growth in RAM (retail, agriculture and MSME) advances and about 10-12 per cent growth in corporate advances in FY22, he said. In an interaction with BusinessLine, Rajeev said BoM will grow its gold loan portfolio to at least ₹4,500 crore from ₹2,000 crore in FY21. Excerpts:

What are your business targets for FY22?

We want to grow our advances portfolio by 14-15 per cent (last year net advances grew 18 per cent) and deposits by 10-12 per cent (16 per cent). Within the advances portfolio, we will grow our corporate advances by ₹4,000-5,000 crore (against contraction of ₹862 crore in FY21), otherwise RAM sector advances in total advances will increase to 70 per cent (currently 63 per cent).

The advances target in FY22 is lower because the base in increasing. But in absolute terms, the growth will be higher.

What challenges do you see in growing advances?

How the second wave of Covid-19 pandemic will play out is a challenge. Now, company sales have started coming down. For example, two-wheeler and passenger vehicle sales declined in April 2021 vis-a-vis March 2021.

In specific areas, there may be issues because of local lockdowns. If lockdowns continue, MSME (micro, small and medium enterprises) is one segment where there may be some difficulty because last year we had restructured some of the accounts.

Are you expecting any big recoveries in FY22?

We are expecting ₹200-250 crore recovery from the resolution of DHFL and ₹250-300 crore from IL&FS Group. With the help of one-time settlement scheme for the agriculture sector, we were able to bring down non-performing asets (NPAs) in the sector from 26 per cent as of March-end 2020 to about 21 per cent as of March-end 2021. This may come down further to about 15 per cent by March-end 2022.

Have you identified stressed assets that you will transfer to the National Asset Reconstruction Company?

We will transfer 4-5 stressed accounts, which have been fully provided for, aggregating ₹700-800 crore to NARCL.

Are you planning to raise capital?

Our capital adequacy was at 14.49 per cent as of March-end 2021. Out of this Tier-I capital was at 10.98 per cent. So, there may not be any requirement to raise capital to support loan growth.

But we have already taken permission from the board for raising ₹5,000 crore. This is an enabling provision. If there is any requirement or the market situation turns conducive, we may go for further public offering or a qualified institutions placement.

As per SEBI regulations, the minimum public shareholding in a listed company should be 25 per cent. The government holds 93.33 per cent stake in our bank.

This has to come down to 75 per cent. So, we want to increase the public shareholding to at least 20 per cent.

Has your bank made any structural changes to improve its operations?

We have put in place a Loan Lifecycle Management System to reduce the Turn Around Time (TAT) of loan proposals. We are centralising loan sanctions in the RAM segment. The corporate branches, which deal with loan proposals of ₹100 crore and above, are now reporting directly to the head office (HO). This has cut the TAT. Earlier, the corporate branches used to report to the zonal office, which, in turn, report to the HO.

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Bank of Maharashtra sees big recovery from IL&FS; No cap on digital loan sanctions, BFSI News, ET BFSI

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BoM earned a net profit of Rs 165 crore in the January-March quarter. The bank has recovered Rs 508 crore from the toxic account of Bhushan Power and hopes to get another cheque of almost the same amount from IL&FS soon. In an interaction with ETBFSI, A S Rajeev, MD & CEO of Bank of Maharashtra, said he does not see a major impact of the second wave for his bank. He also mentioned that they are seeing notable results of end-to-end digital lending platforms which they have created. Edited excerpts.

A S Rajeev, MD & CEO of Bank of Maharashtra

Q. Is there any other account other than Bhushan Power in the future where you are expecting some big recoveries?

The amount may not be as huge as Bhushan, but there are a number of accounts in different stages, and the amount may vary between Rs 50 crore to Rs 100 crore. But we are expecting something big from the IL&FS account, it will take some time though. We are expecting between Rs 500 crore to Rs 600 crore from it. Most of the accounts we have fully written off, it will help us to improve the profitability.

Q. How much did you disburse under ECLGS? Are you also keeping funds ready to disburse to MSMEs once the second wave ebbs? Have you spotted new SMEs?

We have lent around Rs 2,400 crore under this scheme. Our MSME growth last year was 36%. Out of that 12% came from ECLGS scheme. Now most of this, about 90-95%, we have already disbursed. Repayments on these accounts are on schedule. The total MSME accounts we restructured were around Rs 650 crore. To attract MSMEs, we have launched a scheme ‘Ghar Wapsi’, we have the database of the last 5-6 years, and we are approaching those customers who left us. Such accounts are in the range of Rs 500-600 crore. We expect around Rs 1,500-1,600 crore of advances in this segment. Also, this year our agriculture portfolio grew 13-16%. There was a good monsoon, and with settlement schemes, we had a good recovery. This year, we created another portfolio of gold loans. It also picked up really well with Rs 2,000 crore jewellery loans. We reduced our interest rates to the lowest in the industry.

Q. The second wave is grappling the country far more significantly. Do you see challenges in recovery, collections?

At present, there are no major challenges. We have not started to see such difficulties yet. Since we are flagging the account status every month, we performed the portfolio analysis in April and didn’t find something challenging. What we are seeing is that stress in the portfolio is not there like the last time during complete lockdown that happened for one, one and a half month. So there is no stress at present in the portfolio or the repayments. Also, it’s local lockdown and has not started affecting the economy. If it continues for some more time, it may affect the economy. Our feeling is that in another 1-2 weeks the situation may change.

Q. Do you see a slowdown in credit demand this quarter?

Generally, the first quarter of the FY is always negative. It is either negative or the growth rate would be 1-2%. Because banks are busy with miscellaneous things such as audits, transfers, promotions, etc. My experience states that there is not much of credit growth during the period of April and May. So even if the economy is affected by slightly localised lockdown, it will be hit only corporate customers. Sowing starts in June, so agricultural lending will start from then. So if you see a 14-16% growth rate per year in any banking system, either it is negative by 1-2% or positive by 1-2% in the first quarter. So geometrically you can see that if 2% is the growth rate in June, for the second quarter it would be 4-5%, for the third quarter it would be 8-10% and so on.

Q. What kinds of digital adoption has BOM done recently? What kinds of digital capabilities are you building?

We have digital products out there. Last year, we incorporated Loan Management System, which is end-to-end digital for loan advancement or sanctioning loans. There is no cap here on the loan amount. Any amount including corporate loans can be disbursed digitally on the Loan Management System. MSMEs can upload their documents to the system. There are certain agencies we have integrated with such as the income tax department, sales tax department, Crisil, Google reports, etc, which undertake the task of vetting as well. It is done parallelly within 2-3 minutes. There is no manual intervention. Only final approvals have to be done by respective authorities. We have also put in place SAP models. There are some models we are still working on and making changes like UAT. Our entire audit system is digitised. An auditor need not go to any other place. Sitting in their place they can do the audit. Digital signatures are also used, and in every area, 100% digitisation has been made. With such an efficient system, it also helps us in declaring our quarterly results early.



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BoM profit jumps 187% to Rs 165 cr; makes Covid provisions of Rs 583 cr

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Agriculture had a good year, so recoveries were good and retail loans also saw comparatively better recoveries, he said.

Public sector lender Bank of Maharashtra on Thursday reported a 187% year-on-year rise in its net profit to Rs 165 crore for the quarter ended March 31, 2021, aided by a 35% growth in net interest income (NII) to Rs 1,383 crore.
The net interest margin improved to 3.11% compared to 2.41% in the March 2020 quarter.

There was also a one-time other income of Rs 508 crore on account of recovery from the Bhushan Power account. This amount was written off earlier but a one time recovery was made during the March quarter. The bank saw a 215% increase in non-interest income to Rs 1,235 crore.

AS Rajeev, MD & CEO, BoM, said the bank’s asset quality had improved with decline in gross NPA to 7.23% from 12.81% and net NPA from 4.77% to 2.48%. Gross NPA was down to Rs 7,779.68 crore from Rs 12,152 crore while net NPA was at Rs 2,544.3 crore from Rs 4,145 crore.

There has been a reduction in NPAs in all the sectors, including agriculture and retail, as well as corporate loans, Rajeev said. Agriculture had a good year, so recoveries were good and retail loans also saw comparatively better recoveries, he said.

Taking the second wave into consideration, the bank had decided to make additional COVID provisions of Rs 583 crore for any contingencies, he said. But Rajeev did not expect any adverse impact on FY22 performance because of the second wave and the bank would be able to perform well this financial year as the country was better prepared to handle this.

Rajeev said the bank plans to raise capital of up to Rs 5,000 crore by way of follow-on public offer, QIP, rights issue or bonds. This could happen in second or third quarter of FY22 depending on market conditions.

BoM reported a 35% growth in MSME lending, 26% growth in retail lending and 12% growth in agriculture loans during the March quarter.

BoM’s total business as on March 31 was up 15% to Rs 2,81,659 crore, with deposits rising by 16% to Rs 1,74,006 crore and advances going up by 18% to Rs

1,07,654 crore.

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Bank of Maharashtra’s Q4 net soars

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Bank of Maharashtra’s (BoM) net profit soared 187 per cent year-on-year (yoy) in fourth quarter to ₹165 crore on the back of a large recovery in a technically written-off account and a robust growth in net interest income.

The Pune-headquartered public sector bank reported a net profit of ₹58 crore in the year ago quarter. The higher net profit in the reporting quarter comes despite a 92 per cent rise in loan loss provisions.

Interest income

Net interest income was up 35 per cent yoy to ₹ 1,383 crore (₹ 1,023 crore). Non-interest income, comprising fee-based income, trading income and other income, skyrocketed 215 per cent to ₹1,235 crore (₹392 crore).

MD & CEO, AS Rajeev, said recovery of ₹508 crore from the Bhushan Power (technically written-off) account bumped up the other income. Loan loss provisions, including Covid-19 related, increased to ₹1,376 crore (₹717 crore). Provision coverage ratio improved to 90 per cent as at March-end 2021 against 84 per cent as at March-end 2020.

As of March-end 2021, the total deposits rose 16 per cent yoy to ₹1,74,006 crore and total advances were up 13 per cent yoy to ₹1,07,654 crore.

Within deposits, the proportion of low-cost current account, savings account (CASA) deposits rose to 54 per cent from 50 per cent a year ago.

Within total advances, retail advances were up 26 per cent; mico, small and medium enterprises advances (35 per cent); and agriculture (13 per cent). However, corporate & other advance de-grew about 2 per cent.

Rajeev expects 14-15 per cent growth in deposits and 15-16 per cent growth in advances in FY22. Further, the proportion of CASA deposits could go up to 55 per cent and the loan mix between retail:wholesale could change to 65:35 from the current 63:37.

Net interest margin improved to 3.11 per cent in the reporting quarter against 2.41 per cent in the year ago quarter.

Gross non-performing asset (NPA) position improved to 7.23 per cent of gross advances against 12.81 per cent in the year ago quarter. Net NPAs declined to 2.48 per cent of net advances against 4.77 per cent

Meanwhile, the Bank said it is planning to raise up to ₹5,000 crore via equity and bonds.

Last year, out of the enabling provision for raising up to ₹3,000 crore, BoM could raise only ₹505 crore via Tier-II bonds. The market then was not conducive for tapping Tier-I (equity) issuance, the Bank’s chief said.

Rajeev said, in FY22, BoM could raise the resources via follow-on public offer, rights issue, qualified institutions placement issue, preferential issue and via Basel III compliant bonds.

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BoM aims to resolve 20-25 stressed MSME loans under pre-packaged resolution process, BFSI News, ET BFSI

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MUMBAI: State-owned Bank of Maharashtra is looking at resolving 20-25 stressed micro, small and medium enterprise (MSME) accounts under the pre-packaged insolvency resolution process, a senior bank official said.

Earlier this month, the government had introduced a pre-packaged insolvency resolution process for stressed MSMEs by amending the insolvency law.

Under a pre-packaged process, main stakeholders such as creditors and shareholders come together to identify a prospective buyer and negotiate a resolution plan before approaching the National Company Law Tribunal (NCLT).

“With the outbreak of the COVID crisis, the stress on hospitality, luxury retail, tour operators, lodging and restaurant operators has increased considerably. I expect around 20-25 stressed MSME accounts to be resolved under the pre-packaged insolvency resolution regime in the coming months,” Bank of Maharashtra’s general manager (credit – large and mid corporate, MSME) Sanjay Rudra said.

He was speaking at a webinar organised by MVIRDC World Trade Center, Mumbai and All India Association of Industries.

He said under the pre-packaged insolvency resolution system, the government has given an opportunity for MSMEs to resolve their stress at an early stage while holding control over their business.

“Now, MSMEs should maintain complete transparency in the whole resolution process to regain trust and confidence of lenders,” Rudra said.

Speaking at the webinar, AZB & Partners cofounder Bahram N Vakil said MSME promoters should file for resolution with the NCLT only after having a robust base plan.

“If the promoters could come out with a resolution plan with a minimum possible haircut for operational creditors and if it is also acceptable to the committee of creditors, then the chances of such plans being challenged in the Swiss challenge auction are less,” he added.

Emphasising that MSME promoters and bankers should work on a reasonable price discovery of the underlying asset, Vakil pointed out that more often, the fair value estimation of the underlying asset is the sore point of litigation among contending parties.



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New EDs take charge at UBI, CBoI, BoM and BoI

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Nitesh Ranjan and Vivek Wahi have assumed charge as Executive Director (ED) at Union Bank of India (UBI) and Central Bank of India (CBoI), respectively.

Rajeev Puri and AB Vijayakumar also joined CBoI and Bank of Maharashtra (BoM), respectively, as EDs.

Before his elevation, Ranjan was Chief General Manager at UBI. Wahi was earlier General Manager with Bank of India, and Puri was Chief General Manager with Punjab National Bank.

Vijayakumar was earlier Chief Vigilance Officer at Indian Overseas Bank.

 

Meanwhile, Bank of India (BoI), in a stock exchange notice, said three new EDs have joined the Bank — Monika Kalia (Chief General Manager, Union Bank of India), Swarup Dasgupta (General Manager, BoI) and M Karthikeyan (General Manager, Indian Bank).

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Bank of Maharashtra, Vayana Network tie up for channel financing

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A S Rajeev, MD & CEO of BoM, said they were looking at offering a fully digital financing experience to MSME customers, suppliers and distributors of leading corporates.

Bank of Maharashtra on Thursday entered into a strategic partnership with fintech company Vayana Network to offer channel financing service for MSMEs. Vayana is India’s largest supply chain financing platform offering financial support to MSMEs. Through this partnership, BoM has launched the Mahabank Channel Financing Scheme to provide short-term credit to meet funding requirement of dealers and vendors of corporates.

A S Rajeev, MD & CEO of BoM, said they were looking at offering a fully digital financing experience to MSME customers, suppliers and distributors of leading corporates. “We believe in the power of partnerships, and hence have tied up with leading fintechs to launch innovative digital offerings.” Ram Iyer, founder and CEO, Vayana Network said, supply chain finance or trade finance has become a critical vehicle for affordable MSME loans. SCF has gained more traction in the post-COVID era as both corporates and their MSME supply chains aiming at streamlining their working capital cycles and liquidity.

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