Tag: banking

Banks see improvement in solvency profile in FY21

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Banks’ solvency position is relatively better, thereby providing some comfort to their loss-absorption abilities, according to ICRA.

Capital raise, coupled with lower Net Non-Performing Assets (NNPAs), resulted in an improvement in solvency profile for banks during FY21, the agency said in a note.

ICRA noted that public sector banks raised ₹12,000 crore (0.2 per cent of risk weighted assets – RWAs) and private sector banks raised ₹53,600 crore (1.3 per cent of RWAs) of equity capital from market sources during FY21.

In addition, the government also infused ₹20,000 crore (0.3 per cent of RWA) into the public sector banks as part of its budgeted recapitalisation for FY21.

“With decline in Net Non-Performing Assets and improved capital position driven by fresh capital raise during FY21 as well as internal accruals that were buffered by sharp decline in bond yields, the solvency position for the banks stands relatively better providing some comfort to their loss absorption abilities,” as per the note.

With the said capital raise, the Tier I capital position of public sector banks improved to 10.99 per cent as on December 31, 2020, from 9.7 per cent as on March 31, 2020, while for private sector banks, it improved to 16.66 per cent from 14.1 per cent, the note said.

ICRA observed that the Additional Tier-I (AT-I) bond market for public sector banks (PSBs) revived in FY21 with more PSBs issuing AT-I bonds as compared to last year.

However, the recent change in valuation norms of these bonds could reduce the appetite of mutual funds for incremental investments in these bonds, it added.

Anil Gupta, Sector Head – Financial Sector Ratings, ICRA Ratings, said: “As against our estimates of Tier-I ₹32,800-43,100 crore of capital requirements, which factor in ₹23,300 crore of AT-I bonds, where call option is falling due in FY22, the government has budgeted equity capital of ₹20,000 crore for public sector banks for FY22.

“In case the AT-I markets remain dislocated in near term, the government may need to upsize the recapitalisation plan in public banks.”

 

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HDFC Bank Q4 advances up 14%, deposits grow 16%

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Private sector lender HDFC Bank reported a 13.9 per cent growth in advances as on March 31, 2021 compared to a year ago and 16.3 per cent increase in deposits in the same period.

In a regulatory filing on Monday, the bank said its advances rose to ₹11.32 lakh crore as of March 31,2021 compared to ₹9.93 lakh crore in the same period a year ago. On a quarter on quarter basis, advances grew by 4.6 per cent over ₹10.82 lakh crore as of December 31, 2020.

“As per regulatory (Basel 2) segment classification, domestic retail loans as of March 31, 2021 grew by around 7.5 per cent over March 31, 2020 and around 5 per cent over December 31, 2020; domestic wholesale loans as of March 31, 2021 grew by around 21 per cent over March 31, 2020 and around 4.5 per cent over December 31, 2020,” HDFC Bank said.

Its deposits grew to about ₹13.35 lakh crore as of March 31, 2021 versus ₹11.47 lakh crore a year ago. It amounted to a grow of about five per cent on a quarterly basis compared to ₹12.71lakh crore as of December 31, 2020.

CASA deposits of the bank grew by 27 per cent to about ₹6.15 lakh crore as of March 31, 2020 compared to ₹4.84 lakh crore in the same period last fiscal.

HDFC Bank said its CASA ratio stood at around 46 per cent as of March 31, 2021 compared to 42.2 per cent a year ago.

During the quarter ended March 31, 2021, the Bank purchased loans aggregating ₹7,503 crore through the direct assignment route under the home loan arrangement with Housing Development Finance Corporation Limited.

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Karnataka Bank targets over Rs 1.42 lakh cr business turnover in FY22; says digital the way forward, BFSI News, ET BFSI

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Karnataka Bank has targeted 12 per cent business growth in the current fiscal year, expecting total business of over Rs 1.42 lakh crore.

The lender also said digital banking is the way forward and it is at the cusp of engineering a breakthrough in banking industry as ground has been already laid to be the ‘Digital Bank of the Future’.

Even before the COVID-19 outbreak, the Indian banking industry had been undergoing a paradigm shift from traditional ways of banking with digital technology powering this change, its Managing Director and CEO Mahabaleshwara M S said.

He was speaking to all the staff members and branches across the country virtually on the first day of the current fiscal year (April 1), presenting a broad outline of business goals and strategies for FY22.

The CASA (current account savings account) share of the bank has reached a new high of 31 per cent and the digital transactions have also crossed 90 per cent, the bank said in a release.

“For the new financial year the bank has planned to grow its business at a moderate 12 per cent to take the total business turnover to Rs 1,42,500 crore.

“With a healthy business growth, ‘cost lite’ liability portfolio, strengthened fundamentals etc, the year 2021-22 should be an year of excellence for Karnataka Bank,” Mahabaleshwara said on Thursday.

The advent of payments banks and fintech lenders has accelerated the change in the banking industry and Karnataka Bank took a proactive step in 2017 by initiating a holistic transformation journey ‘Project KBL VIKAAS’, said the lender.

The objective of this journey, founded on digital technology as enabler, is to strengthen the bank’s fundamentals and build long term capabilities to continue to stay ahead of the curve, it added.

The bank has taken many digital initiatives, from establishing a state-of-the-art Digital Centre of Excellence (DCoE) in Bengaluru — a digital innovation hub powering various digital products, to digital loans sanctioning for most of retail products as well as introducing tab banking and web banking for opening savings accounts.

“As the digital is the way forward, we have placed digital banking on fast forward mode to pursue the concept of ‘KBL NxT’.

“With many more digital products lined up for this new financial year under this new set up, Karnataka Bank has a business advantage heading into the new FY 21-22 in a post COVID-19 scenario,” Mahabaleshwara said.



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Non-banking finance cos seek easier rules for cancelling NACH mandates

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Non-banking finance companies, especially those with an asset base of less than ₹500 crore, have sought relaxation in rules for cancelling National Automated Clearing House (NACH) mandates by their customers. The Finance Industry Development Council (FIDC) has written to the National Payments Corporation of India “to provide cancellation facility through simpler means such as Whatsapp and SMS” in a secure manner.

In a letter to the NPCI Managing Director and CEO, Dilip Asbe, FIDC has said this would enable customers to cancel NACH mandates in a simple manner rather than having to access the companies’ websites to carry out such a request. NACH or “National Automated Clearing House (NACH)” for banks, financial institutions, corporates and government is a web-based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature and bulk payments.

‘Best effort’ basis

It has also requested NPCI to allow small NBFCs (with asset base of less than ₹500 crore – which are categorised by the RBI as non-systemically important) to provide such a facility on a “best effort” basis and not as a mandate.

“Most of our members are small NBFCs that operate in limited geographies and provide the vital last mile credit delivery to unserved and under-served segments of the economy including agriculturists, MSME, small road transport operators,” FIDC said in the letter, adding that many of these NBFCs are very small and do not have a well developed website.

Further, many of their customers are not tech-savvy and are not comfortable with transacting on electronic platforms though they may be comfortable in using SMS or WhatsApp, it has said.

“Small NBFCs have, with great difficulty, convinced their customers to use electronic and non-cash means for EMI payments, but still the prevalence of cash repayments is significant,” FIDC said, adding that the provision of the facility for cancellation of NACH mandates is neither feasible nor effective in achieving the ultimate objective of customer empowerment.

NPCI guidelines

In a circular dated September 11, 2020, NPCI had come out with guidelines to provide customers the facility for online cancellation of NACH mandates.

“In order to faciliate online submission of customer request for mandate cancellation, all the entities that are obtaining the mandates from the customer shall provide an option to the customer to submit the stop/cancellation request through their website or any other electronic channels,” NPCI had said in a circular, noting that customers have to reach out to the company or the bank branch and submit the cancellation request in á physical form.

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SBI mobile banking faces issues

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Customers of the State Bank of India’s (SBI) were facing issues with online transactions on Thursday morning.

Customers took to social media to report issues with logging into the bank’s flagship mobile app, YONO. Users were also having problems with payments using the Unified Payments Interface (UPI).

SBI on March 31, and on April 1 morning had said that it will be undertaking maintenance activities in the second half, which will be impacting its online services.

“We will be undertaking maintenance activities between 2:10 pm and 5:40 pm on 1st April, 2021. During this period INB/ YONO, YONO Lite/UPI will be unavailable. We regret the inconvenience caused and request you to bear with us.”

However, it did not account for the outage faced in the first half.

Down Detector, a website that tracks internet outage, user reports related to issues with the SBI platform spiked at around 11 am. There were over 200 reports at around 12:21 pm.

In response to a customer complaint on Thursday afternoon at 12:10 pm related to SBI servers not working, SBI replied with a message reiterating the notice that it was undertaking maintenance activities.

However, as informed, the maintenance activities were set to begin post 2 pm.

The bank has faced technical glitched with its platforms on previous occasions. In December last year, SBI’s digital banking platform ‘YONO’ encountered a technical glitch. Customers took to Twitter to complain about not being able to open the app/login.

Today’s outage has occurred as SBI’s branches are closed for business since being the first day of the financial year.

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Will launch country-wide agitations: All India Bank Officers’ Confederation

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The All India Bank Officers’ Confederation (AIBOC) said it will launch a series of country-wide agitations culminating in strikes if the management of the Thrissur (Kerala) headquartered CSB Bank does not implement the terms of the industry-wide 11th Bipartite wage settlement vide the Joint Note for employees on the Indian Banks’ Association (IBA) scale.

“It is pertinent to note here that this 100-year-old bank had implemented all the bipartite settlements thus far beginning with the first in 1966 and the 10th in 2015 along with all Joint Notes.

“…We would like to point out that implementing the Joint Note/Bipartite settlement in this centenary year of the bank will stand to benefit the bank as it will motivate the employees immensely which in the long run will increase the productivity,” said Soumya Datta, General Secretary, AIBOC.

Datta emphasised that AIBOC will stand with all its might behind its associate, the Catholic Syrian Bank Officers’ Association, to ensure that employees on IBA scale in CSB get the fruits of the negotiated 8th joint note.

Compensation structure

In its annual report for 2019-20, CSB Bank said it is the discretion of the bank either to continue with the existing compensation structure prevailing under IBA scheme or modify the structure partially or fully based on the need or discontinue the existing structure in to and switch over to different structure which is prevailing in banking industry by keeping in view, various parameters like industry level, peer group status, burden on the bank, etc.

The report underscored that it is the prerogative of the bank either to utilise the service of IBA in the matter of structuring compensation or devise the compensation structure on its own based on the prevailing practice in the banking industry.

Out of 3,204 employees (as at March-end 2020), 1,805 employees both officers and Award Staff are governed under IBA pay structure and the remaining (1238 employees) are governed under Cost to Company basis.

During this financial year, as a policy decision the bank implemented, reducing the age of retirement of the officers from 60 years to 58 years, the report said.

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Asian companies ready debt deals under new benchmark rate rules

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Asia’s financial companies are gearing up to issue their first debt using a new global benchmark interest rate that will replace the contentious Liboras the region catches up to the rest of the world, according to bankers and advisors.

Britain’s financial regulators last week called a formal halt to nearly all Libor rates from the end of this year, piling pressure on markets to quicken a switch in interest rates used in $260 trillion of contracts globally.

Also read: The end of Libor: the biggest banking challenge you’ve never heard of

Libor (London Interbank Offered Rate) is being replaced with rates compiled by central banks after lenders were fined billions of dollars for trying to rig the reference rate for their own gain in 2012.

Also read: NBFCs in India need to plan for effective IBOR transition: EY India

SOFR replaces Dollar Libor

The Dollar Libor will be replaced by the Secured Overnight Financing Rate (SOFR), which is published by the New York Federal Reserve to use as a reference point for US dollar derivative and debt transactions.

The deadline is likely to expedite the number of debt transactions in Asia using SOFR to meet the regulator’s timetable and set the borrowers’ costs of funds, after the Covid-19 pandemic resulted in a slow take-up rate in the region.

“The first wave of deals using the new benchmarks will be initiated by banks, financial institutions and asset managers due to the push by regulators on them to lead the way,” said Jean Woo, partner at law firm Ashurst.

Asia’s first issuance

Korea Development Bank (KDB), a state-owned policy bank,last week raised $300 million in a three-year floating rate note– the first issuance in Asia sold globally using SOFR as the reference rate.

Also read: ICICI bank makes its first interbank-money market transaction linked with SOFR

Some $2.25 billion worth of SOFR bonds have been issued in Asia in the past 12 months compared to the global total of $160.8 billion, according to Refinitiv data. US companies have issued $124.9 billion worth of SOFR linked deals in that time.

“The whole world is moving towards it, people cannot be closed to the fact there is a change and issuers need to be making steps towards moving to the transitions,” said Amy Tan,head of DCM Origination Asia ex-Japan at JPMorgan.

Joseph Pepping, head of debt capital markets syndicate for the Asia-Pacific region at Bank of America, said the switch away from LIBOR had not been a high priority for Asian borrowers in 2020 but he expected that to change.

“We expect … for more Asian issuers to elevate this on their priority list,” he said.

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Data sharing, cybersecurity top concern areas for banks, customers: Deloitte

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Data sharing, cybersecurity and data protection have emerged as the top concern areas for the banks as well as customers, according to a Deloitte’s report on open banking.

“About 70 per cent survey respondents feel that greater emphasis should be made towards data protection by institutions,” said the report ‘Open banking: Unleashing the power of data and seizing new opportunities’.

Deloitte said the insights in the paper are supported by extensive research, past work, and credentials, complemented by a survey to understand customer needs with 400 plus respondents across age groups and population codes.

The report further said more than 80 per cent of respondents are uncomfortable in sharing the transaction history of accounts, hinting towards a need for all financial institutions (FIs) to assure customers that their data is secure.

Observing that not only banks, but even customers are wary of data sharing, it said, “Cybersecurity and data protection are the top concern areas across all age groups, followed closely by wariness towards third-party access to data and transparency on data usage”.

Over the years, the value of data has reached unprecedented levels. Countries, globally, are empowering customers with access to institutions of their choice, while jurisdictions are witnessing various approaches to open banking strategy and implementation based on regulatory favourability and industry maturity.

FIs, it said, also have realised that they are now custodians and not owners of data and are trying to move to alternative revenue streams after receiving customer consent.

Sandeep Sonpatki, Partner, Deloitte India said the onset of the pandemic has given a boost to welcome digital and API based banking in India with most salaried respondents already being highly comfortable with digital banking.

“However, 69.3 per cent of respondents in our survey felt that greater emphasis should be placed on data protection by the institutions, which makes it very crucial for banks embarking on a journey to develop API-enabled products and services, to have a well-defined roadmap to produce demand-driven solutions and to remain ahead of the curve while maintaining the principles of customer-centricity, security, and trust,” he said.

The report further said access to data can be leveraged by FIs for lead generation, cross-selling products, risk assessment, pre and post delinquency management, collections strategy, and product development; potentially leading to significant business augmentation, asset quality improvement, operational efficiency, and cost optimisation.

Open banking, the report said, is perceived quite differently across jurisdictions. Some have gone ahead to create a regulator-driven, well-defined framework such as the UK and Australia; while others have followed a more market-driven approach such as India.

The bottom line, however, is providing customers control over sharing their information and servicing them through a targeted, data-driven approach, it added.

Open banking also offers scope to increase customer onboarding at remote locations through quick, paperless documentation, verification, and alternate credit risk assessments.

With the onset of Covid-19 and the focus towards digitisation, the report said it believes the next 12-24 months will see a significant shift towards open banking amongst Indian FIs. Companies will invest in building core capabilities to address customers’ immediate needs.

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10 lakh customers of other banks using ICICI Bank’s mobile app

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As many as 10 lakh customers of other banks are using ICICI Bank’s revamped mobile banking app – ‘iMobile Pay’ and the private sector lender expects the number to double over the next two months.

“The bank has achieved the feat in a shade over three months after it made ‘iMobile Pay’ open for all to use, including those who are not its customers. Going by the encouraging response received by this unique initiative that offers interoperability to bank customers, ICICI Bank anticipates that the number is likely to double in two months,” it said in a statement on Thursday.

While the app has registered a good response in large metro cities like Mumbai, Delhi, Bengaluru and Chennai, other like Pune, Hyderabad, Ahmedabad, Jaipur, Lucknow, Patna, Indore, Ludhiana, Bhubaneswar, Guwahati, Agra, Kochi and Chandigarh have also contributed significantly to the growth of the number of users, ICICI Bank further said.

Also read: Private banks gear up to undertake govt business

“The objective of this endeavor was to offer customers of any bank the benefits of seamless payments and digital banking services through our app. We made it possible by leveraging NPCI’s interoperable infrastructure,” said Bijith Bhaskar, Head- Digital Channels & Partnership, ICICI Bank.

Users have especially liked the functionality of Pay to Contacts, which enables users to send money either to a mobile number or a UPI ID of their friends and contacts, to any payment app or a digital wallet.

Other services such a ‘Scan to Pay’, ‘Check Balance’ and ‘Bill Payments’ have also seen the maximum usage.

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