Tag: banking news

SC refuses to entertain bail plea of Rakesh Wadhawan, asks him to approach HC, BFSI News, ET BFSI

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New Delhi, The Supreme Court Friday refused to entertain the bail plea filed on health grounds by jailed businessman Rakesh Wadhawan, accused of money laundering in the multi-crore rupees Punjab and Maharashtra Co-operative (PMC) Bank fraud case, saying that he has been in hospital more than the jail. A bench comprising Chief Justice N V Ramana and Justices Surya Kant and Hima Kohli permitted senior advocate Mukul Rohatgi, appearing for Wadhawan, to withdraw the bail plea to approach the high court.

Rohatgi referred to the medical condition of the accused and said that he has been in jail for quite some time.

“I see, he has been in hospital more than in jail. Go to the high court,” the bench said prompting Rohatgi to say that it was the high court which refused the bail.

“File after some time. Not now. Alright permitted to withdraw to approach the high court,” the bench said.

The Bombay High Court on October 14 had refused to grant bail to Wadhawan.

Wadhawan, founder of Housing Development Infrastructure Limited (HDIL), was arrested by the Enforcement Directorate in 2019 in the case.

The high court had said that Wadhawan’s submission that he was immediately required to be released on temporary bail on medical grounds, was “not justified”.

It had said that denial of medical bail was in no way a breach of Wadhawan’s fundamental right to life since he had been provided adequate medical treatment by the state prison authorities whenever required.

Wadhawan, who had undergone a surgery for pacemaker implantation, had sought that he be released on bail so that he can seek discharge from the civic-run KEM Hospital in the city, where he is recuperating while in judicial custody, and shift to a private hospital while out on bail.

He had said in his plea that he suffered from severe comorbidities, that his immune system had been compromised after having contracted COVID-19 recently, and that he was susceptible to contracting infections and ailments while at the civic hospital due to the heavy footfall the hospital received.

He had also said that the KEM Hospital did not have an ICU facility specifically meant for those suffering from cardiac issues.

The fraud at PMC Bank came to light in September 2019 after the Reserve Bank of India discovered that the bank had allegedly created fictitious accounts to hide over Rs 4,355 crore of loans extended to almost-bankrupt Housing Development and Infrastructure Limited (HDIL).

According to RBI, the PMC bank masked 44 problematic loan accounts, including those of HDIL, by tampering with its core banking system, and the accounts were accessible only to limited staff members.

Mumbai Police’s Economic Offences Wing and the ED had registered offences against senior bank officials and HDIL promoters.



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Cautious banks drastically cut education loans as income, job losses rise, BFSI News, ET BFSI

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The bank credit is ticking up for industry and allied sectors in line with the economic revival, but certain segments continue to stay in doldrums.

Credit to commercial real estate and education loans shrunk by 0.5% and 8.7% on year, respectively, in October.

According to RBI data on sectoral credit deployment, loans to the industry sector increased 4.1% on year to Rs 28,54,571 crore as on October 22. On the other hand, loans to commercial real estate fell 0.5% on year to Rs 2,53,582 crore while education loans credit deployment by banks by 8.7% to Rs 47,260 crore.

Experts say banks have sharply reduced exposure to unsecured credit and are focusing on secured home loans and working capital needs of high rated corporate borrowers. While they are focusing on growing the mortgage book, banks have reduced exposure to commercial real estate, given the uncertain times.

Education loan NPAs

Nearly 9.55% of education loans extended by PSU banks were labelled as non-performing assets (NPAs) as on December 31, 2020, with loans for engineering and nursing courses topping the chart.

Job and income loss and drop-out rates during the pandemic were key factors behind the surge in education loan NPAs.

Rising unemployment rate is posing major challenges to the banking system as the repayment ability of the borrowers are getting impacted accordingly.

About Rs 8,587 crore loans over 366,260 accounts have turned bad as of December 2020.

As on December 31, 2020, there are 24.84 lakh education loan accounts with an outstanding of Rs 89,883.57 crore across the country. Out of these, about 9.55% or 3.66 lakh accounts with an outstanding of Rs 8,587.10 crore have turned NPAs, the parliament was informed.

The highest defaults were in loans extended for engineering courses as Rs 4,041.68 crore spread over 176,256 accounts as on December 31, 2020.

COVID-led spike

Interestingly, the NPA rate has dropped to 7.61% in FY20 end from 8.11% in FY18. It stood at 8.29% in FY19. The category has witnessed higher NPAs than other categories of retail loans including housing, vehicle, that saw bad loans in the range of 1.52% and 6.91% in FY20 While NPAs in the housing, vehicle and other retail sector loans have remained below 2%, consumer durables NPAs have trebled to 6.91% as on March 2020 from 1.99% in March 2018.

Reserve Bank of India
Reserve Bank of India

Rising graph

Led by a rise in lending to micro and small, and medium industries, bank loans to the industry sector grew a 4.1% on year in October, sharply higher than 2.5% a month ago and contraction of 0.7% a year ago, according to the RBI data.

Loans to large corporates rose 0.5% (on a year-on-year basis) to Rs 22.7 lakh crore in October compared to a contraction of 1.8 % a year ago.

All major segments, except services including agriculture, industry and retail posted higher growth rates over the previous year. Overall bank credit rose 6.9% in October compared to 5.2% a year ago according to the latest data on sectoral deployment of bank credit released by the Reserve Bank of India.

Government schemes like emergency credit guarantee schemes targeted at such borrowers also seemed to have played a part in the pick-up in lending to these corporate borrowers during the festival season.

The 10.7% growth in gross capital formation in Q2’21-22 is driven primarily by public capital expenditure although there are also signs of a pickup in private capex in the current fiscal.



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Canara Bank raises Rs 1,500 crore via Basel-III compliant bond, BFSI News, ET BFSI

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New Delhi, State-owned Canara Bank on Thursday said it has raised Rs 1,500 crore by issuing Basel-III compliant bonds. “Our bank came out with issuance of Rs 1,500 crore of additional tier I bonds on 30th November 2021.

“The bank received total bid amount of Rs 4,699 crore, out of which full issuance of Rs 1,500 crore was accepted at 8.05 per cent,” Canara Bank said in a regulatory filing.

To comply with Basel-III capital regulations, banks globally need to improve and strengthen their capital planning processes.

These norms are being implemented to mitigate concerns on potential stresses on asset quality and consequential impact on performance and profitability of banks.

Shares of Canara Bank closed at Rs 207.10 apiece on BSE, up 0.15 per cent from the previous close.

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SBI, Adani Capital enter co-lending agreement, to target farmer customers, BFSI News, ET BFSI

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State Bank of India has signed a co-lending agreement with Adani Capital Pvt Ltd to cater to their farmer customers and increase overall efficiency in farm operations, the bank said in a statement.

SBI and the non-bank lender arm of Adani Group will co-lend to farmers, so that it can help them purchase tractor and farm implements.

“We are pleased to associate with Adani Capital under the co-lending program. This partnership shall help SBI to expand its customer base as well as connect with the underserved farming segment of the country and further contribute towards the growth of India’s farm economy. We will continue to work with more NBFCs in order to reach out to maximum customers in far flung areas and provide last mile banking services,” said Dinesh Khara, chairman of SBI.

The Reserve Bank of India had issued guidelines on co-lending schemes for banks and non-bank lenders for priority sector lending to improve flow of credit to underserved sectors of the economy. The scheme aims to make funds available at affordable costs to borrowers.

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Deutsche Bank strengthens wealth management team in India, BFSI News, ET BFSI

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Deutsche Bank is strengthening its wealth management in India to take advantage of the increased entrepreneurial wealth in the country.

The German lender has hired more than 15 bankers and product professionals across various segments to join the India business in 2021 and early 2022. The additional hires are being made across the areas of relationship management and investment advisory.

“The business opportunity in India has become very compelling with the material wealth creation driven by entrepreneurial activity. We are now shifting gears and expanding our long-standing and established team as we seek to support our clients and reach new ones with our full suite of products and solutions” said Amrit Singh, head of wealth management, South Asia.

Among the new hires are Rajasekar Ayyalu who will take over as director in Chennai where he will be responsible for expanding and deepening Deutsche Bank’s presence in South India. Ayyalu was executive director (investments) at Julius Baer.

Four others, Jai Bhatia, Sanyam Sharma , Anjali Vashisth and Manish Lalwani have joined the bank’s Delhi and Mumbai offices as vice-presidents managing client relationships.

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Emkay Global, BFSI News, ET BFSI

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The recent Reserve Bank of India clarification on banks’ promoter holdings is likely to benefit IndusInd Bank, if the central bank does not have any issues related to the promoters, Emkay Global said in a report.

In IndusInd Bank, the Hinduja brothers hold a 16.5 percent stake. The increase in promoter stake will boost the bank’s financial strength, and their clients will be protected.

The RBI had recently clarified that the promoters who have recently reduced their holdings to below 26% and want to increase it back, can approach the central bank. The promoter will have a choice to bring down the promoter holding to below 26% after the initial locking period is over.

The RBI retained the norm to maintain a minimum (floor) of 40% of paid-up voting equity share capital by the promoter for the first five years, but there is no cap on the promoters’ holdings in the initial five years, Emkay highlighted. That said, the cap on the promoter’s stake over 15 years has been raised from 15% to 26%, which was implemented in the case of Kotak Mahindra Bank.

Non-promoter shareholding will be capped at 10% of the paid-up voting equity share capital of the bank for natural persons and non-financial institutions and at 15% for all categories of financial institutions, supranational institutions, public sector undertaking or government. If this is allowed, then possibly HDFC may not had to bring its stake in Bandhan to 10%, Emkay said.

In the case of invoking pledged shares of a bank, the pledgee’s voting rights will be restricted to 5% till the time the pledgee obtains permission from the RBI for the regularisation of the acquisition of these shares.

The RBI has retained non-operative financial holding company (NOFHC) as the preferred structure for all new licences to be issued for universal b anks, but it will be mandatory only in cases where the individual promoters, promoting entities or converting entities have other group entities, the report said. However, banks currently under NOFHC, such as IDFC First Bank and Bandhan Bank, may be allowed to exit such a structure if they do not have any other group entities in their fold.

The RBI has given in-principle approval to IDFC First Bank-Bandhan Bank, but IDFC will have to first divest stake in its MF/tech businesses for a reverse merger with IDFC First Bank, while Bandhan Bank is not keen on diluting the structure as of now, the report said.

Furthermore, on the relaxation of the listing norms for future small finance banks (SFBs), existing SFBs in queue, including Utkarsh, Fincare, Jana, ESAF, and even the recently-formed Unity SFB, may not get any relief. However, Unity SFB, which is a venture between BharatPe and Centrum, could have different terms, given the potential acquisition of beleaguered PMC Bank.

Small finance banks can now list within eight years from the date of commencement of operations against the earlier condition of within three years of reaching a net worth of Rs 5 billion, and against the demand for 10 years. For universal banks, the listing requirement remains the same, that is after six years of commencement of operations.



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Bank branch addition drops 82% in FY21; bankers bet on phygital model, BFSI News, ET BFSI

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The branch addition by banks fell to a decade low in fiscal 2021, felled by digitisation, pandemic and growth of alternative channels such as business correspondents.

Banks added only 1,383 branches in FY2021 as against 7,728 branches in FY2020.

As of March-end 2021, the network of offices of scheduled commercial banks increased to 1,54,485 from 1,53,102 as against a year ago, as per RBI data.

The consolidation of banks into five large banks too led to a drop in the number of branches as banks went for right sizing of operations following the amalgamation of several PSBs.

Phygital model

Even as there is a surge in adoption of digital banking, physical branches will continue to be relevant as a large percentage of customers are more comfortable doing transactions at branches, according to bankers.

Banks should make efforts in educating customers about various aspects of digital banking so that they can conveniently use these channels.

“I think branches, as a mode or a channel, will not be totally discounted. There is still a significant population who will be more comfortable in one-to-one dealings rather than only digital.

“Therefore, this world of physical plus digital or phygital will be the way forward,” State Bank of India Managing Director Ashwini K Tiwari said at ETBFSI Converge.

City Union Bank Managing Director and CEO N Kamakodi said that though the older generations are much comfortable with the manual banking channel, many of them are now trying to use the digital channel also.

“Around 90 per cent of the banking transactions in India have now started moving into the non-branch channel such as internet banking, mobile banking or ATM. The number of transactions happening at the branches are in single digit,” he said.

Business correspondent growth

The business correspondent outlets of public sector banks in villages have shrunk during 2016 and 2020 while private banks have shown positive growth.

“PSBs dominated the number of BC outlets in villages, but during the review period, on account of consolidation, their BC outlets showed negative growth,” according to an RBI study said.

PSBs’ share in BC village outlets has dropped marginally to 57 per cent in 2020 from 60 per cent in 2016.

The growth in BC outlets in villages was also negative for regional rural banks.

The share of PSBs in BC outlets in rural areas has remained consistently above 60% over the years, being the highest among the bank groups.

Private banks shine

As PSBs continued to maintain their hold, PVBs too registered a higher growth in both access and usage indicators during the review period. There was a growth in BC outlets in villages for PVBs with the growth being significantly high for the north-eastern, eastern and central regions, surpassing the growth of PSBs and RRBs together.

PVBs also significantly improved their tally of urban BC outlets during the five years with their share growing from 77 per cent in 2016 to 97 per cent in 2020. On similar lines, contribution of PVBs in the total number of BC agents too grew exponentially from 37 per cent in 2016 to 80 per cent in 2020.

The BC model grows

“From being an alternate delivery model, the BC model is emerging as the predominant delivery model. While the growth in number of rural branches remained subdued during the review period, there was a significant growth in BC outlets in both villages and urban pockets providing formal financial services at the doorstep of large number of unserved/underserved population,” the study said.

The study noted that about 56 per cent of total Basic Savings Bank Deposit Accounts (BSBDAs) and 65 per cent of General Credit Cards (GCCs) were channelled through BCs. While BCs of public sector banks (PSBs) dominated the deposit space, private sector banks (PVBs) accounted for a major share in GCCs through BCs.

During the review period, the total transactions routed through BC outlets increased considerably both in terms of volume as well as value, it said.



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Bank officers’ union launches nationwide movement against privatisation, BFSI News, ET BFSI

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New Delhi, Bank officers’ union on Tuesday launched nationwide movement against proposed privatisation of stat-owned lenders. ‘Bank Bachao Desh Bachao Rally’ was held at New Delhi’s Jantar Mantar on Tuesday attended by officers and other stakeholders from various parts of the country, the All India Bank Officers’ Confederation (AIBOC) said in a statement.

Addressing the rally, AIBOC General Secretary Soumya Datta appealed to the government to withdraw the Banking Laws (Amendment) Bill, 2021, which has been listed for introduction and passing in the winter session of Parliament.

“In case the government tables and passes the bill paving the way for the privatisation of the public sector banks, the bank officers will unite all the stakeholders of the banking sector and launch a nationwide agitation,” he said, urging the bankers to draw inspiration from the farmers movement.

Finance Minister Nirmala Sitharaman while presenting Budget 2021-22 earlier this year had announced the privatisation of public sector banks (PSBs) as part of disinvestment drive to garner Rs 1.75 lakh crore.

The Banking Laws (Amendment) Bill, 2021, to be introduced during the session is expected to bring down the minimum government holding in the PSBs from 51 per cent to 26 per cent.

In the last concluded session, Parliament passed a bill to allow privatisation of state-run general insurance companies.

The General Insurance Business (Nationalisation) Amendment Bill, 2021, removed the requirement of the central government to hold at least 51 per cent of the equity capital in a specified insurer.

The Act, which came into force in 1972, provided for the acquisition and transfer of shares of Indian insurance companies and undertakings of other existing insurers in order to serve better the needs of the economy by securing the development of general insurance business.

Government think-tank NITI Aayog has already suggested two banks and one insurance company to Core Group of Secretaries on Disinvestment for privatisation.

According to sources, Central Bank of India and Indian Overseas Bank are likely candidates for the privatisation.



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S&P, BFSI News, ET BFSI

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Earnings of Indian banks will get a boost from easing non-performing loans and the nation’s economic recovery that will drive demand for credit.

Many large banks saw their nonperforming loan ratios decline “as new NPA formation was more than offset by recoveries on retail loans,” said Nikita Anand, an analyst at S&P Global Ratings, after both private-sector and government-owned banks reported an improvement in overall asset quality in the fiscal second quarter that ended Sept. 30. “[The banks’] earnings have improved with credit costs moderating,” he said.

As on September 30, the weak loan ratio peaked close to 10 per cent. Credit costs, which reflect provisioning on bad loans, will also likely hit their lowest level in 7 years. This in turn should boost earnings, according to S&P.

State Bank of India, the country’s largest bank by assets, reported total NPAs of Rs 1.25 lakh crore for the quarter ended September 30, down from Rs 1.36 lakh crore in the previous quarter and Rs 1.27 lakh crore in the same period a year ago. Bank of Baroda and Punjab National Bank also saw quarter-over-quarter falls in NPAs.

Meanwhile, the ratings agency said that it is sceptical of allowing corporate ownership in banks, given India’s weak corporate governance. Corporate ownership of banks raises risks of intergroup lending, diversion of funds and reputational exposure, it said. Currently, the Reserve Bank of India refrained from allowing corporate ownership in banks.

Better asset quality, economic rebound brighten Indian banks' earnings outlook: S&P

Economy on mend

India’s economy grew 20.1% year over year in the April-to-June quarter, recovering from a 24.4% contraction in the same period of 2020 when the COVID-19 pandemic forced a strict lockdown across the country. The Reserve Bank of India expects the economy to grow about 9.5% in the fiscal year to March 2022, and Governor Shaktikanta Das on November 16 underscored the “need for sustained impetus so that growth could return to, or better still, exceed the pre-pandemic trend.”

The rating agency said that the economy’s expansion is expected to outpace that of developing market peers in the coming few years. “In comparison, some tourism-dependent countries, such as Thailand, are likely to see long-term scarring as we expect only a gradual resumption of travel-related industries,” they agency said.

Ahead of the Diwali festive season, gross bank credit grew 6.7% year over year in both August and September, reversing a contraction earlier in the year, central bank data show.

“With cash flows improving for underlying borrowers due to easing of the pandemic and lockdowns, most banks have reported an improvement in asset quality and reduction in nonperforming assets,” said Krishnan Sitaraman, senior director at Crisil, a unit of S&P Global Inc.

“It is also a reflection of the clear improvement in economic fundamentals for the country” after the economy contracted 7.3% in the year that ended March 31, 2021, Sitaraman said.

Banks are likely to sustain their earnings improvement in 2022 if credit costs continue to moderate, though Sitaraman flagged the risk of a possible fresh wave of Covid infections and its potential impact on economic activity.

Better asset quality, economic rebound brighten Indian banks' earnings outlook: S&P

Better earnings

The net profit of State Bank of India in the second quarter rose to Rs 8,890 crore from Rs 5,246 crore in the prior-year period. ICICI Bank Ltd’s net profit increased to Rs 6,092 crore from Rs 4,882 crore in the prior-year period.

SBI’s credit cost and net interest margin profile were better than expectations, ICICI Securities said in a note after the lender reported its earnings. SBI’s management expects an opportunity to grow its corporate and small business portfolios as economic activity picks up, the merchant banking and retail broking arm of India’s second-biggest private-sector lender by assets said in a note. “SBI also has sufficient capital and liquidity on balance sheet to support growth.”

HDFC Bank, the country’s largest private-sector bank, saw its NPLs ease to Rs 21,000 crore from Rs 23,000 crore in the first quarter. The lender said its bad loans from small-and-medium scale businesses declined over the previous quarter and the corporate book is resilient, suggesting that a bigger part of incremental delinquency is flowing from the retail and agriculture segments, ICICI Securities said in a note after HDFC reported its earnings.

“Further curtailment of slippages, better recoveries and improved collections will support asset quality trends in coming quarters [for HDFC Bank],” according to ICICI Securities.



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RBI imposes Rs 1 cr penalty on Union Bank of India, BFSI News, ET BFSI

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Mumbai, The Reserve Bank of India (RBI) on Monday said it has imposed a penalty of Rs 1 crore on Union Bank of India for deficiencies in regulatory compliance. The penalty was imposed by an order dated November 25 for non-compliance with the certain provisions of directions issued by the RBI contained in “Reserve Bank of India (Fraud – Classification and Reporting by commercial banks and select FIs) Directions 2016” and “Guidelines on Sale of Stressed Assets by Banks”.

Giving details, the RBI in a statement said the statutory inspection for supervisory evaluation (ISE) of the bank was conducted by it with reference to its financial position as of March 31, 2019.

Examination of the risk assessment report, inspection report and all the related correspondences revealed, inter alia, non-compliance with certain directions to the extent of failure to classify an account as a Red Flag Account despite the presence of early warning signals and failure to disclose ageing of and provisioning for security receipts (SRs) in its annual report, the RBI said.

The central bank, however, added that the penalty is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.



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