Tag: banking news

India Ratings retains overall negative outlook for microfinance institutions, BFSI News, ET BFSI

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FILE PHOTO: A customer hands Indian currency notes to an attendant at a fuel station in Mumbai, India, August 13, 2018. REUTERS/Francis Mascarenhas

India Ratings and Research has maintained an overall negative outlook on the microfinance sector for the second half of the current financial year due to liquidity concerns in small and mid non-bank microfinance institutions, which could lead to a constraint in their disbursements.

The ratings agency retained a stable outlook for the large and strong sponsor-backed microfinance institutions, while small and mid non-bank microfinance institutions, including those with over 50% of assets under management in microfinance, were on a negative outlook rating.

Liquidity constraints of small and mid-sized companies could have a larger impact on Kerala and West Bengal, while harmonisation guidelines, government guaranteed loans, mechanism of Assam debt waiver and equity raise by some of these companies in the second half of the year could support sentiment in the near term.

According to the agency, microfinance institutions can be categorised as per their funding access. For most large companies, bank funding lines could continue and they may not face immediate liquidity stress. However, small and mid-size companies would need to conserve their liquidity, which could to a lag in their performance.

“The lower rated (BBB and below category) entities have witnessed a rising trend in incremental cost of borrowing which is not the case with large entities. If they are able to get a disproportionate share in government guarantee backed loans, it could help them in funding cost,” the agency said in its report.

Credit costs for microfinance institutions are likely to be in the range of 5%-10% this financial year, depending on their size and scale, access to liquidity, that is the ability to continue to disburse, and geographic concentration, the ratings agency said.

India Ratings also noted the recovery efforts taken by microfinance institutions. The collection efficiency improved over July-August 2021 from June 2021, given that around 70% of the borrowers were in the essential goods and services segments. The current collection efficiency at the end of June lagged behind March levels by 15%-20%, according to the agency.



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RBI lifts Prompt Corrective Action restrictions on UCO Bank, BFSI News, ET BFSI

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FILE PHOTO: The Reserve Bank of India seal is pictured on a gate outside the RBI headquarters in Mumbai, India, February 2, 2016. REUTERS/Danish Siddiqui

The Reserve Bank of India today lifted Prompt Corrective Action (PCA) restrictions on UCO Bank, after the Board of Financial Supervision reviewed the financials of the bank, the central bank said in a statement.

The central bank said UCO Bank provided a written commitment that it would comply with the norms of Minimum Regulatory Capital, Net Non Performing Assets and Leverage ratio on an ongoing basis.

UCO Bank will, however, be continuously monitored by the RBI.

Earlier in June, UCO Bank Managing Director Chief Executive Officer AK Goel said that he was hopeful that the central bank would lift PCA restrictions on the bank.

PCA is triggered when banks breach regulatory norms such as return on asset, minimum capital, among others.

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ICICI Bank customers can now pay dues of other credit cards on iMobile Pay app, BFSI News, ET BFSI

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Customers of ICICI Bank can now pay and manage dues of their credit cards, of any bank, using the bank’s mobile application ‘iMobile Pay‘, the bank said in a release today.

Customers can add credit cards of any bank to the application, and then pay and manage their dues.

“With a large section of customers using multiple cards for their various needs, this new solution aims to help them decongest the process of their credit card bill payments,” said Bijith Bhaskar, head of digital channels and partnership at ICICI Bank.

Users can also set bill payment reminders of all the cards they have added, view payment history, share payment confirmation through WhatsApp, and manage and change due dates as per the billing cycle of their cards, the bank said in the release.

The bank has also provided a simple 4-step process to avail this new feature:

> Login to iMobile Pay and select ‘Cards and Forex’ section

> Go to ‘Other Bank Credit Card’

> Tap on ‘Add a card’ and enter the required details

> Authenticate the one time password (OTP) sent on the registered mobile number, and card will be added instantly

> Once the card is added, it can be viewed and managed under the ‘Other Bank Credit Card’ tab



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Axis Bank begins issuing securities under Rs 35,000 crore-debt raise plan, BFSI News, ET BFSI

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NEW DELHI: Axis Bank on Monday said it has started issuing debt securities under its Rs 35,000 crore-debt raise plan announced earlier this year.

In April, the private sector lender had said that its board had approved capital raise proposal up to Rs 35,000 crore by issuing various debt instruments in Indian or foreign currency in domestic/overseas markets in one or more tranches.

The shareholders of the bank had approved the proposal in bank’s annual general meeting in July.

“The bank has initiated the process of issuing of the debt instruments, in the form of the additional tier 1 notes (notes) in foreign currency, subject to market conditions,” Axis Bank said in a regulatory filing.

This will be a sustainable bond under the sustainable financing framework of the bank.

The issuance is part of the existing global medium term notes (GMTN) programme of the bank, it said.

The lender said the offering under the GMTN has been informed to Singapore Exchange Limited (SGX) and the International Securities Market (ISM).

“The notes will not be offered or sold in India under the applicable laws,” it added.



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PSBs may have to provide for over Rs 21,000 crore annually for family pension revision, BFSI News, ET BFSI

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Public sector banks will have to make an additional provision of over Rs 21,300 crore annually on account of a hike in family pension and higher contribution toward the National Pension System (NPS), according to a report.

A special dispensation will be sought from the Reserve Bank of India (RBI) to allow provisions over the next five years, it said.

The plan

Acknowledging that family pension for bank employees is at a paltry level, the government this week had announced that it would raise the same to 30% of the last drawn salary.

Earlier, kin of a deceased PSB employee used to get a maximum of Rs 9,284 per month as a family pension, said Department of Financial Services Secretary Debasish Panda.

“The cap has been completely removed and a uniform slab of 30% at the last-drawn salary will be entitled as family pension,” Panda told reporters here, admitting that the earlier levels were “paltry”.

NPS hike

Similarly, the ministry has also decided to increase the employer’s contribution to the New Pension Scheme (NPS) to 14% of the salary from the current 10%, he said.

Finance Minister Nirmala Sitharaman expressed her satisfaction at public sector banks’ performance in the past few years and appreciated that many of them have come out of the RBI’s prompt corrective action framework.

Panda said a dozen PSBs have become leaner and started delivering profits which have upped the investor confidence in them and made them self-dependent for capital raising.

He said that since last year, the banks have collectively raised over Rs 69,000 crore, including Rs 10,000 crore in equity, and are in the process of raising another Rs 12,000 crore at present.

As on March 31, the total number of pensioners stood at around 5.66 lakh and family pensioners at over 1.55 lakh.



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RBI imposes penalty on 2 co-op banks, 1 NBFC, BFSI News, ET BFSI

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Mumbai, Aug 26 (PTI) The Reserve Bank of India (RBI) on Thursday said it has imposed penalties on two co-operative banks and a non-banking financial company (NBFC), for deficiencies in certain regulatory compliance. A penalty of Rs 3 lakh has been imposed on Jijamata Mahila Sahakari Bank, Pune, Maharashtra for non-compliance with the directions on exposure norms and statutory/ other restrictions-urban co-operative banks (UCBs), the central bank said.

In another statement, it said a penalty of Rs 2 lakh has been imposed on The Muslim Co-operative Bank Limited, Pune, for contravention of/non-compliance with the directions issued by the RBI on Know Your Customer (KYC).

The RBI also said it has imposed a penalty of Rs 5 lakh on Seyad Shariat Finance Limited, Tirunelveli (Tamil Nadu), an NBFC, for non-compliance with certain provisions of the Know Your Customer Directions, 2016.

In all the three cases, the RBI said penalities are based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by them with their customers.



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‘CFOs should keep eye on long-term strategy, adapt to short-term situations’, BFSI News, ET BFSI

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CFOs have to play a major role during the pandemic in their organisations and be ready from the technology and business perspectives.

All eyes are on the P&L projections and the growth expectations from the businesses. With various factors that have come out of the pandemic, I would imagine that CFOs are at the centre with all the strategies that organizations are playing right now, Sudeep Bhatia, Group CFO, Lendingkart, said at the panel discussion CFOs’ View: Building Pandemic-Proof Balance Sheet at ETBFSI Summit.

'CFOs should keep eye on long-term strategy, adapt to short-term situations'

“For CFOs, the major focus has moved more towards a strategist, acting as a catalyst. How you can adapt to every day. Making sure you are ready from a technology and business perspective,” Upma Goel, CFO, Ujjivan Small Finance Bank, said.

'CFOs should keep eye on long-term strategy, adapt to short-term situations'

Adapting to new normal

Niraj Shah, CFO, HDFC Life said in these times, flexibility and agility is something that comes to the fore, and that’s something that a CFO needs to prepare the organization for.

Investing ahead of the time, and being agile, to try and adapt to the changing customer preferences because of the changing environment, he said.

'CFOs should keep eye on long-term strategy, adapt to short-term situations'

The RBI and GOI have taken multiple steps and interventions with every step, and, therefore, all the financial institutions, and all other organizations as well, had to adapt to the situations very fast, Bhatia of Lendingkart said.

Every business will be affected in a different way. Given the situation, and we adjust to that, but just in principle it’s about keeping sights on your long-term strategy, at the same time, adapting, to the short-term situations, Shah said.

Emphasising the need to have a fine balance to make effective use of the liquid cash, Goel of Ujjivan SFB said, “We cannot afford at this point of time not to have the liquidity and wait for the real demand. Demand has started picking up”

The challenges

The Covid pandemic has been the most serious challenge to financial institutions in nearly a century and CFOs need to maintain our distribution and recovery channels open, despite the social distancing advice by the supervisory and compliance function, said G S Agarwal, CFO, Shriram Housing Finance.

'CFOs should keep eye on long-term strategy, adapt to short-term situations'

‘The struggle to manage between these things and keep your balance sheet and P&L intact has been the biggest challenge. Also, to do the compliances remotely sitting remotely without any paperwork, without any physical signatures has been quite challenging, he said.

Customer requests and expectations have grown multifold. “I haven’t seen this kind of customer engagement before even from the existing customer base. This is because they need support from the organization as well,” Bhatia of Lendingkart said.



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Chief Economic Advisor K V Subramanian, BFSI News, ET BFSI

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Exhorting the Indian BFSI sector to make a mark globally, Chief Economic Advisor K V Subramanian has said India should have at least six banks in the global top 100.

“It is a matter of mindset now, the mindset has to be one where we are not happy with just being lions at home and lambs abroad, we have to be lions globally as well, Krishnamurthy Subramanian said, delivering the keynote address at ETBFSI Summit.

Stating that India has to become a big player in the BFSI space in the next decade, he said the sector must seek inspiration from IT, pharma & sports.

BFSI sector needs to have that hunger which will also help the Indian economy, Subramanian said, adding, “Five Chinese banks are in the top 100 global, Swedish banks, American banks. There is no reason why our banks cannot be in the top 20 either.”

Ruing that India has only one bank in the global top 100 — SBI at 55th position, he said for the size of the economy, India should have at least six banks in the global top 100, some in the top 10 or the top 20.

Drawing an analogy with cricket, he said the Indian BFSI sector appears like the Indian cricket team of the 1990s which could boast a lot of victories at home but had nothing noteworthy outside the shores, globally.

The sector has to aspire to become like a cricket team under Sourav Ganguly, Mahindra Singh Dhoni or Virat Kohli where they’re achieving global recognition.

“The BFSI sector has to start mattering globally, their aspirations need to be scaled up. Aspiration has to be set, given the aspiration that India has set for the economy itself.”

Fixing problems

The CEA said India’s BFSI sector has a quality and quantity problem which needs to be fixed, especially when the Prime Minister has outlined Rs 100 lakh crore infrastructure building apart from the National Infrastructure Pipeline.

“Infrastructure will actually require the BFSI sector to be able to participate and thereby learn how to do high-quality lending without suffering the problem of non-performing assets, crony lending, evergreening of loans, gold plating of loans, all the kind of problems that we have witnessed in the Indian financial sector over the last decade,” he said.

He said the country has large corporates and large borrowers who end up borrowing but not repaying, and yet many times banks actually end up giving credit to the defaulters as well.

Observing that on the credit side India is far behind, he said, “The ratio of credit to private credit to GDP at about 58% is one-third of the global average of, close to 170 per cent.”

He said the BFSI sector should avoid the phenomenon of accelerating credit, and braking when bad loans mount, if credit expansion has to happen in a sustained manner to push economic growth.

“It is very important for credit expansion to happen at a consistent pace without the usual accelerator brake phenomenon that has been the characteristic of the Indian financial sector ever since liberalisation where, when the economy starts doing well, credit expands significantly oftentimes in the process. The credit underwriting norms are relaxed, and as a result, the seeds for a crisis are sown during good times,” he said.

Leveraging tech, data analytics

Underscoring the importance of technology and data analytics, Subramanian said banks and financial institutions which were very efficiently leveraging data and analytics had much lower bad loans, and their balance sheet expansion did not come under pressure. “Those banks were also able to grow consistently, and thereby contribute to the economy. That is the objective that the Indian BFSI sector must have,” he said.

The CEA said a lot of the private sector banks have used data and analytics for retail lending, but the usage of the same is very low for large ticket lending and SME lending. “The Indian BFSI sector should hire far more engineer MBAs to bring this technology driven in banking,” he said.

“In BFSI sector leaders need to be those that are technologically very well drained not only to be able to come up with models for retail lending, but also models for large-ticket corporate lending,” Subramanian said.



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Key Highlights of Finance Minister’s meeting with the heads of PSU banks., BFSI News, ET BFSI

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Nirmala Sitharaman

Union Finance Minister, Nirmala Sitharaman on Wednesday met with the heads of the Public Sector Banks to review their financial performance and the progress made in supporting the pandemic hit economy.

Sitharaman took note of the situation of the PSBs and their progress around the restructuring 2.0 scheme announced by the Reserve Bank of India.

“We Reviewed the annual performance of Public Sector banks and also the implementation of announcements of various COVID-19 related packages and Aatmanirbhar Bharat package,” FM Nirmala Sitharaman said.

The minister also declared the results of Ease 3.0 (Enhanced Access and Service Excellence) Index for 2020-21 and launched the Ease 4.0.

Ease is a common reform agenda for PSBs aimed at institutionalising clean and smart banking.

This is the first meeting of the Finance Minister with the heads of PSBs since the beginning of the Covid-19 pandemic.

Following are the key highlights

From Nirmala Sitharaman, Finance Minister

  • Nature of banking is evolving rapidly, and the industry has realised the changing requirements of the sector.
  • Collectively, PSBs have done well and have shown that they are in a position to come to the market and raise funds.
  • Despite the customer requirements during COVID-19 pandemic, work of amalgamation of banks has not suffered.
  • Banks & financial services have been identified as strategic sectors. Govt will have a bare minimum presence.
  • Industries have the option of raising funds outside the banking sector.
  • There will be credit outreach in every district of the country this year.
  • Banks have been asked to come up with special plans for northeast states focusing on logistics, exports from the area.
  • Banks expressed concerns about CASA deposits piling up in eastern areas including Bihar, WB, Jharkhand. Banks should provide facilities to provide credit flow for business development in these regions.
  • Requested the public sector banks to address the needs of exporters. They have been directed to interact regularly with Federation of Exporters Organisation.
  • Banks are raising funds from different avenues. This new aspect needs to be studied to target credit where it is needed.
  • Customer Service of banks has not suffered even during the pandemic.
  • Sunrise sectors and fintech need banking support.
  • Fintech can provide technological help to banks. Fintechs and the banking sector can mutually benefit each other.

From Tarun Bajaj, Revenue Secretary

  • Direct listing of companies on the overseas platforms is under consideration.

Debashish Panda, DFS Secretary

  • PSBs’ contribution for employee pensions under NPS hiked to 14 pc from 10 pc earlier.
  • Pension payouts to bank employees could increase to ₹30,000- ₹35,000 from the earlier cap of ₹9284.

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China shares end higher as central bank boosts short-term funding, BFSI News, ET BFSI

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SHANGHAI: China shares finished higher on Wednesday after China’s central bank boosted short-term funding to ease worries over tightening liquidity amid a faltering recovery, but losses in financial, tech and real estate sectors capped gins.

At the close, the Shanghai Composite index was up 0.74% at 3,540.38.

The blue-chip CSI300 index was up 0.2%, turning around from a small dip at midday. It was led by consumer staples firms, which rose 1.91%.

China’s central bank offered 50 billion yuan ($7.72 billion) through seven-day reverse repos into the banking system, bigger than daily injections in recent months, in what traders saw as a bid to support liquidity and lift market sentiment.

Foreign investors helped lift A-shares, with Refinitiv data indicating inflows of more than 7.5 billion yuan ($1.16 billion) on the day through the Northbound leg of the Stock Connect programme.

But underscoring continued financial risks in the real estate sector that some investors worry could spread, a supplier to debt-laden developer China Evergrande Group said Evergrande had failed to pay some overdue bills.

The real estate index lost 3.67% and the financial sector sub-index slipped 1.37%. The CSI Info Tech index fell 0.74%.

The smaller Shenzhen index ended up 0.39% and the start-up board ChiNext Composite index was 0.54% higher.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.23%, while Japan’s Nikkei index closed down 0.03%.

At 0702 GMT, the yuan was quoted at 6.4774 per US dollar, 0.11% weaker than the previous close of 6.4705.

So far this year, the Shanghai stock index is up 1.9% and the CSI300 has fallen 6%, while China’s H-share index listed in Hong Kong is down 15.8%. Shanghai stocks have risen 4.21% this month.



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