Tag: banking

Exim bank eyes to raise $3 billion in FY22

Banking & Finance

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Export-Import Bank of India may raise about $3 billion in FY22, as against $2 billion in FY21, to support Indian exports, as the global trade is gradually opening up.

David Rasquinha, MD & CEO of the bank, said that he sees demand for pharmaceuticals, chemicals, home textiles, among others, gaining traction as advanced economies are gradually coming out of the Covid-19 pandemic. “This opens up an opportunity for Indian exporters,” said Rasquinha.

Exim Bank expects credit growth in the 7-12 per cent range in FY22 (against 7 per cent in FY21), depending on how quickly the economy revives and how the exchange rate moves.

Harsha Bangari, Deputy Managing Director, observed that the borrowings by Exim Bank will be cautiously calibrated to match credit growth in FY22. In January 2021, the bank had raised $1 billion for a 10-year tenor at a coupon rate of 2.25 per cent in the 144A/Reg-S format.

Meanwhile, Exim Bank, which is a wholly owned government of India subsidiary, reported a 105 per cent jump in net profit at ₹254 crore in FY21 as against ₹124 crore in the year ago period.

Loan portfolio edged up 4.43 per cent year-on-year to ₹1,03,851 crore as at March-end 2021 against ₹99,447 crore in FY20. Non-fund portfolio declined about 10 per cent year-on-year to ₹14,229 crore (₹15,869 crore).

Rasquinha emphasised that Exim Bank gives almost 80 per cent of its loans in foreign currency. So, when rupee appreciates against dollar, the loan portfolio in rupee terms comes down. However, in dollar terms, the loan growth was 7 per cent in FY21.

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Shriram Life Insurance FY21 net profit at ₹106 crore

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Private insurer Shriram Life Insurance reported a three fold increase in its net profit to ₹106 crore in 2020-21.

Gross premium increased by 23 per cent to ₹2,019 crore last fiscal while the number of policies increased by eight per cent to 2,95,838.

“This growth was supported by a 25 per cent growth on total new business premium and 24 per cent growth on retail renewals,” it said in a statement on Friday, adding that approximately 47 per cent of its new business came from the rural segment.

As much as 54 per cent of the insurer’s claims came in from the rural segment. Income from investments more than doubled to ₹541 crore in 2020-21.

Casparus Kromhout, MD and CEO, Shriram Life Insurance said, “Shriram Life has been focused on serving the protection needs of the rural segment and lower income segments. These segments are most affected by the crisis due to the dual impact of the health emergency and loss of income. We remain committed in reaching our customer segment during this difficult time to ensure that financial protection is extended to more customers and that life cover continues for existing customers.”

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SaveIN raises undisclosed pre-seed funding from global, Indian investors

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SaveIN, a social finance-based neobank, has raised an undisclosed amount in pre-seed funding from a clutch of global and Indian angel investors and industry stalwarts. The Gurgaon-based firm will use the funds for expansion plans and product development.

The names of the investors – who were from banking, consulting, blockchain and fintech – were not immediately disclosed.

“The company is looking to use the recently raised funds to expand its market reach, accelerate product development and strengthen its in-house team. We aim to reach over 5 lakh users by the end of this financial year from the present 10,000,” Jitin Bhasin, Founder and Chief Executive Officer at SaveIN said.

Background

Set up in 2020 by banker and fintech professional Jitin Bhasin, SaveIN helps users lend and borrow money among each other, especially for short-term requirements.

Bhasin had teamed up with EY Hong Kong senior executive Anurag Varma and Gaurav Luthra, founder of Whatsup Life to start SaveIN. The company also roped in Rahul Gupta as Chief Financial Officer (former VP-Finance at Stashfin) and Karan Jain as Chief Operating Officer (former Director at Bankbazaar).

The company launched beta phase in April 2021.

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South Indian Bank posts net profit of nearly ₹7 crore in Q4

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South Indian Bank has registered a net profit of ₹6.79 crore in the fourth quarter of FY21 against a loss of ₹143.69 crore during the corresponding period of the previous year. The net profit for the entire FY21 is ₹61.91 crore as against ₹104.59 crore of the previous financial year.

Murali Ramakrishnan, Managing Director & CEO said the lower quarterly profit was mainly on account of credit cost on the fresh slippages during the fourth quarter, as a result of additional stress in the economy due to Covid-19 pandemic. “Bank has strengthened the review and monitoring system of the advance portfolio to improve the credit quality and thereby bringing drastic reduction in the slippages and improve upgrades/ recovery,” Ramakrishnan said.

Vision 2024

The bank has come up with a 3-year Medium Term Strategy (Vision 2024) wherein the focus will continue in the areas of MSME and Retail Loans with improved underwriting standards. The technology initiatives will be leveraged to improve the CASA and the technology income in the coming quarters.

The prevailing Covid-19 pandemic has impacted the growth in the business and personal loan segment. “As part of the business strategy to reduce the exposure in the corporate advances, the bank has brought down the share of corporate advances from 28 per cent as on March 31, 2020 to 25 per cent as on March 31,” he said.

The bank has also been able to meet the targeted levels of recovery/ upgrades which has helped in containing the GNPA level despite higher slippages numbers during the year on account of the pandemic. The provision coverage ratio has improved to 58.73 per cent from 54.22 per cent.

The Capital Adequacy Ratio stands comfortable at 15.42 per cent as on March 31. The bank has raised the equity capital during the quarter for an amount of ₹240 crore which strengthened the Common Equity. “The bank plans to raise further capital during FY21-22 to strengthen the capital base,” he added.

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Pension AUM cross ₹6-lakh crore: PFRDA Chief

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The pension Assets Under Management (AUM) have reached a new milestone and crossed the ₹6-lakh crore mark two days back, Pension Fund Regulatory and Development Authority (PFRDA) Chairman, Supratim Bandyopadhyay, has said. It has just taken seven months for addition of ₹1-lakh crore in AUM, which crossed the ₹5-lakh crore mark in October 2020.

“We had initially thought this ₹6-lakh crore AUM would be achieved by end March 2021. But we had missed it out due to market conditions. However, within one-and-half months we have now reached the ₹6-lakh crore level,” Bandyopadhyay told BusinessLine.

It maybe recalled that the pension AUM, as of end March 2021, stood at ₹5.78-lakh crore (₹4.17-lakh crore as of end March 2020).

Bandyopadhyay said that the PFRDA was now looking at an AUM target of ₹7.5-lakh crore by the end March 2022. “I am happy that whatever projections we had made two years back.. we are on track. At this rate, I believe we are on path to reach the projected level of ₹30-lakh crore by the year 2030,” he added.

Variable annuities

Bandyopadhyay said that work is on towards amendments to the PFRDA Act and once this gets Parliament nod, then pension fund managers and even the PFRDA will be in a position to roll out other payout products (such as systematic withdrawal plan) that will be distinct from annuities.

He highlighted that annuity rates in the market have fallen and many retirees are unhappy about the current level of returns.

The need for variable annuities – where the returns vary according to the market related benchmark – has all the more increased, given that annuity rates have fallen in line with sharp fall in interest rates in the system.

Meanwhile, the PFRDA Board has given approval for National Pension System (NPS) subscribers with corpus up to ₹5 lakh to withdraw their accumulations on retirement funds without mandating their investment in annuities. “This decision is expected to be shortly notified. We are also alerted our CRAs to be ready with the changes,” Bandyopadhyay said.

The pension regulator’s Board has also approved extension to the maximum entry age for availing the NPS benefits to 70 years from the current 65 years. Simultaneously, the exit age limit is also being extended from 70 years to 75 years. “This decision will be notified soon and will get implemented this year,” he added.

MARS

The PFRDA has floated a request for proposal (RFP) to appoint a consultant to design Minimum Assured Return Scheme (MARS) under the NPS.

The whole idea behind having MARS is to have a separate scheme that can offer a guaranteed minimum rate of return to NPS subscribers, especially those who are risk averse. Currently, the NPS gives returns annually, based on prevailing market conditions.

The appointed consultant, with requisite actuarial skills, is expected to help formulate/design a MARS that can be offered to the existing and prospective subscribers by pension funds.

The chosen consultant is also expected to set up a procedure to evaluate and approve basic scheme design modifications by pension funds and supervise MARS. The consultant would be required to prescribe fees, solvency requirements, risk management and reporting mechanisms for pension funds in respect of MARS, according to the RFP document.

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Depositors’ body wants banks to take a cue from Govt and not cut deposit rates

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The All India Bank Depositors’ Association (AIBDA) has requested the Reserve Bank of India (RBI) to advise banks to reduce their operating cost and prune the net interest margin, so that the entire burden of cut in interest costs does not fall on depositors.

The Association, in its pre-monetary policy memorandum to RBI, underscored that the depositors in the small income earner and senior citizen categories are suffering the most due to the current negative real interest rate (adjusted for inflation).

“While a pause in repo rate is desirable to support growth at this point in time, too much liquidity in the market works adversely against the depositors without a significant increase in bank credit. As depositors are major stakeholders and risk bearers in the financial system, their interests should not be ignored,” said DG Kale, President and Amitha Sehgal, Honorary Secretary, AIBDA.

They cautioned that a negative real interest rate may increase the wedge between savings and investment in the economy going forward and hamper growth in the long run.

The Association observed that since February 7, 2019, the repo rate (interest at which RBI provides liquidity to banks to overcome short-term mismatches) has been reduced by 250 basis points and has remained unchanged at 4 per cent since May 5, 2020.

Moreover, the RBI has made a liquidity provision of over ₹13-lakh crore in 2020-21.

Flush with liquidity amidst sluggish demand for credit, commercial banks reduced term deposit rates nearly by 200 basis points, it added.

Take a cue from government

The AIBDA office bearers opined that banks could take a cue from government’s decision not to cut the interest rates on Small Savings Schemes.

“In a deregulated environment, it may not be possible for the RBI to re-regulate deposit rates. But the entire burden of cutting interest costs should not fall on depositors. We would like to reiterate that the one-year real deposit rate should be at least 2 per cent for saving-investment equilibrium to be maintained at a reasonably high level,” Kale and Sehgal said.

ATM/POS charges

The Association said no charge should be imposed by the card-issuing bank in case of a failure of transaction at ATM/POS.

Referring to banks imposing a fee every time there is a transaction decline at an ATM or point of sale (POS) due to insufficient balance in the account, the AIBDA reasoned that such transactions are nowhere at par with cheque/ECS returns. These charges are currently of the order of ₹25 + GST.

“It (declined POS/ATM transactions due to insufficient balances) does not involve any intent of systemic inconvenience or distrust to a third party. We would like to mention that NPCI does not consider it as a transaction and there is no cost imposed by NPCI/ acquirer bank onto the card-issuing bank,” said Kale and Sehgal.

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MHA permits FCRA accounts to open account in SBI New Delhi

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The Ministry of Home Affairs (MHA) has permitted existing Foreign Contribution (Regulation) Act (FCRA) account holders, including NGOs and associations, to open their “FCRA Account” in the New Delhi Main Branch (NDMB) of the State Bank of India up to June 30, 2021.

“After that date they shall not be eligible to receive foreign contribution in any account other than the “FCRA Account” opened in the NDMB,” as per an official release circulated by the MHA on Wednesday.

The MHA, in a public notice issued on May 18, stated that all persons/NGOs/associations, who already have been granted a certificate of registration or prior permission by the Central government, should not receive any foreign contribution in any account other than the designated “FCRA Account” opened at the NDMB of the SBI from the date of opening of such account or July 1, 2021, whichever is earlier.

“Keeping in view the exigencies arising out of COVID-19 situation and to ensure smooth transition to the amended FCRA regime, the Central government has further decided that the registration certificates expiring/expired during the period between September 29, 2020 and September 30, 2021, shall remain valid up to September 30, 2021,” the public notice said.

Existing FCRA account holders were earlier given time till March 31, 2021 to open their FCRA account in the NDMB under the amended Section 17(1) of the FCRA, 2010, the release pointed out. “The amended section had come into effect on September 29, 2020. The extension in time has been given in view of the exigencies arising out of the COVID-19 situation and to ensure smooth transition by NGOs to the amended FCRA regime,” the release added.

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Six trends that will shape banking, fintechs this year, BFSI News, ET BFSI

Banking & Finance

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The banking and finance world is moving at a fast pace, The last year was about the digitalisation of banking services among the customers. While that continues. other trends are emerging that promise to reshape the space this year.

Open banking

Open banking is a revolutionising technology that brings fintech and banking together and enables data exchange across institutions. Fintech markets in the UK and Europe have become crowded with AIS and PIS services providers and will reshape the traditional banking industry. However, there are still many traditional players in banking that are reluctant to build partnerships with fintech companies. The hurdle of Open Banking regulations has made it difficult for fintechs to get into banking and adopt the technology.

Hike in banking fees

Globally, banking and fintech firms are hiking their fees. Some banks have already announced that they are planning to charge customers for interbank payments or increase fees for payments and account opening. Fintech companies and digital banks also continue to review their commissions.

Decentralised finance

The surge Bitcoin value has put focus on other revolutionary trends of the crypto world including decentralised Finance (Defi). It is a pool of financial applications based on crypto and blockchain technology and used worldwide across banking, insurance, and other financial services. Yield Farming, a part of Defi, offers its users to maximise returns by locking up their crypto assets and, in turn, earning interest, crypto coins and tokens. Another trend is Non-Fungible Tokens (NFT), which are digital assets that span both tangible and intangible assets like music, art, virtual real estate and even virtual sneakers. NTF data are unique and non-exchangeable, thus it ensures that users can verify the authenticity of these digital assets. There is Polkadot or blockchain of blockchains that enables blockchain networks to operate together seamlessly. It is a multi-chain ecosystem that allows you to move any type of data across any type of blockchain.

Banking-as-a-Service platforms

Banking-as-a-Service (BaaS) industry has attracted many players and is set to become a US$7.2 trillion industry by 2030. There are signs of serious BaaS momentum, with leading banks such as BBVA and JPMorgan Chase ramping up significant investment into the unique API-type models. Goldman Sachs has announced its own new BaaS portal for developers.

Focus on cybersecurity

There has been a rise in fraudulent activities during the Covid pandemic. Cybercriminals have heavily exploited the disruptions and attacked financial institutions. With the recently introduced Open Banking, there are more concerns about security, privacy, and fraud in banking and fintech. Open banking has magnified the impact of breaches and cybersecurity incidents as well. To fight financial crime, banks need to implement new security measures and diversify the ways our financial data are stored. To protect data, more companies are storing their data on on-premise and cloud platforms and implementing machine learning to identify all kinds of fraudulent activities across their network and platforms.

Anti-money laundering fight

The sixth AML Directive was introduced in European law last December, which sets out that all EU members and their organisations must implement these regulations by June 2021. The 6th AMLD aims to close the gap of domestic legislation and harmonise the definition of anti-money laundering across EU member states. The new directive also focuses on predicate crime as the list of financial crimes has been expanded covering a wider range of activities not listed in the previous directives.



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NEFT upgrade: Service will not be available for about 14 hrs till 2 pm on May 23

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The National Electronic Funds Transfer (NEFT) service will not be available from 12:01 AM to 2 PM on Sunday, May 23, 2021, as the Reserve Bank of India (RBI) will undertake a technical upgrade of the service.

The Central bank, in a statement, said the upgrade is targeted to enhance the performance and resilience and is scheduled after the close of business on May 22, 2021.

RBI asked member banks to inform their customers to plan their payment operations accordingly.

The Real Time Gross Settlement (RTGS) system, which is used to send and receive funds of ₹2 lakh and above, will continue to be operational as usual during this period.

The advantages of NEFT for funds transfer or receipt include round the clock availability on all days of the year; near-real-time funds transfer to the beneficiary account and settlement in a secure manner; positive confirmation to the remitter by SMS/e-mail on credit to beneficiary account; and no charges to savings bank account customers for online NEFT transactions.

While there is no minimum amount for NEFT transactions, the maximum amount is Rs 10 lakh.

RBI had completed a technical upgrade for RTGS on April 18, 2021.

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Public sector banks losing market share in loans to private sector rivals

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The proposed privatisation of two public sector banks (PSBs) in FY22 could accentuate the already declining market share of PSBs in loans, with the share of private sector banks (PvSBs) expected to go up further.

A realignment of market share in loans has been happening in the banking space over the last four years.

PSBs’ (or state-owned Banks) market share in loans declined to around 59 per cent (of all scheduled commercial banks’ outstanding credit) in December 2020 against around 65 per cent in December 2017.

However, during this period, PvSBs market share rose to around 36 per cent from around 30 per cent, going by Reserve Bank of India data.

The aforementioned development comes in the backdrop of PSBs turning cautious on loan growth in the face of stress in their balance sheets and IDBI Bank getting classified as a PvSB following the Life Insurance Corporation of India becoming its promoter with management control in January 2019.

Consolidation exercise

PSBs loan growth also slackened as some of them focussed their energies on streamlining operations following mega-mergers within the grouping.

Dena Bank and Vijaya Bank got amalgamated with Bank of Baroda with effect from April 1, 2019.

The aforementioned consolidation exercise was followed by mega-mergers in PSB space in FY20-21.

With effect from April 1, 2020, Oriental Bank of Commerce and United Bank of India merged with Punjab National Bank; Syndicate Bank merged with Canara Bank; Andhra Bank and Corporation Bank merged with Union Bank of India; and Allahabad Bank merged with Indian Bank.

During the last four years, PvSBs pressed ahead with loan growth. Many larger and mid-sized PvSBs were neither constrained by capital nor weighed down too much by bad loans.

Realignment & privatisation

Now, if the Government makes good on its Budget announcement of privatising two PSBs in FY22, the market share of State-owned banks could shrink further by about 3-4 percentage points, with the share of PvSBs correspondingly going up.

In 2018, Uday Kotak, Managing Director & CEO, Kotak Mahindra Bank, observed that private sector banks’ market share will go up significantly and be on a par with that of public sector banks in the next five years.

“…This major mega trend in the redefinition of the industry structure is something which is playing out as we talk,” Kotak then said.

Banking expert V Viswanathan assessed that PvSBs are focussing on credit to small and medium enterprises (which offer collateral), wholesale trade, home loans and related top-up loans, loan against property, auto loans and personal loans, among others, in a big way.

Meanwhile, small finance banks have grown their market share in loans to about 1 per cent in December 2020 from about 0.22 per cent in December 2017. Foreign banks’ share came down to 3.98 per cent from 4.44 per cent.

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